60 Second Snippet #142 - Why paying more should drive better results

Why paying more should drive better results

One of the most common discussions I have with business leaders is about employee remuneration. Many business owners recognise the need to pay higher wages to attract and retain top talent, but few fully grasp the expectation that should come with it: increased performance and productivity.

As a business accelerates it’s growth, employee numbers increase and so the need to keep the correct balance between cost and return is required.

Paying more isn’t just a cost, it’s an investment

We’ve all been there.? Bob gets paid ￡45k and we have to offer him ￡50k to stay, which he does.? But we don’t change Bob’s targets to reflect a ￡50k salary which means a mis-match!

It’s the same with a pay rise.? Kathy gets paid ￡52k and is due a rise.? Wait until she is delivering regularly at a higher level before increasing her pay.

When you offer competitive salaries or increase wages, it’s not just about keeping employees happy. ?It’s an investment in your business. ?A well-compensated team should deliver greater efficiency, higher quality work, and increased service levels. ?However, this only happens if expectations are set correctly.

The relationship between compensation and performance

The key to ensuring that higher wages result in higher output lies in communication and accountability. Here’s how you can make it work:

1. Tie raises to performance metrics?– Employees should understand that pay increases come with an expectation of improved results. ?Whether it’s higher sales, better customer service, or more efficiency, clearly define what success looks like
2. Encourage ownership and responsibility?– When people feel well-compensated, they should also feel responsible for the company’s success. ?High wages should foster a culture of accountability, where employees are motivated to contribute at a higher level
3. Use promotions strategically?– Promotions should not just reward tenure but recognise employees who consistently add value. Higher positions should bring increased responsibility, not just a bigger pay-check.

95% of employees agreeing to a counter-offer to stay are not employed in 12 months’ time so think very carefully about the impact of the short term retention plan.

If you’re raising wages without raising expectations, you’re simply increasing costs which makes you less profitable. ?But if you use higher pay as a tool to drive performance, you’ll see a return on your investment in the form of stronger employee retention, better results, and business growth.

Your team’s compensation should align with their contributions.? Pay well, expect more, and watch your business thrive.

Gary