Page 99 - Retaining Top Employees

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Compensation: Why It (Almost) Doesn’t Matter 87

To use your compensation package to build trust, it must be
built on four pillars. It must be:
1. Fair
2. Clear
3. Consistent
4. Honored
It is harder to fulfill these four requirements than it seems,
because changes in circumstances can place some of these
characteristics in conflict with others.
Here’s an example. You’ve set up compensation packages
for your salespeople. Then, if a new line of products is intro-
duced, you may need to change the payment terms of commis-
sions to reflect this. You’re being fair, certainly, but maybe the
payment schedule becomes overly complex and therefore
unclear. To simplify the schedule, you introduce a few more
changes in wording, some of which work and some don’t.
Before you know it, although you’ve acted with the best of
intentions, some employees feel that you’re not being consistent
in the way you are paying them. The next thing you know, while
you’re trying to get your commission definitions right, a month
slips by without payments, because no one is quite sure on
what basis to make the payments. Result? A breach in the trust
between you and your employees.

Pick Your Issue
In my experience,most organizations are consistently
weak on one of the four pillars,not on all four. In that
case,don’t try to redesign your compensation policies from scratch
around all four pillars.You can improve them considerably by concen-
trating on just one aspect.
It’s worth polling your employees to get their perception on the
area where the policies are weakest.Ask them to indicate whether
they feel you can make the most improvement in being fair,clear,or
consistent in your policies or simply in honoring the compensation
agreement.Then,work on that one pillar.