“Show Me The Money”—A Different Look at Compensation
When it comes to retaining and attracting workers, the question of compensation is usually at the top of the list. We have participated in many discussions debating what truly motivates employees. Is it money, benefits, culture? Although this question has strong arguments on all sides, you may not be able to easily solve it if you have limited resources. Creating a lucrative bonus plan, incentives, promotions, or fringe benefits may not be effective if you cannot easily articulate it. However, you can still be attractive and stay competitive in the marketplace if you implement some simple strategies and consider the things you can control.
In our book, “The Team Game: How Your Business Can Dominate Year After Year,” we dedicated an entire section to compensation due to its importance in the process of creating and motivating team members. The Workforce Institute at Kronos Global Survey 2018 listed unfair compensation among one of the top reasons for employee burnout. Therefore, addressing compensation is critical to keeping happy and focused employees. Having clarity around the topic of money can lead to a more satisfied and productive workforce. When working with teams, the sharing of work or collaboration between team members can add another level of complexity to the conversation on compensation. Am I being fairly compensated for what I do? Will I get hurt if a team member doesn’t pull their weight? It is critical to add transparency to the topic and have a plan on how to communicate it to each person.
Here are some tips that can aid in motivating employees when it comes to compensation plans.
• Establish a simple compensation plan makes it clear and transparent how people get paid. This simple step creates a culture of trust, partnership, and collaboration. Whether you agree or disagree that money truly impacts performance, having a clear plan of communication will focus the attention on the important metrics that drive performance.
As an example, complicated bonus plans based on formulas that require an engineering degree to figure out do not motivate employees to reaching peak performance levels. Complicated plans that require tracking from arbitrary dates, or setting goals with no tracking systems can be a turn off and a demotivator. If formulas must be used, keep them simple, i.e., increase business by this amount, receive X amount, and receive 1 percent for every additional $10,000 over goal.
• Don’t keep the compensation plan a secret. With so much information available online and Websites such as Glassdoor making it easier for candidates and employees to understand what their role is worth, it is more important than ever to build compensation plans that are simple and easy to explain. People want to know how they make money and how they can make more. If it takes more than five minutes to explain the compensation plan, then it is too complex. The moment it stops being simple, it stops being an incentive.
• Build key metrics that drive performance and the right behavior, and are simple to track. If you feel you need to create an entire IT program to track the metrics, then it is too complicated. Tie the metrics to the company key drivers of success. These are already being tracked and everyone should be aligned to support the same goals. Also, be sure to avoid ambiguities. We have seen incentive plans that have a percentage allocated as discretionary—this is not always viewed positively by the employees since it leaves room for politics or favoritism and can create a negative connotation.
Building metrics for sales organizations is usually easier and more direct, but if your team is not directly involved in sales that can be tracked by revenue or increases in sales, then choose a metric that is tied to driving the right behaviors that still support the overall company objectives. An operations department many times feels disconnected from the sales or revenue side. The team may feel they do not directly contribute to the bottom line but, there are some key metrics that, if done effectively, directly support the sales of the company. These include metrics such as number of applications in good order, improving processing times by a specific number of days, improving customer responses by a specific number of hours, and other important factors. For a marketing role, it can include the successful execution of five marketing campaigns by a specific date, or number of leads generated from those campaigns. Building one or two key metrics will improve results and morale with each team or individual.
In teaming, we focus on creating clarity through the team playbook, which describes the important parts of the team including compensation. Teams may choose to align their members to the key metrics that drive the performance of the leader and detail how the revenue will be passed on to the team. In commission or fee-based practices, the playbook adds clarity on each member’s role on the team and during the sales process. Each part of the sales process has a value assigned to it. Consider a sales organization. When engaging with a prospect, there are key steps that need to occur in order to convert that prospect into a client. These steps in a teaming culture may be managed by different people, but they are interdependent on each member effectively doing his or her part. For this type of compensation structure, having a clear written out compensation plan provides transparency and minimizes disputes due to lack of clarity. Team members are clear on their role and on how they can earn more by increasing their participation in the process.
Following these steps can add value and motivate team members, but disputes still can occur. A best practice is to assign a team member to handle compensation disputes by referencing the playbook. It also makes sense to include a dissolution section detailing what happens when a team member leaves a team (although not necessarily the organization). Another recommendation is to periodically review the playbook for updates to the business process, new roles and responsibilities, or changes in the compensation-sharing structure the team may have in place.
Here’s an additional excerpt from the “Team Game”:
The “Show Me the Money” Syndrome
Did you know that money is mentioned more than 800 times in the Bible? Money has always been at the top of the list of most people’s desire, and it is the No. 1 cause of disputes in business and in marriages. So it should come as no surprise that compensation can be a challenge for organizations.
People want to feel appreciated for their work, and while accolades and awards can go a long way in showing appreciation, most people want it where it makes the most impact on their lives: their wallets.
When first forming your team, the initial worry among team members may be that their compensation will be impacted—that they’ll either lose money in a teaming environment or there will be an inequality among players. This is especially true in commission or fee-based businesses. Top achievers might fear they will not be able to achieve the income they have previously earned.
The question is: How do you fix it?
Excerpt from “The Team Game: How Your Business Can Dominate Year After Year” by Bellaria Jimenez and John F. Bucsek. For more information, visit: https://theteamgame.com/.
Bellaria Jimenez is president of MassMutual Tri State and co-author of “The Team Game: How Your Business Can Dominate Year After Year.” She is a Certified Financial Planner and Chartered Financial Consultant, and a member of GAMA, WIFS, FPANJ, and NAIFA. She has received several recognitions throughout her career, including the Hispanic Corporate Achiever of the Year; Top 50 Business Women in New Jersey; and the Prominent Woman Award. Her passion has always been to attract, train, and develop women, Millennials, and Hispanic advisors to help them reach their full potential. Due to her dedication and commitment to Financial Literacy Initiatives, she had the distinguished honor of ringing the opening bell on Wall Street during Financial Literacy Week.
John F. Bucsek is a Certified Financial Planner whose success in building and implementing change in financial firms spans for decades. He has been brought into organizations that require an overhaul when change is inevitable and all else has failed. He is the recipient of many industry awards and honors, and is active in several industry associations, including the Impact Committee for the AALU, the board of trustees of the GAMA Foundation for Education and Research, and President Elect for FPANJ.