Rule 16: Recognition II

The Irrelevant Compensation Admonition:  Recognition & Incentives Should Not Replace Inadequate Compensation

Not only should incentives (or other variable compensation) not be a surrogate for leadership and management, neither should they attempt to be supplements or replacements for poor, below-market base compensation. 

The workforce is savvy and will see right through it, and almost immediately self-interpret new incentives as a long overdue entitlement.  Instead of a motivation, incentives on top of a poor base compensation structure will be seen as “the long-lost raise we never got”.

What is “Inadequate Compensation”?  As a general rule: base salary, plus benefits, plus incentives paid for business as usual (minimum standard) performance, that totals more than 3% to 5% less than the market average for each specific job position (depending on prevailing market conditions). 

If your Unit Manager’s total compensation (base salary + benefits + minimum standard incentives) is 5% or more below job market average, your Unit Manager will likely misinterpret those incentives as an entitlement.

If total compensation is “adequate”, and market average (business as usual) performance results in market average incentives, then the workforce will immediately perceive above market average performance incentives for what they’re intended to be:  motivation to achieve above market average performance results.

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>>> Rule 17