September 26, 2019
Tying Compensation to Contribution
There is lots of conversation about compensations, wages, getting paid more, getting paid for a persons worth etc. The conversation is healthy as long as it considers and incorporates all of the factors and the actual contribution value the role contributes to the overall result and outcomes of the organization.
Some roles appear to be more straight forward to evaluate direct contribution to an organizations results. For example, a sales person whose sole role and reason for being in the organization is to close sales of the products and services to other businesses or consumers who are in need/want of the businesses product and services. When a sale is transacted then the sales person should be rewarded for their part in the process. This is where the challenge can start with this type of role. Depending on the nature of the product or service, some sales organizations not only have sales people but they also have sales support staff. People who directly contribute to the sales such as systems engineers but they are not always directly working the dynamics of the sale. They are more focused on translating the sales requirements into solutions to provide a given result to the customer. Without quality systems engineering, the sales person is not as likely to close sales for the company. It gets more complicated from there. Once the sale is closed and moved into implementation/delivery, the operations side of the house must live up to the design and commitments of the sales proposal. When all of the upfront proposal and contract work is done to the highest of quality then the delivery should follow suit. If there are any vague aspects of the deliverables then problems begin to work their way into the end result. These challenges erode the profit in the project and thus the company bears the burden of ultimately delivering to the customer a satisfactory result sometimes at the cost of the profit in the original proposal.
I worked us through this scenario so that when each member of the sales process is considered, it requires that each person take accountability for their portion of the sale so the end customer gets what they want and the business makes a profit doing the business transaction. If at any point during this chain of events a communincation breakdown takes place, a missing piece of information is not discovered, a vendor product under performs etc. then the whole project gets shaken up and places profitability at risk. Oddly enough, the risk on the job is all too often only owned by the business owner or stockholders, not the employees directly. The employees still want their wages and at this time in our history, they want more for same contribution or in some cases less contribution. The key here is that individual contribution is being accounted for in the expectations of the role. The challenge today is the confusion of worth, contribution and compensation. This presents itself in the form of less contribution related to the actions taken or not taken by staff. The actuality is that some portion of the staff wants the role by definition. They want the responsibility and the title. They do not always want or hold themselves to the accountability which comes along with the role.
I will clarify here that compensation comes in more than one form. In some cases total contribution is not always just dollars and cents. Sometimes it comes in the form of other benefits such as paid time off (PTO), medical benefits etc. All of these other compensation pieces must still get paid out of the profit of the business. The profits of the business go up when each and every role in the organization delivers on the expectations of the role and are accountable to those expectations.
This week take a look at you role structures, your expectations and accountability framework for those roles and your overall compensation package to your staff for those roles. Is the accountability structure such that it is rewarding correctly and appropriately for each role in the chain of success? Do you and your staff members understand the total value of compensation each receives for being accountable to thier contribution to the success of the business? What happens when accountability, responsibility and expectations are not met?
Need to have a third party look at your accountability structure and give you some true and authentic feedback?
Call JKL Associates at (313) 527-7945 in Michigan or (407) 984-7246 in Florida to get the conversation started.
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