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The Salary Dilemma: Should You Be Open About Employee Pay?

Should your company’s salary information be transparent?

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Salary-Dilemmas

When you start a new business and have just one or two employees, it’s both easy and practical to make salary decisions on a case-by-case basis. As your business grows, however, this approach likely will cause staff to speculate, often inaccurately, and gossip about who earns how much. This dynamic can distract them from doing their jobs.

In an effort to avoid such fallout, some entrepreneurs make all their employees’ salary information available to everyone in the company. At the other end of the spectrum are those business owners who think this approach is completely crazy.

So who’s right? Should your company’s salary information be transparent? In my experience, many entrepreneurs debating transparency don’t see the underlying issues.

When you look at employee complaints about salary, they usually stem from at least one of the following three core issues:

  • Employees perceive salary decisions as arbitrary and presume they’re unfair.
  • Employees view their performance differently than you do.
  • Employees are confused about how the performance and compensation system works.

Here are three ways to address these issues:

1. Develop a salary formula.

Stop making case-by-case salary decisions. Instead, define every job in the company and develop a salary formula for each one. To eliminate any perception of arbitrariness, the formula should take into account factors like an employee’s skills, experience level and performance.

For example, say the salary range for a customer service agent is $20 000 to $30 000. An employee with average skills, experience and performance would earn $25 000. You can then rate the employee on a scale of -10 to +10. For example, if the employee had no experience, they would receive a -10 for experience. The combination of these ratings would then determine where in the salary range the employee falls.

With this formula, employees will stop asking “Why does Mary earn more than me?” and start asking “What do I need to do to become a senior customer service agent like Mary?” Instead of complaining about seemingly arbitrary salary decisions, employees will focus on improving their skills to earn more. It’s a subtle, but important distinction.

2. Regularly tell employees where they stand.

Every job in the company should have a written set of objective performance expectations. Employees should know how their performance compares to those standards. In addition to an annual formal review, it’s critical to provide frequent informal feedback.

Let me illustrate this point with a personal example on a smaller scale. I have three daughters under the age of nine and they all have “jobs” (household chores) around the house. If I gave them feedback on their “job performance” only once a year, they certainly wouldn’t keep up with their chores. While employees don’t need the hourly feedback my kids seem to need, a single annual review just isn’t enough.

When you provide frequent performance feedback – say, monthly – employees have no reason to be resentful about salaries because you give them ample time and guidance to improve. Conversely, when you tell an employee on 31 December that he or she has been doing a bad job since 1 February and, as a result, won’t be getting a raise, expect him or her to be rightfully resentful.

3. Educate employees on your performance and compensation system.

Once you’ve adopted a systematic performance and compensation system, communicate it to all employees, department by department – even if employees don’t (or are afraid to) ask about it. In a department-wide meeting, explain the hierarchy of job titles, the skills needed to qualify for each level and the performance criteria for each job level. (Also be sure to include the same information in materials for new employees.)

For example, you might announce that the customer service department now has only two job titles – Customer Service Agent, and Senior Customer Service Agent. To qualify for the latter, one must have mastered computers systems X, Y and Z; be certified on product lines A & B; and have a quality rating of 9+ for the last two years.

Before the new system goes into effect, give each employee a “sneak preview” performance and compensation review, based on the new guidelines.

This gives everyone a chance to get used to the new system and to identify any conflicts without salary changes at stake.

Once you’ve followed these three steps, you’ll have an objective, systematic and well-communicated approach to inform your company’s performance and salary decisions. At that point, whether or not you make salaries transparent will be a moot point because you’ll have effectively eliminated the underlying issues.

Managing Staff

The Value Of Employee Growth

When you’re running a fresh and shiny new business, how do you ensure your employees feel like they have a place to go?

Chris Ogden

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Investing into the future of an employee is a complex task at the best of times. Well-established organisations battle to manage employee expectations and growth trajectories so what options does a startup have when it is still finding its feet? While having an agile and energetic young company is often enough of a drawcard for talent, you still need to create pathways that are unique to your business and that allow for employees to grow, both personally and professionally.

Step 01: Embrace difference

Recognise that your business is made up of a variety of different roles and that each one offers different employee pathways. You need to find the pathways and roles that suit an employee’s personality and their idea of where they want to grow.

It’s in seeing these differences and embracing them that you are already providing your employees with a voice and showing them that they are heard.

Related: 5 Benefits Of Turning Your Employee Into An Intrapreneur

Step 02: Be inventive

Find a way of creating growth opportunities even with the few roles you have in your business. For example, you could create a methodology that has tiered levels within a specific role. Then a person has opportunity to expand their skills and responsibilities in that role. This would work for roles that are fixed, like an office admin, or for roles that are flexible.

Step 03: Finance and responsibility

Outline how a person can grow financially and show them the additional objectives and responsibilities their role offers. Some people aren’t just about the money, they want more to do and they don’t want to be bored.

Step 04: Key Performance Indicators (KPIs)

It is essential that you measure people so that you can create opportunity for them. Tell them their KPIs so that they have benchmarks and everyone has expectations. This allows you to let people know when they are or are not doing well.

They can assess their performance properly and there is no risk of people having differing expectations that impact on ability or role. You must openly and honestly review employees and yourself.

Related: 6 Ways To Build Your Business With Employee-Entrepreneurs

Step 05: Encourage mentorship

It’s really worth encouraging people to guide or mentor one another. Some people may stay in your business for years, some only for a few months, but you want to see them all grow. By creating an environment that inspires people to mentor and guide one another, you’re ensuring that every person in your business is given a chance to teach and to learn.

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Managing Staff

Peak Performance: How To Get The Best Out Of Your Business Team

Understand and more importantly apply the following to your business and you too can dramatically improve the experience of your employees and ironically, with that people over profit approach attain profits never seen before.

Dirk Coetsee

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“Sell your cleverness and purchase awe”

Rumi

Under the periphery of Leadership and humanitarian philosophies lies the reality of people not always being understood nor treated well in their workplaces. Albeit that lip service is often paid to a people over profit Leadership style few entrepreneurs or companies bring it to life to its fullest potential.

Those select few leaders whom have had the awesome experience of leading business teams that are inspired, constantly learn new skills and sharpen existing ones, are change adept, with behaviours aligned to the business vision, and solving problems within a ‘family environment’ of mutual trust and respect have indeed ‘sold their cleverness and have purchased awe’.

Understand and more importantly apply the following to your business and you too can dramatically improve the experience of your employees and ironically, with that people over profit approach attain profits never seen before.

Related: Peak Performance: Multiply Personal And Team Business Performance

If it is to be it is up to me

tony-robbins

The author totally agrees with Tony Robbins who states that “Business is 20% technical and 80% psychology”. The state of your business and the performance of your business team is so much dependent upon your state as an entrepreneur, business owner, or investor. Your psychological  state as a tapestry weaved together by your thinking, beliefs and behaviours influences all aspects of the business.

If you demand states of positivity, peak performance, massive and confident actions from your team you yourself better embody those states day in, day out.

Luminaries and leaders such as Jim Kwik (Brain and learning expert) , Tony Robbins (World leading Life coach and Billionaire entrepreneur) , Ed Mylet (Entrepreneur and passionate advocate for peak performance) take control of their lives, days, and states by consciously doing a variety of practises each morning to ensure that they are at optimal levels of performance and state as they approach a new day.

Conscious , focussed, and mindful efforts such as ‘NLP Peak state exercises’, Meditation, Prayer, reading, visualisations, breathing exercises,  and physical exercise can be very impactful with regards to your daily engagements as a leader or entrepreneur.

I love what Ed Mylet has to say about self-confidence and influence:

Self-confidence comes from keeping promises to yourself which equals self-trust’. We all lose self-confidence and self-trust when we keep on promising to ourselves that we will start exercising or stop smoking and we never do. Start keeping promises to yourself as a matter of honour.

‘Influencing is not making others believe but its’ about showing them that you truly believe in what you are saying’.

Inspire instead of motivate

Be future orientated in deed and speech as an Entrepreneur. Hold and treasure an inspiring future Vision in front of your team and ‘sweat and bleed’ alongside them to actualise that vision. ‘First seek to understand and then to be understood’, as the late Leadership expert Stephen Covey said, in relation to your communication style. Most of all love your team and foster a culture of self-improvement, growth and learning.

Tell inspiring and true stories in relation to the vision and team members’ behaviours that are in alignment with your companies’ vision. Motivation is fickle and tied to your will-power which is finite.

Sincerely hold on to an inspiring future vision and defining Purpose which can provide infinite inspiration.

Related: Business Leadership – Learn How To Embrace Change

Entrepreneurs and leaders create environments for team members to thrive in

The ultimate ‘hack’ in relation to performance for entrepreneurs and leaders is to create an environment for their co-team members within which they can thrive, creatively contribute, and feel as part of a family that is actualising an inspiring future vision.

When team members do not feel safe or trusted they spend a lot of time creating safety nets (even sometimes false ones) for themselves as opposed to actually doing their work. Lead by inspiring example and actually do what you say you will do all in alignment with the companies’ vision and values and your team members will trust and follow you.

Personalise their rewards and constantly demonstrate that you care about them as people and value them as highly important contributors to the attainment of the companies cause.

Go forth and lead your team to the peak of your collective performance!

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Managing Staff

5 Things To Do When An Employee’s Performance Deteriorates

It can be confusing and frustrating when a successful employee’s performance takes a nosedive. Intervene effectively using these five steps.

Liz Kislik

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For all kinds of reasons, even longstanding, highly productive employees can experience a performance slump at some point. The Towers Watson Global Workforce study showed that up to 26 percent of workers surveyed said they felt disengaged, and another 17 percent felt detached.

As a founder, you may not always find an obvious way to get someone back on track, but the investment of energy you would need to turn this situation around is still so much less than what would be needed replace and train a new employee.

So, the upshot is that it only makes sense to figure out what’s going on and take action. Ready? These five approaches may help.

1. Ask explicitly if the employee is okay

And find out if there’s anything that you should know about instead of assuming you understand this individual’s current circumstances and reactions. Of course, it will help if you’re already aware of his or her personal situation.

Perhaps the employee is dealing with a new and challenging circumstance that’s distracting. In that case, it can help to share your evidence: “James, I was wondering if everything’s okay. I noticed that you stopped/started doing X, and I figured I’d better check in with you about it.”

At one of my clients’ companies, when a leader touched base with a staffer who had fallen below expectations, the woman explained that her dog had died, and she was grieving. Knowing her boss cared about her helped her refocus on her work.

2. Look for signs of stress and burnout

stress-and-burnout

Burnout costs U.S. businesses as much as $300 billion each year, whether the reason is employees having had to absorb too many changes or the fact that they’ve just been plain old working too hard for too long.

A longtime administrator I knew was being criticised for her negativity, her self-pacing and  her avoidance of anything new. After some analysis, however, it became clear that there was more work than her team could handle. Once her team was staffed up and the new team members were reasonably up to speed, she started to recover her resilience and became more even-keeled.

Related: Why I Stopped Doing Annual Employee Reviews

3. Probe for changes in the employee’s job

Perhaps there are new problems with equipment, resources or information flows; maybe a major customer is giving the employee a hard time, or a manager is behaving differently in some way.

A CEO I work with was concerned about a downturn in an executive’s previously outstanding performance. We discussed how the employee had recently been assigned to lead a new initiative for which he did not have previous experience, although he was the best internal candidate. The CEO agreed that as soon as the new initiative could afford to pay for an experienced executive, the reassigned employee should return to the assignment where his performance had been consistently superior.

4. Describe your expectations for the employee’s performance

employee-performance

And talk about how the business, team or customers are affected when it’s lacking. Although up to 87 percent of employees in one survey reported by Strategy + Business said they wanted opportunities for development, only one-third reported actually receiving feedback to help them improve.

So, make sure you’re concrete and specific about both expectations and impacts. Ask what employees need from you or from others in the organisation to help them get back on track.

I had to give one senior leader excruciatingly detailed feedback, in areas from interpersonal dynamics to personal hygiene. It wasn’t pleasant for either of us, but until he was made aware of exactly what was disturbing to customers, there was no hope for improvement.

Related: How Diversity Drives Board Performance

5. Provide meaningful recognition

Employees in  a survey by the Cicero Group were three times more likely to choose recognition as the single factor most likely to motivate superior performance– over inspiration, autonomy and even pay.

Recognition doesn’t have to be expensive or even time-consuming. One leader I knew started using the daily standup meeting not just to review the progress of the work, but also to mention superior contributions and excellent performances. Not only did preparation for the daily meetings improve, but team members were eager to make contributions that could be noted.

In sum, even excellent performers can lose momentum or be stalled by circumstances from time to time. How to respond as the employer? Intervening early will help you feel optimistic about a positive outcome and give the employee involved the benefit of the doubt so you can demonstrate to staff the confidence you have in them and your willingness to provide support during a tough time.

Just don’t wait to do this: If you wait till you’re fed up with either the person or whatever’s going wrong, you’ll find it much harder to turn the situation around.

This article was originally posted here on Entrepreneur.com.

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