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How a Compensation Plan Can Grow your Business

For most companies there are numerous times throughout its existence that are incredibly exciting. Things are fast-paced, changing, and rapidly growing. The founders’ innovative ideas generate a buzz that enchants everyone involved, and they are all ready and motivated to do whatever it takes to make this new company strong and successful. Unfortunately, the phase enthusiasm doesn’t last forever. The company will inevitably hit a point of stagnation. The people and great ideas that got the company up and running will not be able to progress as quickly as it once did.

Eventually, you are going to have to innovate to be able to continue being successful, and one of the best ways to do that is through a compensation plan. According to a study done on business owners who were rated “fast-growth” “a strong hiring strategy of stock options and signing bonuses did not have retention value”, meaning the compensation strategies that first gained you the best employees will not work in the long-term. The companies from this study that invested in a creative and individualized compensation management plans were the ones that were able to continue at this “fast-rate” of growth.

Compensation plans need to change and grow just as the company does. Just as the study said, the strategies that worked from the beginning will not continue to work in the long run. For example, having impressive sign-on bonuses is great for acquiring new employees. It attracts people who are willing to join your company now, and it motivates those who are looking for jobs to act fast, helping your company in a quick and timely manner. Unfortunately, from the perspective of an employee, a sign-up bonus is only a one-time perk that will now continue to reward them for their work in the company. However, there are ways to use this bonus-method and turn it into something that attracts long-term employees. For example: merit-based bonuses and quarterly-bonuses are great compensation perks that both continually honor your employees for their work and propels them to do their very best work. So, in order to keep your employees at your company and motivate them to produce quality work.

The article also mentions how stock options may not always be the right option for your company; however, there are ways to use this compensation strategy that helps business growth in the long-run. For example, this Forbes article discusses several ways to use stock options or other stock packages to motivate and retain your employees to propel company growth. One of the factors the article mentions is that “options can provide a significant financial incentive to employees to reach predetermined goals and in time,” showing that personally investing in your company is motivating for an employee to make that company successful. It also makes sure that your employee will be more likely to stay with your company for a certain amount of time, if your stock packages require the employee to hold the stock for a while before selling. The article ultimately concludes that “employee stock options can foster the twin goals of increasing worker productivity by providing economic stakes in the success of the company while at the same time enabling employees to achieve a substantial reward without a cash burden to the company,” proving that including this as part of your compensation plan can be extremely beneficial for both your employees and your business.

There are two key terms that I previously mentioned: creative and individualized. The secret of compensation management is that there is no “one-size-fits-all” plan for compensation. There are many elements that go into creating the perfect plan for your business, and that takes a lot of time and energy and can cause a lot of stress. That’s why compensation management software is so effective at helping companies organizing their payroll, benefits, and rewards systems. A good compensation plan establishes two key things: happy, productive employees and happy, productive employers, and both ensure that the company is bound for long-lasting success.

In this article from Entrepreneur, the author talked to Vinaya Varma, CEO of mjunction, the largest e-commerce website in India, who credited a good compensation structure as a pivotal factor of sustainable business growth. One of the reasons for this is that it inspires employees. He stated that compensation plans “”shifts an employee’s attention towards generating more revenue for his/her organization and empowers them to overcome their departmental agendas.” Employees that know that they are going to be fairly and competitively compensated when their employer uses a set, consistent plan, and, in return, they are more likely to focus their efforts into their company. An employee that knows that they will be rewarded for their hard work will work hard.

Now this may sound simple, but there are actually so many factors that go into fair compensation for your employee. A compensation plan ensures that you are not over or under-paying any of your employees, and it keeps all employee pay consistent between similar positions. Without these consistent elements, there could be chaos. Imagine that two of your employees start comparing salaries and benefits, and one one employee finds out that their salary was less than the other’s (when they had similar credentials and accomplishments); there could be an enormous conflict. A compensation plan, specifically one done through a compensation software program, guarantees that this situation could never happen. By riding of spreadsheets that make the process far more difficult to understand (who really knows how to use excel, anyway?) there is no way that a mistake like this could be overlooked, which saves you a lot of time, money, and stress.

Another one of the specific ways that a good compensation play can do this is through compensation perks or benefits. First of all, a pay package that includes unique benefits, such as merit bonuses or stock options or units, and are far more likely to attract potential employees and retain top-performing employees. In this article aimed at people searching for jobs, the authors demonstrates that a compensation package goes far beyond the traditional base pay. He states that “base pay is important, but it might also not be that the most important thing.” He then goes on to analyze three different perspective job offers, and concludes that the one with the lowest base pay actually yields the highest rewards for the employee. As it turns out, your employees are actually looking for something that goes beyond a high monthly-salary. They want the jobs that will both pay them a fair salary and provide benefits that continually reinforce their work. This is the way to have happy, faithful, and productive employees: through a solid, consistent compensation plan.

Ultimately, there are many ways that a good compensation plan can help your business grow. First, when you have a consistent plan (one without those obnoxious and hard to understand spreadsheets) you are guaranteed to fairly pay everyone of your employees. Second, a compensation plan with a continual rewards system, such as bonuses or stock-options, your employees will be highly motivated to stay a part of your team and produce quality work. And, finally, diverse compensation plans that allow a unique range of benefits will attract high-quality employees that want to stay at your company. Together, all of these things allow you to have faith in your employees and their work and rely on them to help you continue to grow your company.

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