If you are like many of the executives I work with, you struggle with your compensation programs. You want to control costs, be fair and reward the top performers. You understand that a strong and balanced compensation plan will help you attract, develop, and retain productive, happy employees. Maybe you want to improve your plan, but you haven't had the time to work on it.

How do you get from your current situation to a compensation program that is a truly fair and equitable programs for your organization?

Let's start with the state of many small company pay structures. I typically see a structure that has evolved over the years based on two principles. The first is to keep payroll costs low. The second is based on expediency and involves paying what is demanded to solve problems as they develop.

The longer these "structures" evolve, the more they become internally inequitable and out of sync with the market. They create problems because they cannot be justified to staff and have a negative impact on the level of talent in the company.

Interestingly, once you start thinking about how to make it better, the steps flow one to another. The first step is to create a structure.

The structure is a progression of salaries with the midpoints ascending in relation to market value and value to the company. Each job has an associated range, demarked by a midpoint, minimum and a maximum. A compensation professional can help you develop and manage ranges. Once these ranges are defined, your options and strategies expand.

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Here are seven ways a compensation structure will help you manage smarter

1. Structure helps you build for the future. In my experience, and to the surprise of most owners, when a structure is created most employees fall into the appropriate range. True, employees may be low in their ranges. However, management is not compelled to give anyone a raise. Having ranges creates an opportunity to think about what your employees can do to increase their value to the company. Increases can then be tied to performance and development targets.

2. The mid-point, not the maximum, is the target. If the structure is properly positioned in relation to the market, the mid-point tells what a fully qualified person should be paid. This means that smaller and slower raises are appropriate for those who haven't developed target skills and faster and larger raises are given your top performers: those who have skills and have showed they can use them. Communications with individual employees about compensation isn't limited to reactions to employees asking for more money. These conversations become about the how the employee can provide more value to the company in order to increase their compensation.

3. Being creative about the range between mid-point and maximum. Employees who are paid above the mid-point should be the top performers. It is likely that they are more valuable to you than to another employer because they know the culture, values, procedures, and personnel in your company. They should be paid for their value. At the same time the current employer should recoup gains for training them. These are the employees who can be challenged creatively. How can the organization make their raises and bonus rewards contingent on company performance and individual performance?

4. Change from profit sharing to incentives. Individual incentives must be part of a top-down goal-driven initiative. The CEO, owner or General Manager defines corporate objectives in very specific terms. The acronym is SMART (Specific, Measurable, Attainable, within Responsibility, and with Time Frames). SMART goals build in criteria that allow everyone to see whether they have been achieved. The corporate goals are then parsed between departments and within departments between people. In theory, everyone has goals. Bonuses are tied by a formula to corporate and individual results. Expensive? It doesn't have to be. Research shows that the goal itself provides motivational incentive and that moderate rewards work as well as big ones. The important feature is that individuals have some control over the size of their rewards. That gives incentive programs the motivational value that profit sharing lacks.

5. Harness the power of groups. Should you have only individual goals, or do group goals work as well? The advantage of group goals is they can bring group social pressures as well as economic incentives into play. Once again, research says that having them is more important than their size. Brainpower and creativity is more important than cash in making these work.

6. Communications about company performance becomes meaningful. Performance goals encourage communication about the performance of the company and give employees a reason to care. At least three meetings are mandatory: (1) a meeting at the start of the year to share corporate goals and the ground rules of the incentive program; (2) a mid-year review to discuss results and encourage performance; and (3) an end of year summary, congratulating staff for good work or reviewing what was learned, so there will be greater rewards for all next year.

7. Performance management and reviews can become a way of life. What is the purpose of a performance review in a performance oriented culture? One purpose is to look back and evaluate what was done the previous year. The fact that you have created performance goals and development goals makes this a more productive exercise. The creative part is that you can look forward and begin dialogue on how to do better next year.

Is this a program that can be put off, or should you be working to rationalize your compensation program, starting today? You have to ask yourself, as the small business owner, what is the danger of not putting a solid compensation plan in place, and allowing the current situation to continue?

If you believe in the value of money, you should ask is you are getting as much as you could from your payroll expenses. If the answer is no, it is time to start making the changes that will help you get more value from your investment in people.

Either way, you must believe in the value of people. It is your human capital that will grow your business, develop loyal customers, and contribute to your increased profitability.