Compensation — Getting the Best out of your Team – Part 3

Getting the Best out of your Team – Part 3: Compensation


Too often, when compensation is mentioned, people just think of base wages, commission and bonus when they hear the term compensation.  Organizations, and employees, need to think about all of the elements that form their compensation package, not just the pay related ones.

There is notable organizational expense and value to employees related to health care and other aspects of their benefits package (i.e. dental care, drug plan, short term disability, life insurance, pension, 401K/RRSP, etc).  Beyond wages and benefit packages, there is also significant benefit and value with respect to policies such as sick days, personal days, vacation, tuition reimbursement, study days, moving days, on-site daycare, community service days and a fitness benefit program.

It is the combination of all of these that truly represent the compensation package.

Different people are motivated by different things.  Many people like to think that money is the primary motivator of employees – and they are wrong.  Numerous studies over the past 20+ years have shown that while money is an important contributor to employee motivation and satisfaction, praise and recognition from their manager, attention from the leadership team and the opportunity to contribute (lead projects, have input into decisions, etc) all are more powerful.  So, while we are discussing the specifics of using compensation programs to get the best out of your team, we are not suggesting that money alone will do it.

It is important that your pay and overall compensation package be competitive to the market and industry you are in.  You need to be able to attract and retain the level of talent necessary to meet organizational objectives, which is difficult to do if you are paying significantly below others competing for the same people.  You don’t have to be paying the most, but you do have to be reasonably competitive.  Exactly where you position yourself against the market is a strategic decision based on your ability to attract and retain the people you need to succeed.  If you do not need to have the best and highest potential employees based on what your organization does, then you can be positioned lower in the market.

Someone will always be willing to pay a superstar a little more money to get them to jump ship.  This is where the non-wage elements of compensation come into play, and why it is important that your employees understand the value of the things we mentioned above as well as other beneficial policies.  We will also reiterate that compensation alone will not retain employees if the environment and management practices are poor.  It will retain them for a period, but eventually even the most generous pay checks lose their impact and employees decide they need to move on to truly feel challenged, rewarded, growing and happy in their career.

Again, the level of wages and other compensation elements you offer employees may be driven by your needs and will vary based on the market realities of your location and industry.  Now, let’s look at some specific things organizations can do to leverage their policies and employee-related spend to create an engaged and motivated workforce.

We have already identified that wages need to be appropriately competitive.  H3R believes it is important in working with our clients that wages, both base pay and bonus, recognize contribution and appropriately differentiate between employees.  Providing the same raise or bonus to a star employee as you do someone who is considered a marginal performer will have a doubly negative effect.  First, your star feels that he or she is not valued and that their capabilities and hard work have not be noticed or appreciated.  Second, the poor performer does not see any reinforcement of the messages you’ve been sending them about improving their performance – hopefully you’ve been sending these.  If these facts about raises and bonus payments become widely known among employees (and you have to assume that it will), there will be a de-motivating effect on top employees and the development of a who cares attitude among all employees since compensation apparently has no correlation to performance.  So, our first key is that performance drives cash compensation and reward.

Next, you need to look at your workforce and determine what other programs will provide the most value and offer the biggest bang for your buck.  If you are an organization that typically hires new grads and sees most of them leave within a few years as part of the natural cycle (which you do not view as a problem to be corrected), investing a lot in retirement programs is not going to provide significant perceived value to that group.  That demographic will be more highly motivated by flexible shift scheduling, training and development opportunities and having access to the latest tools and technologies.  There will be a lot more benefit to the organization by ensuring a level of training investment as well as by having a tuition reimbursement program and accompanying study day policy.  You are not trying to change the cycle of their departure (although these programs may increase retention) as your primary goal here.  You are trying to maximize performance and contribution of these employees for the period that you have them, hence, offer programs that they see great value in and appreciate.

You should look at the statistics related to program participation and usage to determine the impact and success of each.  If you are spending money on programs that employees do not perceive as having value, you are wasting money.  It may also be something that you want to conduct an employee survey and/or focus group about.

Analyze your workforce and get their input into the benefits, programs and policies that you implement.  Depending on demographics, you may need a variety of programs to address the needs of different employee groups.  This is not always as simple as a one size fits all solution.

Using compensation as a tool to get the best out of your employees doesn’t simply mean paying them more.  It means implementing programs that have value to the employees and being smart with how you administer them.

Compensation can, and often does, become a negative workplace issue despite your best efforts to implement rewards.  It is not that the employees are ungrateful, inconsiderate or disloyal, it simply may be that the programs are not designed appropriately to satisfy the goals you have set out.

In Part 4 of this series, we will discuss Supervisory Practices.

Recommended Posts

Leave a Comment