Where to begin?

Where to stop!?

Lets start with the label. I prefer to speak of pay practices rather than ‘compensation’; they include the same elements – salaries and wages, and perhaps performance recognition – but to me imply quite different things.

I am of the view ‘Compensation’ is a counter productive term. ‘Compensation’ means replacing a loss. The term implies that in providing work effort to the employer the employee in exchange needs ‘something that counterbalances or makes up for an undesirable or unwelcome state of affairs’ (American Heritage Dictionary). Now I’m not so naive as to think that all work is desirable or is welcome by all employees and therefore ‘compensation’ is a necessary condition in many unsavoury jobs. Or even in ‘savoury’ jobs if the employee is unhappy in it. However, even in nasty jobs, with effective job matching of employees’ talents and temperament with the duties and conditions of the job there can be high intrinsic value in almost any job.

The goal in organizational life is to have in place highly committed and engaged workers who produce the most effective outcomes they can for their customers and for the organization. It is now well established that employees are motivated by at least one of three conditions: accomplishment, autonomy, and recognition (and pay is a poor substitute for recognition). And consequently the job of every manager is to create conditions under which employees can be successful: Give them assignments in which they can use their best talents and attributes to do worthwhile things; give them room to work on their own, and the authority to do it; make sure they know their contributions are valued and appreciated. When a manager does all this he or she will have motivated and engaged employees doing their jobs.

So why ‘compensate’?

I think we need to get away from the old transactional model (and for that matter the old expense line on the income statement) and move to pay practices that truly reinforce a culture of employee engagement.