Compensation is one of the largest expenses in an organisation and companies need to understand that its role is to incentivise behaviours in employees that customers appreciate and make them reach for their wallets.

This was a key message delivered by global strategist Verne Harnish when he addressed a Shannon Chamber webinar recently. He was invited to present to members on this topic given the increasing competition for talent and the requirement by companies to attract and retain employees.

In his hour-long presentation Harnish gave many examples of companies who are creatively restructuring their compensation systems conscious of the fact that in recompensing employees they are dealing with human psychology as well as seeking to get the results they need.

Advising attendees to consider five design principles when setting pay scales in their organisations – Be Different; Fairness and Sameness; Easy on the Carrots; Gamify Gains and Sharing is Caring Be – he said:

“Start with wide pay bands to give people the opportunity to move up the organisation. Be careful on individual incentives as these can be fraught with a lot of problems and jealously; focus more on incentivising teams. Adopt a gamification approach to rewarding employees. Keep it non-monetary and keep as much fun in the system as possible. Have a good structure in place for longer-term share equity schemes and only pay this out annually,” he said.

He also stressed the need for companies to keep their customers in mind when addressing employee compensation, and the importance of understanding the link between labour costs and overall revenue generation.

“You need to ask how much you are willing to pay people. Remember, one great employee can replace three good employees. That’s why it’s important to focus on attracting the great,” he added.

Summing up the importance of the webinar, Shannon Chamber CEO Helen Downes said that the pandemic has forced human resources’ managers to review their compensations strategies.

“The employment landscape is extremely competitive now and this is forcing companies to review their compensation packages to ensure that they are fit for purpose. They will benefit greatly from getting these tips from Verne Harnish who has been helping small and medium sized companies to successfully scale up for over four decades.

“We look forward to having him back in Shannon in May for a two-day workshop when companies may have had a chance to action some of the key messages delivered today. As Verne said, how companies compensate people is one of the most important strategic decisions they will make but few get it right. Nail it and they can add hundreds of percentage points to the bottom line while driving up the energy in the organisation but if they make the wrong call (or piecemeal the decision together), the results will create needless drama throughout the organisation,” Ms Downes added.

For more information on Shannon Chamber events check out www.shannonchamber.ie/events-training/