Every other job I've had uses some sort of stressful review as part of the salary process. You get a good review, your raise is bigger; bad review, smaller raise. This seems like it works, but it actually doesn't.
What's the goal of a review? To provide feedback. Shouldn't you be interested in feedback so you can get better, not just so you can get paid more? If so, shouldn't you be getting it all the time, instead of twice a year?
What's the goal of a raise? To keep you from being effectively paid less (because the cost of living keeps going up), and to make sure you feel satisfied with how much money you're making. There's nothing in there about making sure some people feel less appreciated than others. So pick a percentage number, preferably one that's above COLA, and just give everybody that. If that's not enough, your base salary isn't enough.
Note that none of these goals overlap. Feedback and salary don't really have common goals. If you're trying to get people to do better work by dangling the salary carrot, you're taking away intrinsic motivation – see DHH on mixing open-source and money, he did a good job with this topic – and you'll end up with less performance and motivation, not more.
The main goal of raises isn't cost of living adjustments, but as a part of career progression.
If you're staying in a stable role and productivity, then you need COLA.
If you're improving, in time you become significantly more valuable both to the company and to outside market, so you deserve much larger compensation than back in the years when you were a fresh-out-of college newbie.
I don't think his reply runs contrary to your post, if you include the last part of that sentence:
> To keep you from being effectively paid less (because the cost of living keeps going up), and to make sure you feel satisfied with how much money you're making.
It does run contrary, given "pick a percentage number, preferably one that's above COLA, and just give everybody that" which explicitly doesn't (a) differentiate improvement from non-improvement; and (b) doesn't address significant salary increases due to professional growth and changing responsibilities.
It's not contrary cause of this "So pick a percentage number, preferably one that's above COLA, and just give everybody that. If that's not enough, your base salary isn't enough."
Which, to me, implies they have different base salaries for different positions. So when your "career progresses" you get a different (predetermined) base salary. Orthogonal to raises.
