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Payment Philosophy: Part Two

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Paychecks are not Managers

Many businesses expect that an employee’s need to receive a paycheck will manage the employee’s behavior. This is simply not true. Compensation plans must reward behavior that creates success; pay is not the primary management tool. The proper training, coaching, support, and technology all need to be in place in order for employees to meet the organizational goals. If managers are not actively managing their employees through constant coaching, most employees will not reach the level in which a pay raise is acceptable. Employees will quickly become frustrated if they are constantly passed up for a raise but never told why. Managers or small business owners must be active participants in their employee’s success, because their employees are active participants in the businesses success or failure. Good compensation plans must line up with the business plan and strategies. Managers or small business owners must look at their employees as success partners and align their business goals with the employee’s compensation plan. The great thing about pay-for performance strategies is that variable pay allows employees to be rewarded when their work causes the company success but also does not hold the company to high fixed salaries that they can’t afford if sales fall.

Is Your Compensation Plan Perceived as Fair?

Ultimately, the success of a compensation plan comes down to how it is perceived by employees. If the plan is consistent, easy to understand, and attainable, it is more likely to be seen as fair even if the pay is lower than some competitors. Employee often judge if their pay is fair by taking into account their work load versus their pay, and their pay in comparison to their peer’s pay who have similar skills and responsibilities. If employees see any inequality with their pay, they will try and correct it by not working as hard or looking for a better paid position within a different organization. When looking into how you pay your employees, it is important to remember that attracting and keeping quality employees will keep you on track to meeting your own business goals. Begin by starting with a pay structure that will encourage quality employees to apply and continue your success by presenting opportunities for your employees to grow with you.

July 25, 2011 by Executive Editor, Mark Zarr.  All rights reserved 2011

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