So what about compensation in this constantly changing environment? Here are some factors
to consider as pay — as it inevitably will — moves from controlled, stable and fixed dollars to
pay that varies with success and results:

Make sure your program is integrated with your business strategy

– Design it to focus employees on areas critical to organization survival and success by
rewarding results employees can influence

– Be sure the plan and the process reflect your culture and values

– Focus on the customer, both external and internal. Use some element of your total pay

program to rec::ognize and reward customer service and satisfaction.

Make sure the program is cost-effective. If your company is squeezing out profit margins to
survive, participate in that effort by maintaining or reducing fixed compensation costs.

Don’t be stingy. If you want outstanding results, pay outstanding rewards.

Employees typically feel the results of the downside of performance. It is equally important
that they benefit on the upside.

Don’t expect perceptions to change overnight. Traditional systems have been around a
long time. Changing to a variable pay philosophy is not a short-term project.

Be prelfared to spend time and effort to train and educate managers and employees,
alleviate their fears, and gain understanding, acceptance, and credibility for any new

Do this through clear, ongoing communications. These messages must reinforce the
link between the company’s ability to achieve business goals and succeed in the
marketplace and its ability to support an effective compensation plan.

Above all, inspire. Do whatever you need to do to get people excited and focused on
improving performance and results

Make the program important. Publicize it, promote it, market it. Make sure everyone
knows and understands its importance to them and to the organization.

There is much talk today about compensation. Much of the talk centers on the motivational
impact of pay and incentives. While motivation is, of course, a key element, as we have
reviewed, there are other catalysts pushing organizations to change the way they pay
employees. Not the least of these is the critical need to vary cost structures. For most
organizations, compensation is the largest element of operating costs. If business dictates a
reduction in costs, companies are forced to reduce labor costs by layoffs and downsizings.

However, many organizations are changing the way they view people and pay — away from
traditional, cost-of-doing-business programs to programs that focus employees on improving
business performance and rewarding them for their contributions.

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