By Hedley Lawson
In an uncertain economy, many companies are facing difficult and challenging choices when it comes to rewarding employees. Salary budgets are being cut, and incentive awards are decreasing. According to a global survey of 1,028 HR and finance professionals conducted by Mercer Consulting, 73 percent of respondents are likely to reduce their projected salary increase budgets in 2009, and 12 percent consider freezing salaries. When it comes to incentives, 60 percent of respondents expect to reduce 2009 bonus payouts based on 2008 performance.

In difficult economic times, optical labs need to manage rewards carefully. “The biggest concern for companies is losing top talent,” says Tom McMullen, U.S. rewards practice leader for The Hay Group in Chicago. “Good performers can land a new job no matter what is going on in the broader economy.”

In this challenging financial environment, labs need to make sure that they are spending their compensation dollars wisely. For many labs, this means focusing incentives and salary increases on key talent in the most important jobs. These are the employees a lab can least afford to lose and who are likely to be in greatest demand. But focusing on rewarding top achievers gives rise to challenges such as:

•To ensure appropriate rewards for key employees and high performers, labs must take the time to identify properly which employees fit into that category. “So many organizations can tell you about every segment of their customer bases,” says McMullen. “But ask them the same question about segmenting their employee population and they can’t answer.”

•The need to reward and motivate high performers could impact incentive compensation and salary budgets to the point where little is left for the remaining employees. “If you take that budget and target it to the highest-performing employees, some employees may get zero,” says Erin Packwood, leader of Mercer’s human capital practice for the southwest region in Houston. “However, this approach can make that budget go a little farther.”

•Methods for managing employee performance must be effective. “Although more organizations are increasing the quality of their performance management programs, there is still work to be done,” says Packwood. Effective performance management helps to ensure that the company is rewarding the right people—and that employees understand pay and incentive decisions by linking them clearly to business performance.

There are many ways that labs can help define employees who deserve exceptional rewards. Some labs spotlight those holding the “key jobs” in the organization, while others favor employees that they have determined to be high performers or high-potential individuals. These employees might not have reached the high-performer level but show the promise to do so.

Gen-Probe, a biotechnology company with about 1,000 employees based in San Diego, focuses its incentives and merit increases heavily on high-performing employees. For this company, identifying high performers is a relatively straightforward exercise: defining clear goals and metrics, and then communicating to employees exactly what they are expected to do. This practice is considered the most effective and allows employees to feel both challenged, providing all team members the opportunity to contribute and be recognized and rewarded for their achievements.

No matter what parameters or criteria an optical lab uses to select the employees eligible for special rewards, incentives or salary increases, it will be much more meaningful and provide greater employee engagement if the parameters or criteria are applied consistently. Like any other performance criterion, lack of clarity or confusion about what is required to achieve high-performer status is likely to lead only to a lack of engagement or achievement of critical objectives by employees.

It is a good idea to expand the definition of rewards beyond the financial, especially when monetary rewards are getting scarce and labs face tighter margins and profits. Rewards can encompass anything of value a lab provides to its employees, including benefits, training, professional development, career advancement and long-term opportunities.

In this regard, career development in the optical lab business segment should not be underestimated. Labs can garner a great deal of good will with their key employees and top performers by talking to them about what they want to be doing in their jobs and careers, and how that might fit with the lab’s needs.

It’s easy to overlook the motivational and positive psychological benefits of nonfinancial rewards. It costs very little to invite a group of high performers to have lunch with the lab owner or senior management to discuss the company’s future, but the motivational benefits attached to that invitation can be considerable.

Hedley Lawson is a contributing editor for Business Essentials and monthly contributor to VisionMonday.


Labtalk June 2020