One WorldatWork study indicates that employee compensation can represent between 20-50% of the cost of doing business. More specifically, compensation costs can comprise upwards of 70% of total operating costs. Needless to say, numbers like these have management's attention and for good reason.
"The cost of compensation is too important not to ask the 'two-million dollar' questions. Some of the questions may only be ten thousand dollar questions, yet some may be twenty-million dollar questions or more."
With this level of impact, every dollar being poured into employee compensation needs to be able to show a healthy return on investment. The success or failure of a reward initiative could make or break an organization's financials. Therefore, rewards initiatives must be done right and done right the first time - meaning successful discovery, planning, design, communication, adoption, and institutionalization of desired behaviors. To that end, partners in Organization Development are equipped with the skill sets to facilitate deep discovery, recognize rewards as an element in a larger strategy design (e.g., Galbraith's STAR model), and understand culture change.
Cut to the chase: Engineering was at the mercy of the Program Management Office, and the engineers were already working to their fullest capacity. In most cases, they were working inefficiently or ineffectively, letting QA pick up the quality issues they knew were slipping through the cracks. Had we created an incentive plan, we would have been inciting even more of the inefficient and ineffective behavior. By simply asking some insightful questions, the VP of Engineering was able to come to his own conclusion (I love it when that happens!) that the incentive plan was not the way to go, and rather he was going to sit down with the head of Program Management to work out a better way of delivering quality products within a realistic timeline: a better solution for the long-term health of the organization and its employees.
This could have easily been a two-million dollar mistake with no ROI for the organization. The cost of compensation is too important not to ask the 'two-million dollar' questions. Some of the questions may only be ten thousand dollar questions, yet some may be twenty-million dollar questions or more.
What are some of your ‘fill-in-the-blank’ dollar questions that have helped your organizations find the right solution while considering the high cost of compensation?