A good plan must recognize the relative value of each individual contribution as demonstrated through sustained performance. It must first emphasize actual work accomplishment as measured by objective performance appraisal. This will insure full recognition of exceptional performance while avoiding an over payment for performance below established standards. Many companies treat exempt employees as equals in performance and give flat percentage increases across the board to all exempt employees except perhaps a rare few who have surpassed all standards.

This practice drives good people out of the company because tangible recognition of accomplishment is lacking. And, because excellent, mediocre, and poor performance are rewarded alike, compensation Euros are wasted.

A good compensation plan also provides for payment of individual salary rates which will attract and retain capable employees who are willing to meet present and future business needs. It should motivate people to want to strive voluntarily and continually to increase their value and contribution to the company. The plan should provide for the determination of an individual progress through a results-oriented appraisal system. Competent employees should be advanced to positions of greater value. And perhaps most important is the provision for a communication link between man and manager. There must be open and frank discussion of compensation matters affecting every employee.

There is need for a formal plan in all sizable organizations. Systematic position evaluation helps to determine the relative worth of one job as compared with another. Salary structures provide avenues and ladders for advancement, and each position should have a rate range to permit room for growth through salary adjustment as the individual improves his contribution. One point should be noted: There is no effective universal plan of job evaluation, and separate guidelines must be established for exempt and non-exempt positions.

A major prerequisite to an effective evaluation procedure and maintenance of the system is the position description. Position evaluations must be based on position content, the capabilities required to perform the work, and the relative contribution of the position to the success of the business. In determining the relative worth of the job, it must be remembered that it is the position which is being evaluated and not the man assigned to the position. If the ability of an individual exceeds the needs of his position, an effort should be made to re-assign him so as to utilize his skills and abilities more fully. Either the man or his manager can write the description, but both need to agree on its content.

Salary decisions should be made by managers who are responsible for the work of employees as long as such decisions are consistent with approved guidelines and appropriate policies and practices, including salary surveys of comparable jobs outside the company.

The company needs are to attract and retain and motivate employees and, in the process, achieve maximum value from the work for the salary expended. The employee has a right to expect fair and equitable salary treatment, opportunities for deserved advancement, favorable work situations in which his contribution can be maximized, and communication on salary matters affecting him.

Administration of salary is an individual matter on the exempt level. Each salary should be viewed as unique and separate within general guidelines; there should be no force-fitting to predetermined statistical parameters. Salaries should be reviewed at least annually.

There are a number of considerations involved in individual salary determinations. These include:

1. Performance in relation to predetermined goals or accountability factors of the position.

2. Market trends, both generally and in relation to special skills.

3. Internal salary structure and internal salary relationships.

4. Cost of living, including special geographic considerations.

5. Company policy and budget considerations-although these should not rule out appropriate increases over an extended period of time.

6. The length of time between adjustments, particularly when business conditions have stretched out increases.

7. Promotion, transfer, or demotion.

8. The possibility of losing the individual, weighed against salary costs for his replacement.

9. The individual present salary III relation to the range for his position.

10. The rate of salary progress for the individual and whether it bears an appropriate relationship with his potential.

11. Improvement in level of performance.

12. Level of performance of the manager’s group, particularly III bonus considerations.

Factors which should not be considered in isolation include age, health, timeliness of decisions, amount of supervision required, initiative exercised, personality, amount of effort expended, amount of travel required, amount of formal education, years of experience, loyalty, and size of family. It should be emphasized that these factors are important only insofar as they contribute to the realization of-or failure to meet quantitative goals and performance standards.

There is numerous compensation plans, most of them made up of some combination of these elements: base salary, profit – sharing, bonuses, commissions, stock bonus, stock options, deferred compensation, insurance, savings plans, and fringes. What combination is best varies from year to year with the circumstances and the tax laws. A number of good professional consultants are available to help a company select the best plan for its needs.

It must be borne in mind constantly that business effectiveness is directly related to the ingenuity and effort which exempt employees put forth in their work. It is vital that salaries be so administered as to avoid feelings of dissatisfaction about pay. While satisfaction in itself may not provide the motivation for increased productivity, a feeling of dissatisfaction is an inhibiting factor that prevents the full and effective utilization of executive talent.

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Category: Business Management
Keywords: Business,investing,company,organizing,organization,administrator,manager,leader,Motivation,Attitude