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08/31/2012

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I agree Ann. But I think the differentiation should be made between employees with critical skills even if average performers rather than high performers of any job function.

With budgets so tight now and likely to stay that way --- to me the dividing line is between those with critical versus core skills. Critical skills defined as skills that are "critical" in making company's goals and strategy.

HR has a hard time with that along with operations. The era of consistency may be on the wane ---- that will be a big struggle for HR.

I enjoyed this article and plan to recommend it as a follow up to my recent blog post http://www.nosmokeandmirrors.com/2012/08/09/does-your-sales-compensation-plan-create-%E2%80%9C-commission-junkies%E2%80%9D/ about how the wrong compensation plan can actually hurt your brand in the mind of your buyers.

It is a tough balance as we try to reward the behaviors we want and motivate under performers to improve. However if we swing the pendulum too far, one way or the other we may realize brand damage in the market as our salespeople become what I refer to as “commission junkies”.

I have used targeted total compensation ranges in the past to overcome the concerns you shared.

I really enjoyed the reports

Mark

Thanks for the posting on the importance of differentiation in rewards.
It is common to confuse two things related to reward differentiation: fixed pay solutions, and variable pay solutions. They are NOT one and the same, so we need to separate solutions of one type from the other. It is also common to assume that proposals to provide EXCEPTIONAL contingent rewards to persons who perform EXCEPTIONALLY will mess up the budget. Budgets are about planned revenues and expenditures (not just the latter, even though it is the latter that most people in HR and Rewards see or are told about).

When someone goes the extra mile to help the organization exceed projected performance levels and / or revenues, there should be few 'budgetary' constraints on rewarding them from some of the extra revenues, and other intermediate outcomes leading to the same. Even though the line of sight is not always so readily obvious between individual and team performance on the one hand, and measures of revenue on the other, there is an increasing body of empirical evidence of the links (between high performance behaviors and revenues). Additionally, it is well established that the contributions of high performers, is in many areas, significantly higher (sometimes in multiples) relative to the ‘others’. We do need the others, by and large. But to ignore these links and evidence is to allow oneself to be relegated to the limiting, backwaters of traditional fixed pay solutions (and don’t get me started on the debilitating effects of so-called ‘Merit pay’ and merit matrices that are largely used in traditional fixed pay solutions in, ….you guessed, it budget-conscious-and-constrained environments).

We all know, or should know, that regular or excessive reliance on fixed pay solutions is limited at best when it comes to finding creative solutions to meet the needs of organizations in our competitive, and changing environments. Recent evidence of excesses in the application of variable rewards notwithstanding, it is to this latter realm -- broadly defined to include differentiated total rewards -- that we are more likely to find answers to many of the emerging challenges of our environment. In competitive environments, we do need real differentiation in total rewards: solutions that go well-beyond the now generally pedestrian (and sometimes puerile and problematic) practices of tiny tinkering with fixed pay.

The hackneyed phrase, 'You get what you pay for', is a truly loaded one. ‘Pay’ is, today, multifaceted, multi-layered, and indeed very complex. Thanks again for the posting.

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