{"id":926,"date":"2018-01-17T10:00:03","date_gmt":"2018-01-17T10:00:03","guid":{"rendered":"http:\/\/rocksolidbizdevelopment.com\/ourblog\/?p=926"},"modified":"2025-07-01T17:20:22","modified_gmt":"2025-07-01T17:20:22","slug":"compensation-equity-issue-people-want-know-compensated-fairly","status":"publish","type":"post","link":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/compensation-equity-issue-people-want-know-compensated-fairly\/","title":{"rendered":"\u201cCompensation is an equity issue.  People want to know that they are being compensated fairly . . . &#8220;"},"content":{"rendered":"<p>The Overture Group is an executive search firm with an additional specialty in compensation consulting.\u00a0 We recently heard a presentation by Bob Lindeman and Mark Reilly, both managing directors of that firm.\u00a0 They reminded us that compensation is (or should be) a strategic issue, not a simple, tactical, what-are-we-gonna-pay-this-person issue.\u00a0 And our strategy should consider not only the outcomes we hope to achieve, but also the compensation methods we intend to use.\u00a0 That is, do we want pay a straight salary or do we want to use some combination of salary plus incentive (pay for performance)?\u00a0 If we want to use incentives of some kind, should they be short-term or long-term incentives, or both?\u00a0 We also need to consider what portion of our total compensation package should be salary and what portion should be incentive.\u00a0 So there\u2019s a lot to think about.\u00a0 For more on this, please continue reading below.<\/p>\n<p>\u201cCompensation is an <strong><em><u>equity<\/u><\/em><\/strong> issue.\u00a0 People want to know that they are being compensated fairly compared to others doing similar work within the company, and to others doing similar work in other companies.\u00a0 After that it\u2019s a non-issue.\u201d\u00a0 \u00a0 \u00a0 \u00a0~ Richard Teerlink, former CEO, Harley-Davidson<\/p>\n<p>Mr. Teerlink is right as far as it goes . . . nothing ticks off an employee as much as learning that someone else is being paid more for the same work.\u00a0 When pay practices pass the fairness test, that may make compensation a \u201cnon-issue\u201d as far as employees are concerned, but not for managers.\u00a0 As long as managers are pursuing, reviewing, amending and\/or changing compensation strategies, compensation will continue to be an active issue for them.<\/p>\n<p>Using compensation strategy as a starting point, let\u2019s look at a few such strategies and the outcome each may be aimed at achieving.<\/p>\n<ul>\n<li><u><\/u> If you are intent on attracting the best talent available . . . particularly if the market for key positions you need to fill is highly competitive . . . you may choose to pay a premium over the going rate for those positions.\u00a0 On the other hand, if there is a glut in the market for the sort of people you need, you could actually consider a compensation package that is at or below the market rate.<\/li>\n<li><u><\/u> Companies often use long-term incentives to retain their key people.\u00a0 These programs, sometimes called \u201cgolden handcuffs,\u201d set aside a pool of bonus money that require a participant to stay with the company for a prescribed length of time.\u00a0 If the participant bolts early, the bonus is forfeit.<\/li>\n<li><strong><u>Better payroll control.<\/u><\/strong> Sales commissions have always been based on the idea that you only get paid a commission on what you sell.\u00a0 It doesn\u2019t matter how long or how hard you worked.\u00a0 No sale, no commission.\u00a0 When a similar incentive structure is applied to administrative and operational roles, participants are paid the incentive amounts only when certain specified goals are met.\u00a0 In this way, payroll becomes more flexible in that it ebbs and flows as the participants achieve (or fail to achieve) the key goals that will move the company forward.<\/li>\n<li><strong><u>Improved communication.<\/u><\/strong> As they say, \u201cFollow the money.\u201d\u00a0 A well-conceived incentive program shows the participants, in a clear, unambiguous way, where the company priorities are, where the company is trying to go, and the role he or she must play to help the company get there.<\/li>\n<li><u><\/u> Not in the equal-pay-for-equal-work way Richard Teerlink referred to.\u00a0 Here we\u2019re talking about an incentive system that rewards, not just the CEO, but all the key players who helped achieve the company\u2019s goals.<\/li>\n<\/ul>\n<p>As you consider the compensation strategies and outcomes that would be most appropriate for your business, consider these do\u2019s and don\u2019ts:<\/p>\n<ul>\n<li>Do keep it simple. If participants have to go to an Excel spreadsheet to figure out what the plan can do for them, forget it.\u00a0 That will be a non-starter.<\/li>\n<li>Don\u2019t try to make an omnibus comp plan. It\u2019s tempting to try to build in provisions aimed at governing all behaviors and all activities of the plan participants, but don\u2019t do it.\u00a0 That will only add a layer of complexity that will be unhelpful and will violate the bullet point above.\u00a0 A lot of that stuff you\u2019re just going to have to manage the old-fashioned way.<\/li>\n<li>Do make goals that are tied to compensation as specific as possible. Sometimes tough to do when the goal is qualitative rather than quantitative, but it can be done.\u00a0 It will be very detrimental to your plan if there are misunderstandings and disagreements about whether or not a goal was accomplished.<\/li>\n<li>Don\u2019t confuse a discretionary bonus program with an incentive program. It\u2019s nice to hand out $500 checks because the company had a good year and you want to share the wealth, but there was no \u201cincentive\u201d involved.\u00a0 And there\u2019s a dark side to discretionary bonuses.\u00a0 They can get to be entitlements.\u00a0 People will begin to expect bonus checks at the end of the year regardless of the company\u2019s performance.<\/li>\n<li>Do put an expiration date on all comp plans . . . annually often works best. Even the most carefully crafted plan can have unintended consequences, sometimes bad for the company, sometimes bad for the employee.\u00a0 Or maybe the company\u2019s priorities have changed requiring a different compensation strategy.\u00a0 In any case, there needs to be a specific point in time when the plan can be reviewed and, if necessary, changed.<\/li>\n<\/ul>\n<p>Our purpose here is two-fold:<\/p>\n<ol>\n<li>To convince you that compensation is an enormous and complex topic with lots of moving parts. This blog doesn\u2019t even begin to scratch the surface.\u00a0 If you doubt your internal resources to deal with it effectively, seek outside help.\u00a0 Messing around with people\u2019s pay will get you in a lot of trouble if you don\u2019t handle it properly.<\/li>\n<li>To convince you that compensation planning is a strategic issue and merits the time and attention you would devote to any other strategic issue.\u00a0 That means you should be looking for specific goals with specific outcomes, and compensation negotiations should be guided by that strategy.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>The Overture Group is an executive search firm with an additional specialty in compensation consulting.\u00a0 We recently heard a presentation by Bob Lindeman and Mark Reilly, both managing directors of that firm.\u00a0 They reminded us that compensation is (or should be) a strategic issue, not a simple, tactical, what-are-we-gonna-pay-this-person issue.\u00a0 And our strategy should consider<\/p>\n<p><a href=\"https:\/\/rocksolidbizdevelopment.com\/ourblog\/compensation-equity-issue-people-want-know-compensated-fairly\/\">Read More\u2026<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[39,35,27,22],"tags":[],"_links":{"self":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/926"}],"collection":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/comments?post=926"}],"version-history":[{"count":1,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/926\/revisions"}],"predecessor-version":[{"id":927,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/926\/revisions\/927"}],"wp:attachment":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/media?parent=926"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/categories?post=926"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/tags?post=926"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}