One of your goals as a small-business owner should be to recruit and develop a dedicated, hardworking team that serves the company well and contributes to its success. But if you don't put some serious thought into how you compensate your employees, you're likely to fail in that regard. That's why it's crucial to establish a well-thought-out strategy that serves your workers and your business well. Here's how to start.
1. Decide what your needs and goals are
There's no one-size-fits-all approach to developing a compensation strategy, so as you set out to do just that, think about your business needs and goals. Are you struggling to retain employees? Attract talent? Both? Are you satisfied with the team you've built but eager to motivate them to do better? Before you decide how to compensate your staff, figure out what you, as a business owner, are hoping to gain by investing time into developing your strategy.
2. Look at the big picture
Compensation isn't just a matter of salary; there are different components that go into a compensation package, like workplace benefits, bonuses, and commissions. As you set out to develop your compensation strategy, think about the various things you want to accomplish and the various perks you want to be able to provide. It stands to reason that if your goal is to offer a stellar health plan at no cost to your workers, another area within the realm of compensation might have to give.
3. Do your research
Maybe you genuinely want to pay your workers a fair wage and offer a reasonable benefits package. But what might seem equitable in your mind might, in reality, fall short when you consider what your competitors are doing. As you develop your compensation strategy, be sure to do plenty of research so you understand what businesses that are similar to yours are offering. You might also try talking to recruiters and getting their take, since they're often in a strong position to have that information. Furthermore, don't be afraid to survey your own employees to see what benefits are most important to them. The more data you gather, the more informed a strategy you'll establish.
4. Consider your opportunity costs
As a business owner, you're no doubt aware that money spent in one area will mean less money to spend in another. So as you develop your compensation strategy, ask yourself what offering a better package to employees will mean for your business. It's nice to be generous, but you don't want to be too generous if it hurts the business in other ways or prevents it from growing.
5. Make it scalable
Ideally, your business will continue to grow and thrive for many years to come. So when you think about compensation, don't just consider the near term. Rather, aim to develop a strategy that's scalable as your company gains more customers, increases its revenue, and expands its workforce. For example, you might manage to afford certain benefits now when dealing with a smaller staff. But what happens when you go from having 30 people on board to 100? That's something you'll need to plan for as you craft your company's unique approach to compensation.
The right compensation strategy can be a boon to your business and its employees, both current and future. Keep the above points in mind when developing your approach to compensation, and with any luck, it'll end up setting the stage for success while giving employees a reason to not only work for you, but work their hardest.
The Motley Fool has a disclosure policy.