For those of us who work in compensation, the “peanut butter” approach to pay-for-performance may not be new.

This approach consists of taking merit increase and variable pay budgets and spreading them thinly and evenly across the employee population. However, thin swipe of peanut butter may not make a very filling sandwich for the high performers who have been working through their lunches and missing dinners with their families.

So how do we use limited compensation dollars to recognize the contributions of our top-performers, while also keeping the rest of the employee population happy?