Salary talk and employee compensation

by on June 16, 2009 · 0 Comment POSTED IN: HR Info Center

The majority of problems in employee compensation conversations are trying to justify base salary

Most of the time, most of the problems we have with salary talk are with trying to justify base salary employee compensation. On occasion, there are problems with bonuses. But, more often than not, a bonus is basically calculated based on some kind of objective criteria.

We lay out some kind of sales quota, profit margin, production quotas, you know it depends on the job, where we kind of lay out certain things or group performance or company performance. The bonus comes from those. Most people don’t argue with them. They may say, well, you set my threshold too high but bottom line, it’s not the same kind of demeaning experience we typically have before.

I would also say that you can pay for performance with bonuses. So, it’s not often the point of contention.

Remember to tie corporate goals to employee compensation
There are many schemes and formulas with employee compensation. It’s just very difficult for me to get into all the different ways you can do it. But I will say this, be really careful about how you design bonus formulas, because you can shoot yourself right in the foot. It’s really easy to encourage people to do things you don’t really want them to do. And I can tell you a story after story after story of people doing things that really weren’t in the best interest of the company. But, frankly, they were paid to do them. And so, therefore, that’s what they did.

Concrete group measures work best with employee compensation
So, don’t get too creative in how you design these things. Bigger measures are normally better, concrete measures are normally better, paying for superior individuality can impact teamwork.

Again, I’ve seen a lot of times and going back to Dr. Deming’s philosophy about sub-optimization where you optimize somebody for superior individuality and they will sub-optimize teamwork or group. I also think profit sharing is almost always positive.

Three different conversations: Employee compensation, development, and performance review
Separate this conversation about employee compensation from the conversation about career development, but one thing that I think is very important in terms of bonuses, whenever we’re working with a company, we try very carefully to say, look, please don’t incentivise people to develop themselves.

The reward for being developed is you’re developed. You’re more promotable. You have more exciting job. And you know, and we spent money to get you there. So, we shouldn’t be obligated to reward you to develop yourself. That’s part of your job here. That’s not my job.

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