In 2006, a Yahoo executive named Brad Garlinghouse wrote a memo that leaked to the press and immediately went viral. He called it the “peanut butter manifesto,” and his complaint was visceral: Yahoo was spreading itself thin across too many priorities, he argued, refusing to make hard choices and allowing weak performers to hang around while top performers went unrecognized. "I hate peanut butter," he wrote. "We all should."

But 20 years later, it turns out that nearly half of American companies like peanut butter quite a lot. According to a report from the compensation software company Payscale, 44% of employers said they either plan to or already have rolled out uniform pay bumps to all employees in 2026, giving everyone a modest raise no matter how substantial—or not—their contributions. The phenomenon has a name: Peanut butter raises.

I founded my business around the same time Garlinghouse was tapping out his manifesto. And while I understand the appeal of a smooth, simple process like evenly-distributed raises, I have also learned that when you fail to differentiate your best people from everyone else, they’re almost certainly the ones who notice first. They’re also the ones who have the option to take their talents elsewhere.

The Appeal Of Peanut Butter Raises

There are two main reasons why a company might give peanut butter raises: When they can’t actually distinguish top performers, and when managers want to take the path of least resistance, Nick Bloom, an economist at Stanford, tells the New York Times.

There’s more at work than simple laziness, however—according to Payscale CHRO Lexi Clarke, companies are dealing with tightening budgets and a cooling labor market. Far from being new, it’s a strategy that becomes more prevalent during times of economic uncertainty , like during the 2008 recession. As a result, “organizations are defaulting to what seem to be safer, more uniform decisions,” she told SHRM.

Finally, there’s one more justification for a one-size-fits-all wage, which is in an effort to weed out bias, which is something that employers are actively working to mitigate, Clarke adds. According to Payscale’s report, “some organizations, particularly those with large frontline or lower-wage populations, are rethinking their compensation differentiation as inflation continues to affect workers unevenly.”

These are all reasonable motivations. Bias in performance reviews is real and well-documented, and economic caution is rational. It feels intuitively fair to make sure the lowest-paid people on your team aren't left behind when prices keep rising.

But in my opinion, fairness and sameness are not the same thing, and treating everyone identically isn’t actually equity at all.

While peanut butter raises may seem like a viable short-term strategy in a tough job market, they pose more risk than reward.

For one thing, your best employees will always be the first to fly the coop in the face of an unfair policy, leaving you with less than your A-talent. In a low-hire, low-fire market like the one we’re in, employers aren't as worried about people quitting. Even when employees do leave, many organizations think automation and AI can fill the gaps, experts at Korn Ferry write .

To me, this is wrongheaded. Your best employees are exactly the ones who bring the skills that AI doesn’t have—strategic, out-of-the-box thinking, a growth mindset, the ability to solve problems before they arise. These are exactly the people you want to fight to keep on your team.

But the reality is that workers who don't feel adequately recognized are twice as likely to quit within a year, according to Gallup. This makes sense—it’s disempowering to work hard knowing there’s no reward in sight; moreover, this style of raise-giving tells top performers that their employers frankly “just don’t care that much,” Kevin J. Murphy, an executive compensation expert at USC, tells the Times.

As Korn Ferry puts it, a peanut butter approach "represents a disconnect from the stated goals—namely, to attract and reward top talent—of many organizations." Instead, you end up losing that talent, and keeping the ones who should be moving on.

I’ve always embraced the idea that if you’re paying your employees fairly, it should hurt a little. At Jotform, we have what I believe to be great company culture; on most days, our employees derive meaning and fulfillment from their work. But I know that the primary reason for our high retention rate is that we pay our people what they’re worth.

This includes raises. Even in a lean year, you can vary raise amounts meaningfully across your team. The gap doesn't have to be dramatic to send the right signal. People want to be acknowledged, and what matters is that your best people can see that you see them.

There are also better places to tighten the belt. Payscale’s Clarke advises leaders thinking of implementing peanut butter raises to ask themselves why they’re doing so. “If it’s because of administrative burden, streamline your workflows. If it’s due to inflation, target merit increases to the roles that are hit the hardest. If the concern is bias, dig into your performance practices,” she said.

The truth is, your employees aren’t all the same, and they should not be treated as such. Assess each person as the individual that they are, and keep the peanut butter where it belongs—between two slices of bread.