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Compensation, Remuneration And Rewards

 

As golfers say, if you focus on what you’re doing wrong, you’re going to keep doing it. If you worry about hooking that next shot off the fairway, that’s exactly where the ball is likely to go.

If you want to lift your game, you focus on what you want to do right. And if you want your team members to lift their game, you encourage them to be positively focused. You can do this by congratulating them and rewarding them when they perform well.

The rewards may be monetary, but money isn’t everything. It’s not even the number one reason people take, or remain in, their jobs. A Bankrate survey of graduates found that their salary expectations were generally reasonable, and that they were more focused on getting a job that had good benefits, such as a medical and dental plan or life insurance.

Workplace training and opportunities for career advancement were also more important than the size of the pay packet. Other surveys have found that team members place a very high value on being recognised for their achievements, having meaningful work, and being part of a good and effective team.

This means two things. First, you don’t need to focus solely on money when you think about rewarding your team members. In fact, you might find that a lower take-home salary, tied to a good benefits package, might be more attractive to the team and more tax effective for you.

Secondly, it means that good management practices can save you money. If you manage your team well, you won’t be competing just on the size of the pay packet. This doesn’t mean that you pay people less than they are worth. That’s never a good idea. You don’t want anyone to defect to a competitor for a few thousand dollars, especially when the replacement costs can amount to months of salary.

It does mean that you might take some of the sting out of salary demands if you reward people in non-monetary ways. This can take the form of frequent and positive rewards and recognition. Not only will this make team members feel good, it will also reassure them that they are mastering skills and making progress.

Praise is most effective at the time it is earned - so frequent feedback can be more effective than a year-end bonus, unless that bonus is tied to clear performance goals. Small, irregular celebrations can have an uplift effect on morale. You could take your team out for a night together after a particularly tough month, for example, or you give them some extra time off. An extra $50 in a pay packet, along with a thank you note, can give everyone a real boost. And people respond very well to informal encouragement, such as a phone call or a small gift.

You might reasonably put aside three percent above your payroll costs for celebrations and rewards. While this might seem like a large investment it can easily reap a good return in improved productivity by happy team members. It can also be more effective if you personalise the reward. That is, be aware of individual tastes and preferences, giving football tickets to one team member and opera tickets to another.

You can also bear this in mind when designing salary packages. As a smaller business, you might be less bound by policy than large companies. You may also be able to show flexibility when setting benefits and working conditions as part of a salary package.

Of course, rewards are not just a way of maintaining morale. They are also a way of maintaining focus. This means that both monetary and non-monetary rewards should recognise achievement against clear and objective performance criteria. The criteria need to be measurable and they ought to have an obvious connection to the performance of your business.

For example, a team might have the goal of cutting costs by 10 percent over a 3-month period. Or members of a sales team might have uncapped commission for winning new clients. If criteria are sufficiently precise, employees should be able to measure their progress on a daily or weekly basis.

Having clear and measurable criteria will also help you create a culture in which individual performance can be rewarded without provoking too much resentment or envy. It will be clear that individuals have earned their reward and that the same opportunity is open to everybody.

Try not to give rewards that benefit one or a few team members to the exclusion of others. If your sales team has had a great month, don’t reward just the top two or three performers. That tends to get people working against each other rather than with each other.

You may choose to mix both individual and group incentives as a way of keeping your team cohesive. You might have an annual bonus that is calculated according to the performance of a whole team, for example. There is a drawback to rewarding whole groups, in that some members will be tempted to coast and reap the benefits of other people’s effort. But you can supplement the group incentives with individual incentives which will make such a scenario less likely.

And, finally, when you set up incentive schemes such as those involving bonuses, make sure that you deliver. If a bonus is not tied to any particular performance goals, then you might be able to say to your team, “Look, these are our figures for this year. We just can’t afford a bonus”.

But if you tie a bonus to individual performance, the only option you have is to deliver, regardless of what sort of year you have. Performance management relies on you maintaining credibility. If you ever fail to deliver, that credibility will be damaged along with the effectiveness of any future incentive schemes.

So, when planning how much to reward your team, look very carefully at your finances and revenue projections for the year and make sure that you can deliver in all circumstances. If you have any doubts in that area contact us for assistance.

Until next week,
Mike Reddy
www.syb.com.au