What if your pay strategy actually made your employees more accountable? Skeptical? “Is that even possible?” you wonder. It is. In fact, I’d go so far as to say that if your compensation approach isn’t driving greater accountability, then it needs repair. It’s probably doing more harm than good.
Financial rewards should turn employees into stewards of shareholders’ interests by bringing clarity to their roles and the outcomes for which they are responsible—and then holding them accountable for meeting those performance standards. So how do you create a pay strategy like that?
Aim for Stewardship
Employees demonstrate accountability when they adopt a stewardship approach to their roles. Dictionary.com defines stewardship as “the responsible overseeing and protection of something considered worth caring for and preserving.” In an employee accountability context, this means your people adopt a stewardship mindset towards shareholder interests by taking complete ownership of the outcomes for which their role is responsible. So, how do you instill a sense of stewardship?
Before your people will become better stewards by taking responsibility for results, they have to come to believe and understand why that matters—not just to the business, but to them personally. And before they will believe that, there are certain things they need to learn or know.
What your employees need to believe before they’ll own results is that they have a partnership relationship with you and other organizational leaders or owners. They don’t want to feel like they are just filling a position and performing a job. Instead, they want to fulfill a role and have a strategic impact. Before they will assume complete responsibility for outcomes, they have to believe there is an underlying purpose that their contribution is serving that is worth supporting. They have to believe that there is alignment between the owners’ vision and their own.
So what do employees need to know or come to understand before they will believe they are in partnership with you in building the enterprise? They need a clear understanding of what their role is, how success for that role is defined and where it fits in the business model and strategy of the company that will lead to the realization of the future company. They also need to know how they will be rewarded for fulfilling those expectations—and whether those rewards will allow them to fulfill their economic goals and ambitions. This means they need to clearly see there is a unified financial and strategic vision for growing the business.
Focus on Line of Sight
Your employees need context for their roles. This comes when you are able to create and reinforce line of sight in the minds of your people. Alignment of this type means that individuals working within your business are able to understand and articulate the link between these elements as they go about their work:
- The company’s vision of the future
- The business model and strategy of the organization
- Their role and what is expected of them in that role
- How they will be rewarded for fulling those expectations
- How those rewards will help them achieve their personal economic vision
When employees see the relationship between those five things, they feel “settled” and perceive there is organizational continuity at play. They believe their role has strategic purpose and are able to view it in an expanded context. If they can feel that, they will understand better why they must be stewards of outcomes; because achieving results doesn’t just drive company performance—it serves their personal interests as well.
The Role of Compensation
So where does your pay strategy fit in all this—and why is it so critical?
Everything you do in your organization communicates at least two things to your employees:
- What you value.
- Where they fit.
This is especially true of the financial value proposition you offer your people. As a result, they look at their compensation and assess whether or not you understand why they consider pay important and what they want it to help them achieve. Most employers don’t think about this when they are constructing their rewards approach. They think in terms of salary and benefits—incentives and retirement plans. They look at market pay data and decide whether what they are paying is reasonable and competitive “enough.”
That is not how employees look at their pay. They look at compensation through two lenses: a personal lens and a business lens. On the personal side, they are evaluating three things:
- Does my pay package help me achieve the standard of living I feel I have earned at this stage of my career?
- Does my compensation match where I feel I am in my career development right now?
- Does my earnings capacity put me on track to achieve the contribution ambitions I have (putting my kids through college, devoting myself to good causes, helping me develop a level of economic independence to have freedom to “make a difference”)?
On the business side, they are also assessing three issues:
- Does the way I’m paid give me clarity about my role and what’s expected of me?
- Does my compensation reflect a partnership relationship with the business leaders of the organization?
- Does my pay package reinforce organizational continuity and fairness?
If your people answer any of those questions “no,” it is unlikely you will find the accountability you’re hoping for. Why? Because a “no” answer means you haven’t communicated confidence in your people or sensitivity to why they care about their financial relationship with you. This creates dissonance and can lead to employees applying their strategic efforts in a direction inconsistent with where you’re trying to go.
Here’s a simple example.
Let’s suppose you are meeting with a group of your key people and are discussing your revenue goals for the next four years. You communicate how important it is that the company grow from $100 to $150 million over that period and that you are fully confident it’s achievable. You talk about how essential those in the room are to the fulfillment of that goal and that you have great confidence in their ability to achieve it. You end the meeting by saying, “So let’s go for it! We can do this!”
Your people walk out of the meeting and subsequently engage in conversation with each other. “That’s a great goal and may be achievable, but what do we get out of it if the company gets there?” They discuss the fact that their compensation package includes a salary and an annual bonus plan. There is not long-term value sharing commitment that allows them to participate in the wealth multiple they help drive for the organization.
The result is they this as a lack of organizational continuity; which subsequently creates dissonance and diminished trust. Where trust is low, so is accountability. And that’s why the way you pay your people is so critical. It either reinforces or stifles line of sight. To the extent it is having a stifling effect, what your people need to believe in order own results never occurs. Consequently, they don’t become stewards. And without stewardship, there is no employee accountability.
I probably don’t have to tell you that we are living in a business environment where no one can afford to have unaccountable employees. Companies who don’t nurture a stewardship mindset don’t win. They don’t have a culture of high performance. As a result, their best people leave, premier talent doesn’t join and an anti-virtuous cycle subsequently drives the organization into oblivion.
The moral of the story is compensation matters if you want to improve employee accountability. If you get it right, the sky is the limit on what you can achieve.