You Get What You Pay For

Early on in my career in off-shoring a training manager said, "if you pay peanuts, you get monkeys." Compensation is tricky: Base pay, bonuses, signing bonuses, pay-for-performance, incentives, and it goes on and on. What should be considered for compensation? How is performance related to pay?

Look at the market. OK, that's too simple. But it is true. The problem with many cut-throat vendors is trying to one up the others with a few more pesos, rupees, dollars, etc. In the end, the industry suffers because we all end up pricing ourselves out of the market. Take a look at the current market and be relatively competitive. That's really it. If you pay above the market rate, you better demand higher skills and expect slow hiring. If you're below the market rate, expect to invest more in training and you better have a spectacular coaching culture if you want to survive.

How is performance related to pay? Beyond the skills mentioned above, compensation can be one of the tools used to reward behavior. This external stimulus for behavior should always be accompanied with pomp and circumstance however. What am I talking about?

Well, we all have two type of motivation, internal (intrinsic) and external (extrinsic). The extrinsic rewards get you so far (further with some). And internal motivation is that burning desire within to do a great job -- and with any fire, we can add fuel. Making a big deal out of performance-based rewards is critical to driving this much stronger motivation.