| Compensation
Compensation is becoming even more crucial in small
businesses as more factory jobs go overseas and national
companies move operations out of Tucson. Unemployment
has lowered the bar on raises as many people are just
happy to have a job.
With
the compensation world changing, successful businesses
need to take a broader look at compensation. The first
question is “what are you trying to accomplish?”
Certainly workers need to be able to feed their family
and provide a standard of living that is acceptable.
That is what is referred to as base pay.
Too
often owners misinterpret the effects of base pay. They
feel they are paying 10% or more of revenue to employees
and in return they should get loyalty and motivated
interested employees. When they don’t, they get
jaded and disappointed. Their attitude transfers to
employees and, over time, the whole organization decays
into a situation of surviving day to day from 9-5.
Owners
must realize that base pay is expected by the employees.
Even a nice 10% raise is motivating for a very short
time. The raise as part of base pay becomes part of
what the employee expects in return for his or her services.
Increases in base pay become permanent but the motivation
is temporary. If you take it away it is de-motivating
for a long time. In addition, annual raises means that
it will be 11 more months before another raise which
is disappointing in itself.
The
purpose of base pay is not to motivate employees nor
will it assure top-notch performance in return. Base
pay is the cost of getting the employee to show up and
do what he or she is told. There will always be a few
that will not even show up on a regular basis and there
will always be some with a tremendous personal work
ethic that will transcend compensation but on average,
don’t expect too much from base pay.
Base
pay is important to provide employees a decent standard
of living. Base pay is a part of keeping people on staff
because hiring and training is so expensive. Don’t
underestimate the importance of base pay but don’t
expect too much from it either.
Achieving
Excellence
Beyond
base pay, compensation is often used to achieve the
goals and objectives of the company. The owner or executives
must first define excellence. Then you must motivate
the staff to achieve it.
People perform to higher levels of achievement when
they are motivated. How do you use compensation in your
business to motivate employees to achieve more? One
means that works with everyone from toddlers to geriatrics
is “fun and games.” Work in itself can get
routine and repetitive and the goals an owner constantly
harps about can sound like a broken record. How do you
change the receptivity of workers to the message? Contests
and games with a monetary reward can be effective. Often
the reward can be an experience like a trip, dinner,
evening out etc.
There
is another aspect of the game that is important. Recognition
for the winner is as valuable as the monetary reward.
Just as the winning football team prances around with
one finger pointed skyward for days after a victory,
the winner in a contest in the business reminds everyone
that sees him or her for days of the importance of achieving
the goal set by the owner.
Commission
or pay for performance is another important part of
compensation. Again, defining excellence is the first
step. Finding a measurement that is reflective of that
performance is the second critical step. Then setting
the compensation or commission based on achievement
of the desired goal. This assures that payment will
be covered by improved results. Unlike base pay, the
raise is not permanent and the motivation lasts as long
as the compensation.
The
right compensation plan for your business can be as
important to success as having the right products or
the right location.
|
