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Careers: Is Compensation About The Money?
By Bert Sadtler, Senior Contributor


Companies today must re-assess their talent needs in order to remain competitive and drive growth. The satellite communications industry continues to face numerous challenges, yet remains ripe with opportunities. As great talent can make a huge impact, employers need to get it right and make a “great hire.” 

To assist with career and leadership issues, SatMagazine asked Bert Sadtler of Boxwood Executive Search to provide his insight. Boxwood is a management, consulting recruiting firm with offices just outside of Washington DC and in Bradenton, Florida. Boxwood’s services involve job growth, maximizing the performance of critical, senior level talent and addressing the shift in the recruitment and compensation paradigm for employers.

And, yes, compensation is about the money. What else provides such an easy and immediate reward to an employee? Employers can offer creative benefits, an energetic workplace environment, flex schedules and extended leave, but all these take second place to “the money.” Various forms of stock options and equity can fall into a version of “the money,” depending upon the structure of the employer.

Employers have the responsibility to protect their cash while simultaneously incentivizing their employees. This means employers attempt to motivate their employees using alternatives to cash compensation in order to receive the “biggest bang for the buck.”

All that being said, CEO’s and Senior Leaders tell me that they support a simple business philosophy, yet this philosophy is rarely implemented today. The  thought is that Senior Leadership will pay significant compensation to employees who provide extraordinary value to their employer. 

Employers agree that today’s workplace is quite dynamic and that creative approaches are welcome and frequently implemented. However, many employers continue to use the same compensation model that has been instituted from past years.  The model is: If the employer meets certain goals (usually revenue targets), then all employees qualify for a bonus in addition to  their base salary. 

This approach is designed to serve the employer, not necessarily the individual employee. The approach suggests that all employees deliver a similar value. By working as a team, employee and employer benefit. In theory, this approach sounds great.

Unfortunately, there exists an unintended outcome, one that is totally avoidable.

While the outdated model does universally reward the employees for the employer’s success, it does not drive excellence. The model does not speak to each and every employee individually, challenging and encouraging them to their highest levels of achievement. The model does not encourage passion.  In fact, the one-for-all and all-for-one model is more socialistic than capitalistic. 

Mediocrity and status quo are the biggest enemies of an aggressive, growing, capitalistic organization. The outdated model is unable to promote sustained excellence and, instead, allows “average” to creep into the organization—otherwise known as mediocrity.

On a report card, the letter grade of “C” is considered satisfactory. However, most will agree that a company would bristle if assessed at a grade “C” and labeled merely as a ‘satisfactory’ entity. Yet, satisfactory and average are translated to mean pretty much the same mediocre level.  

The outdated compensation model is saying to the employee: “You are a group and your employer holds you accountable as a group, and rewards you as a group.” The employer wants this group to be a TEAM, but has, in fact, modeled them to be a GROUP.

If the old compensation model is more socialistic than capitalistic, allows for mediocrity, and creates groups rather than teams, what model is best?

First, there must be agreement that today’s marketplace is faster paced and more demanding of results and stresses that everyone needs to be delivering value. In essence, we are “interviewing for our job” each and every day. 

Our output is not equal. Employees are not equal in their talent and their value. Some are smarter, some are creative, some decide to work longer hours. Some have 40 hours committed to their work-life and spend significant additional time on commitments outside of “work.”  Some employees have a unique drive to over-deliver on their projects.

As private enterprise is not the government wherein all employees are compensated with a specific pay grade level (regardless of their performance), companies must attempt to break the mold and strike out in new ways that acknowledge the individual for their performance.

Employees are different entities—why not weigh compensation more heavily on performance? Don’t employers run their business on a pay-for-performance basis? Highly performing companies win business, deliver quality and grow their revenue. Underperforming companies do not.

By the employer directing the company’s goals through a performance plan, goals can be individually allocated to each employee in a way that ties back to the employer. If the employee can meet the goals, a smaller bonus is paid. Great results deliver a larger bonus. Extraordinary results deliver an extraordinary bonus, thereby recognizing, encouraging and rewarding excellence and assigning a recognizable value to performance results. 

By defining the goals for each employee, the employer can still incentivize employees to collaborate and be “team-like.” Individually defined goals drive accountability and excellence, eliminating a socialistic model and eliminating mediocrity.

Smart leaders realize the business value of rewarding extraordinary results with extraordinary compensation. 

Traditionally, variable compensation and performance-based compensation has usually been associated with sales producers. 

Why limit performance to just revenue producers? Instead of measuring sales revenues, the employer identifies and defines critical key objectives for the employee to meet and complete. While the objectives can be developed as unique to the employee, all of the objectives are in harmony with the company’s short- and long-term goals.

Under this performance model, compensation is viewed as “OTE,” or, On-Target-Earnings, comprised of base salary, bonus, stock, equity, and so on.

The base salary represents 40-60 percent of the total OTE with attainable goals, and the related bonus components making up the remaining 40-60 percent. There are stretch goals and rewards for extraordinary performance, with no limit or cap to slow down or discourage over achievers.

Finally, while most compensation cycles run for 12 months in parallel with a company’s financial year, why not cut such in half and run a six month cycle in order to incorporate adjustments resultant of the dynamic changes in the marketplace? This structured approach only works with a company-wide commitment by all of the managers to spend the necessary time in establishing appropriate individual goals and then providing timely feedback to the employees and, no—this is not an easy path.

To those of you who find this to be a significant change, as well as a significant time investment to implement, ask yourself, what is more costly than NOT realizing the full potential of an organization’s talent?

Time and time again, employees tell me their compensation model does nothing to motivate excellence. They feel they are identically for their good work as they would be for their extraordinary work.

Stay the course if your mediocre compensation model is good enough... however, consider a change if “extraordinary” is your company’s preferred paradigm for a more beneficial ROI.

Good hunting!

About the author
Bert Sadtler is an invited speaker who discusses the shift in the recruitment paradigm toward acquiring critical, senior level talent, as well as in analyzing the shift in the employer’s performance-based compensation model. Bert can be reached at: BertSadtler@BoxwoodSearch.com.

About Boxwood Search
As a dedicated, consulting resource to the employer, Boxwood designs compensation models to reflect the current trends and  launch senior level recruitment campaigns to attract and acquire talent. Position examples include: CFO, COO, Senior Program Manager, Vice President of Sales, Director of Marketing, Vice President of Engineering, Director of Contracts & Compliance and Vice President of Business Development. Examples of industries have included: Government Contracting, The Intelligence Community and the Communications/Technology Sector.