By; Keith Kefgen and Rosemary Mahoney, February 1997
In terms of compensation, it is evident that in 1997, base salaries and bonuses should be based on performance. Make sure you know what the competition is doing by conducting annual compensation surveys. How many of you already gave out "Santa Claus" bonuses instead of a bonus that reflects real performance measures? Although you can t undo the past, you can plan for the new year with a structured compensation program that meets both company and individual goals.
When structuring a new policy, be sure to incorporate the above recommendations. For example, base bonuses on EVA or EBITDA formulas, rather than Gross Operating Profit. Economic Value Added, for example, is a measurement tool that determines if a business is earning more than its true cost of capital, thus giving managers a better idea of whether they are creating or destroying shareholder wealth. Or perhaps you should structure bonuses according to group goals rather than individual ones, to create more team work in your organization.
For you multi-nationals, when sending people overseas, consider the host - based approach. This approach treats employees as a citizen of the host country, eliminating the need to maintain purchasing power of comparable positions at home.
And for you public companies,
compensate directors with stock options instead of cash. Also demand that
they take an equity position in the company by requiring a purchase of
common share
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Resist the temptation to offer maintenance to hotel general managers. With the market rebounding, it is a costly perk. Furthermore, dump the company car liability in favor of cash allowances. Stock option plans are inherently strong motivators for management due to the fact they directly tie company performance and executive pay. So forget about all those add-on programs such as Stock Appreciation Rights, restricted stock awards and tandem awards. They amount to nothing more than double dipping. If you do not offer a 401K plan, get one. They offer many advantages to both employer and employee and they are relatively easy to implement.
Concentrate on what you do best, and oursource the rest. There is no need to have a large HR department if it would be more cost efficient to hire experts on an as needed basis. For example, outsourcing the recruiting, training and even payroll functions have become commonplace. The human resources executive must be free of minutia to concentrate on strategic planning with-in the company.
Concerning employee recruiting, more and more will be done through 'on-line" services. Though it is not a panacea for all types of recruiting, on-line advertising will take the place of newspapers for filling lower level positions.
So, as you run on that treadmill
at the gym you just joined, just remember that your company needs to shape
up too! Happy New Year!
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