(And Getting What You Pay For)
By Jack Ruffer

Targeting bonus and salary structures to best enhance job performance.

Bonus programs are also part of a company's compensation strategy. Depending upon the company's financial success, resulting bonuses maybe large or small but, either way, they are an acknowledgement of hard work by dedicated employees.

Now I've seen large sums of money doled out to department managers who have divided the total number of employees in their departments into the dollar amount they've received and distributed the money accordingly. I can think of no better way to defeat the purpose of a bonus program. Such a distribution assumes that everyone contributed equally to the company's success. Bonuses are supposed to reward those who gave the job their all. That can be at any level of the organization. When an electronic sub assembler has a zero defect quality defect record and another has .005 defect record, which do you suppose deserves a bonus? Which was more productive? Which caused the other less work? Who do you want to single out as an example to the others? Whose record should the other be attempting to replicate? The same rationale applies at all levels of the organization. Should an employee receive a bonus just for being present on the day bonuses were handed out? Of course not! Bonuses should be performance based and paid when they're earned, not just at the end of the year.

One factor I always considered in making my recommendations for bonuses was singling out those managers who habitually completed the performance appraisals of their people on time. It wasn't the only factor, but it was an important one. I can think of a number of instances where managers who failed to get performance appraisals in on time lost a significant portion of the potential bonus because of that failure. Ho-Ho-Holiday Bonus

I'd also like to take advantage of this opportunity to address the use and form of so-called "Christmas (or Holiday) bonuses." I take exception to their use. Sure, a Christmas turkey or ham is a nice way for the employer to say, "Merry Christmas" to employees but when it takes the form of money, I draw the line. If the employer's fiscal year coincides with the calendar year and the past year has been profitable, then let's call it what it is, "profit sharing." To hand out across the board "bonuses" flys in the face of what B.F. Skinner calls rewarding desired performance. If everybody gets a bonus, but everybody didn't perform up to speed the bonuses send the message that superior work and dedication aren't expected and Skinner warned about paying for unwanted performance. When you do, you get more of the same. Such a practice undermines your whole compensation philosophy and is a slap in the face to those who really put their shoulders to the wheel. I much prefer to reward superior performance when it's recognized, right on the spot and throughout the year. In this way, bonuses are tied directly to performance and underscore the purpose of you compensation strategy.

Other incentives (or potential incentives) to hiring and retaining the best employees which were identified by the CID management professionals I interviewed are: 401(K) including employer matched plans (matched some small meaningful percentage), medical benefits including a percentage paid by the employer toward dependent coverage, profit sharing, flextime, telecommuting, extra vacation days as a non-cash bonus, vacation days based upon tenure, Employee Assistance Program (EAP), company subsidized cell phones and lap-top computers so that some of the work can be done at home. Now, I recognize that profit margins in association management companies are not the envy of Wall Street. Some companies however, because of their past success and growth have more resources available to recognize employee contributions and offer other incentives. Economists call it "economies of scale." Smaller companies that want to grow larger will eventually have to come on board or they'll never attract the quality people they need nor will they be able to retain the good people they have.

There you have it, as brief and concise as I can present it. Compensation is not the only incentive to recruiting and retention, but without a well-thought out compensation plan, you're swimming up stream. So, do what you have to do; be prudent and proactive. Form a compensation committee, analyze your jobs, give your compensation some structure by establishing salary ranges, publish your compensation philosophy, your strategy and your salary ranges. Once in place you'll be light-years ahead of your unenlightened competition and your employees will love you for it.

Publishing the Pay Scale

To make my point I offer the following several paragraphs from one of last year's nonfiction best sellers, "Semper Fi - Business Leadership the Marine Corps," by Dan Garrison and Rod Walsh. The authors, both former Marine Corps officers, are successful businessmen in their own right. And, before you scoff, listen to just who gave highly favorable reviews of their book: Fred Smith, Chairman/CEO, Federal Express; Robert S. Morrison, Chairman/President, Quaker Oats; then Governor, now newly appointed Senator from Georgia, Zell Miller; Dan Rather, Journalist; Russell W. Meyer jr., Chairman/CEO, Cessna Aircraft; Walter Anderson, Editor, Parade Magazine, among others:

"Although money is not motivation for joining the Marine Corps (and, if it were, the recruiter would take a long hard look at the candidate sitting across his desk) the recruiter is pleased to share with all the pay scale. Every recruit, and every Marine, can look at the matrix chart of Time in Grade and Pay and see what the future holds in terms of income. There are no secrets. Every Marine knows approximately what his associates earn, all the way up to the Commandant himself. There are no rumors that Sergeant Kowolski 'cut a good deal' with his boss and is entitled to more vacation that the rest of the base, or that Captain Jones is 'pulling down' more than Captain Smith.

In the corporate culture, there are few matters more private than one's personal income. Paychecks, or automatic deposit receipts, are mailed in security envelopes. We tactfully look away when a nearby associate tears open the envelope, and we wouldn't dream of asking anybody, at work or play, their annual income. But we do wonder, sometimes aloud, what our peers and superiors earn.

If one employee were to ask another "what he made for a living," the answer would probably be that it was none of his business. But, is that entirely true? It may be very much his business if the rumor is true that his peer, who just arrived from another company, is making 25 percent more a year for doing the exact same job. Taking no comment as a confirmation of his suspicions, this longtime employee may harbor resentment against his company that could manifest itself in any number of ways. And, the tragedy is that his resentment may be totally unjustified; in fact, the newcomer may be earning less than his senior and simply unwilling to admit to it. There is no doubt that management, by protecting the privacy of its employees, had the best intentions. But a completely unnecessary obstacle to the successful completion to the corporate mission may have been created. A working environment rife with distracting speculation is truly a house divided against it self.

Management might consider publishing the pay scale so that every salaried employee knows where he stands today and what he can strive for in the future. Commissioned employees, as well, would appreciate knowing that there is an objective, standardized base pay schedule, shared by all commissioned associates--or, if not shared, then structured so that all levels are objectively achievable.

There would still be some room for privacy. The matrix does not, for example, have to show one annual dollar figure; it could be a range, separated by thousands of dollars. And there is, of course, the bonus factor, which can't be published because it is after the fact, based on performance and the end of the year. The criterion for bonuses and their formulas would be published--and be objectively achievable for all—but the year end results would be between the employee and his W-2 statement. A major cause for rampant speculation within the workplace, however, could be removed. Every associate in the company could feel he was participating in a program that was fair to all, with a potential for increased income that was open to all."

The above is not unprecedented. Many of today's major corporations publish their salary ranges for all, employees to see. And believe me, I know. I worked in such a Fortune 50 corporation. And our competitors did likewise.