Pay Them More, Not Less
By Ian Brady
How companies compensate their employees is always a tough balance – they want employees and job seekers alike to view pay levels as fair and in line with what other companies offer for similar roles. At the same time, the natural mentality in business is to try and maximize revenue while keeping expenses to a minimum – especially during challenging economic times.
There are actually many reasons though why it might be prudent to consider paying your top employees more instead of less. We've all heard the statistics like 80% of your productivity comes from the top 20% of your employees. Numbers like that illustrate just how critical it is to retain your top performers and to attract more of those same types wherever possible. In this article we’ll show you how paying your top talent more instead of less can pay off exponentially on bottom-line results and can help take your company to that next level.
Why Pay More?
The success of any company ultimately rests on one thing – the performance of its people. Now ‘performance’ can be broken down much further, but in the end if the employees of a company aren’t producing results on a day in-day out basis then the company as a collective won’t be successful.
For this reason, it’s imperative to ensure employees are motivated, engaged, and happy in their jobs. Employees exhibiting these characteristics are much more likely to be productive, and thus contributing to the success of the company. Those that perform best for you, your A-Players, always have multiple options in terms of where they could work – they’re always in demand. Paying them well shows your appreciation for their eforts and contributions and a commitment to keeping them with your company.
Pay isn’t the only factor that affects things like job satisfaction and engagement – if you’re not recognizing your employees or providing great leadership, then pay alone won’t keep most employees happy. Pay however is a big piece of the puzzle for many and without it, those other factors will only motivate them so much.
Ensure There’s a Return For The Company
When we talk about paying employees more, it doesn’t mean you should just go and raise salaries company-wide. Top pay should be reserved for top performers since you should always expect to see a positive return on your investment. Those with a consistent record of past performance are probably more deserving of a higher salary.
That said, it doesn’t mean others in the company shouldn’t have the opportunity to become high earners as well. Put in place goals for everyone in the company to see how they respond. Set up a commission or bonus structure where people can earn extra for performance that earns the company more. Chances are you’ll be surprised as the opportunity to earn more is just the incentive many need to take their performance up a notch.
Part of the problem in coming to terms with paying people more is that so many companies view salaries and compensation as an expense rather than an investment. The fact is it only ends up being a true expense if you’re not getting any benefit from the money you’re paying out. Many companies tend to cap performance bonuses and limit the amount an employee can make. The problem with this is that people will work to the cap; if each additional dollar paid out is generating increased revenue, then why put a limit on the incentive? As long as the company is seeing increased returns, don’t cap how much an individual can make.
Change the Pay Structure
While the thought of less guaranteed salary usually seems unappealing to most at first, there are ways of creating performance-based compensation plans that are both attractive to employees as well as being beneficial for the employer.
Switching from a situation where employees earn a straight salary to a split of guaranteed income and performance bonuses can be a welcome change for all parties. While some might look for the safety of a guaranteed salary in this economic environment, A-Players will see it as a challenge and opportunity for greater returns. Many are happy to forgo a portion of guaranteed salary for the opportunity to make even more. A-Players know they’re good and are confident in their abilities to meet and exceed the expectations placed on them.
For this type of compensation plan to work, goals need to be transparent and individual so that employees feel they have direct control over achieving them - consider quarterly payouts as well to build trust. When executed properly, a situation like this is beneficial to both the company and the employee – the company doesn’t pay unless they see results, and employees have the opportunity to be rewarded financially for performing above and beyond and earning even more than if they were compensated strictly by their set wage.
Re-allocate Your Funds
While each and every employee plays a different role and in some way contributes to the success of the company, the people that really make a dramatic impact on your business are much fewer in number. As mentioned, it’s retention of these A-Players that should be your top priority.
At times when money is tight, it’s sometimes hard to be able to pay these top performers what you’d like, and more importantly, what they’d like. At the same time, there are probably a few people that you feel could do more or aren’t quite earning what they’re paid.
Layoffs should always be a last resort, but to be a leading company you need to have a team where everyone is contributing. Managing non-performers out will allow you to give your A-Players better compensation, and ensure the key people responsible for the company’s success continue to be leaders for you. In the wake of such events, be careful not to overburden your A-Players with work typically done by others.
Create a Talent Snowball
Combining a generous compensation structure with other desirable attributes such as great leadership, employee recognition, rewarding work, and a positive culture not only keeps your current top performers happy but will help in attracting more top talent to your company.
The real win comes as you start to generate momentum with great hires – like attracts like. Great people want to work with other great people, so as you gain a reputation for being a destination company for A-Players, you’ll find that where you had to work harder at finding them in the past, they’ll now be coming to you more and more.
Make it Part of Your Employer Brand
While you don’t want to be known as a company who just hands out money to anyone and everyone, being known as a company who seeks out the best and compensates them accordingly should be a key part of your employer brand strategy. It positions you as an employer of choice from both angles – that you employ some of the brightest and most talented people around, but also that you’re willing to pay well for that performance. A company that pays well also gives off the perception of success – that they can afford to pay well because they do well!
Making generous pay for top performers part of your employer brand will position you as a desirable employer and more importantly, help to attract the top talent in the market – exactly what your employer brand should be doing.
Pay + Great Management = WIN!
Pay isn’t the only thing top talent looks for, but by combining it with a solid management team that provides leadership and recognition, along with challenging and engaging work, you’ll help to position your company as an attractive employment option for top talent in the market and ensure you hang onto your current top performers.
By adopting a more generous compensation scale that rewards high performance, you’ll undoubtedly see an increase on both sides - engagement, retention, and overall job satisfaction will rise on the part of your employees, and productivity and performance will increase for the company. For those that say they can’t afford to, they might want to think about if they can afford not to?
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As Partner, Ian Brady works in partnership with some of the brightest minds in the technology, financial services, and energy industries.
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