The A Player Compensation Plan

Anytime I hear a CEO say, “My employees are lazy and they don’t care about the company,” or “Nobody wants to work anymore,” it’s a red flag for me. My first question is “Have you given them a reason to care about the company?”

Somehow a lot of leaders have come to believe that everyone they hire should be excited to give them 110% gladly for either low pay or poor quality of life, or both. Inevitably this strategy results in poor quality employees and a high rate of employee turnover. If guilt is your primary motivational tool, then let’s put some new tools in your tool belt that work better.

Entry level employees who quit cost the company 1X annual salary to replace, and leadership positions cost up to 10X annual salary to replace. The main goal of a business is sustained financial success so everyone can pay their bills, right? Turnover cost takes a huge chunk out of that financial success.

Be careful what you reward, because that’s exactly what you’ll get. Equity Theory and common sense tell us that you can’t blame people for trying to maximize their outcomes; i.e., doing the best they can for themselves and their families. If you pay people the least amount you can and give them a poor quality of work life, you can expect a commensurate return in effort and engagement.

Overall the folks in the C Suite tend to work long hours, but they also tend to do interesting work and are well-paid. Don’t you think the people lower in the org chart have the same human motivations?

What if we were to treat all employees like business partners and give them a reason to care about the company? How would we do that?

For starters, you need to pay people fairly. That means market value or slightly above, and that’s about all the motivation you’re going to get out of money. The rest of employee motivation is about quality of work life.

Additionally, who wants to work at a company where the top folks want to keep all the money for themselves? In these organizational cultures there’s often a lot of talk about “the team” and “how we value teamwork” but when it comes time to share in the wealth that everyone’s hard work has created, suddenly the corporate values change.

Implementing a profit-sharing plan that includes educating workers on financial basics will motivate and engage people to give their best for the company. You only give folks more money if you have it to give, and you’ll make more money for the company over the long term. Now you’re rewarding both individual performance and teamwork with others, and you have a compensation plan that attracts and retains the A Players you need to maximize the success of your company.

There is an exception to this plan. If an employee’s only motivation is money, then you’ve hired someone with the wrong values. The right people have other strong motivations that drive their behavior, like wanting a challenge and wanting to be part of a high-performance team.

Here’s how you create a compensation plan and organizational culture to attract and retain those A Players that you need for sustained financial high-performance:

High-Performance Habits

  1. Pay people fair market value or slightly above, and implement a profit sharing program.
  2. Give pay raises proactively as market values change; if you make your “business partners” plead for more money enough times they will leave to go somewhere where they are treated with more respect.
  3. The rest of employee motivation, engagement, and retention is about quality of life; recognition, work that is interesting and challenging, autonomy, being part of a high-performance team, etc.
  4. If an employee is being paid fair market value, has a profit-sharing program, and has a good quality of work life but still constantly harangues you for more money, then you’ve hired someone with the wrong values–you need to “free up their future.”
  5. If a good employee asks for more money, then it’s a great day for you! “That’s awesome, I’d love to give you more money! What contribution are you going to make to the company so I can afford to do so?”
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