Here’s something to ponder. How well is your compensation planning keeping up with the needs of your employees? If you’re like many other employers, you’ve done your best to stay current with cost of living index updates and changes to employee benefits, and you’ve maintained a fairly productive workforce through careful recruitment and training initiatives.
Pat yourself on the shoulder for accomplishing all that because it’s NOT easy in this day and age.
Identifying issues with your compensation
Still, your compensation program isn’t a “one and done” but instead requires ongoing attention. So now might be a good time to ask yourself, “Are my employees getting the kind of compensation that really counts?”
While money isn’t the only means of motivating employees—and it may not even be the best means of motivating employees—one thing we know for sure is that failure to pay employees fairly is a morale and productivity buster.
So now ask yourself these questions: Do your employees look forward to coming to work every day? Do they refer their best colleagues to you? Do they have positive attitudes that shine through in everything they do? Are your clients telling you about the great service and commitment your employees demonstrate?
If you’ve answered “No” to any of these questions, it could be time to transform the way you handle compensation.
The limitations of traditional compensation
It’s easy to get caught in a rut with traditional pay for performance methodology. Under this model, employees are essentially presented with a carrot on a stick, and if they perform to certain standards (the stick) they may get a nibble or two of the carrot.
At the center of this model is the dreaded annual performance review, during which the employee must hear about the things he failed to accomplish while half-heartedly setting new goals that most likely will be promptly forgotten as the year progresses and other, unexpected priorities take precedence—all while waiting for news of the measly raise in pay he’ll be getting. Doesn’t sound too appealing does it?
The benefits of modern compensation
In the modern world of compensation, employers conduct regular salary reviews, which enables them to ensure that pay levels are fair for the skills their industry demands. And instead of limiting salary increases to a once-a-year effort, employers regularly review work types to see if added responsibilities, knowledge, and tasks warrant incremental pay increases.
More ways to compensate a strong workforce
Another way to make compensation count is through employee engagement campaigns.
Employees allowed input into the business will be more engaged than those who aren’t allowed input. Conduct regular staff meetings and encourage employees to share their ideas and concerns in an open communication platform. Use this feedback to develop benefits and programs that help employees become better on the job and to promote a more positive workplace.
Also, a work environment that supports employee well-being is vital to the longevity of the workforce and qualifies as a bonafide perk. Update the corporate office with new furnishings, lighting, plants, technology, and collaborative work spaces. Give employees a place to de-stress from daily challenges. Encourage better habits by adding healthy snacks to the company vending machine, encouraging small exercise breaks, and offering a relaxing atmosphere in the break areas.
Last, make your compensation count by clearly communicating to employees what they’re getting in exchange for their hard work. Many employees fail to consider their total (i.e., cash and non-cash) compensation. Create total compensation statements that provide a complete picture of what you offer. Include employee benefits, on-the-job perks, and the amount you invest in training.
All of these actions will go a long way toward fostering employee loyalty and ensuring that your employees appreciate how well you understand the importance of compensation that counts.
Learn more about compensation with this comprehensive eBook: Bring Back the Sizzle — Compensation Plans that Get Workers Fired Up
I agree with your thoughts about performance based compensation, but I think the performance should be tied directly to company performance in a small to medium sized company, or business unit performance in a larger company. Business is a team sport, where sales, operations, finance etc. need to work together to support one another, for the company to be successful. By making results transparent, employees are able to make decisions with more and better information, which is the reason open-book companies I coach consistently outperform their competitors. A good large company example is Southwest Airlines, a fun coaching client of… Read more »
Hi Bill,
I couldn’t agree more with your points on performance based compensation! Being transparent about the results of performance is definitely the key to taking things up the next notch. It sounds like your coaching clients have recognized this with your expert help.
Thank you for your comments and for sharing the other valuable resources with readers!
All the Best,
Tess