I don’t think “paying for performance” is the most effective way to motivate employees.

I do think it helps employers allocate merit budgets. In sales compensation plans it may drive performance to some degree. And annual bonus plans, well – those are usually so complex, and the payment is so much later than the behavior it rewards I don’t know that they are highly effective either.

When you want to motivate performance go beyond pay and look at internal motivators.

Employees have strong feelings about their pay.

Each of us wants to feel valued and appreciated. We want to be compensated fairly for our time, effort, skills, and results.

We compare ourselves to our peers and that impacts how we feel about our pay.  

Pay compression is when there is little difference in pay between employees regardless of differences in their education, training, knowledge, experience, performance, skills, or abilities.

There are two types of pay compression. The first is when a new hire is paid closely to a tenured employee. And the second is when there is a small difference between a manager and a direct report.

What causes pay compression?

It is easy to focus on what is missing and more difficult to focus on what you have.

It is easier to focus on what you can’t control instead of what you can.

Are you focused on the past that you can’t change? Or are you focused on the present? Maybe you are hyper focused on the future.

Exceptions to the normal pay decision making process are a slippery slope.

Scenario #1: You are changing your bonus plan and one aspect of that change is a decrease in bonus targets for some job levels. The CEO wants a few employees grandfathered (with no end date to the grandfathering) so they can keep the higher bonus targets. The employees on this list are all white men.

My pay increases as an employee when I stayed with my employer were:

• 3% most years because that was the merit increase budget.

• ~3.5% - 4% other years when my performance was high AND we had someone else on the team who wasn’t performing. “You have to rob Peter to pay Paul.”

But when I changed jobs and got a new employer, my starting salary was:

When you prepare to talk to an employee on your team about their pay, be sure to have all the facts gathered.

This means you know what you are paying them and why. Often the “why” is tied to performance.

Anticipate the employee’s questions and prepare so you can confidently answer.

Make sure you schedule the meeting at a time when neither of you will be tired, angry, frustrated, or hungry.

Growing up on a farm, I saw my father fix a lot of equipment. It seemed like he was under a combine,  tractor, cultivator, truck, bailer, or drill at least once a day.

Today, I recognize that he prioritized maintenance.

Earlier this week I posted about fixing your data. Job data and employee data. Maintaining files, systems, and data are an aspect of many white-collar jobs.

We are seeing a lot of layoffs these days. The top external worry of CEOs is a recession/ downturn and that is influencing the decision to lay off team members.

Inflation is keeping us up at night. Interest rates rising, little to no economic growth, difficulty retaining and acquiring customers, and profitability are also on the list.

By data I mean job data and employee data.
 
I am so tired of recommending to employer clients that they fix their "system of record." Think Workday, Paycom, Paycor, ADP, SAP, etc.
 
I have current and past clients who share an Excel file with me and then they manually say that we must edit the grade, job family, job title, and/or target incentives before we can start the analysis.

If the process to decide how much to pay someone...base pay or incentives is complex and difficult to explain, simplify.

Pay transparency laws are going to continue to be passed.

Your employees are going to ask you more questions. And you're gonna be on the struggle bus if you can't explain things quickly.

Spend the time developing training materials and train your managers on how to talk about pay with their employees.

• 57.8% of organizations do not train managers on pay communications.

• Manager training becomes more likely the larger the organization grows.

• Just over 50% of large organizations (5,000+ employees) train their managers.

Each of us has opinions about how much someone should be paid for performing a job.

I just read an article about the jobs that people think are overpaid. Here are the top 5 jobs:

1. Influencers
2. Politicians

It starts with confidence. Confidence is that feeling of being able to rely on yourself. You’re sure of yourself and your abilities.

Next is commitment. Confidence leads to commitment. Not the up and down commitment but the kind that is unwavering. Commitment means you do what it takes no matter what. It is that dedication to get from Point A to Point B, so you build the necessary habits and never give up.

Habits are routines practiced regularly. 40% of your actions are not conscious decisions but habits.

A 3-step loop is the process of a habit.

1. Cue is any trigger that tells your brain when and which habit to use. (The traffic light turns green.)

2. Routine is an activity, emotion or behavior. (You drive through the intersection.)

I am speaking to an audience of compensation professionals in a month and have been thinking about what is included in an effective compensation strategy.

This is what I came up with.

Millennial and Gen Z workers were nearly twice as likely as Baby Boomers to discuss pay with their coworkers.

Even when employees were subject to a pay secrecy policy at work, over half of Millennials still discussed pay with coworkers, while only 26% of Baby Boomers talked about compensation.

When you are matching jobs to salary survey data, two things are needed: an honest internal job description written by the employer and an external job description in the survey.

It is never a good idea to match a job to survey data by job title only. Some employers give high level job titles to lower-level work. And sometimes high-level work is given a low-level job title to keep the wages low.

An honest representation of the job’s responsibilities is needed so a comparison can be made to the survey description.

When I reflect on things that I regret, it is often because I said “yes” too quickly. I was enthusiastic about the idea and wanted to contribute or I liked who asked me to be involved.

My immediate "yes” didn’t consider my other priorities and my available time and energy.

And my regret increases often because I didn’t say “no” soon enough.

1. Who?
2. Produces what?
3. With What? The right resources, motivation, and authority need to be in place.
4. By when?
5. Because?