Compensation Rules

Darren Dahl writes The New Rules of Compensation in the July/August 2009 issue of Inc and talks to four entrepreneurs about changes they made in their employee compensation strategy. The tactics are varied, but the results all point to a better bottom line AND HAPPIER EMPLOYEES!

Go figure. What works? How about:

• Eliminating a 5% premium over competing employers by paying market rates as an alternative to layoffs.
• Changing the commission structure so salespeople earn a bigger commission the less they discount the price.
• Making a fast price change to reflect new market realities, and then restoring a previous pay cut to compensate the team's hard work.
• Using the opportunity to replace B-Team players with A-level performers. "When we replace the B-level performers, it actually elevates morale" says the owner.

Dahl refers to today's economy and it's effect on employee compensation as "unprecedented". Managed carefully, entrepreneurs can lever the circumstances to create win-win opportunities for both themselves and their employees.