Here's a jaw dropper: Paying employees $100 will get the same results as if you'd pay them $1000. It gets to a certain point where money can't motivate people to reach desired results. True, you'll need to cover their basic necessities so they can get a goodnight's rest. Once you get to that point, you'll have to think beyond levels of compensation to get results.
The Purpose Behind Paying Employees
Understand that the purpose of compensation is not to get people to produce what you want, but to recruit and retain them in the first place. Once you go this far, you must structure a compensation system that rewards those who fit your company's model.
For example, let's say you ran a company that dedicated itself to customer service, and are hiring new salespeople. Now let's say you offered 100% commission. It may sound like a good deal because you'll only pay them if they produce. Yet, the compensation system doesn't fit your company's model because it doesn't consider customer service.
A More Effective Way to Paying Employees
A better compensation system would be to offer a base of 33% to cover their basic necessities, 33% for their sales volume, and the rest to their level of customer service. When you do this, you'll attract people who have great customer service skills. You'd also eject from your company those who don't.
Now what if there's a top notch sales person who can bring in the high volume of sales, but has bad customer service skills? You'd be tempted to bring the person onboard. If you do though, you'll dilute your values -- causing your other salespeople to follow suit. If you stick to your values, you'll have more opportunities down the road. Remember, the constant theme: delivering good and consistent decisions will build you a great business.
When paying employees, it's vital you base the compensation system around your company's core values.
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