Compensation can be a real positive in influencing the performance of a company, or it can create real problems.
I have never met anyone who said, "I think I make too much money." I have also never met anyone who didn't say, "I would like to make more money than I do." The fact is most people would like to make more and almost everyone feels they are worth more than they are paid. I spent some time years ago in analyzing a large financial company and a mid-sized technology company. I conducted climate surveys and both companies were ripe for this type of analysis because overwhelmingly people did not think they were compensated fairly. This was also a prime reason for turnover in both companies.
Not surprisingly the less experienced, entry level people felt most strongly about being treated unfairly when it came to pay. Executives, and senior sales people were unanimous in a desire to make more money but almost all of them thought they were compensated fairly. The exceptions in this last group brought me to an interesting assumption.
The exceptions were largely in sales or a few key executives that were able to identify exactly how much revenue they personally brought to the company, or exactly how much they had saved the company by changing practices. I interviewed each of the people in this category as well as entry level positions as one group and then interviewed those that felt they were compensated fairly as another group.
The group that felt their pay was too low tended to be a little less experienced and more removed from P&L responsibility. Many of them would say things like, "I brought in over half a million in revenue last year and I only made $X, I'm honestly thinking about starting my own business." This was a revelation. So I asked how much profit do you think that half a million represented? The answers were all over the board and consistently higher than the actual gross margin. Then I asked them to give me a net number represented by that same revenue. Again the numbers were much higher than actual.
We then spent the next year costing and qualifying the value of positions and in some cases an increase in base was warranted. All of this was done using benchmarking within the specific industries.
In all cases we were able to determine how every position could have a pay-for-performance component, even administrative staff. We also created a communication plan that allowed for everyone to participate in and understand how they were compensated and what they could do to make more in their current position.
One year later the survey results were much different. People were in fact paid more, but the company also made more as a result of the pay-for-performance programs. Less than 2 percent felt they were not compensated fairly. Ninety-eight percent wanted to make more money but felt they were compensated fairly when compared to others in their industry or their company.
Do you think people in your company know how much they are worth? Do you?
GLEN BLICKENSTAFF is the CEO of The Iron Door company, which makes high-end doors and windows. Glen has a track record of turning around and managing retail, building and financial companies. @glenblickenstaf