Leadership/Management

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Compensation
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By Ken Chapman, PhD
Ken Chapman & Associates, Inc.

Bonus time just came and went and most people feel that they got less than what they expected, especially considering how good they believe their performance was.  The question they all have is, “Do I say something to my boss or just accept the fact that companies try to pay workers as little as possible?” 

If there is one topic that unites employees, it is compensation.  Almost no one feels adequately paid.  Interestingly enough, compensation also unites employers.  The vast majority will tell you that they pay their people fairly, if not better than fairly.  And into the gulf between those points of view fall legions of people who feel like you, confused, frustrated, and even cynical.  Indeed, there is nothing like compensation to drive a wedge between employees and management, which is a shame, to put it mildly.  You simply cannot be a great leader and get great results in today’s marketplace without paying people the right way without any arbitrary differentiation.   

We do know that when people are truly underpaid, it is usually because their bosses deal with compensation all wrong.  That is, the bosses are either skinflints or sprinklers.   

Skinflints scrutinize expense reports like Scrooge, with vigilance looking for the errant umbrella charge to the company or, God forbid, the meal receipt for the dessert.  Worse, when it comes to giving out raises and bonuses, skinflints practically writhe in pain.  Many are expert in delivering the “It’s been a rough year,” speech even in good times. 

Unfortunately, these folks are everywhere and we can only guess what makes them tick.  But from the experience of many experts, most seem to have a constitutional paranoia about being taken.  Whatever their psychosis is, it is deadly for motivation, creativity, productivity, and just about everything good in an organization. 

Sprinklers are not necessarily cheap; they just give everybody on their team similar raises or bonuses regardless of performance.  Many sprinklers say their approach is fair and promotes teamwork.  Some even use that argument to defend across the board pay cuts during slowdowns.  With few exceptions, such shared sacrifice is evidence of a leader too weak to make the hard call.   

Other sprinklers are not about fairness as much as phoniness.  They distribute equal chunks of change be it from a two million dollar or a two hundred thousand dollar bonus pool because they cannot bring themselves to tell people where they really stand, particularly under performers.  It is just so much easier to just let everyone think they are doing okay.  Again, this is merely weak management and inevitably sends good people packing. 

So how does a boss get compensation right?  It is actually easy and stems from the most common of common sense.  First, conduct performance appraisals that let employees know exactly where they stand.  Second, pay accordingly.  That means if someone is not delivering, do not give him a mini bonus just to keep his nose in joint.  Pay him nothing extra.  If someone is performing so-so, make him feel it with so-so sized checks.   

But most important, make your compensation system mean something by rewarding your stars as much as you can.  Use money to make a resounding statement about pay back that comes with superior results.  Giving your top employees bigger-than-ever-before checks may not come naturally at first, especially alongside giving other employees smaller than usual bonuses.  Fight the discomfort.  Part of being a truly effective leader is embracing the spirit of generosity.  Indeed, the act of making your best people feel richer than they ever imagined should thrill you as much as it does them.  If not, keep giving until it does. 

For more information about Ken Chapman and Associates’ Leadership Development Programs, contact Ken Chapman at 205.366.0265 or email Ken at kchapman@leaderscode.com.

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