By Bert Sadtler. You remember the days when businesses paid their employees a flat salary? Can you remember a day when business professionals worked most of their career for the same employer and retired? Can you remember a day when you were handed your phone messages on a pink slip of paper with unreadable scribbles in blue ink? When was the last time you received an important business message on a pink slip of paper? When was the last time you noticed the majority of employees retiring at the end of their career from the same employer of the last 20-30 years?

Are you feeling that the business world is changing in front of you?

If we agree that our business world is in a state of constant change, why isn’t updating and aligning compensation more of a big deal? While some business people come to work to earn as much as they can and others come to work to make as much of a difference as they can, both of them are recipients of compensation for their efforts. In the ideal model, if a business does well, its employees should be rewarded.

If the business has one or two employees, it is clear that those 1-2 people should be rewarded for the business’s success. If the business has 10,000 to 20,000 people, how many of them have directly influenced the success of the business, how many of them have worked hard to be supportive, how many have simply been along for the ride and how many have not done their job?

In the days of 20-30 year careers with the same employer; layoffs, employee performance and competitive productivity were less critical than today.

Back to rewarding employees who deliver value… Most businesses site their cost of compensation to be among their largest expenses. Business would also say they ask themselves what kind of return they receive for their investment in paying employee compensation.

Maybe the question we should be asking is “ What isn’t a big deal about your compensation?”

Compensation has evolved from simply salary to salary plus bonus in an effort to encourage and reward employee performance. Some employers pay a bonus when the business does well. Unfortunately, this one fits all model allows the over-achieving employees to miss being truly recognized and the under-performers to be undetected.

One common “big company” approach to bonus compensation is to review and slot employees into a performance grade level. The employer has predefined that a certain number will fall into the lowest grade, middle grade and highest grade. With the highest grade earning the employee the bonus compensation, the employer will limit the number of employees allowed to receive the highest grade.

This may appear to be the most cost effective approach for the employer, in reality, this causes the employer a loss in productivity as employees are competing between each other to get a higher score than their co-worker instead of collaborating with their co-worker. In addition, the “bell curve model” totally fails when you have hired the best talent available are limited to only awarding a high grade to a small few.

At the core of a rewarding compensation program is:

• Employee performance
• Employee retention
• Attracting and hiring critical talent

Shouldn’t the compensation program be designed to deliver the company measureable value? Shouldn’t the compensation program align with the focus, direction and goals of the business? Shouldn’t each employee understand his or her role in order for the company’s goals to be achieved on a short term basis? Shouldn’t the employee be rewarded when he or she achieves their respective goals?

If every employee were to achieve or exceed their goal, the company should be doing very well and reaching or exceeding its goals.

The summary just described falls under the compensation model called: Management by Objective or MBO’s. MBO’s require structured interaction between managers and their employee, they require that leadership has a focused direction with defined short and long term goals, they require alignment within all levels of an organization. MBO’s reward the employees who deliver results and call-out the ones who don’t. MBO’s improve employee retention and attract critical talent to want to join an organization.

Do you find your business is already enjoying the results of an aligned performance compensation program or are you still in the “pink slip of paper” phase? What about compensation isn’t important?

Good hunting!

About Boxwood
Boxwood is a management, consulting and recruiting firm with a presence in two regions -- offices in the National Capital region and also in The Greater Tampa Bay Region in Florida.   As a dedicated, consulting resource to employers, Boxwood develops strategies for organizational growth through performance rewards, as well as the evaluation and acquisition of critical talent. Market sectors include: SATCOM, Government Contracting, Communications and Technology.  Bert Sadtler is an invited speaker to discuss the shift in the employer’s performance-based compensation model as well as the shift in the changing paradigm toward acquiring critical senior level talent. Bert can be reached at: BertSadtler@BoxwoodSearch.com