The Compensation Conundrum

Jim Collins in his book Good to Great writes, “The purpose of a compensation system should not be to get the right behavior from the wrong people, but to get the right people on the bus in the first place and then keep them there.”

Every compensation plan should be constructed to help the company achieve its operational and strategic goals and to attract, reward and retain the right people. If the plan does not accomplish these two objectives it needs to be restructured, unless your goal, of course, is to attract and retain average or less-than-average performers.

Today’s workforce also operates somewhat differently from previous generations. There was a time when the employee and the employer had an unwritten social contract. The employee was loyal to the company and vice verse. Somewhere along the line this social contract was broken. Companies have less loyalty to employees and employees are often accused of being loyal only to themselves. If this is true, today’s workforce needs a different kind of compensation program.

Today, the skilled workforce is shrinking. Companies are often looking for employees at other companies. Losing a skilled worker to a competitor is not something any company wants to experience. Compensation is one aspect of how you keep employees, but not the only or most important.

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