Several key thoughts emerge including:
The stories in the book are the highlight. Each story shares how a company’s compensation package develops and instills its culture, attracts, or repels employees
The key to any effective strategy is being different. Design a “strange” compensation plan to incentivizes behaviors your customers and other stakeholders expect. Make sure your comp plan aligns with your culture/core values or risk it being rejected. That’s why it is dangerous to just copy someone else’s compensation plan. Don’t look at people as a cost; they are an investment. This mindset is crucial as you design a compensation plan that supports what Verne and Sebastian call a Good Jobs Strategy. This allows you to scale with fewer people, who are paid more, yet with a lower total cost basis than your competition – a win, win, win in the marketplace.
Get the mix of fixed and variable compensation right keys to an effective compensation plan. Be clear about what you reward with each. Base compensation is rarely motivational – and raises are short-lived in their impact – Verne & Sebastian feel this component of compensation is considered a hygiene factor.
Financial incentives influence employee behaviors in three ways. They help people decide if they want to work at your firm (selection effect), tell employees what is important (information effect), and motivate people to try harder (motivation effect). Be careful what you reward! Sebastian and Verne caution to go easy on carrots. Monetary rewards are effective under 8 conditions, yet they rarely apply. Sales is likely the only area where incentives work well.
A reminder from Propeller: Accelerating Change by Getting Accountability Right blogs:
The right culture practically guarantees success; the wrong culture will almost always lead to failure.
Either you manage your culture, or it will manage you.
Compensation is another way to manage your culture.
To create an environment where everyone is inspired to give their best, contact Positioning Systems today to schedule a free exploratory meeting.
Growth demands Strategic Discipline.
Discipline sustains momentum, over a long period of time, laying the foundations for lasting endurance.
A winning habit starts with 3 Strategic Disciplines: Priority, Metrics, and Meeting Rhythms.
Meeting Rhythms achieve a disciplined focus on performance metrics to drive growth.
Let Positioning Systems help your business achieve these outcomes on the Four most Important Decisions your business faces:
DECISION |
RESULT/OUTCOME |
PEOPLE |
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STRATEGY |
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EXECUTION |
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CASH |
Positioning Systems helps mid-sized ($5M - $250M) business Scale-UP. We align your business to focus on Your One Thing! Contact dwick@positioningsystems.com to Scale Up your business! Take our Four Decisions Needs Assessment to discover how your business measures against other Scaled Up companies. We’ll contact you.
NEXT BLOG – Good Jobs Strategy
“Worry about what people do, not what they cost,” writes Jeffrey Pfeffer in his classic HBR article Six Dangerous Myths about Pay. Next blog will share a specific story about, a Spanish Supermarket Chain, from Scaling Up Compensation, focusing on the Good Jobs Strategy, its flywheel, and why your focus should not be about what your people cost, but what they do.