Many companies want to reward their top-performing employees. Increasing the compensation of high performers provides an incentive for them to exceed expectations and continue to excel in their day to day work. Additionally, it makes them less likely to accept positions at other companies offering higher compensation and different benefits if they feel valued and respected. Let’s discuss compensation strategy for your business, and how to ensure success for your organization.
Resource and Budget Challenges
Resources are finite, and performance is relative. Understandably, most companies have a limited budget for annual increases in base pay (merit pay) or employee bonuses. For example if the merit pay budget is 3%, there are two extreme methods of distributing this budget:
- Give every employee a 3% increase in their base pay.
- Choose to give high performers a 5-10% increase and give bottom performers 0%.
Performance Drives Decisions
Most managers and department leaders, if given total autonomy on how to distribute a 3% merit budget, will likely give 4% to top performers and 2% to bottom performers. They truly want to reward high performers but are hesitant to give no merit increase to bottom performers due to the potential for attrition to occur. Employees who a manager wanted to fire are probably already gone, so the bottom performers who remain are typically seen as “okay” performers (not rockstars, but also not “bad” workers). Therefore, most managers are very reluctant to give bottom performers no merit pay or zero bonuses.
Compensation Strategy For Your Business
In the scenario above (as well as many others), it is crucial for companies to have a process and system in place to ensure that high performers receive more compensation than bottom performers. This strategy is essential and vital to attract – and retain – the best employees. If you are not sure how to proceed or have concerns on making the proper decisions, fractional HR services and consulting can provide the expertise needed to develop and implement these strategies effectively.
Compensation Strategy Services
At Preferred CFO, we specialize in helping companies develop and implement compensation strategies tailored to their needs. Our fractional HR services are designed to help businesses attract and retain top talent by creating a fair and motivating compensation structure for all workers.
The Preferred CFO Difference
Not all fractional HR companies like ours offer outsourced human resources solutions that are customized, flexible, and cost-effective, ensuring you have access to the best HR consulting and support without the overhead of a full-time HR department.
By partnering with a fractional HR provider like Preferred CFO, you can access a wide range of HR solutions already mentioned, but also tap into expertise around payroll, recruitment, onboarding and training, unemployment claims, and more. We truly believe that every company is different, and we strive to provide white glove HR solutions at the most competitive rates on the market.
Preferred CFO Fractional HR and You
Let us assist you in creating a compensation strategy that aligns with your business goals and keeps your top performers motivated. With our expertise in fractional human resources, you can be confident that your compensation strategy will attract and retain the talent you need to thrive for many years to come.
Contact us today to get started!
About the Author
tom applegarth
Tom Applegarth is a 30-year veteran in the Human Resources industry, with experience spanning manufacturing plants, retail stores, and divisions of Fortune 500 companies. Tom has HR experience across the United States as well as Europe, Asia, and Latin America.
His experience has brought significant, measurable improvements in employee engagement, attrition reduction, recruitment of the best and the brightest employees, and establishment of high-impact HR processes and improvements.
Tom has over 30 years of experience, including serving at high-profile companies such as Goodyear Tires, Belden, Potter Electric, and Young Living.
You may also be interested in...
4 Sources of Startup Capital for the Modern Entrepreneur
Less than five years ago, this blog post would have included only three options for early-stage entrepreneurs to raise capital. Today, it’s exciting to discuss a fourth—crowd funding. Whether you’re working on an idea and need some seed funding, or you’re already...
Startup Lessons from the SpaceShipTwo Breakup
Three days after the Virgin Galactic’s tragic crash and loss of its pilot and its SpaceShipTwo manned rocket, we reflect on startup lessons to be gleaned from the situation. John Goglia recently posted an article on Forbes describing some of the major differences...
Out with the Old: Annual Performance Reviews
Out with the Old One of the benefits of working directly with small to medium-sized businesses as part-time CFO’s is that we get to experience the culture of many clients. Some cultures foster results and innovation, encouraging and motivating employees to do and be...
The Secret to Profits: Financial Metrics
I want to continue with the one of my most popular series on secrets to profitability. One of the secrets I’ve seen successful companies use to harness more profits is the sue of specific financial metrics. Your business may be great at producing a product, great at...
ROI Analysis: Small Businesses Fail at This Critical Contract CFO Strength
Critical Contract CFO Components Most Small Businesses are Missing Continuing with a series that I started writing a few months ago, another component has been on my mind while working with clients recently. Strategically approaching goals and identifying the...
The Secret to Profits: Financial Control
Purpose of Business There are arguably many reasons why entrepreneurs start companies—provide jobs for others, accomplish a social good, leave their mark on the world—to name a few. No matter the altruistic or wealth-creating motive, all businesses should have as the...
The Secret to Profits: Distinction
In a previous post we discussed how a culture of performance positions your company for better profits. We feel that an inward focus is the first and best place to start so that any externally facing improvements don’t set your customers up for disappointment....
The Secret to Profits: Performance
Selling your product in Wal-Mart or on overstock.com may be the right strategy for you—if your product is cheap and made in China. There are similar ways to sell out when you provide services as well, but chances are, the vision that you aspire to is one of...
Startup Lessons from NFL Behavior Regulations
With only the most recent moral misconduct happenings in the NFL, we are finally seeing an effective control emerge: capitalism. As discussed at length by Ray Hennessey in his article on Entrepeur.com, we owe recent regulation over NFL behavior to the power larger...
The One Word that Could Change Your Life & Your Business
Of the estimated 1 million words in the English language, which is the most powerful in effecting change? Which word do you think the great inventors of history and builders of today’s businesses use like gold? Power players learn to wield the power of saying, “No.”...
Do You Try To Win Or To “Not Lose”?
Risk is inevitable in all business. Especially in smaller businesses where just starting and opening the door the first day is itself a large risk. You shouldn't try to live life on the edge and risk all your assets, but taking calculated risks at times when it's...
The What: Hiring a CFO
In a previous post I discussed indications that it may be time to bring on a full-time CFO or interview outsourced candidates. Now that we know when to find someone, let’s discuss what we should look for. Even though your choice of CFO will depend on your vision for...
