Base Salary
When a business starts or is struggling to survive, cash flow determines compensation. Success leads to organizational complexity and the challenge to manage compensation costs while ensuring market rates (to recruit well-qualified people) and internal equity (so that employees feel that compensation is fair).

A salary structure that organizes base salaries in terms of value to the company and assigns salary ranges to jobs allows a company to control expenses, while factoring market conditions and employee equity into the equation. A salary structure is the first building block in striking the right P/PC balance.

Incentive Programs
When a business starts, the easiest way to pay bonuses is from profits. In an incentive program that motivates performance, rewards are linked to job responsibilities so that each employee's behavior is a significant determinant of the reward. In a small organization where everyone is top management, these conditions are met, more or less. As the organization gets more complex and employees are further removed from management, profit sharing incentives have less and less motivational value because individual performance has less and less to do with individual incentive payments.

Indeed many studies show that the most important element in an incentive program is the opportunity to impact results. The connection between job responsibilities and the metrics for reward is more important than the size of the reward! Of course total pay must be competitive to attract and retain employees. However, the design of the program has a major impact on performance.

A well-designed incentive program helps build profits and, just as important, directs incentive payments to those who contribute most to the success of the company.

Development
Employees know that they are important to a company when the company shows interest in their development. Systematic attention to development of human assets is not part of the agenda of most organizations. Everyone is too busy! Yet, this is more critical

Companies that develop talent devote time to determining where new talent is needed, who the most valuable employees are, and what is being done to compensate them and develop them. They understand that value is more important than cost and that the reward for nurturing talent is succession depth and fewer resignations of the most valuable people. The expense of such a focus is minimal. When development is a priority, the organization can walk the walk and communicate two important things to key employees: (1) they are valued, and (2) their future and the future of the company are aligned.

Now is the time to evaluate your company's compensation program and ensure that it helps you control cost AND nurture your most important asset. It is also the time to plan to develop the skills and potential of your best employees as a critical step in building the future success of your organization. Give me a call. Lets talk about what you can do now.