Now you may be asking yourself, why is he talking about this? Isn't it rather obvious, like 2 + 2 certainly equals 4? Doesn't everyone reward employees for their personal efforts?
Sad to say though is that there really are organizations out there that don't view the employer-employee relationship in quite the same way as the rest of us. Their thinking is, "We pay them a salary for doing their job. Why should we pay more? Case closed."
Okkkkk, but taking a page out of an old Compensation 101 textbook let me list the reasons that such a negative attitude about your workforce can become a problem, both short and long-term.
- You need to pay competitive wages: While this point is seldom argued your comparative marketplace is a moving target. What looks like competitive today soon won't be, so unless you have a process for updating your competitiveness those pay rates will start to slip behind. And that slippage will pick up speed over time.
- Business costs rise over time; so do costs for your employees: The price of most items is higher today that it was a year ago. If your employee costs (pay levels) are fixed/frozen your employees will have an increasingly difficult time making ends meet.
- Behavior rewarded is repeated: It's an old saying but is worth repeating until everyone "gets it." If you reward desired behavior (good performance) you'll likely get more of it. Conversely, the lack of reward tends to encourage average behavior, or worse.
- Do you want a high-performance culture?: If you fail to provide employees with equitable and competitive pay that's linked to their job performance, what you'll get instead is a lot of Joe Average performance. Because an employee's personal self-motivation (they'll work hard anyway) is not sustainable. That personal battery of enthusiasm will drain down and shut off.
- Employee expectations: Yes, they expect to be paid a reasonable base salary for their work, but they also expect to be both acknowledged and rewarded (pay increases) for making a continuous effort on the company's behalf. No one will work well for very long with their pay frozen or the likelihood of more money being a "maybe" or a "we'll see."
- An elemental cost of doing business: This may be hard for some to understand, but if you're going to operate a business there are certain costs that need to be incurred. Otherwise, don't bother. And one of those costs is to properly pay the people who are working for you. They keep the business going, and you should never forget that.
- Honoring your commitment: Do you proudly tell everyone who will listen that you're a "pay-for-performance" company? Do you believe that employees drive business success? Well then, you had better walk the talk. Because employee trust is at stake, and failure to hold up your promises will ensure business mediocrity, if not a slow descent into failure.
- You should fear the alternative: If you decide to march to the beat of a different drummer, to say "nahhh" to the above, then consider what your future likely holds in store for you. Because when employees start to say, "why bother?" you're in trouble.
- Dissatisfaction with management: This is both negative and infectious. Disgruntled people are not quiet people.
- Reduced morale: Sad faces and blank looks are not signs of an engaged workforce. Talk around the break room will lean toward other "opportunities."
- Reduced productivity: Employees take their foot off the gas pedal. What you get from them starts to drop off from a desired 110% effort to somewhere south of 100%.
- A higher degree of disengagement: When your employees start to mutter, "I don't care" - that attitude will spread, either slow or fast. What it builds is a low performing culture. Think of your business as a car driving around town with the brakes on.
- Increased turnover (leavers) - of the wrong sort: better performers, who always have an option in the marketplace. Someone else will tell them, "We love you. We'll take care of you. Come work for us."
If you believe that employees are important to the success of your organization, then not having a proper pay-for-performance program in place to recognize and reward job performance on a regular basis is a mistake of the highest caliber.
Then again, perhaps some believe that employees are an easily replaceable commodity, that their pay is a cost worth trying to reduce, rather than an investment. Employees are not people, but simply cells within a spreadsheet, or blocks on an organization chart.
Just remember that what you sow is what you'll reap.
Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations. He is also associated with several HR Consulting firms as a contributing consultant. Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation. He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a clowder of cats.
Creative Commons image, Bob Fett Reward," by pasukaru76