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...
How to Determine How Much Your Business Is Worth
Business Valuation Methods & Determining What Your Business is Worth Whether you're preparing for a sale or acquisition, seeking debt or equity financing, or evaluating other strategic business decisions, it's helpful to have a good pulse on the value of your...
Understanding the 9 Core Traits and Qualities of a Successful CFO
As Preferred CFO performs speaking engagements and advisory with CEOs around the country, one of the topics we’re continually asked to address is how to evaluate the quality of a financial team. Among these is answering the question, “What makes a great CFO?” We’ve...
1 Big Budgeting Mistake You’re Probably Making
One Big Budgeting Mistake You’re Probably Making A budget-first mindset not only wastes time and resources but also often results in an unrealistic and/or inaccurate budget. It’s a time-old Q4 tradition—lengthy planning cycles consisting of sitting down to tap out a...
What Are The Differences Between a CPA And a CFO?
We're often surprised by how many businesses hire a CPA, believing they're receiving not only tax services but CFO strategies as well. The reality is that there are many differences between a CPA and CFO. However, it's no wonder the two are confused, as CPAs will...
Signs Your Company is Ready for a Part-Time CFO
A CFO brings high-level expertise and strategy to an organization. A CFO’s primary role is to elevate financial strategy, streamline operations, trim fat, and maximize sustainable growth. But how do you know if your company is ready for a CFO? How do you know if your...
7 Essential Financial Tools Every CEO Needs
Turn on the Headlights: 7 Essential Financial Tools Every CEO Needs to Confidently Accelerate Success & Growth Many businesses make the mistake of believing that financials are all about historical numbers and budgets. However, if these are the financial tools you...
What is a 13-Week Cash Flow, and Why Isn’t It Enough for Most Businesses?
We've recently seen more and more CPA firms, fractional CFOs, and financial experts advertising 13-week cash flow plans. The messaging behind these offers insinuates that this simple 13-week financial reporting document can help businesses ease the burden of financial...
Payroll Protection Program Flexibility Act Passes in Senate
On May 28, 2020, the U.S. House of Representatives approved a bipartisan bill, the Payroll Protection Flexibility Act 417 to 1. On the evening of Wednesday, June 3, this bill passed in the Senate and is now on its way to the President's desk where he is expected to...
What to Do if Your Business Didn’t Receive Stimulus Funding
The COVID-19 situation has caused financial stress for many businesses, causing uncertainty and leaving many companies with decreased financial security and revenue. What makes this time especially difficult is that not only are many businesses suffering a cash...
Handling Business Cash Flow During a Crisis
Managing Business Cash Flow During a Crisis Early in 2020, we were hit with an international crisis that most businesses were not prepared for. As COVID-19 swept through countries, quarantines and stay-at-home orders created economic stress that caused many business...
Five-Year Financial Forecast & Projections: Why They Matter
If your company is preparing to raise capital or if you are currently writing a business plan, you may be getting ready to build your 5-year financial forecast. It can be intimidating to plan this far into the future—as well as knowing what kind of projections to...
18 Essentials for Preparing to Raise Capital
Preparing to raise capital can be an exciting and stressful time. It means your company is experiencing growth and that you’re ready to take things to the next level. The best way to prepare to raise capital is to ensure you have the documents and information...
