Compensation, A Bridge To High Performance

Pay – just another budget line item expense...or maybe not.

True, pay is a cost, but if we view it as an expense we immediately set ourselves in conflict with the workforce. This is because the workforce is selling time, its primary resource, and is intent on getting the highest price for it.

However, if we view pay as an investment, concerned only with receiving a reasonable return on our investment, then we can develop a pay system that builds a partnership rather than conflict.
We transform pay from an expense to an investment when we link it to performance, i.e. incentive pay. Incentive pay is a sociotechnical bridge. That’s a fancy way of saying it can be used to link people to an organization’s objectives (business plan), resources (human and otherwise), systems and processes (workflow, operations, etc).

Here’s how it works. Compensation is a powerful communication tool. Start talking about pay and you get everyone’s attention. Link pay to performance outcomes and you have a tool for communication and motivation, the foundation on which to lead growth and manage change.
The process of developing an incentive pay system requires us to define those key elements that add value to the organization. Examples are profit, revenues, expense control, productivity, quality, customer satisfaction...you get the idea. The process also requires us to identify how to measure the performance of these value drivers and establish performance criteria for them (good performance, average performance, poor performance). When we link rewards to improvement in the measures, we establish a powerful platform on which to engage and develop our employees.

A properly designed incentive system encourages the employees to focus on what drives value into the organization. For example; if we tell the workforce they can earn an additional 10% of their pay if customer satisfaction improves by 15%, we most certainly will have focused their attention on customer satisfaction. We will also have developed within them a desire to understand how they can help improve customer satisfaction. If we take the time to educate them as to how their roles affect customer satisfaction (develop their line-of-sight), then we can ask for their commitment to improvement.

Focus, understanding and commitment. Sounds like just the ticket for a successful growth or merger strategy.