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Simple Steps to Create an Effective Compensation Plan

falling dollarsHow do you create a compensation structure that is fair to all employees, attractive to new hires, creates excitement and loyalty amongst your team and engages their learning development while increasing productivity? Reinventing the wheel is not necessary, but creativity, communication and evaluation of your existing plan are essential.

In my years of creating compensation plans for organizations, I have found the overall goals of the firm lack a link to a compensation process. For example, one of my clients would like to establish their firm as “the best place to work in town”. I love the goal but found that it doesn’t link to any current processes.    When employees read this statement every week in their staff meeting, it is fruitless, stands alone and has become meaningless. Linking the goal to various processes, specifically a compensation plan, would benefit this firm across the board.

Creating an Effective Compensation Plan

Follow these steps to create an effective compensation plan.  Communicating your compensation plan is extremely vital. Communication provides team members with a thirst to stretch themselves to reach higher levels within the compensation structure; therefore increasing engagement, productivity and development.

Compensation Analysis

  • Perform a SWOT analysis of your existing compensation plan by studying the strengths, weaknesses, opportunities and threats of your current structure.
  • Complete a cost analysis by focusing on your overhead and human capital costs. Determine the affordability of new hires if desired

Job Evaluations

  • Create an organizational flow chart or review and update your existing chart.
  • Review job descriptions and create, clean-up and re-align to match roles.
  • Determine roles for new hires if applicable.

Performance Management

  • Audit your current performance management system.
  • Establish goals expectations and incentives.
  • Collect and conduct 360 degree appraisals.
  • Analyze data.
  • Create professional development plans.

Compensation Plan

  • Integrate individual performance with compensation.
  • Base/Benefits/Incentives/Extras – If you haven’t read our blog  Compensation Conflict? What Employees Really Want, please do! You will find some great ideas on establishing your compensation plan.

Cost Analysis Update

  • Perform an overall cost analysis of your firm.

 When compensation plans are effectively communicated, morale and retention will improve significantly. DownloadIronstone’s Compensation Planning Checklist for use at your firm. 01.15.13IronstoneCompensationPlanningChecklist

 Question: What compensation challenges are you facing at your firm?

Let us know by leaving a comment! We want to hear from you!   

 

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020
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Relationship Management or Incentive Plans? Which Will Inspire Your Team?

Incentive plans should not be misconstrued as a means to motivate your team.  You first need to  build concrete goals and then inspire your team to reach each goal with conviction.    It is imperative to communicate overall firm goals with your team.  Group and one-on-one meetings provide an opportune time to discuss and evaluate strategies to reach each goal.  Allowing your team members the opportunity to contribute to the overall success of your firm will instill motivation, confidence and passion that incentive plans cannot do on their own.

Before implementing an incentive plan, make certain your team members are fully engaged and committed to the position they hold at your firm.  This will mean you, as a manager, must realize offering an incentive plan will not magically transform a disengaged team or team member.   In our blog, “Learn How to Make an Employee Incentive Plan Effective,”  https://aeschlapia.wordpress.com/2012/04/03/learn-how-to-make-employee-incentive-plans-effective/  we stressed the importance of being a good manager by guiding your employees to work on what is most important and then implementing an incentive plan as a reward.

Employee incentive plans are a significant component for firms wanting to stay competitive and on track with the pace of evolution in the workforce.   You will need to do your homework for your plan to be effective:

  • Recognize all factors that affect your team’s behavior.
  • Look at the type of culture you have in your firm.
  • Understand each of your goals and the processes you will use.
  • Develop a measurement system for each goal.

At Ironstone, we have found many employee incentive plans simply don’t reap their intended results because  they were implemented for the wrong reasons.  Don’t be fooled in believing that an incentive program will counter poor behavior, performance or disengaged team members.

Start your incentive plan after you have managed your employees to the level of being:

  • Engaged
  • Passionate
  • Productive
  • Loyal

Once your team is instilled with the qualities listed above, you can implement your incentive plan by including the following critical elements:

  • Identify your desired activity/goal
  • Develop the tactical plan and how employees will work toward achieving each goal
  • The amount of time allotted to obtain each goal
  • The reward for achieving the goal

Remember every aspect of your plan needs to be measured to ensure the program’s success in achieving each goal.  Make sure your firm’s strategic goals are concise and specific which provides team members a clear understanding of what is expected from them.

Goals should be challenging, yet achievable.  The incentive plan will be destined

 for failure if goals are interpreted as being unattainable.

A successful incentive program requires that each feature is suited to your team members’ interests.  Find out what motivates your team.  Adapting each element of the program to fit your team will provide you with engaged participants and enhance the effectiveness of the program.

Ironstone can assist you in strengthening relationship management at your firm which will lay the foundation needed to implement a successful employee incentive program.

Readers, we are curious!   What are your thoughts on employee incentive programs?

Follow us as we explore each of Ironstone’s Fundamental 4™!

• Strategic Planning
• Business Development
• Operational Effectiveness
• The Human Element

You won’t want to miss our next in the series: Business Development-Prospecting

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020
• Connect with us: