Remuneration system for the growth of a company

When we realize that the productivity of our employees is the impact power that affects our company’s cash formula then we are just at the beginning. For the awareness that we need something is the first or the zero step in the process of something happening, making or launching an action. However, there is also the frustration of managers, because although they know what they need, they do not have the resources to put up and design the system so that it becomes the driving force of the company’s growth, not another set of reports.

This action has several levels of functioning. One level is strategical – what we want to measure and what we want to stimulate. This level is the most important because it sets the foundation for the tool with which you will manage the company. I divide companies and their managers in two groups:

• those who know what they want to achieve strategically with the remuneration system and already at the beginning they understand clearly the rewarding keys that should be used and installed in the model; and
• those managers who know they need a model but are not sure how it should look like. They think that only the existence of a remuneration system will help them raise productivity. They are partially correct, but since this tool is also intended for management and leaders of the company, it must also include strategic elements that will help you …

Remuneration system for achieving three strategic goals

So this system is designed to achieve three strategic goals: to stimulate company’s growth, improve productivity and profitability, as well as cash-flow in the company. No matter what other company’s higher goals are, these are the prerequisites for their achievement. Although it is possible that just by measuring it you will raise productivity, you still want to meet the other two goals, and you need to get a deeper understanding of your company’s drivers and to see how to achieve them.

The second level of action that the remuneration system wants to cover is motivational. This means that although this is a tool for managing your company’s growth and going toward those segments and markets that at some point help you achieve these three goals, it is a tool to manage people and their formation as well. There are many theories that talk about people’s motivation, but basically certain needs always have to be met. These needs are different at different stages in which people and organizations find themselves, and it takes certain skills to align the goals of organizations and employees. For this reason, in each remuneration system must remain a place for a specific subjective part, whereby the team leader or manager retains the discretion to award a certain part of remuneration for the actual motivation of an individual, based on his own intuition and knowledge of people and their motivation.

Who can motivate people?

Alan Weiss, the organizational development guru says no one can motivate a man with any means or remuneration if he is not motivated inside (intrinsically). So a man is motivated or unmotivated, and if you give a higher pay to an unmotivated employee you will have a richer unmotivated employee. This is what I found out firsthand in a shop that is part of the well-known European chain of shops, and is regarded as one of the most desirable employers and has the highest salaries in the industry. In one of their shops where I was doing my usual shopping I noticed a salesman who was very loud in some internal conversations, in which he expressed his dissatisfaction with working conditions and said that “he was paid very little regarding the amount of his work”. This individual is highly unmotivated for his internal reasons and the fact that he gets overpaid, enjoys a comfortable working atmosphere and has a relatively easy job does not make him more motivated. It is therefore necessary in addition to the common elements of remuneration, to find in every individual the elements that motivate him and then build on it.

Abraham Maslow and his pyramid

According to the needs pyramid of Abraham Maslowthere are five needs that man is trying to satisfy in his development (physiological needs – health, food and preservation of the species; safety – a roof overhead and protection against danger; belonging – love and belonging to a group; respect – self-esteem and respect from others; self-realization – achieving your own potential). Each of these needs motivates a person at a certain point in life, and none of these motivations persists, except for self-realization.

Another motivating element is to encourage team spirit because we know that solo players have their values, but these values have to be in the service of the broader organization and its interests.

The third level of action and design of the remuneration system is technical – How to arrange all these components into one model and how to maintain it? Which reports do we need? Who will work on it? etc. Although this is a ground level relatively and in many cases simple if we know exactly what we want, it is most often the reason for the failure and for not having this system. Management usually does not have time or resources to move this elaborated model into an algorithm that can then be used as a tool or module in a system such as ERP, CRM, WMS, or in a plain Excel model. I recently talked to the general manager of a company who perfectly clearly knew what he wanted in the remuneration system and could express it concisely in a few sentences but he admitted that they simply do not have the resources to deal with that technical part, so they asked for our help in designing the model and transforming strategic guidelines into the growth drive.

Regardless of the fact that most of the things under the sun are simple (even the remuneration system may look like that), it is necessary to design a model in such a way as to carry out the predefined general and specific strategic goals, to serve as the management and employee development tool, and that certain resources are allocated so that the system has all the necessary elements for continuous and easy use.

When this kind of remuneration system is introduced, it is very important for it to be clear and transparent to the employees (those who are evaluated) and to the management (those who will evaluate). It should not happen that people get smaller salary without receiving feedback on why that happened …