Compensation & Productivity

There are many studies that point to the lack of increased productivity after someone has been given an increase in their salary.  And although the same studies will note a modest increase in productivity in some employees after a salary increase, they are quick to note that it is a temporary lift.  Once an employee gets used to the new salary, productivity will revert to the previous levels.  So what do you think about decreasing compensation to motivate increased productivity?

Suppose you have a commission sales force selling your product, and your sales are down for the previous year and things are not looking any better so far this year.  To increase profits it is determined that we need to pay the sales force less money.  Somehow that will increase sales and make more money?

Another company is in the middle of launching some aggressive skill building programs and then the 1st quarter sales results came in lower than expected.  The way to off set reduced sales was determined by eliminating training thus saving money.  So if I understand this correctly, the focus is on reducing expenses, when the issue is increasing sales.

Compensation is a tool that can motivate certain behaviors.  At the same time if you remove compensation, you will rarely if ever increase productivity.  Most of the time the only increase productivity you will get from the employee is in looking for another job!

By decreasing income, or training which is also seen as a benefit, you are sending the signal that you are putting less into this employer-employee relationship.  So why on earth would any sane person believe the employee would react in a positive way?  Instead of the little extras this employee might be doing for the company, they now see themselves as doing and giving less in this relationship to offset the decreased compensation

You have heard of the phrase “You get what you pay for?”  How about this new phrase, “You don’t get what you don’t pay for?”


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