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!

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

    1. John, I really appreciated you take on money and when the other currencies are not available the demand for money increases. I wonder how many companies think about it this way? I would venture to say very little. We need to take this all into account when thinking about employees and how we compensate them.

  1. John,
    This article is very much on point and well written. Too often managers will take steps to address symptoms of employee relations issues, not only performance management issues, such as when they see a trend of employees unexpectedly leaving a company and everyone assumes the issue must be a wage issue. While it is nearly always true that when an employee changes jobs they will negotiate a higher wage at the new company (experiencing a higher financial reward, per se), that fact does not verify the core for leaving the company was their low rate of pay at the current company. Indeed, employees leave companies for a wide range of issues, and nearly all of those issues are related to the contents of your article. Great focus on the core issues related to culture and employee engagement.

  2. Great Post John. It is about having opportunities to develop & grow personally and professionally. I wish more companies would implement other currencies. Thanks for sharing.

    1. Lisa! Thanks for your comment. We really need to think about developing and recognizing great talent and cash is only one piece of the story. There are some great companies out there, but not enough.

Please share your comments

This site uses Akismet to reduce spam. Learn how your comment data is processed.