"If you want your employees to become truly entrepreneurial, you must let them share in the risks and rewards of creating a successful business."

Give Employees Reasons to Help You Succeed

By John Bowen

In this era of belt-tightening, it's a good idea to examine and perhaps overhaul your employee compensation structure. For most financial firms, compensation is the largest component of their cost structure. It's essential that you get the highest possible return on investment from your compensation program.

To create value in your company, you must deliver greater value and consistent experiences to your investors. You need all your employees' help in achieving your vision. Your most valuable assets, after all, are your employees. But have you really given them a stake in the business to maximize their performance and abilities? One of the biggest internal structural challenges is motivating your employees to help your business be hugely successful.

By its very nature, compensation is the reward for a job well done. To continue to work as an incentive, compensation must keep up with what is offered in the marketplace. Compensation and status within the company increase as a person brings more value to the business. Ideally, it's a win-win situation for both the company and the employees.

Reward Results, Not Tenure

Your goal should be to effectively redesign your employee contract to read: "If we're successful, you're successful." If your employees get to share in the rewards of the company, they'll be more interested in their work. Unfortunately, most of us reward our employees with increased pay for increased tenure. Instead, rewards should be tied to results.

Make Rewards Meaningful

You want your workers to be more self-directed and motivated—to move from considering themselves simply employees to becoming entrepreneurs within the company structure. An effective way to do this is to design a package around what is truly important to those being compensated.

Motivating factors are different for everyone. If we're smart about it, we will design compensation around what will help our employees address their needs, goals and values. Because your employees have the best understanding of what will motivate them, include them in the planning and redesign of your package.

A major component of any new compensation package is an assessment program that results in pay for the desired performance. Too often good employees end up with a dubious reward: more work. As far as compensation is concerned, there is usually very little difference in pay between a great employee and a mediocre employee. Instead, your new compensation structure needs to be horizontal rather than vertical, focusing on team functions. It should be flexible and variable, rewarding the team for being focused on the customer.

Involve Employees in the Process

Employees need to be concerned with the firm's success and productivity while their superiors need to keep an eye on cost control and align pay with performance. Unfortunately, most employees believe that they have little or no impact on overall productivity. If they are able to save the firm a little money, they don't personally share in the gain. They also have little sense that their pay is tied to or affected by it. In a study by Meek and Associates, a Los Angeles-based human resources consulting firm, 73 percent of employees said they felt quality and effort have little or no impact on their pay. Only nine percent believed they would personally benefit from a productivity gain.

To make your new compensation program work, you need your employees to assist you in determining the company goals, team goals, individual goals and resulting compensation. We've all been taught that if we just do our job and stay with the company, we can automatically expect to get an increase in pay as time goes on. If you want your employees to become truly entrepreneurial, however, you must let them share in the risks and rewards of creating a successful business.

Together you will make it happen—in good times and bad.