“It’s not your salary that makes you rich, it’s your spending habits.” — Charles A. Jaffe

Dilbert’s “Salary Theorem” states that “Engineers and scientists can never earn as much as Business Executives and Sales People.”

This Theorem can now be supported by a mathematical equation based on the following postulates:

Knowledge is power.

Time is money.

As every engineer knows:power = work/timeSinceknowledge = powertime = moneyIt follows that:knowledge = work/moneySolving for money, we getmoney = work/knowledgeNote that as knowledge approaches zero, money approaches infinity, regardless of the amount of work done! (ilikeitfunny.net/)

As every engineer knows:

power = work/time

Since

knowledge = power

time = money

It follows that:

knowledge = work/money

Solving for money, we get

money = work/knowledge

Note that as knowledge approaches zero, money approaches infinity, regardless of the amount of work done! (ilikeitfunny.net/)

Thisweek we continue our review of Human Resources Management. So far the main areas we had visited were recruitment, performance appraisal and training.

This

week we continue our review of Human Resources Management. So far the main areas we had visited were recruitment, performance appraisal and training.

Other critical areas of HR Management are compensation and retention. Most employees remember HR when they look at their pay cheques and think that they are being short-changed, while many employees will perk up when they hear the word compensation, really hearing “more compensation”. However, there is a particular myth that needs to be addressed here, so let us peep in on Carol Sherwood, a store manager.

Carol is reviewing the salary package for two of her workers, Shernet and Suzan. Carol knows that Shernet is more productive and generally performs better than Suzan. Shernet lives with her parents and it is well known that she is saving aggressively to buy her own house. Suzan, on the other hand, performs less competently than her co-worker, and is late for work enough times for it to be an occasional headache for the store manager. However, Carol knows that Suzan is a struggling single mother with four children, and so has been paying Suzan more than Shernet for the past year and a half.

Carol now has a dilemma because Shernet has found out that Suzan is being paid more than her. “Suzan and her big mouth!” Carol fumes.

Many employers, especially small business owners, operate on the premise that they should pay their staff primarily based on the personal needs of employees, and so, oddly enough, sometimes pay more reliable and better-performing staff less because they perceive that “they are not that much in need of the money”.

This is a mistake. Employee pay levels should be based on balancing a few variables, including individual performance, the organisation’s ability to pay, and the dynamics of supply and demand of the particular skill set. Typically the larger companies understand this, but some smaller business operators miss on this one.

As indicated, some skills are scarcer and should, in an ideal world, attract greater pay. Similarly, in the same ideal world, excellent workers should be compensated better — much better, than poor, shoddy workers. That is the problem in some organisations.

I remember once before when I was at a certain organisation, my performance in every respect, and from any angle of assessment, was superlative. However, at the end of the period I realised that the star, the average and the slacker all received the same increase. This is potentially demotivating to the star, and even to the average guy. The temptation then was for all to tend towards being slackers, because it seemingly did not matter!

Some persons think that once five people are doing the same job, with the same job description, they should all be paid the same amount. I do not subscribe to that. We must be careful not to encourage a distorted notion of fairness.

Did you know that according to some people’s understanding of “fair”, God would be unfair? Well, according to the Bible, didn’t God give one person five talents (money), another two, and still another just one? Even more enlightening is the reason that was given for this — each based on ability! So the donkey was not being a jackass when he said, “..the world nuh level!”

I do not believe God is unfair. Neither do I believe that it is unfair to reward the high performer with higher compensation than the low or non-performer.

Another myth with respect to compensation is the notion held by many employees that if the employers have a particularly good year, for example, then their permanent pay should be ratcheted up by the same degree as the increased performance in that year.

But hold on! There are two pieces of information that should be reckoned with first. One is the fact that the owners are the ones that risked their capital, and do have the right to enjoy returns on their investment. Typically the risk for the employee is fairly low, even infinitesimal, compared to that of the investors.

The next point is that if the employees want that jump in pay in a good performing year, shouldn’t it also be fair for them to accept a reduction in a bad year? OK… please don’t start quarrelling with me – simply food for thought. My problem is that I am troubled with fairness and objectivity – it is always best to be able to see both sides.

Finally, please remember that compensation does not need to be only financial in nature. Reward and recognition programmes – like posting the photo of the employee of the month in the main lobby, can be powerful motivators. Having facilitators to assist with the development of individuals’ development programmes can also help towards the goal of employee engagement. Having a gym and other such facilities can also do wonders for the staff!

Dr Kenroy Wedderburn is an MBA part-time lecturer. Send your e-mails to drkwedderburn@gmail.com.

Dr Kenroy Wedderburn is an MBA part-time lecturer. Send your e-mails to drkwedderburn@gmail.com.