When Kenexa High Performance Institute researchers Brenda Kowske and Jack Wiley embarked on a years-long study of best HR practices, they asked thousands of employees worldwide a simple question: What is the most important thing you want from the organization for which you work?
They heard one response over and over: Fair compensation for a day’s work, and enough of it.
For everything else that contributes to employee satisfaction, most people wouldn’t do their jobs free. Compensation is a critical tenet of the employment contract, Kowske and Wiley write in their new book, Respect: Delivering Results by Giving Employees What They Really Want (Jossey-Bass, 2011).
They urge employers interested in attracting and retaining excellent employees to ask these questions about their compensation practices:
1. Do you have a stated compensation policy? A good policy spells out a broad framework within which decisions about starting pay, raises, variable compensation and related issues are made. Consider your policy a strategic planning document. If you find yourself making compensation decisions on an ad hoc basis every year, you probably need a sound policy.
2. How well do you explain benefits to employees? Do they understand that benefits comprise a significant portion of their total compensation?
Sure, you should spell out the value of your benefits in your handbook. But you should also hold regular face-to-face meetings to explain what they’re worth. More important, you should make sure employees understand that benefits only have value when they are used.
3. Do employees have access to reliable information about pay practices? If the office grapevine is where most employees learn how compensation works, you need to fix that. Fewer topics cause greater dissension than uninformed speculation about how much co-workers earn or how big their raises were.
Take control of the rumor mill by offering concrete information about how you (and your supervisors) make pay decisions. Share the formulas you use to calculate merit increases and set variable compensation levels.
4. How much does pay depend on performance? Do employees understand what they have to do to earn a fatter paycheck? Do your merit-increase and variable-pay criteria make sense from an employee’s perspective?
Is it within employees’ control to achieve goals that pay off? Or are the performance measures largely based on market forces ordecisions that employees can never influence?
Here’s where you need to work hard to alignpriorities, management attitudes and employee expectations. Transparency will help. That doesn’t mean posting everyone’s rate of pay on the company bulletin board. It does mean making sure everyone believes that compensation is based on a rational system that rewards effort and other measurable contributions to the organization’s success.
5. How much do variable pay plans really pay out? No surprise: Employees tend to like plans that actually reward better pay for better performance. If your variable-pay program promises bonuses every year, but no one ever seems to get a bonus, you probably have a credibility problem.
Note: It’s impossible to address variable pay and pay for performance without carefully considering how your performance-appraisal system works in real life. If employees and supervisors don’t take your performance-management system seriously, good luck stamping out cynicism about merit raises and variable compensation.
6. To what extent do compensation and benefits programs reflect your organization’s values? If you say you’re a customer-driven company, your compensation systems had better reward excellent customer service. If research and development is your organization’s competitive advantage, it’s reasonable to establish bonus criteria that reward creativity and initiative.
Do your recruitment materials tout a corporate culture that honors work/life balance? Make sure your benefits support that—through offerings such as wellness programs, flex schedules, leave policies and other programs that acknowledge that employees don’t just live to work.
7. How would employee dissatisfaction with pay and benefits affect your organization? The morale hit could result in poor employee performance. It could create a revolving door, launching an exodus of your best employees.
Plus, if word of dodgy pay and benefits practices leaks out, you might find it harder to attract the new workers you need.
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