This message originally came from Del Chatterson at LearningEntrepreneurship.com

Donald Trump made his name as a Reality TV star with the trademark line, "You're fired!"  As President in the real world, instead of the very unreal Reality TV world, he may have used it one too many times.

There is a lesson here for entrepreneurs. Firing an employee needs to be done at least as well as the initial hiring, maybe better. A firing has greater impact on the rest of the organisation. 

Although your conversations one-on-one may be very private, a firing tends to get more public attention and generate stronger reaction. Maybe it's the "fear of firing." The message received by employees staying on the job will be more important than the message delivered to the employee who was fired. Their perceptions and interpretations of what "really" happened will affect their own behaviour.

They have seen how someone got fired, now they need to know why.

Could it just be something the boss didn't like? Something that was said or done that had nothing to do with the job?

Be sure they get the right message, and quickly.

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​Generally, there is no “merit only” increase. The various approaches in one way or the other include an allowance for inflation. In these times of low inflation (including wages), incentives based on available merit increases are of very little value.
 
I counsel clients that the best compensation is to assure that employees are paid correctly according to their experience, skills, business competencies and effectiveness/performance. This is a 52-weeks-per-year issue – not a once-per-year event. It also reflects the subtle difference between the concept or compensation and rewards. Rewards fall under the umbrella of win/lose, while compensation should be a fair payment for value provided. Compensate all employees based on what they bring to the table – at every pay period. Tell them what you are doing, and let everyone get back to work.

You get what you pay for – where did you hear that before. How many of us have bought something from a TV pitchman and found that the product was  not what we thought. Likely the product was not worth even close to the  $19.95 (plus
shipping and handling) that we paid.

Business owners and managers are not immune from finding that always trying to get the  cheapest deal often turns out to be the most expensive and  unsatisfactory in the long run.

Incentives are a classic and very common area where poor planning and unwarranted
assumptions lead to  unexpected consequences, with three-aspirin headaches that
could have been avoided by a little additional clear thinking. 

What Behaviours do your incentive plans reward?
 
Do you know?

Incentive plans need to be carefully designed to promote the success of the organization. As long as the money is flowing, an employee expecting a  bonus isn't going to ask, "are you sure you want me to do this?"  That's not going to happen, and most incentive plans are not  self-correcting.  Employees will follow the dollar bill with little thought for the bigger picture.

If you haven’t looked at the details of your own plans lately, you should. For many companies, this  is an ideal time, when the new year is approaching and new goals are  being set for 2014. Does your incentive plan reward the right kind of measurements that support the company's wider objectives? Does your  plan reward employee behaviours and results that help to deliver  business success?  Do you expect – and do you measure - a Return on  Investment (ROI) for the incentive money you've targeted for
incentive  payments?

There are enough variations in incentive schemes to fill many books (and they do), but certain fundamental design elements  apply as requirements for success.

• First, the company has to succeed.  Only targets and activities whose achievement advances the company's bottom line should be used to incent  employees. Incentives should not be paid when the company is not  succeeding. You must define what success means, but you should not  reward
  failure.
• Spell out in detail what you want the employee to achieve. Don’t assume that everybody knows – explain everything.
• Provide enough reward to influence behaviour.  Like any incentive, if you want  to
  focus minds on certain behaviour you need to place a clearly visible  carrot out in front.
• The greater the achievement, the greater should be the reward. Be generous when achievements are greater than expected.
• Make sure you can measure performance against quantifiable
  milestones. 

There are other important criteria for an incentive plan to work, but unless  you start with a clear map that details where you want your employees to focus their efforts and what results you want them to achieve, you run  the risk of missing the mark - which can be an expensive mistake.  You  will need a team effort, not the disconnected activities of individually focused entrepreneurs.

The success of an incentive plan should be determined by the overall  success of the
business. A successful incentive plan 1) measures  achievement (not only effort), and 2) directly supports the company’s  business. An incentive plan that does not achieve even these two minimum goals should be looked at carefully and either fixed or scrapped. Think about it, and stop wasting your money.


Inspired by an article on sales compensation by Chuck Csizmar, CMC Compensation Group


 

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Do you avoid confrontations when you are disappointed with an
employee’s performance?  When you approach an employee about his or her performance or behavior, it’s important to do it in a non-threatening manner. This can be challenging - you may be frustrated with declining job performance. Whatever the case, it is helpful to prepare for difficult conversations and practice your opening
words.

If you are documenting performance, it is advisable to discuss with your HR
advisor. They can help you talk through your own feelings and help you prepare.
 
List the issues as you see them…

This list should contain specific incidents, behavior, or observations, not generalizations or conclusions. Before you meet, identify what you want to accomplish with the employee, both from the conversation and from their future work performance.

Prepare for responses…

Try to anticipate all possible responses. (Be prepared to deal with denial.) Consider, for example, how you will respond if the employee refuses to cooperate or tells you that everything will work itself out in time.

Practice your opening words, out loud…

Be direct and give specifics.

“There’s something important that we need to talk about.”

“I haven’t been happy with your follow-through on projects lately.”

Try not to analyze the cause…

Remember that your goal is not to analyze the root of the problem, but to recognize that
it exists and determine what further action should be taken. Tell the person your concerns. Emphasize that you want to help. List the things that you have observed, and tell how these incidents affected the work. State how you feel as a result of these things. Then tell the person that you need and want to help resolving the problem and that you have to come up with a plan to prevent these things from continuing.

Come up with a plan…

Be specific about what you want and encourage the employee to offer suggestions.

Plan a follow-up meeting within one to two weeks…

This important step can afford the employee an opportunity to inform you of any progress in meeting established goals, and to be certain that both parties agree that positive action is happening.  If there is no progress, consider modifying the plan and/or progressing with further discipline.

When problems fester, they generally get worse. Don't ignore them.


This article is based on a blog by Kathleen Greer of KGA Inc.

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Your company’s success is dependent on the  people you hire. Particularly if you are a startup, your early hires are  critical to your company’s success. So it’s easy to say that you need to hire the “absolute best people you can find.” But what does this actually
mean?

There are two different and important variables –technical competence and cultural fit. 
 
Imagine that you have a two-variable spectrum  for each person—from low to high.

Now, hiring someone who is low on both  technical competence and cultural fit makes no sense – disaster is guaranteed.  And obviously, finding and hiring someone who is high on both technical competence and culture fit is the ideal outcome.

But what about the other two cases? How to decide?

Too often, managers default towards choosing  people who have high technical competence, hoping that cultural fit will take care of itself. This is a big mistake - as this is exactly the wrong person to hire. While the new hire may have great skills for the job you need done, managing and integrating this person into your young team will cost time and money, and may be fatal to building a cohesive group. And you will incure
greater costs when you have to fire the person – causing expensive turnover that
you could have avoided by making a better initial choice. For leadership positions, there is an additional problem - your new hire will look to hire other people who have a cultural fit with them, rather than with the organization, quickly compounding the problem and putting the company at risk. Quickly, polarization happens and your young company wastes time and energy on issues that add nothing to success.

Of course, people with low competence but a high culture fit are also not great hires. But if they have “medium” competence, or have high competence in a related role, or if they’re early in their career and ambitious to learn new skills, they probably are a smaller risk than the high competence/poor fit employee.

While you always want to shoot for high competence, high cultural-fit people when you are hiring early in your company’s life, it’s always better to choose cultural fit over competence when you have to make a choice.

One lesson is to learn is that cultural fit, is in fact, a competence as important, and sometimes more important, than technical competence. 

This article is based on ideas published by Brad Feld in the Wall Street Journal

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Here We Go Again

At this time of year, many companies are doing performance appraisals, and working out salary adjustments. Many managers are thinking that 90 minutes in a dentist’s chair sounds like a better bargain.

One common complaint is that with salary increase budgets running around 3%, there is no room to provide rewards and incentives that light a fire under employees.

Where is the reward?
 
A very good question. Where so many go wrong is focusing on the annual salary adjustment. This is seeking satisfaction in the wrong place. The reward for competent performance is a salary rate that is commensurate with the external market, equitable within the company, and an accurate reflection of the employee’s performance. This reward keeps on giving, with every pay deposit all through the year.
 
The annual adjustment assures that pay remains appropriate in the context of inflation, changes in knowledge and skills, and changes in level of performance. 
 
The reward is not the increase – the reward is appropriate pay on each pay deposit, year in and year out.
 
If you get this right, and communicate it effectively, there is a second important benefit. Pay ceases to be an issue and the annual increase is not a matter of high emotion. Employee relations and engagement improve.

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I often see companies with a great work environment and   work-life balance. I see engaged employees who care about their work. Rewards and recognition happen. That is great. But is the compensation plan helping the cause?

In my practice, I hear companies try to explain why substandard compensation is fine for them. Most use some of the above as excuses. Those things all add to a corporate culture, but they don’t replace a competitive compensation plan. Companies should work for a great environment and work-life - genuinely caring about employees and working to have them enjoy coming to work pays off. But it is equally important to take care of them financially - regardless of their level in the company.

Here are three reasons why having a competitive compensation plan is critical:

Money Talks - A reputation for underpaying employees gets known quickly and is hard to shake. A mediocre compensation plan will show up  - without fail - on websites like glassdoor.com, Yelp and the informal network - places where employees can anonymously air their frustrations. People talk about being underpaid. If you want to attract and retain top talent, you must be known for taking care of your employees. 

Compensation Benchmarking and Retention - When employees feel appreciated, they are less likely to leave. People start job searches for a variety of reasons, but feeling they paid less than their market worth - or not paid fairly - is usually an important
factor. When employees can feel success financially, they will likely feel more engaged and give the extra time and effort on the job. Companies are always looking for any way to control costs, but an uncompetitive compensation strategy can easily backfire. Treat your team well – there will be a major return on investment.

Make sure you know what competitive salaries are. Do not rely on Payscale.com, your “feel” for things or anecdotal stories from someone’s brother-in-law. Understand your reference market (where your talent comes from and goes to). Learn what the competition is paying for talent, or what companies deemed “Best Places to Work” pay, and then create competitive compensation ranges for your employees. You should be making market-based compensation decisions and then trying to do a bit better, particularly for your top talent. If you do that, and communicate your compensation philosophy, you will have more enthusiastic, focused employees. And compensation will not be a major factor.

Mind the Gap – Learn how to pay correctly. Gaping salary differences between members of the same team with similar years of experience is a serious mistake. Unless someone has earned a degree or there is some other quantifiable reason to put them ahead, don’t allow serious gaps. Think through the raises you give out and the offers you extend. They must be consistent with the rest of the team, or with other individuals adding similar value to the organization. It is important each time you make
salary adjustments for an individual that you have a compensation plan in place to support them. If an employee keeps performing at a high rate, you must ask if you are paying them correctly and adequately for the value they bring to the table. If the answer is no, you need to figure out an alternative – or risk a disaffected employee and a costly disappearance.

To most employees, money is not everything. But feeling under compensated will have a negative impact on attitude, engagement, the working atmosphere and turnover. A competitive compensation plan that employees understand will resonate with recruits and employees, and make your business a more appealing place to work. It will cut your costs to a greater degree than the small costs of being competitive.

Adapted from a recent article by Lindsey Gurian, B2C.com