Linking Pay to Performance

“More Companies Offer Packages Linking Pay to Performance” quoting from an article in today’s Wall Street Journal. “More companies are looking to increase the importance of merit-based raises. And more companies may also seek to link performance to benefits such as retirement savings with health care. Home Depot, like most companies, had long had a bonus program limited to managers and executives; workers in its stores had little incentive to go the extra mile. Several years ago, the company decided to change that. In 2003, it launched a program that gives store associates (workers) the opportunity to earn a bonus if their stores meet certain financial goals. Last year, Home Depot paid out $90 million under this plan”.

Yesterday I sent a three page email to DeWayne Bartels covering merit pay, longevity, automatic raises based on seniority instead of on merit, ect., in answer to his request for my comments on comments made on the floor of the City Council last week. Perhaps DeWayne will quote me in this story he is planning for the Observer on the subject of pay for city employees. If anyone wishes a copy of my email just send me your email address.

I started my business career as a salesman. The first three months I was on straight salary, (not much) the 2nd three months I was on salary and commissions and after nine months I asked to go on straight commission and never looked back. Incentives have long been used by private enterprise. Expect incentives to become more the way of keeping up with the emerging third world and with competition at home and in all sectors of employment.

Not all people re-act the same to incentive pay. That is understandable but longevity and loyalty will not keep you employed as you get older if you cannot compensate with greater production or efficiency. Dependability will certainly be factored in your job security. Nor will it guarantee you a yearly wage increase. In this new world developing, the rules are changing. You will need to keep up or accept no raises and possibly less benefits. Believe me, the best guarantee for job security is your own ability to adapt to a rapidly changing world. Belonging to a union is helpful but even some unions have not been able to retain jobs for their union members. Maytag in Galesburg is just one of many examples.

Relate what I write to the secure old Peoria system of “Dad works at ‘so and so” company so Dad of Mom will be able to get son or daughter a job there also.” I don’t believe this system has worked at large companies for quite a while now. For job security today he or she must more than adequately fill the job description and he or she must accept the responsibility of their position. And expect job descriptions to change more frequently. Expect to hear the word “compete” more and more frequently. For those who do not want their kids to have to compete and expect their grown kids to get a trophy for showing up at work; this probably will not happen unless Dad and Mom own the business and probably not even then.

Those of you who work in the public sector will find as the years go by the public sector will be run more like a private business. It has no choice if this country wants to maintain its leadership in the world. There will be constant challenges by employees, union or non-union, and challenges to elected officials and administration to gain access to additional dollars. If this part of the country loses more of its economic growth steam the demand may be greater than the resources.

All who have prepared themselves to compete and to be responsible will be in the best position to insure their own job security.