To Create a High-Performance Culture, Build a Unified Financial Vision for Growing the Business

So far, this newsletter has argued that companies need fewer "employees" and more "growth partners." We've spent some time talking about the difference between the two--and have emphasized that the term growth partner is not just a clever new way to talk about the people who work for you. It's a mindset.

Company leaders can initiate that mindset by articulating a growth partner philosophy (see our previous article). Such a statement defines the kind of relationship company owners want with those they employ. It also acknowledges what it will take to attract and retain growth partner-level talent. Any philosophy worth the paper it's written on likewise addresses the nature of the financial relationship companies want to have with their people. Why? Because great people will not join an organization that does not offer a complete and compelling value proposition.

And why should they?

Why an Effective Employee Value Proposition Matters

An employee value proposition in today’s business environment is much more significant and carries more weight than it did even a few years ago. This is because a company’s value offer is how it competes for the best people—and in the current talent market, that competition is fierce. As a result, the employee experience you promise needs to frame your organization as unique—even irresistible.

Historically, as long as a company provided an “adequate” compensation and benefits plan, it didn’t need to spend much time thinking about what it offered an employee. It wasn’t that long ago when many people felt lucky just to have a job, and employers did not have to do much to impress their people. When existing or prospective employees felt fortunate simply to be employed, they were not inclined to “upset the apple cart” by negotiating for a higher salary or better benefits. In fact, if an employer offered a competitive salary and had a 401(k) plan, they were considered going above and beyond what was necessary to attract and hold onto great people.

But times have changed. Today, a value proposition is a means of differentiation. Organizations distinguish themselves by how they define the opportunity their company will provide those who join and stay with their companies. Because skilled, educated, and experienced people are in short supply, they have many options in the current talent market. The tables have shifted and top talent can set the terms it will accept for its employment.

Value Offer Purpose: To Attract & Retain Growth Partners

The realities of today’s business environment make it critical that you understand what your company’s employee value proposition should help you achieve. Its primary role is to attract top talent and then turn them into growth partners. Let’s explore what that means.

As a business leader, you have a vision for your company. Presumably, you envision a business that is bigger and better tomorrow than it is today. You see your enterprise through the lens of potential—and are confident that if the right pieces are put in place, you can build something meaningful and lasting. However, you recognize that you cannot build that future company alone. You will need people around you who are as passionate about the business's growth possibilities as you are—and have the talent and skills to make it happen. You need people who will be stewards of your vision and can produce the results that will lead to the growth you seek.

So, who are those people and how do you attract them?

People who will commit to partnering with you to build the future enterprise are referred to in business literature as catalysts or strategic leaders. Whichever term you prefer, they are individuals who, by virtue of their skills and experience, can significantly alter your company's growth trajectory. People like this typically want to join a successful organization and apply their unique abilities to build something great. They will likely start their own business if they cannot find that kind of opportunity. As a result, they are looking for a value proposition that mirrors what owners experience.

Owners benefit from their business investment through value creation. As profits increase, business growth is fueled, and shareholder value grows. Similarly, catalysts want an opportunity that allows them to participate in the value they help create. This does not necessarily mean they have to receive stock in the business. There are many other ways to reward their performance. It just means how they are compensated should reflect their role as a growth partner.

What Role Does Your Pay Offering Play in Your Value Proposition?

Regarding compensation, this is what top talent expects:

? There is a philosophy that guides pay decisions, and it is fair. That conclusion is drawn because...

? There is a mechanism for sharing value with those who help produce it. Consequently...

? There is unlimited earnings potential for those who perform.

Most organizations don’t have problems with their compensation offering because they pay their people too little. They have problems because there is no philosophy driving in what form and how much they compensate those they employ. As a result, employees feel pay decisions are arbitrary, and they become suspicious. Catalysts want compensation to appropriately reflect the growth partnership they seek, encouraging a unified financial vision for growing the business.

The centerpiece of your employee value proposition is your pay offer. And in today’s competitive environment, what you offer must be distinctive and compelling. The compensation proposals made by most organizations to the talent they are trying to recruit do not meet that standard because they are not complete. Let’s explore what that means.

A complete pay strategy addresses all aspects of the financial partnership top talent wants to have with your organization. It also aligns employees with the company's vision, business model, and strategy. This can only happen if a company's compensation offering is balanced. This means consideration is given to all the specific pay plans that might be included in the company’s overall rewards offering, and a determination is made on how each might help fulfill the pay philosophy of company owners. In general terms, these elements are either benefits or compensation-related. Plans you consider will typically fall into these categories:

Benefits:

· Core Benefits

· Executive Benefits

· Qualified Retirement Plans

· Supplemental Retirement Plans

Compensation:

· Salary

· Performance Incentives

· Growth Incentives

· Sales Incentives

To create a complete and compelling pay offer, you must determine which elements to include in your value proposition and the "weight” each will carry. This can differ by tier or class of employee. For example, not all employees will not likely participate in a growth incentive or supplemental retirement plan.

Your intent should be to create a pay strategy that is both flexible and enduring. This is accomplished the same way a balanced investment portfolio is engineered. You select various asset classes (compensation plans), each playing a role in the overall portfolio (pay offering). As economics change, you don’t replace asset classes in your portfolio (at least if you follow prudent investment principles). You simply rebalance the allocation.

This is how you create and manage a flexible but enduring compensation offering as well. As things evolve (e.g., the economy shifts, your company goes through a hiring spurt, you expand your market or product offering, etc.), you do not have to redo your entire pay strategy and substitute new plans for old ones. You just need to adjust the emphasis or scale of opportunity each will have within your overall rewards structure.

Your Goal is to Build a Unified Financial Vision for Growing the Business

Leaders of winning companies are better than their competitors at building a unified financial vision for growing the business. They align what is economically important to employees and what matters to shareholders (enterprise growth). Certainly, the need for unity extends beyond just fiscal issues. However, if the workforce and shareholders are not linked in their understanding of the financial performance needed to drive company growth, then one faction or

another will end up unhappy—if not both. To be content, owners will need to see a satisfactory return (and ideally a superior one) on the investment they have tied up in the business. Similarly, employees expect to get a return on the commitment and engagement they pour into the company.

So how is this kind of unity created and sustained?

There are three dimensions to a unified financial vision that endures.

1. Line of Sight: Successful business leaders can get their employees to see the relationship between:

· The vision shareholders have for the future of the company.

· The business model and strategy required to achieve that vision.

· The employee’s role in that model and strategy—and what’s expected of him or her.

· How the employee will be rewarded for fulfilling those expectations.

When this kind of alignment is present in a company, there is little room for misunderstanding priorities or performance standards. Employees see what is required for shareholders to achieve their growth goals and why it should matter to them in their roles.

2. Stewardship: The best chief executives build a performance culture based on a stewardship mindset. They instill an ownership mindset and a results orientation in their workforce, and they provide a rewards system that fosters both. Premier business leaders attract talent that is motivated by a role to be fulfilled, not just a position to be occupied or a job to be done. They draw people who want to work for an organization that makes clear the outcomes for which they have a responsibility and the resources at their disposal to achieve them--and then let them loose to “own” those results.

Stewardship is either encouraged or inhibited by the company’s pay strategy. If you want employees to think like owners (become stewards), then how they are compensated should mirror how shareholders achieve their earnings—at least long-term. At a minimum, the chief executive’s value-sharing approach must maintain a balance between rewarding short and sustained performance. Employees must be able to adopt a long view in their decision-making without ignoring what the business needs to achieve in the next three, six, or 12 months. If your rewards strategy pushes their attention too far in one direction at the expense of another, the unified financial vision for growth crumbles—or at least is stifled.

3. Partnership: High-performing CEOs don’t just want employees. They want growth partners. To achieve their growth goals, they need to be surrounded by “gamers,” people willing to get their hands dirty (so to speak), make sacrifices, and do what is necessary to succeed. So, how do they achieve that?

A sense of partnership with employees is achieved by promoting a compelling purpose the business and its workforce can only achieve together. And the most successful business leaders are experts at discovering how and why that purpose would matter to their employees. Sherry Hakimi, founder and CEO of Sparktures, explained it this way in an article she wrote for Fast Company:

"What makes some companies wildly successful while others flop?"

"Starting and surviving in today’s economy is hard, but the companies that figure it out have something in common: the pursuit of purpose, alongside the pursuit of profit. A purpose mobilizes people in a way that pursuing profits alone never will. For a company to thrive, it needs to infuse its purpose in all that it does."

"An organization without purpose manages people and resources, while an organization with purpose mobilizes people and resources. Purpose is a key ingredient for a strong, sustainable, scalable organizational culture. It’s an unseen-yet-ever-present element that drives an organization. It can be a strategic starting point, a product differentiator, and an organic attractor of users and customers."

Note that Sherry emphasizes that purpose and profit are not mutually exclusive pursuits. She suggests that the purpose is the mobilization spark that gets employees to understand why profits matter. It is the key to fulfilling the company's and employees' unified purpose.

Purpose-fueled profits are lasting profits. And lasting profits create enduring companies that can, in turn, continue to support worthy purposes. This is the focus of business leaders who are succeeding at the highest levels.

The outcome that a well-designed employee value proposition should produce is this kind of unified financial vision for growing the company. This means your people feel financially aligned with the company's vision and purpose, its business model and strategy, employee roles and expectations, and how individuals are rewarded for fulfilling those expectations. When your employees sense there is this kind of “line of sight” in your organization, they feel confident that the experience they are going to have with your company will be superior. They will come, stay, and perform...well.

In 21st-century business, company leaders must treat their employee value proposition as a strategic issue. It is a defining piece of the employer brand that is crucial in today’s highly transparent environment, where potential employees can easily research the reputation of the company that is courting them. So, understanding both what an employee value proposition can help you achieve and what it should contain is essential to ensuring yours will provide a competitive advantage in recruiting and retaining top talent--and that you will be surrounded by growth partners who are as committed to the achieving your growth ambitions as you are.