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  • Writer's pictureFaye Almeshaan

Compensation Guide to Drive Team Performance

It’s no secret that pay is a huge motivator for many people, but why is it that if you took two employees doing the exact same job and gave them that exact same number, you might see wildly different reactions? Exhibit A.

Because compensation isn’t just about the amount—it’s about how each person perceives that amount.

Many managers miss the chance to use compensation discussions as a powerful tool to boost engagement, retention, and performance. Let's change that.

Step-by-Step Guide to Effective Compensation

Step 1: Do Your Homework

This goes without saying, but sadly, I need to say it. When you are deciding on compensation, you must find industry benchmarks for that role at that level and location. You need to know what other companies are paying because I guarantee your employees already know (hint: from talking to other companies).

Make sure you’re paying fair market value or above. And if budgets are tight, make sure your benefits make up for it in some way, maybe offer more days off or development opportunities.

Step 2: Have a clear system and process (my 2 favorite words!)

Clarity is king. Create clear compensation buckets that include salary, bonuses, and equity for each role at every level and in each geography. This transparency eliminates confusion and ensures fairness, preventing those awkward 'they earn what?!' moments.

Then set up your process. When do compensation cycles happen? Who is involved? How do budgets and approvals work? All that fun stuff! I’ll cover more of this in another blog post.

Step 3: Is it fair though?

Fair pay isn't just good ethics; it's good business. In today’s diverse workplaces, there’s a lot of unconscious (and conscious) bias. It’s your job to ensure pay equity. Regular pay equity audits can identify any disparities based on gender, race, ethnicity, or other characteristics.

Look for patterns and signs, like are women always at the bottom of the pay range when men are always at the top? Don’t be scared to take a deep look, if there is an issue, this is an opportunity to fix it before it becomes a standard practice.

Step 4: Recognize and Reward

Walk them through their individual, team, and overall company performance, and tie that directly to the changes in their compensation. This helps employees feel like their work is recognized and rewarded, and that they are compensated for collaborating and supporting the overall organization.

For high performers, this is a huge opportunity to hype them up, shower them with genuine thank yous, and paint a vivid picture for what their future can look like if they keep it up. For those who might not have performed as well, use this as a coaching opportunity, explain how they can turn it around, and show them what their comp would have looked like if they did perform.

Step 5: Master the Art of Messaging

The way compensation adjustments are communicated can hugely impact employee perception. Train managers to handle these discussions with as much care as salespeople handle their pitches.

Don’t just tell them they got a raise, show them you did the research, have a clear policy and system, ensure them it’s fair, and of course, that you appreciate their work and want to continue to reward it. Make them see this wasn’t an off-the-cuff decision, it was thought out meticulously because you care about them and want to make sure they are compensated correctly.

Step 6: Listen.

Listen actively to your team's compensation concerns and be transparent about what can (and cannot) be changed. Understanding doesn't always mean agreeing, but it does mean respecting and considering employee perspectives.

Final Thoughts

I’m not saying if you follow these steps, you’ll hit 100% compensation satisfaction. There are of course so many factors we can’t control, but by focusing on what we can control and continually striving to improve our approach, we can turn compensation from a source of dissatisfaction to a tool for motivation, engagement, and performance.

Give it a try and see how it goes!


About Faye

Over the last 12 years, Faye’s worked with, scaled, and invested in 250+ companies that have raised from leading investors, such as Andreessen Horowitz, QED, Lerer Hippeau, Bessemer, Serena, and so many more.

As a seasoned operator, founder, investor, and now Fractional COO she brings a holistic approach to scaling companies. With an emphasis on collaboration, open communication, and transparency, she’s been able to turn around and supercharge the growth of companies globally.

If you’re interested in connecting with Faye, book a call here

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