The Balancing Act – Compensating Performance
Executive Summary:
• Provide a culture which aims at developing its people and compensating them fairly. • Mitigate risk by not having the organisation too dependent on any one individual.
• “A” Players love working with “A” Players and therefore, attract the same.
• The internal communications piece is a powerful retention tool. • What is the percentage of gross margin budgeted for total people costs?
• Be slow to give away equity.
Over a recent coffee in Sydney’s CBD area with a small business owner, I discussed her strategies for compensating her high performers. Her retention strategy for pillar leaders was to give them equity and pay them, on target, 50% above the market. On further exploration, she revealed how fearful she was of other key members leaving the organisation. However, despite showering this leadership team in gold, there had been a recent defection. There was shock and self-recrimination on what should have been done better to retain this “key” leader in the organisation.
People leave organisations. The reasons for leaving vary. It is rarely just for compensation. In a talent-short market, great talent will always have a choice. You should always assume your best talent is regularly being head-hunted. The best strategy is to provide a culture which aims at developing people and compensating them fairly. At the same time, it is important to mitigate risk by not having the organisation too dependent on any one individual. That includes you, the business owner. Sharon Koss writes that compensating performance needs to address three levels:
• Talent attraction
• Peak performance
• Talent retention