MBA2178 Guest Teacher – Jen L’Estrange – How to Be Creative with Compensation

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This trip is draining my wallet.

Yeah, but we'll be with family. You're in a good mood.

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Like I mentioned, Jen Lestrange is the founder of Red Clover over@redcloverhr.com she knows exactly how to put together an amazing compensation package for her team. Regardless of how big or small your team is, you might think you can't attract great talent because maybe you don't have a ton of cash on hand or all the great perks that Google or like free lunches and massages. But there are things that you can offer that your future employee or your future team member values a lot more than unlimited drinks or free doggy sitting. In fact, you can cultivate your whole compensation package to reach goals that will allow you to make more money so you can compensate them further. That's why I'm so excited that we have Jen Lestrange here today to teach you this lesson and get you thinking about crafting the perfect compensation package for your business. I'm going to pass it on to Jen now, but I'll be back to wrap up today's episode and give my takeaways. But for now, take it away, Jen.

Hi, this is Jen Lestrange and today we're going to talk about how to get creative with compensation. Let's get started. So when we talk about creative ways to implement compensation strategy and planning, what we usually do is to break it down into three parts. And the first is to really take a close look at what are the different components of compensation and how they affect the business from a budget perspective. The second is to look at the business holistically and decide what is it we're trying to achieve and what goals are we putting out there. And then third, how do we design a compensation plan that actually supports those goals? So first things first, let's talk a little bit about what goes into comparison. And I'm going to take this from the perspective of a business owner or someone who's running the profit and loss statement, whether it's the finance director or the chief financial officer, and invite you to take a look at your profit and loss statement and think about compensation holistically. And by holistically, I want you to think about all of the elements that go into the expenses that are related to what happens when you hire an employee. So that total cost perspective. And let's start at the things which the employee sees. And then we're going to talk a little bit about some of the things that maybe the employee doesn't see, but that you have to pay anyway. So first we have base pay. Base pay is either the wages or salary, whether they're fixed salary or an hourly wage rate based on time worked, which forms the base pay that the employee receives. Then on top of that, every pay period, you have payroll taxes, there's the employee deductions that come out of their side, plus the employer side which come comes on top of what you pay them, which goes to federal and state authorities for your tax payment. You have payroll fees that are related to the systems that they're using. And then on top of that you have benefits. If you're offering any kind of group healthcare, vision, dental, short term disability, whatever group benefits that you're offering to your population that come on top. And then after that we also have insurance. Insurance is something that even for the smallest of employers, you might just have one or two employees. You're still going to be required to pay certain insurances, whether that's just workers comp, or you might need to increase your levels of coverage for business insurance or contract for epli, which is employment practices liability insurance because you become an employer. Once we get past that, then we can start to look at some of the, what I call fun stuff, which is where we can start to talk about things like variable pay, which is everything that is pay at risk. It covers commissions, bonuses, short term incentive compensation, long term incentive plans, equity plans, phantom equity plans, long term programs, deferred profit sharing and the like. And then beyond variable payment, we also have benefits and perquisites. So for perks we have things like pto. PTO is a big topic among candidates today. How much for how long? How do you use it? Can you keep it? Can you roll it over? All that good stuff, unpaid time off, which is something that can also be super attractive for employees. So even if they're not getting paid, the ability to be able to take some time off to do something personal, whether it's short term or long term and be able to come back to that job successfully can be really attractive to certain candidates. Flexible work practices is probably the number one question that we get asked of candidates. So the definition of what that workday or work week looks like and how much influence they have over where and how work gets done is probably the single most attractive perk that we see coming, particularly from small businesses today. So the ability to be flexible with those working practices is super important to people. And other things that you might add around the sort of the perk framework, which is anything that the employer is paying for on behalf of the employee. So that could be an allowance for transport, company car, a membership to an association that they use for professional purposes, or, or it could just be a subsidy for a gym. Any of those things where the company is paying on behalf of the employee, but it's used by the employee is considered a perk. That's essentially the overview of all the different components of what you can use in compensation. And before you decide to take a fresh look at what you're doing with comp and maybe add some things in, change some things around, take a look at what you're currently paying, make sure you have a full understanding of computer, all of the elements that come in to your compensation plan, including those things that may not be immediately visible. Because whatever you do with your comp now, you will need to continue to maintain and uphold for every employee that comes through the gate after you put it in place. So it's one of those things where once you put it in, it's very hard to take it away, and it will overall increase your total cost per employee as you go forward. So once we have an overview of what's happening around comp and all the different things that we can look at are in comp, the next thing is to take a step back and sit down and look at what are we trying to achieve with the business, what are the goals? And we ask the question because as much as oftentimes people will come to us and they ask to start the conversation with comp. Comp really comes at the end of the conversation, meaning once we've had a chance to establish what is the business goal? What is the goal for the organization? How is the organization designed to support that goal? How are the jobs designed to support that organization? Once we know how the jobs are designed, we know what kind of knowledge, skills, experience, behaviors, activities are required that are essential for those jobs that we want a reward for. And the rewards are based on what's actually done as a contribution to the business. So if you haven't had an opportunity to sit down and look at your organization and job design, start there. And then once you know what it is you're asking people to do, you know what you need to design from a pay perspective to help get there. So that, in a nutshell, is essentially how we get to the comp conversation. Once we've established with an organization what it is they're trying to achieve our goal with a pay design, whether we're looking at changing even something as simple as how vacation is used, we're designing that to try to reinforce the foundational elements of their culture and their values, but also the behaviors that we want to see. I'll give you an example. Just something as simple as vacation pay. If you are working with a policy where it allows people to take, let's say, two weeks vacation a year, can they take the two weeks in one lump sum, or do they need to spread it out? Are there certain times of the year when you don't want them to take vacation because it's really busy for the business? Or maybe you want to implement unlimited vacation time. There's an upside and a downside to that. But anytime you're looking at what you're implementing with compensation, or with your perquisites or your benefits, think about it in the context of how it fits into your organization and the behaviors that you're trying to achieve. I'll use another example around commission program. So commissions are probably the most straightforward thing to implement because they're usually related to sales. So we've got a number we can rely on. And anytime you're implementing something around variable pay, we want to make sure that we're tying it really closely to how people can see how they can influence their pay and that they're able to do something and see the result as far as how they're rewarded. So commissions are easy in the sense that if I sell something, I will earn a commission based on what I've sold. But here's two examples of two different behaviors. In one case, we have a salesperson where they are being asked to go out and find new customers to buy from the business. And then once that relationship is established, they hand over that customer relationship to someone inside the organization who manages the account. So that person is hired and expected to bring in new business every single month, over and over again. So it's bring us new leads, close the deals, and move on to the next new lead. In the other case, we have Another salesperson in another organization who's not only being asked to go out and find the new customer, but they're also expected to nurture that customer relationship for two, maybe three years to further develop opportunities for additional sales or ongoing business relationship. And so they keep in touch with that customer every month. They meet with them, they make sure they're okay with the products, services, whatever it is they're doing, but they continue that relationship. So in each of these cases, the commission structure is going to look different. In the first case where they're bringing in new business month after month, but they're not actually maintaining an ongoing relationship with the customer. They're going to be rewarded based on a one time commission. There's no ongoing payment. They close the deal, whatever that percentage is they get, but it's based on the new business and then they move on and they go after and they hunt someone else for the second salesperson. Where they're expected to nurture that relationship over several years. They might continue to earn an ongoing commission over the period of time that they continue to maintain that relationship. So they might receive slightly less in the commission payment in year two and year three, but there's something there to reward them and reinforce the behavior of reaching out and keeping in touch with that customer because the customer retention element is so important. So there's just two examples of how two ostensibly similar jobs are being asked to do two different things for two different organizations. And the pay is designed differently to meet each of those behavioral needs. All of these things around compensation are related to how we engage with people successfully to help them be productive for the business, contribute to the business, and ultimately stay with the organization as long as possible. And defining effective compensation is as much about demonstrating pay transparency, being clear about how we communicate the goals and how we reward people so that they see a line of sight between what we're defining in terms of the pay policy and what they're actually rewarded with as it is articulating to them what their role is in the organization and how we pay them accordingly, and demonstrating that through the pay plans and practices that we put in place, that we're paying people fairly and equitably internally to the organization, and that we can communicate that we understand that jobs from one department to another are paid in a way that represents fairly but clearly, and in a way that is transparent and open the relative value of each person's contribution to the organization. I hope this was helpful. If you have any questions or if you want more information on how to think about compensation and ways that you can implement compensation plans and strategies for your organization. I'd invite you to Visit our website RedCloverHR.com and we have several downloadables that are available there including one specifically for compensation. Thanks very much. It was great being here today.

Gas, snacks, tolls.

This trip is draining my wallet.

Yeah, but we'll be with family. You're in a good mood.

What's your deal? What's my deal? I saved at Metro with no activation fees and I got 1 line of 5G for just $25 per month. Kept the phone I left and a 5 year price guarantee on my top text and data detour to Metro.

Get that more for your money feeling only at Metro by T Mobile. Just bring your number $30 first month.

And $25 after with autopay not available.

If with Metro or T Mobile in.

The past 180 days.

What a fantastic lesson by Jen Lestrange. If you want to learn more about her and her work, go to redcloverhr.com I want to share something that I learned through the years of managing a team, compensating my team, making sure I'm attracting the right talent with my compensation package. One on ones at least once a year I will sit one on one with every single team member to learn more about how much they enjoy their job, what they don't enjoy, how the experience of working for our company can make their life better, easier, more fulfilling. These questions allow me to start thinking creatively about how I can compensate my team so that they feel like, hey, this is a pretty good job. I want to stick around. And the thing that I've learned is that a lot of the stuff that we have implemented that are a little bit out of the box are not your typical stuff like bonuses or commissions or raises. Yes, we have systems in place to give people increments, but it's not the deciding factor that make them love their job. One example of this is our team retreat. We love doing a team retreat. We do physical team retreats, but we also did a virtual one during COVID because we couldn't travel. Now you might think, why would somebody really care about this? Well, interestingly, people like fun. Remember fun? People like getting to know their teammates, bonding, playing games, having interesting experiences. Those experiences that we created and offered to our team members in those retreats are experiences they can't create on their own. They can't force everybody on their team to spend time with them or to bond with them or have fun or play games. The organization of the event is actually something that is invaluable, meaning that they can't put a price tag on it. And it's something that really look forward to. We tried a lot of other things as well that kind of fell flat. Small rewards and gifts, shout outs and even software that helped us give a chance to show off good work from the team and compensate them with gifts and points and things like that. But it didn't have camaraderie, it didn't have fun, it didn't have a chance for them to get to know each other. So it kind of fell flat. You have to remember that human beings are social beings. They want to socialize with other people. Even introverts, they want to get to know people. They want to have chats, they want to break bread, have meals, have a drink. This adds value to the workplace, but their life as well. It gives them experiences. So consider it even in a remote setting. When we ran our virtual retreat during COVID we sent people party packs with food and drinks and we enjoyed them together and played games and it's not the same as being in person, but we did what we could during that challenging time in everybody's life. Hope that helps. And hope you enjoyed today's guest teacher lesson by Jan Lestrange. I sure did. If you did leave us a rating review on your favorite podcast app, on Spotify, on Apple Podcasts and Stitcher Radio, let us know what you think of the show. Go ahead and do that right now. Thank you in advance for doing that. Before I go, I want to leave you with this. Every time we run some sort of celebration party retreat and I see the positive return on investment we see from the team, even just from the camaraderie, from the smiles, from the job satisfaction, I'm reminded of the show, the Office. And all joking aside, I know that they had a party like every other day, but also the people that worked in that office at Dunder Milfin stayed at dundermilfin for years. And I know it's a fictional story, but. But we all know of workplaces like that. Listen, I'm the first person to say that work is hard and as a business owner, I need to make sure that my team feels valued. Because yes, I work hard as well, but I can't expect people to burn the midnight oil and to give everything they got without feeling valued. So a little fun can go a long way. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care. Of hey, Fidelity. How can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Huh. That sounds easier than I thought. You got this? Yeah, I do. Now, where did I put my keys? You will find them where you left them.

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