Anyone who has ever found themselves in a salary negotiation knows the dilemma: You start to suddenly wonder if you are really performing the way you should and, of course, how your company will take the message. This uneasy feeling of discussing salary with your boss seems to be the new norm—although it’s not a must.
Instead of leaving their staff in the dark about finances, managers and Human Resources should regularly approach development and compensation plans together with their employees. A worker who follows a mutually agreed compensation plan likely will take on more responsibility, willingly learn new skills, and arrive at the workplace full of enthusiasm instead of frustration.
Employee training, compensation, and salary transparency all go together. The remaining question is how managers can use compensation to improve employee performance?
Talent Development and Compensation Planning
Every company knows its employees are one of its most valuable resources. That’s why salary expenses in companies make up approximately 70 percent of total costs. Unfortunately, managers cling to the belief that employees are a cost instead of an investment. That’s why many companies turn a blind eye to rewarding their employees for their engagement in addition to the base salary. However, the dilemma is not just about salary payments. Roughly 75 percent of businesses still don’t provide formal training to managers on how to talk with their employees about compensation. Therefore, lacking transparency and honest communication poses the second problem in this sense.
When it comes to people’s wages and compensation, managers should use the power behind their throne to develop the best human talent. Suppose you want to strengthen the development of your employees’ skills to achieve better business results on a more rounded basis. In that case, you should offer each employee a transparent, market-oriented, and development-focused compensation plan. Take a look at the four steps every manager should follow to link personal development with a compensation strategy:
1. Start with managing relevant data.
Those seeking fair play must always base their actions on accurate and relevant data. In the end, fairness is what the individual employee strives for and what corresponds to the employee’s competence level. The compensation also should reflect the salary level in the industry and the company’s goals.
Accordingly, the managerial journey begins by collecting the necessary data into an accessible database for HR staff. We recommend identifying the following data and creating individual worker profiles:
- Experience in position
- Experience in industry
- Development metrics (qualitative and quantitative, related to the tasks)
- Market data on salaries
- Profit, sales, employee costs, and other business data related to salary compensation
Of course, such databases need managers to feed them up-to-date information, which can be a daunting task. This is where automated software assists humans in the best possible way—especially when collecting numbers such as market figures, company profits, and automatic work time calculations. Data updates can save the manager a lot of time, sweat, and costs.
2. Lead a conversation with your employees.
When dealing with rough metrics, it is just as important to talk with each employee. Ask them about individual motivations that drive them and what skills or professional goals they pursue together to assess their strengths and weaknesses. The company’s goals also find should their way into the conversation; ideally, both elements make a good match.
Let’s take a closer look at a tangible example. In a small carpet company, people repair and sell handmade carpets. In the customer service area, the manager and the service agent can jointly determine whether, for example, there has been an increase in sales after client contact. Customer service satisfaction can become another metric to measure the agent’s development.
Now, when it comes to agreeing on compensation, remember that money is not everyone’s cup of tea. The right mix of total rewards could include bonuses and other short-term incentives and long-term incentives and benefits such as restricted stock, healthcare coverage, or retirement contributions. If you want to follow the standards successful corporations in the competitive talent market have set, it’s about time you consider every aspect of talent growth.
3. Create a compensation plan based on future growth.
Let’s get down to the nitty-gritty. SMART, an educational method for development, can work as a guide to a tailored compensation plan. According to this plan, all goals agreed upon with the employee should be Specific, Measurable, Achievable, Relevant, and Timely. This can give employees a clear path to follow and give managers a yardstick to measure their progress against.
A SMART goal for the customer service agent in the carpet shop could sound something like this: Handling customer service requests by live chat software. The agent can opt for a company-paid workshop to learn how to communicate efficiently with customers. An increasing customer satisfaction rate and a decreasing first response time after two months can, for instance, lead to extra dental healthcare insurance as a bonus.
It is imperative to have open and transparent conversations about whether the goals are achievable for the respective employee. Remember that the goals you set with your employees should be proactive and challenging—yet realistic. Otherwise, employees will think it’s pointless to try.
4. Revisit development milestones.
Once you have created a detailed development plan, put it to the proof. Set up individual meetings to revisit the compensation and development program with the person concerned. No more than three to six months should pass between individual sessions. During those meetings, managers and talent can discuss the learning curve, raise the bar, set new goals, and introduce new compensation schemes.
Deeply tying employee growth to total compensation and communicating openly about goals will equip managers to put development plans into the proper corporate context. All in all, talent development is not just about rewarding individual performance. It’s also about creating a corporate culture in which both managers and employees are fully aware of each individual’s value to the company.
