The Essential Factor Most Companies Miss When Determining Compensation
There is a huge miss that a staggering amount of companies make when discussing/negotiating compensation with their employees. Typically, companies use five "Essential Factors" when determining compensation: years of experience/education level, industry, location, in-demand skill sets, and supply & demand.
What's missing? ROI. Will the amount being offered provide a larger return through the individual's motivation and likelihood to remain/grow with the company than the cost of the investment.
Companies don't necessarily "win" a negotiation because they saved some money when reviewing compensation with one of their top people. Chances are, they've simply managed to retain a demotivated individual who is about to do way less production than they did leading up to that compensation discussion.
They've checked out. They're no longer all in. They're probably interviewing somewhere else.
Ironically, this often happens at SaaS companies where the entire sales process is based on showing prospects an ROI. Their goal is to show companies that if they make a new investment in the service they are offering, it will result in a higher return than if they did nothing at all.
It's time for companies to add a 6th essential factor when determining compensation. It cost's a lot more to recruit and onboard someone new in the hopes that they turn into an A-Player then it would to motivate the people you already have.
Your Workforce MD | Diagnosing and solving workforce challenges for a healthier bottom line.
3yTroy B. this is for sure! The losses in productivity and turnover (or worse, the chronic absenteeism or presenteeism of employees who stick around but aren't really into their work/employer) are staggering, and the underlying reasons can usually be fixed. Money clearly isn't a prime motivator, or we'd all be gunning for top paying jobs, right? Time to look at other factors that either attract or repel, and do something about them.
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