Related Posts Plugin for WordPress, Blogger...

Tuesday, May 14, 2013

Variable Compensation: An Open Letter to the New Senators

The election is over and you are probably bracing for work. Here's an unsolicited suggestion that I'd like to add to the lot that you are receiving; promote variable compensation as a way to distribute wealth in this country.

I am not an economist. I have difficulty adding more than 20. I am making this suggestion out of what I know as an entrepreneur, an HR practitioner, a former employee and a citizen of this country who experienced financial hardship for most of my life.

Every so often, cause-oriented groups ask for across-the-board increase in basic salary. Most of the time, they don't get what they want for the simple reason that not all employers will be able to afford it and I believe that to be true because it is for me. But what I think employers should be able to afford in a big way regardless of their financial situation is give performance based incentives. A well written program should entice employees to work hard, be more productive, strive for quality and manage cost because that's what it takes to earn the incentive. You might be thinking, well these things are already around and that's true. It's true for managers and knowledge workers but not for many marginalized workers. Also, if there are existing variable compensation for marginalized workers, they are pathetically small. Employers are not motivated to give more than pittance.

What good will a widely practiced performance-based compensation
do to the Individual, the company and the country? Plenty!

  1. This will not only increase the employees' compensation and improve their purchasing power, it will also motivate them to be more productive and improve their sense of ownership of the company's interest. Yes, a good rewards program can do that, I believe. I've seen too many clock watchers in the workplace because they don't see any difference between giving one's best and doing the minimum required and waiting for time to tick out. Whether those who read this agree with me or not, I believe there's a culture of entitlement in our country that needs to go if we are to improve our lot as a country and it should start with the individuals.
  2. Here's where I think the government can help. If they can give tax incentives to employers for giving various forms of variable compensation, it will benefit the companies in so many ways. Variable compensation will relieve employers from the stress of across the board increases that are not always affordable to all. Performance bonuses and incentives can come from money already earned. Increase in individual productivity can mean increase in overall productivity. Increase in purchasing power can mean increase in sales specially for those who sell their products and services in the country.
  3. If the government can influence employers to share their profit with employees, they are effectively encouraging redistribution of wealth and in a good way too, I believe. Anything that will improve the people's purse will go back to commerce which I bet will fuel the economy. 

This idea did not come from any economic study so I appeal to you to look into it and consider the wisdom in doing it.

Gain sharing shouldn't even need legislation, it should be a moral responsibility and a logical thing to do but It is not happening. We measure our success by the amount of  money we've gained rather than how much we've helped others and it is hurting us as a nation. I think that if legislation is needed to make that happen, then  so be it.

No comments:

Post a Comment

If you have an opinion about this topic or a related experience you want to share, please feel free to leave a comment but please be respectful. No bad words please or I will be constrained to delete it.