Ogden Publications Case Study: Is It Fair? Part 2

| 5/2/2012 11:56:27 AM

After pay, benefits are the second-most-obvious element in a compensation package. In the United States today, no mindful individual can feel financially secure without health insurance. Most employers have acknowledged this fact and make group health insurance part of their standard compensation packages. Likewise vacation time, sick leave and some form of insurance against disability are important to peace of mind. Holidays and some flexibility in scheduling enhance family life and help employees create balance in their lives. 

Beyond salary and benefits are the more abstract but equally important elements that make an employee feel valued. Does the staff have access to management? Do managers listen effectively? Does the management, in turn, share meaningful strategic information with the staff? Are all employees aware of the company’s philosophies, strategies and tactics? Are achievements acknowledged and celebrated? 

More controversially, are standards for productivity and demeanor established and upheld? Nothing undermines the morale of dedicated employees more insidiously than a general tolerance for a lack of dedication. Great team members want to be held accountable. And they want to work with other people who feel the same way. 

In discussions of compensation we shouldn’t neglect the shareholders. The business’ owners, whether they are scattered across all the equities markets around the world or in the office next door, need to be fairly compensated for putting their capital at risk. How do managers and stockholders define a fair return? Generally, it’s defined by what the shareholders require. 

For better or for worse, the question of whether a business is fairly compensating its stakeholders – owners, employers, suppliers, etc. – is determined by whether those stakeholders FEEL they are being compensated fairly. Compensation is a compilation of many different resources transferred through a business. If the employers, managers and owners – all the stakeholders – feel good about their participation, then I think the compensation can be judged fair. 

Some managers will succumb to the temptation to create this sense of fairness by overpaying shareholders, employees and suppliers. One can often silence criticism, at least temporarily, by paying a little more. A lot of people have ruined businesses that way. When costs run amok and a business fails, none of the stakeholders is pleased with the outcome. 

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