Compensation

Money may not be the first thing that motivates performance, but is much more important than whatever comes third or fourth. Employees want competitive compensation as well as being rewarded for unique contribution. This means balancing the requirements of internal equity and pay for the job with the recognition that people do not perform equally and should not be paid the same even if they have the same job title. People, not jobs, get the work done. The current trend towards market pricing reflects a shift from considering the job the major pay determinant to considering a hybrid of job, person and market.

More and more companies are developing “broad bands” to reduce compensation management precision and allow flexibility in managing base pay. Flexibility should be paramount in managing the entire work force.

Equally important is the understanding that different elements of the total compensation package may be valued differently by different categories of employees, as well as by the same employee at different stages of his/her life and under different circumstances. This consideration is very relevant when companies consider their benefits packages.

Finally, a lot of companies nowadays are learning that it pays to become a better employer. Companies known as good places to work find it easier to get the talent they need to stay competitive. This is an upward spiral. The better workplace you build, the more good people you attract. Good people help build an even better workplace. The notion that in order to succeed in today’s business environment companies need to demonstrate operational efficiency (competitively priced, reliable and easy to use products and services), product leadership (offering leading-edge products or services), and customer orientation (highly customized solutions and services) is generally accepted. What is being added to this list of success “must-dos” is employee orientation. The best employers use the same values and approaches in making decisions about their employees that they use in making decisions about their customers.

Barring another major crisis, the need to work smarter, make more with scarcer resources and tighter competition will make attracting and retaining the best people as important as attracting money, materials or new technologies. Is your company up to it?