The relationship between compensation and contribution.
I was reading a book by Charles Coonradt (one of my favorite authors and an all around great guy) titled “Managing the Obvious” and I came across an idea regarding compensation and contribution.
Chuck (to his friends) believes in scorekeeping. (Setting 3 to 5 goals with each employee and then publically displaying their results.) He feels that this motivates the employee and I agree. According to “Managing the Obvious” he also believes that if things are going correctly every employee will feel underpaid because he/she will always need to contribute more than they are compensated for. If the opposite becomes true then the company is in trouble.
In an industry where 72% productivity is the norm I have seen first hand many companies where lack of productivity seriously damages the business (to view a webinar on how to increase productivity). Employee costs are too high for what they contribute which reduces profits to the point of being non-existent.
I spend a lot of my time with Automotive Service Business Owners creating business plans and setting goals for their company, then teaching owners to meet with employees, set (and agree upon) goals and create scorecards for the employee surrounding these goals (for help learning how to effectively negotiate with employees). I also teach them how to tie the goals to pay and performance, which is not commonly done in the Auto Service Industry. I think that most owners believe that if they tell the employee that he/she must contribute to get his/her compensation then the employee will quit. My experience has been quite the opposite. In my experience, employees that have goals and visual measurements that are tied into their compensation contribute much more than employees that don’t and are happier and more confident in their positions.
So… If you want happier and better paid employees, set some goals, display performance and tie that performance into their pay. (for assistance with understanding and creating performance based pay plans click this link)