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How to Incent Your Employees for Higher Performance

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Burlington Chamber of CommerceLunch ‘n Learn

September 2013

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Today’s Agenda

1. What are key components of an effective compensation program for small/medium-sized businesses?

2. How to effectively use bonuses as a reward for performance

3. A review of non-cash rewards and programs to help you retain your best employees

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Your Compensation Program

Why?

• Shows your employees that you have done your due diligence• Ensures equity among your employees• Provides a forum for employees to understand

structure

“You are not just picking numbers out of the air” 3

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Internal & External Equity

Fairness = Internal Equity + External Equity

Internal Equity• Allows you to compare dissimilar jobs

within your organization• Skill, effort, responsibility, working

conditions4

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Internal & External Equity

Fairness = Internal Equity + External Equity

External Equity•What is the market paying for a

comparable job?• Participate in/purchase salary surveys,

on-line research, information gleaned through hiring process 5

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Compensation Structure

Includes:• Writing Job Descriptions• Conducting Job Evaluation• Collect External Market Data• Develop Salary Ranges (or Total Compensation)• Ensure integrity of Compensation Structure

* Will need to enlist the services of a Human Resources professional 6

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As a minimum…

• Establish a simple ranking scale • Assign a salary/wage range as opposed to a set

rate of pay for each job• Consider dividing range into thirds

L3 – new employees or employees in trainingM3 – fully qualified/match external market rateU3 – experienced/paid above market

• Decide on what to communicate to employees

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Bonus Programs

Why?

• In these times of low annual salary increases, use bonus/incentive plans to retain top employees• Motivate employees toward specific company

targets, performance objectives, team results• Reward for incorporating company values into

completion of work responsibilities 8

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Bonus Program - Key Components

Who is Eligible?

Criteria for Achievement

Calculation of Reward

When is Bonus Paid?

Termination of Bonus Plan9

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Success of Bonus Program

To ensure program success in motivating and retaining employees:

Document the program

Communicate plan to eligible employees

Regular status updates of achievement against criteria (monthly, quarterly)

Regular review of program (annually)

Self-funding10

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Reward, Recognition & Non-Cash Programs

Employee Benefits Programs

Recognition Programs

Other non-cash programs

If the employee does not value the reward provided, it will not serve as a motivator toward future performance 11

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Compensation or Reward?

Cash compensation:• Low wage earners who live paycheque to paycheque• No specific actions you wish to reward• Temporary, contract or seasonal employees• Bonuses easy to meet and employees have come to

depend on them to make ends meetRecognition & Reward (cash or non-cash):• Basic financial needs met; awards viewed as special gift• You want employees to focus on key targets or behaviours,

or specific short-term situations (e.g. product launch)• To retain top talent• ‘Model’ top performance for other employees

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Fairness & Trust Trumps Cash

Does money buy happiness?• Fairness drives satisfaction – what people really

value is not money itself but the sense of fairness that surrounds it• Trust stimulates the most positive reactions –

people want to trust those they interact with and want to be trusted• Fairness and trust lead to cooperation – these

feel-good effects lead to voluntary cooperation 13

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Fairness & Trust Trumps Cash

Manage to be fair and trusting• Get to know your employees as individuals and

workers; this means spending time with them• Do what you say you will do• Trust your employees – trust your employees to

do what is right instead of instituting a myriad of controls that show the opposite (95% rule)• Publicly recognize and reward what you value• Privately critique and discipline 14

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Questions & Answer

Thank you for your time.

Questions? Comments?

Faye Wales, Boomer Match to Business www.bm2b.ca15