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Leader's Edge Put ’Em All in One Basket

By  Julia Kramer

What if you targeted your highest achievers and gave them all of the eggs? You’d keep those stars longer and motivate others to work harder and smarter.

Common wisdom tells us not to put all of our eggs in one basket. The risk is too great: One false step and we’re left empty-handed. If you regularly read my column, you won’t be surprised that I disagree. I say, “Put ’em all in one basket!” and earnestly commit to one goal, one result, one clear outcome. The uncommon wisdom of this tactic is exceedingly apparent in the areas of employee reward, compensation and incentive programs.

Think about your last round of compensation increases. If your firm is like most, you went through performance evaluations and measured actual (or estimated) results against a performance plan. Then you tried to put a salary increase number to the actual results, within the confines of a budget—a budget that may not have taken into consideration internal circumstances and external market conditions.

In the end, you probably ended up with a rather homogeneous salary increase plan. Your under-performers got no raise or a nominal standard of living increase. Your average, solid performers got a few percentage points above that (nationally, employees received 3.7% increases on average in 2005). Your stars? It’s possible you divided up what was left of the pot and gave it all to them. You may even have gone to bat and found a few more percentage points to throw their way.

In the end, how many of your employees were really, I mean truly, impressed, satisfied and yes, excited, about their increases? I suggest that things might be different if instead of spreading out your eggs among too many baskets, you fill just a few of them to the very top.

What would happen if you targeted a small segment of your employees—the highest achievers, the ones you know will move the firm forward—and gave them all of the eggs? I bet you’d keep those star employees longer, motivate others to work harder and smarter, and quickly see the underachievers head for the door.

There are several ways to give bigger rewards to your most deserving employees, but you don’t want to do it via salary increases. Annual, significant increases over-inflate salaries in relation to the market and lock you into these escalated rates in the future, regardless of the ongoing performance of the employee. Use salary increases to fairly acknowledge employee contribution and to achieve internal equity, and base your budget for raises on national averages and market considerations. Additional rewards can be distributed via a separate rewards program.

One previous employer called its separate rewards program “The President’s Circle.” At another company, employees earned the designation of “High Achiever.” Whatever you call the select group of up-and-comers in your firm, the inclusion criteria must be defined and demanding. Make it clear that excellence in one technical or functional area is not enough to reach this level of reward. A real star does not just meet defined production goals, but is also a skilled communicator, a relationship builder, an organizational advocate, an innovator, a strong team player and an ethical role model. Conversely, losing the individual would result in a measurable loss to the firm in terms of revenue, morale, efficiency or strategic position. Including criteria such as these precludes an ambitious employee from squashing those below and around him to reach the top. It also minimizes the subjectivity of a program and provides a sound, legal basis for variances in compensation.

Rewards shouldn’t drain your operating account. Put aside budget dollars for the program and don’t dilute it—a very select few should benefit. To ensure that you get the most bang for your buck, pay close attention to the degree of differentiation you achieve between the rewards you distribute to the top few contributors and what you normally provide to the rest of the staff. If you are located in a big city and you subsidize a portion of every employee’s parking or transportation costs, it may be as simple as footing the bill for your top performers to enjoy a year in a reserved parking spot.

Other popular mega-perks include additional vacation time, a trip to a dream destination, invitations to coveted meetings and power lunches, contributions to employee-designated charitable organizations and educational opportunities. (Many top schools such as Wharton and Harvard offer executive development programs.) I personally have a warm spot for cold, hard cash or even gift certificates, but not everyone feels the same way. When in doubt as to what your employees really want, ask them long before bonus time so they feel free to be both honest and creative.

Performance-based bonuses are not new but they are still a powerful incentive. Refresh your old program or create a new one, and don’t let misguided socialism leave your competent employees uninspired and your go-getters disappointed. Use salary dollars to pay your employees fairly. Then create a separate, special rewards budget and fill a few deserving baskets full of eggs. Don’t worry about the risk. Employees know these golden eggs are rare and will do what it takes to fill their baskets again next year.

Kramer, an HR consultant, is a contributing writer.
j.kramer@LeadersEdgeMagazine.com


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