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Innovative Employee Compensation Methods To Motivate Employees David Westman Executive compensation is hot.

Compensation consultants and the variety of program packages they offer are increasing exponentially. In contrast, regular employees are getting shafted when it comes to compensation issues. These non-executive workers feel ignored and frustrated as they see the gap between executive and employee compensation widen with each passing year. Yet, it is these people who make up the bulk of the work force and collectively contribute the most to company success. Several trends indicate a need for more focus on employee compensation. These include: • A continuing shortage of qualified professional, technical and administrative employees. • A growing need for employees who are multi-skilled and adaptable to change. • A decreasing level of long-term commitment by employees (i.e. employees are much more willing to move around to meet their career and lifestyle preferences). • An increasing need for balance between work and other facets of life. Despite these trends, many companies continue to offer employees the basic compensation package that has been around for years: base salary, traditional benefits like health, welfare and retirement, and perhaps a profit-sharing plan. Are there alternatives to consider? Absolutely! Unfortunately, many top managers lack both the time and the creativity to take advantage of numerous other compensation vehicles that drive performance improvement and build employee morale and commitment. These vehicles are not necessarily expensive. In fact, some of the most effective ideas involve minimal or no cost. During the course of research, I identified over 100 low-cost or no-cost programs which have been used successfully by companies. Following are examples of programs that tie directly to employees performance: • Time Off Surprise: Give Supervisors a bank of days and/or afternoons off that they

It involves hanging poster board at key locations within the company. • Behind-The-Scenes: Recognize employees yearly or periodically who are not usually in the limelight. One of my clients required me to make frequent trips to Vermont. • Cash For Ideas: Periodically hand out index cards and ask employees to record ways the company could save money. Pay a nominal amount (like $3 per idea). the Good Tries program. One compelling reason is that most employees believe there is a need to find a better balance between work and free time (per a Milliman & Robertson . pay an additional $25 or 10% of the savings – whichever is greater. I arranged to stay the weekend and pocketed half the $750 difference in airfare. More than 70% of employees surveyed support implementation of these programs. involves recognizing employees who take risks. An alternative. At $1100. I recently took advantage of a similar program myself. but employers should also consider nonperformance based programs. allow them to keep half the cost difference between their choice of hotel or transportation and the company’s standard.can reward to staff on the spot for meritorious service. Of the employees I’ve surveyed. 68% believe this would improve staff performance and morale. I used this bonus to fly my wife out to join me for a wonderful get-away in the height of the colorful Vermont leaf season. If the idea is implemented. Written at the top of each board is a problem that needs solving. Variations of this program include handing out $20 bills or lunch coupons. for example. The Poster Ideas program is somewhat similar. regardless of whether those risks result in failure or success. The above programs are tied to performance. Anyone can write their ideas in the space remaining on the poster • Travel Expense Gainsharing: Create a program for employees who save on travel. By taking advantage of my company’s gainsharing program. the weekday round-trip airfare cost more than a similar excursion to Europe.

Amoco.m. some employees may choose to arrive at 6:00 a.m. the “effect on personal/family life” ranked far ahead of wages. and 3:00 p. commitment and future performance.survey). These types or programs enhance recruiting initiatives. fitness and recycling. Organizations which offer incentives to enhance satisfaction beyond the job will benefit from employees’ loyalty. Some topics might include handling difficult situations. all employees could be require to be at work between 10:00 a. Others may choose to start their day later and leave later. Although many employees are motivated by the rewards that good performance often brings. They include: • Core Hours: Give employees flexibility with regard to when they work onsite.m. or on a permanent basis. Non-Performance Based Programs These programs also complement post-performance reward programs like those discussed above and traditional incentive compensation plans. Examples of non-performance based programs abound. Who would have dreamed years ago that companies such as IBM. and leave at 3:00 p. • Casual Dress Program: Give staff a casual dress day once a week. • Employee Discounts for Company Goods: Offer certain goods and services . Attendance for these programs should be voluntary.m. For example. Beyond this general guideline. and Arthur Anderson would let their employees go casual? Yet these and hundreds of other companies of all sizes have joined the casual-dress bandwagon. during the entire summer. dealing with change. nutrition. • TIPS (Tips for Improving Performance): Offer employees a 15. The 1993 National Study of the Changing Work Force finding reveal that when employees were asked the most important deciding factors for accepting a 30minute workshop on topics they need to enhance their professional and personal lives. others perform will if they are treated will from the start. goal-setting.

• Deserve a Discount Program: Initiate a discount-card program with local merchants. while at a small Midwestern college. computers and peripherals. These incentives may not be viewed by some as compensation because there is no exchange of cash or merchandise.000 students. which can result in 10-20% savings to staff on purchases like haircuts. Nearly 20 years ago. food and entertainment. The National Study of the Changing Work Force findings cited previously indicate that the most important deciding factor for accepting a job is “open communications. and no traditional or non-traditional benefits or perks. You don’t have to be as large as American Association of Retired Persons to initiate this idea. open communication channels and break down organizational barriers – all of which are valued by employees and enhance their motivation and performance. More than 65% of employees surveyed support this type of program. clothing.” including any or all of the following: -Dry cleaning pickup and delivery -Shoe shining and repair -Drivers license. • SOS (Services on the Spot): Introduce an SOS program which offers employees the ability to run “errands at their desks. I started a similar program with 15 area merchants which resulted in 10 to 15% saving to our approximately 2. But such programs encompass a broad set of interactions which build camaraderie. More than 80% of employees surveyed supported this. and office supplies. auto tag and title renewal -Gasoline fill-up and/or oil change service -Drugstore item delivery -Cafeteria take-home dinners Relationship-Building Programs A third category of ideas to consider to motivate employees and maximize performance are relationship-building programs.” which can be translated as healthy working relationships.purchased by your company at cost to staff like gasoline. The same factors that motivate people to start a .

Examples might include Ugly Tie/Earrings. Prizes might be given for best costumes. • Stand By Me: A Chicago-area financial institution sponsors numerous radio advertisements promoting a program in which their executives spend a day outside the bank each year working side by side with their customers. Hawaiian. Timberland is giving each employee 40 hours of paid time each year to work with local charities. recognize . employees are encouraged to send questions in advance. • Orient the Family Program: Sponsor a family orientation program for new staff which includes refreshments. In addition to the public relations value. Silly Socks. Nearly 90% of employees surveyed expressed enthusiasm for this idea. This idea can be equally effective in building relationships internally as executives work side by side with staff. Crazy Sweater. • Cooperative Charity Day: Give each department an annual day off to work with a local charity organization. have taken this concept a step further. a slide or video introduction to the organization and dialogues with top executives.job search will likely motivate them on the job as well. Many companies neglect to consider the influence that spouses and other family members have on employee satisfaction. Follow up with family socials throughout the year. Nearly 70% of employees surveyed liked the concept. and/or Halloween Costime Days.or no-cost programs available to motivate. such programs build pride in the work force and serve to enhance internal relationships. office tours. • Special Dress Days: Plan special dress days to promote a sense of humor. Application Issues Given the multitude of alternative low. in response to the recent volunteer initiative directed by Colin Powell. Although the discussion is free-flowing. Examples of relationship-building programs inlclude: • Executive Coffee Breaks: Institute a program where the CEO and/or other top executives meet with all or small groups of staff for an hour or so over coffee. Some organizations.

. role etc. The entire compensation package should work together. traditional annual and long-term incentive compensation plans. organizational level. Many also lack the creativity to design or develop new ideas. Consultants can certainly offer their experiences working with numerous companies.” by Jim Harris o ”1001 Ways to Reward Employees.” by Bob Nelson o ”Care Packages For the Workplace. ask your counterparts in other organizations for suggestions.” by Barbara Giant 3. Even with time and creativity. low or no-cost programs should not be slapped together. supervisors and human resources professionals don’t have time to research alternatives. Gather input from a cross-section of employees to select new programs. Here are four key principles to consider: 1. and traditional benefit plans. Such feedback may reveal that different programs are more appropriate for different employee categories (e. I also highly recommend the following books as references: o ”Getting Employees to Fall in Love With Your Company. why do so few companies go beyond the traditional approach to compensation? A primary reason is that executives. without competing priorities. Examples include base salaries. In addition to the ideas presented here. Identify as many program alternatives as possible for consideration. o Identify survey participants and empolyee categories: for example tenure. Action steps to keep in mind are: o Define specific programs to include in a survey.and reward employees. supervisors versus staff). Don’t just settle on the one or two you personally find appealing. 2. union versus non-union.g. Identify the role incentive programs should play in supporting the company’s overall strategy and other compensation programming. o Conduct follow-up focus groups to clarify and expand upon . o Tailor and administer the survey to selected particpants o Develop a presentation format and tabulate survey results. patience is rare. Like any compensation initiative.

Other guidelines for program development and implementation include: 1. o Develop and implement a communications campaign.and nocost programs. Reward. Helpful Tips In addition to identifying and implementing organization-wide low. Companies should target no more than five programs for initial development and implementation. 5. Moving forward with too many programs can be overwhelming and result in a lack of focus. It is better to spend time administering a few programs right and then gauging staff reactions. 3. Assure broad eligibility for awards. obtain feedback and finetune the programs over time. Ideas which may not be appropriate for the entire organization may prove highly effective for certain departments and employees. Let experience guide the organization and shape future ideas. 4. o Utilize a review process which includes the Project Team and top executives. Specific action steps to keep in mind are: o Convene a Project Team to establish general guideline for each selected program. Avoid competitive programs to the extent possible (i. Recognize that staff at all levels contribute to the organization’s success. Incorporate variety in program offerings. recognize and build relationships throughout the year. Use a systematic process to finalize program design and rollout.) 4.survey results. Consider merchandise as an alternative to cash awards. don’t divide employees into “winners” and “losers”. Employees might simply use .e. it also makes sense to give supervisors a list of additional ideas for possible use within their specific work units. since what is meaningful to one person may not be meaningful to someone else. o Administer the programs. o Assign a champion or sponsor accountable for each selected program to: -Draft administrative guidelines -Develop a detailed implementation plan -Assure that all appropriate stakeholders have input. 2. Allow personal expression by giving employees several reward options 6.

there are three basic principles all employers. SE Kansas State University There are many different aspects of human resource management. No matter how much time and effort is spent in setting up the compensation package. Presented to you by the Iowa Business Network. While it may be easy for an employer to put off writing a job description or assembling a handbook. Granted. and setting up 401(k)s while others may just pick a dollar figure out of the air and call it finished. It’s not about Money 3. Fogleman Extension Agricultural Economist. most managers are busy asking: “What do I have to pay to . 7. doing wage to buy groceries or pay the electric bill. Take advantage of the accumulated experiences of others and internal creativity to craft a new approach to compensation management which employees will value and which will drive performance to new heights. some employers spend weeks or years choosing health insurance providers. large or small. Use your corporate logo when possible. Send the Right Message 2. Some are optional. should consider. 1. Use the Right Carrots Send the Right Message When it comes to employee compensation. employees are reminded of the company’s appreciation each time they loot at it – be it a gym bag or a VCR. 1 Creative Compensation Sarah L. Summary Companies are not bound by tradition when it comes to compensating and motivating employees. Some are not. More than 70% of respondents to a recent survey believe that the corporate logo or related symbols add meaning to an award. With merchandise. the process of setting up a compensation package is one that every employer has had to go through.

But an employer who develops a truly creative and successful compensation package understands that it’s not about money. It is the principle on which the following two components of this paper are based. and opportunity for growth. It’s not about Money It’s easy to think “dollars per hour” when thinking about compensation. feedback. Child care and health benefits say that you value family. A better question might be: “What do I want my compensation package to say?” Whether you realize it or not. It is important. task enjoyment. Successful compensation packages are really total rewards systems. praise and recognition. No matter what compensation elements you use.3 Direct Compensation is an employee’s base wage.…. compensation is the equivalent not to how they are paid. After all. It can be an annual salary. Throwing a party at the end of your business’s busy season lets the employees and their families know that you2 appreciate it when your people go the extra mile. to how they are valued. This includes career and social rewards such as job security. flexible hours. employee recruitment. for employees. motivation. and friendships. One of the biggest mistakes an employer can make is to make a large investment of time or money to initiate compensation elements that his/her employees do not need or want. Compensation packages can be linked to business structure. That message is important. and indirect elements all based on the objectives of the employer and the needs of the employees Non-Monetary Compensation can include any benefit an employee receives from an employer or job that does not involve tangible value. retention. direct. but ultimately. to give a lot of consideration to your business’s compensation structure. they all carry a message. performance.?” That is not an easy question to answer. Compensation is typically among the first things potential employees consider when looking for employment. It’s about meeting the employee’s needs. and satisfaction. therefore. Giving longevity bonuses for employees on the anniversary of their employment with you says that you value employees who stay with the business. it is already saying a lot. containing non-monetary. hourly wage or .

progressive managers can create compensation packages that are as individual as the employees who receive them. Businesses that cannot compete with high cash wages can offer very individualized alternatives that meet the needs of the people you want to employ. In a tight labor market. Dental. A recent graduate may be looking for stable work and also an affordable place to live. therefore. retirement programs. unemployment and disability payments. Indirect Compensation is far more varied. child care or housing (Schuler). Some indirect compensation elements are required by law: social security. Employers have a wide variety of compensation elements from which to choose. indirect compensation becomes increasingly important. Other indirect elements are up to the employer and can offer excellent ways to provide benefits to the employees and the employer as well.4 Indirect Compensation Alternatives Flexible Working Schedules Elder Care Retirement Programs Moving Expenses Insurance (Health. a working mother may take a lower-paying job with flexible hours that will allow her to be home when her children get home from school. Eye) Subsidized Housing Paid Leave (Sick/ Holiday/ Personal Days) Subsidized Utilities Tickets to Events (ball games. the importance of the task is obvious. such as profitsharing bonuses. Such creative compensation alternatives are the small business’s competitive advantage. For example. concerts) Magazine Subscriptions Boots and Clothing Laundry Service Company Parties Use of Farm Trucks.any performance-based pay that an employee receives. paid leave. including everything from legally required public protection programs such as Social Security to health insurance. By combining many of these compensation alternatives. Machinery Farm Produce / Foods/ Meals Cellular Phones/ Pagers Child Care Use of Farm Pastures and Gardens Ask ten different people what a fair wage is and you’ll get ten different answers. While there are no hard and fast rules in determining a fair wage. Research . Both of these individuals have different needs and. would appreciate different compensation elements.

For example. Unfortunately. 3) provide some funds for savings or recreation. operating a forklift in a factory and driving a tractor may require similar skills and. this technique is not necessarily well suited for agricultural producers (Fogleman et al). Discussing wage expectations with employees can help determine what their compensation package should look like. if either internal or external equity is violated. While money isn’t everything when constructing a compensation package. A compensation package is one of the most concrete ways in which an employer can communicate the . a business will most likely experience employee dissatisfaction and employees will begin to balance5 their performance through a variety of ways ranging from decreased productivity to absenteeism and eventually to leaving the business (Billikopf).indicates that employees expect wages to 1) cover basic living expenses. Use the Right Carrots While the second principle applies to meeting the needs of the employees. Internal equity refers to fairness between employees in the same business while external equity refers to relative wage fairness compared to wages with other farms or businesses. can be compensated similarly. therefore. These are typically fast and easy ways to establish compensation guidelines for many businesses. it is a large portion of what the package may eventually contain and it may be the only element a potential or current employee may think about when considering other employment options. An agricultural manager can do informal surveys of other agricultural producers to determine the “going rate” for labor or modify existing studies of nonagricultural businesses to compare employees not by job title but by skill sets. No matter the compensation level. what constitutes a fair wage? One approach to determining a fair wage is a market survey. and 4) increase over time (Billikopf). the third principle applies to meeting the needs of the business. 2) keep up with inflation. So. It is absolutely vital that businesses maintain internal and external equity. A few phone calls to other employers in similar businesses can determine the “market” value for a specific job (Schuler).

Measures such as feed conversion rates. or bonuses for arriving to work on time.mission. The general consensus of recent studies is that pay should be tied to performance to be effective. think again. Based on their compensation package. the employer has to be careful to “use the right carrots. equipment repair incentives to encourage good equipment maintenance. Are the employees of that farrowing unit to blame for the sudden rise in nursery mortality? No. Your operation may benefit from the following: tenure bonuses for long-time employees. The result: nursery mortality starts to rise as sick and weak pigs who normally would have stayed in the farrowing unit are shipped off to the nursery and. be certain that those incentives send the message that you want your employees to receive. As Johanna Slan said in Using Stories and Humor. somatic cell count. The key is in finding carrots that don’t send the wrong message and making employees understand how their actions impact the entire business. The more production information data your business has.7 . If you’re surprised by that answer. as always. To help solve this problem. consider a farrow to finish swine operation where the farrowing unit has seen an increase in pre-weaning mortality. yes. the easier this is to accomplish. “Sometimes we try to fix people when it’s the system that stinks. and values of the business. vision. But. die. it is worth the risk. or mortality can offer great sources for performance incentives. eventually. Successful managers must search for things the employees influence and base performance objectives on these areas. An employer has to be certain that those responses match the objectives of the business. The benefits and incentives set in place by the compensation package will invoke certain responses from the employees.” So. the owner instigates a bonus system based on6 live pigs out the door.” For example. is it worth the risk? Should an employer instigate some type of performance incentive when there is a possibility that it will only create problems in other areas of the business? The answer is. those employees were only doing what their managers wanted them to do—they were following the carrots. In other words.

Make sure it is fair. promote those people. Implement your new system. --Recruit new employees --Motivate current employees --Reward well-performing employees --Minimize risk of violating federal laws --Build employee loyalty --Any combination of the above 2. The area of employee compensation should be no different. Decide what you want your compensation package to do. remembering to --Communicate with your employees about their needs8 --Review your compensation package regularly. equitable. The future of your business could depend on it. If you want your employees to stay with you for a long time instead of training new employees every season—offer bonuses or tie their wages to their tenure. and can be trusted with the most challenging of tasks—recruit those people. and competitive. If you need employees that show up on time. consider the following checklist: 1. reward those people. References . Finding the time to build and implement an equitable wage structure can be difficult. Talk to your employees about their Compensation needs: --Health Insurance --Paid Vacation --Housing --Child Care --Retirement Planning 3. Structure your compensation package based on what your business is about: --Goals --Mission --Vision --Values 4.Conclusions Agricultural managers face many decisions every day. To make the process easier. work hard. If you want your employees to be innovative—reward them for new ideas. --Be flexible and innovative to maintain a competitive advantage --Maintain both internal and external equity Successful agricultural producers rely heavily on common sense when it comes to management decisions.

“Labor Management Decisions”. al. Volume 60. Cincinnati. Labor Management in Ag: Cultivating Personnel Productivity. Ohio: SouthWestern College Publishing. Here are four types of variable compensation plans from Compensating the different types of Industry: Gain sharingReward employees for achieving pre-established goalsManagement bonus plansTie compensation plans with performance . R. Winter-Spring 1999. April 1999. April 1998. Volume 8. (1998). Risk Management Education Summit. Howard. RB99-02. Schuler. University of California APMP Research Papers.9 Fogleman et. Employee Compensation and Job Satisfaction on Dairy Farms in the Northeast. Gregory. Number 39-6. Agricultural Extension: University of California. Kansas Department of Human Resources. Number 1. September 1997. Getting your compensation plan to align with corporate CRM goals also means implementing the right plan. Kansas Wage Survey: 1996 Edition. Cornell University. Doane’s Agricultural Report. Managing Human Resources.Billikopf. Rosenberg.