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...
Understanding Organic Growth vs Inorganic Growth
Business growth requires both organic and inorganic growth. Each method carries its own set of advantages, challenges, and implications for the trajectory of a company. Whether you are a startup or established enterprise, understanding the dynamics of organic and...
Management Development Unlocked Podcast
This episode of Management Development Unlocked marks the 50th episode! Eric’s guest is Tom Applegarth. Tom’s entire career has been spent in human resources at multiple companies, both big and small. Today, he is the Vice President of Human Resources for Preferred...
Small Business Cash Flow Management: Strategies for Success
Recognizing Cash Flow Problems & How to Solve Them We know that the majority of small businesses fail within the first five years, but a study by Jessie Hagen, previously with U.S. Bank, drilled down into the reasons why this occurs. In her study, she found that...
Empower Your Business with a Virtual CFO
In today's dynamic business landscape, having a strategic financial perspective is more crucial than ever. However, not all businesses can afford to have a full-time Chief Financial Officer (CFO) on their roster. Many choose instead to utilize virtual CFO services – a...
Key Performance Indicators for Financial Success
Financial Key Performance Indicators (KPIs) are crucial measurements of a company’s fiscal health. These metrics provide a window into the current and projected profitability of an organization, enabling managers and stakeholders to make informed decisions. By...
Inventory Management: Strategies to Boost Profits
For many businesses, product inventory is their biggest asset. Effectively managing the inflow, storage, and outflow of inventory is critical to the financial success of the company. When inventory management is done right, customers can place orders with confidence,...
Meet Tom Applegarth Outsourced HR Solutions
Preferred CFO recently added Human Resources Veteran, Tom Applegarth, to the Preferred CFO team to offer outsourced HR services in addition to or standalone from outsourced CFO services. In this video, Tom introduces his experience and key benefits he offers Preferred...
How to Control Labor and Benefits Costs to Cut Down Expenses
Your employees are the lifeblood of your business. However, labor is also typically the highest cost for most businesses. Costs associated with hiring, training, compensating, retaining, rewarding, and managing employees can easily spiral out of control when there is...
Financial Audits: Ensuring Transparency and Trust in Business Operations
A financial audit serves as a valuable tool for ensuring a company’s compliance with legal and regulatory requirements, building credibility with stakeholders, managing financial risks, and maintaining transparency in the financial operations of the business....
2023 SaaS CFO Guide
A SaaS CFO is a chief financial officer with specific experience in the Software as a Service (SaaS) industry. A SaaS business is different from traditional businesses that require a one-time purchase or otherwise brief relationship transaction as a SaaS company...
Cost Analysis and Price Analysis Explained
Cost analysis and price analysis are two important procedures that are used by businesses to calculate the true cost of a product or service and determine the best sales price. By understanding and correctly utilizing these processes, businesses can make informed...
How to Conduct a Market Analysis
Before starting a new business—and periodically thereafter—it is important for company executives to carry out a market analysis, also called a market evaluation. Most entrepreneurs conducted a market analysis (to the best of their abilities) when they were developing...
