Tag Archives: compensation

Built on a Dollar More?

“Now, you have me confused,” Max protested. “Yes, the bonus becomes an entitlement, so it loses its power to motivate.”

“Is it possible,” I asked, “that the bonus never had the power to motivate in the first place? Let’s talk about you. You said, that sometimes you enjoy work. Why do you work?”

“I told you. I get a sense of accomplishment. Some of the work, I actually enjoy.”

“Like what?”

“Sometimes, I get someone on the crew, it’s their first job. They become part of a team, working together and I can see a sense of pride on their face. As a manager, I enjoy that. I get my own sense of accomplishment.”

“And, their first paycheck?” I prompted.

“Yes, there is a smile on their face.”

“So, compensation is important, but if that is all there is, your team members will jump to another company for an extra dollar an hour. So, how do you build your system? How do you, as a manager, build your culture? Do you build your culture around a bonus, or do you build it around accomplishment? You only get what you focus on.”

How Do You Match the Offer from a Competitor

“Can you match the other offer?” I asked.

“Not a chance. Most of the people on my team, we were able to get during the recession within our pay structure. But now our competitor has come back strong, they have a new owner willing to pay much higher wages,” Ray replied.

“Then you will lose them,” I nodded.

Ray was quiet. “There’s nothing I can do?”

“No, with that pay differential, you are going to lose them.”

“But, I could lose my whole team,” Ray protested. “There must be something I can do.”

“Accept the fact that you could lose your whole team.”

Ray sat back, his eyes slowly went to the ceiling, staring at a corner. “Okay, so what do I do?”

“First, look at your roster, this list of people on your team. Would this other company really come in here and hire every one of them with an offer to double their compensation? For real?”

“Well, no, there is only one person, who worked for them before,” Ray was ticking through the list. “And they are truly an A performer. They probably deserve what they were making at the other company. We just couldn’t match it here.”

“So, let’s say your team does become a target, the offers are likely to be competitive, let’s say 3 percent better. What can you do to retain your team?”

Pay Banding

From the Ask Tom mailbag:

Yesterday, you talked about compensation and referred to pay bands. I think I know about pay banding, so how does that relate to Levels of Work?

Levels of Work, as described by Elliott Jaques in Requisite Organization, provides a logical framework for pay banding. Here’s the framework.

Stratum V roles (Longest Time Span tasks ranging from 5 years to 10 years)
Stratum IV roles (Longest Time Span tasks ranging from 2 years to 5 years)
Stratum III roles (Longest Time Span tasks ranging from 1 year to 2 years)
Stratum II roles (Longest Time Span tasks ranging from 3 months to 1 year)
Stratum I roles (Longest Time Span tasks ranging from 1 day to 3 months)

Pay Banding, as a concept, slices each Stratum range into six segments (or eight segments, or four segments, but I like six). Entry level pay in each Stratum role would define starting pay for that Level of Work. Six segments up the Time Span range in that Stratum would define the highest pay for that Level of Work.

Pay banding provides a structure to design predictable Fair Compensation inside each Stratum, leaving the Team Member’s Manager and Manager-Once-Removed (MOR) discretionary latitude to make compensation decisions inside defined guidelines.