The average salary increase budget for 2012 will, based upon current forecasts, be about 3%.
Increases to base salaries are nice to give but they, by their very nature, are hard to justify financially. Unless the fundamentals of a business (productivity, waste reduction, raw material costs, sales, etc.) change positively, raises hurt the vitality of an organization. In a down market, we need extra money for marketing, for cash reserves and other important things.
In today’s fast-paced, global economy intentionally hurting the bottom line is the surest way to ensure that your product or service becomes a candidate for third world adoption.
Perhaps it is time to have employees at all levels of an organization meaningfully participate in generating the funds necessary to fund the extra money they’d like to get. A well thought out and implemented incentive program can make an incredibly positive impact on both a company’s bottom line and their employee’s commitment to it and morale.
I thought I was a good employee until I some of my annual income became “at risk”. Now, I see the world much differently – and much more clearly. I “invest” every penny, watch for unproductive activity, go way out of my way to provide excellent customer service, etc. We need to help our employees become more involved in the, at least, virtual ownership of our companies.
Do incentives really work? After 30 years of experience with them, I say the answer is a definite “depends”. If well designed and communicated, yes; if not, no. The incentives you come up with quickly, generally start hurting you quickly. One piece of advice, seek help and take the time necessary to do this properly.
Let me give you one example of an incentive that worked. A manufacturing company had high turnover (30 percent a year), low productivity (typically 85% of standard), low quality (90%) and a raft of related problems. The business was in trouble. I went in and spent time with the organization thinking about the multitude of factors that caused these issues and developed and communicated a good plan.
What happened? A year later turnover was at 15%, productivity was at 95% and quality was at 98%. Absenteeism was down, on time shipments were through the roof, new found profit was flooding in, employees were happier. Best yet, the new incentive was much more than self-funding.
Changing to an incentive driven company isn’t for everyone but right now is the time to start thinking about whether it is for your company.
All the best,
Rick Galbreath
www.performtogrow.com www.outplacementcompany.net www.complianceactionplans.com