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A recent INC. article, titled "Why Google Quietly Uses the Power-Law Rule to Pay Its Superstar Employees 'Unfairly,'" details a troubling trend affecting businesses of all shapes and sizes: Many leaders are undervaluing their best people and are unaware of it.
While the concept of “equal and fair” has good intentions when it comes to rewarding employees, it can have equally bad results. Many (if not most) companies determine compensation and rewards based on job titles as much as performance. That’s a mistake. Every organization has top performers, and those top performers must be identified and rewarded accordingly. Forget about job titles. Figure out what your top performers mean to your bottom line, your culture and any other important measure you use for your company. If you have a senior manager who’s doing a pretty good job, and a lower-level employee who is doing a great job that is essential to your business’ success, which one deserves the bigger compensation?
This isn’t not the way business leaders normally think about compensation — and that’s the problem.
There are plenty of reports you can access on industry salaries for your company. But your company isn’t the “industry”; it’s a unique entity that may very well operate much differently than your competitors. Try looking at your company in a new light that focuses on value instead of titles. Think about what really matters to your company, identify those who are the driving force behind your success, and compensate them accordingly. “Fair pay” should reflect the value an employee brings to the table, not an industry standard.
Rewarding your star performers will help your business stay successful by keeping those people on your team. But you can amplify their value by having them mentor those employees who could use some performance improvement. Your star employees are stars for a reason — they do things in a way that matches your company culture and bring incredible value to your bottom line. These people are the best prepared to help mold the behavior of under-performing or young employees.
Start by identifying the core skills and actions of your star employees. What are the things they do that make them great? Can these skills be deployed across your organization? Have those stars mold the behavior of others through mentorship. Again, it’s about seeing your company in a new light, focused on true value. Essentially, you’ll be able to create carbon copies of your best performers (or something close to it). Take that magic dust and spread it around!
The best way to get your team running like a well-oiled machine is to compensate them as a team. Profit-sharing programs have been gaining in popularity, for good reason. When employees share in the company’s profits, they are far more likely to work to make the company profitable.
It also creates a more team-centric environment where people worry more about the company’s health than their own little corner of the world. It can result in improved communication, improved processes and improved profitability. It can also help you control compensation to ensure that it tracks with your business success, rather than negatively impacts your bottom line, while at the same time, eliminating feelings of jealousy or thoughts of being overlooked by certain employees. When every person in your company is concerned with the bottom line, you’ll likely see your profit margin creep up quickly. Essentially, you’re creating co-owners for your company who will help you achieve your company’s goals — and do so happily knowing they’ll share in the company’s success.
Everything I’ve discussed here is basic, common-sense stuff. There’s no big secret here. But there is a mindset to break: the traditional, role-based, industry standard compensation plan. Too many businesses are playing follow the leader when it comes to employee rewards. Be the leader instead. Zig when they zag. You’ll find that both your employees and your business will be better off in the long run.
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