Effective employee recognition begins with pay equity

by on May 11, 2009 · 0 Comment POSTED IN: HR Info Center

Decent market wages are the beginning of an effective employee rewards program.

Non-monetary rewards and employee recognition are completely irrelevant if you are under-compensating people in the marketplace.

So, one of the things you’ve got to be able to do is go back and validate, are we competitive for the kind of roles we’re trying to recruit for? Are we competitive to get great talent or are we really competitive to get minimally qualified people? How do we determine that? Where do we look to benchmark it?

What I tell many of my clients in my executive search practice is a couple of thoughts about cash compensation in relation to employee recognition.

Employee recognition begins with competitive cash compensation
Number one, I don’t recommend to anybody that we try to peg cash compensation at the mid-point of the range, because top performers don’t have to take mid-point salaries. Whether they make minimum wage or they make $150,000 a year, they don’t have to take salaries that are in the middle of a bell-shaped curve.

You’ve got to be able to pay them in the top quartile. That’s what I use in the definition of success. Top quartile performance. They require top quartile compensation.

Backwards compensation plans
The other thing I tell my clients is, you have to pay whatever it takes to get someone who can do the job you’ve defined.

You’ve got to pay whatever it takes to get someone to do the job. In our country, we actually do this backwards. We set a number. We say, I can pay this person $45,000 a year and then we go out and try to find the best $45,000 person we can.

But what if, you define a series of benchmarks, standards, objectives, outcomes, metrics that person has to hit? You hire them at $45,000, but they can’t do it. They’re only partially competent. They’re really good at doing 75% of the job but they can’t do the other 25%.

How many of you have someone like this working for you right now, where they’re really good at doing 60, 65, 70, 80% of their job, but they can’t do the rest of it?

Don’t overcompensate for under performance
I’m going to suggest, in that case, you are grossly over-compensating those people. And layered on top of that, if your direct reports can’t get done what you need them to do, who gets to do that stuff? Because it just have to get done.

If you guess yourself, you’re exactly right. The number one frustration I hear as I travel the country, among executives, senior managers, CEOs, is the frustration over their own jobs. Because they feel like they’re being sucked down and doing the work of their team.

And one of the issues is, that happens because we don’t set strong performance objectives, standards, metrics, benchmarks.

I have yet to meet an organization that can’t define what outcomes they’re looking for, at least one or two, for every role in their organization.

And I’m going to suggest, if you’re not doing that and you’re not moving down the path of performance management, this stuff is completely irrelevant. This is like performance management on steroids.

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