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Compensation Failure: How a Singular Focus on Cash Can Kill Culture

Today's post comes to us courtesy of board member John Frehse, senior managing director at Ankura Consulting Group.

If you ask any Human Resources professional what they pay their employees, they will respond with a dollar amount. If you ask them how they compensate their employees, they may also include things like medical benefits and paid time off. While salary figures and standard benefits are indeed critical components of compensation, it is important to understand that many other currencies are not only accepted by today's workforce, they are demanded.

“Currencies” are varied and certainly not just limited to financial reward.

A few examples:

  1. Investments in training: Very simply - does your company invest in its people?
  2. Visibility: Do employees have visibility into performance, productivity, and what is required of them? Can they see fellow employees' availability to gain flexibility by swapping shifts and requesting time off?
  3. Structured mentoring: Companies often like to talk about mentoring, but does it really take place? Without a proper structure where employees are matched with appropriate leaders, mentoring becomes a “nice to have” but not an actual program.
  4. Public recognition for performance: Are employees who go above-and-beyond required performance and provide discretionary effort publicly recognized for their contributions?
  5. Leadership-enabled Success: Do leaders and administrative tasks slow down or block success? Are employees discouraged from making improvements because “management will never support it?”
  6. Merit-based promotions: How often is your firm looking outside of the company to find leaders? If this is common, dedicated employees are being passed over for outsiders and this can crush morale.

Frankly, when discussing culture and employee engagement as a byproduct, money is rarely the key driver. It's other “softer” currencies - like the ones above - that drive positive behaviors, and therefore results.

When a wide range of currencies is not available to the workforce, the demand for cash goes up. In an environment with little or no chance of advancement, recognition, or mentoring, employees will demand larger amounts of the only currency available. And when cash becomes the single driver, morale and performance are traditionally very low. The more employees are starved of a wide range of currencies, the more financial compensation is needed to satisfy them, and this does not translate into better performance.

So, what currency is most important to you as an employee? How well - or poorly - does your organization score when it comes to providing compensation beyond just salary and benefits? Tell me in the comments!

Share your insights!

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