The Compensation Equation
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Click here to view and download a Benefits Worksheet Template.
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When it comes to discussing money and financial issues in the workplace, we find it may create an uncomfortable and uncertain situation. People think more about money, care more about money, and discuss money more than almost any other subject in life. So, we wonder, why don’t we talk about money? If money is so important and impactful, we recommend you ‘do what makes your stomach hurt’ and engage in productive, meaningful, and courageous conversations around wages and benefits with each and every Team Member. Knowing they have extreme clarity around their compensation has the potential to further energize and engage your Team Members.
We view compensation as the sum of the following three factors:
#1. The VALUE a Team Member brings to the organization including the education, experience, and the expertise they have developed as a result. Two individuals may possess similar education and vocational/life experience however, one individual may clearly have developed and demonstrated greater levels of expertise. Developing expertise is rooted in an individual’s emotional maturity (their ability to handle themselves and others effectively), the characteristics they have developed, their intellect, their degree of self-limiting behavior (or even more importantly “non-self-limiting” behavior) and environmental limitations which may be or may have been imposed on an individual.
The value a Team Member brings to the organization is used to measure/negotiate base salary. Base salary can be increased at any point in time and is most effectively adjusted at intervals connected to meaningful value increases rather than an arbitrary calendar date.
#2. The CONTRIBUTION a Team Member makes to the organization. Once the Value a team member brings to the organization has been identified and agreed upon, additional compensation can be earned/provided based on the Team Member’s daily, weekly, monthly, quarterly and or annual performance. For example, has a special project been completed? Have they decreased expenses or increased production or sales profitably? Have they engaged in facilitating a merger or acquisition, achieved an educational milestone, or taken on more responsibility? The opportunities to recognize, validate, and affirm contributions made to organizations are endless and limited only by limited thinking. Contributions based on performance increase compensation during a fiscal or budgetary year in contrast to long term increases to base compensation.
#3. The value of the BENEFITS a Team Member receives from the organization. The attached worksheet is a template we use to capture and calculate the total value of the benefits a Team Member receives in addition to their base salary and their performance incentives. We believe there are several benefits to sharing this type of information and overview with Team Members at least annually and specifically when an increase is made to base salary. Providing this type of information may give a Team Member insight into a variety of important factors as well as demonstrates the partnership nature of the employer/employee relationship outlining factors such as local, state, and federal tax rates and burdens. Sharing this information quantifies the value of time off received, health insurance and wellness benefits, and the extent of the value of education, training, tools, and equipment (including use of transportation and parking). When quantified and demonstrated, we’ve discovered this equation adds a financial benefit of a minimum of 20%, usually in the range of 25 – 30%, and in certain cases significantly more.
When we shy away from quantifying and sharing this type of valuable information with our Team Members, we create a space where individuals will make up their own story and or arrive at their own conclusions regarding the compensation they receive. Employers may hesitate to share this level of information for a variety of reasons and some employers may not recognize the value this information can bring. Others may hold the belief that Team Members do not care or may not be educated enough to understand. In some cases, we’ve found employers sadly believe, they can’t trust their Team Members with this type of information and that they may “ask for more money” if provided with this information.
The potential benefit of creating a workplace environment where people can be and become the most effective versions of themselves hopefully outweighs the fear that you will be taken advantage of. Sharing information such as this is powerful. Trust is built, engagement is deepened, and the value and contribution a Team Member makes is validated and acknowledged in a tremendously positive and life affirming manner. We’ve found it is rare a Team Member will use this type of information to negotiate unfairly or inappropriately and conversely, when this information is withheld, it can lead to gaps in understanding and expectations, and therefore gaps in clarity and trust.
We believe author Brené Brown when she says, “clear is kind.” As expert consultant Patrick Lencioni states, “Clarity leads to organizational health” and you cannot over communicate clarity! We hope and trust this template will provide you and your Team Members with an opportunity to engage in meaningful, clear and productive conversations around value, contribution and benefits as you look ahead to new year.
2022 Managing From The Inside Out Dates
Winter 2022
February 2, 9, 16, 23
March 2, 9, 16
Spring 2022
May 4, 11, 18, 25
June 1, 8, 15
Fall 2022
October 5, 12, 19, 26
November 2, 9, 16
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Register today to engage in professional growth and development as a Leader Manager and join us for Managing From The Inside Out! Simply email Katie Williamson at katie@lauraschanz.com to reserve a seat for yourself or a Team Member. The 2022 Registration Fee is $1,195.