Benefits Of Coordinating Compensation And Rewards

Leading at Light Speed is a powerful leadership book by Eric Douglas revealing the 10 specific ways an organization must act and behave to build trust, spark innovation, and create a high-performing organization. In Chapter Six, Stimulate the Creative Flow, Eric discourses upon Aligning Compensation and Rewards.

Many companies link compensation to performance, believing that it will motivate people to make the organization more successful. To some degree it will. However, the flow of creativity increases more when the strength of the organization and its success is made primary, rather than the efforts of one person or group. When it comes to aligning compensation in order to springboard the flow of creativity and imagination, you may wish to consider the following:

First calculate the Total Maximum Compensation (TMC) that a person should receive. Certain forward-thinking companies (Google, for example) limit the compensation amounts for their highest paid executives to a certain multiple of the lowest paid, e.g., 10 times. Therefore, if $50,000 is the lowest, then an executive’s maximum payment would be $500,000.

A guaranteed base compensation of up to one-half of their TMC seems a fair payment for corporate executives and senior leaders. For example, if the TMC for a particular leader is $1 million, then the base might be set as high as $500,000. The remainder should be paid out in bonuses, based on the organization’s overall performance targets and balanced scorecards.

Here are some forms of forward-thinking compensation you can use to reward people for performance and spark creative flow:

Gain sharing: This is an awards fund that is based on how well an organization does in meeting its strategic or business goals. Each individual, no matter what their position in the company, receives a bonus in the form of a cash payment. Every employee’s bonus should reflect clearly established measures of success – when such transparency exists, trust grows within the ranks of the organization.

Team innovation awards: By announcing you’ll reward teams that do a superb job achieving specific innovations, you can motivate everyone without eroding trust. It is highly beneficial for all involved to make sure no team is always the “superstar” – the wealth and accolades should be enjoyed by all.

Take this free work survey to see if your organization practices the 10 Quantum Leaps of high-performing organizations.

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