Traditionally the underlying objective any of compensation structure has been to attract, motivate and retain good staff. However, choosing the right compensation structure to achieve a specific goal can be difficult. There is a myriad of variations from which to choose, but they all basically come down to either base pay or performance pay.
Performance pay involves setting base pay plus establishing a formula that will provide bonus payments based on certain performance criteria. It is a widely used in particular industries, based on the concept that pay can motivate job performance, increase employee effectiveness, and align business goals. Research suggests that pay can do this when it's linked to actual performance. This model offers several potential advantages:
• Ties staff member's compensation to performance
• It rewards the right behaviors and builds unity
• It encourages self-management
• It encourages innovation
So what does this have to do with business sustainability?
By linking compensation to specific sustainability concepts, businesses have the potential to align the sustainability goals of the organization and motivate behavior.
• For decades, the oil and gas industry has had health, safety, and environmental goals tied to employee compensation, which has dramatically improved the entire industry’s performance in those areas.
• According to a recent news report, National Grid will tie a portion of its executive compensation to carbon reduction targets. They will measure staff performance on emissions reductions as well as traditional performance benchmarks.
• Companies across industries are successfully integrating environmental health & safety criteria into supplier performance metrics.
At Taiga Company, we recognize a key to business sustainability is attracting, motivating, and retaining top talent. We realize that there is not a single incentive structure right for all businesses. Our professional consulting works with clients to define a structure that best fits the organizational needs.
Is your current pay structure facilitating the performance your business desires?