Chapter of The MREA: Part Two – The Four Stages: The Nine Major Compensation Models
Compensating your talent is a vital step towards growing your organisation and leveraging people properly. Let’s cover the options you can consider when deciding on how to compensate talent and what options Gary Keller recommends:
The MREA recommends that you pursue a competitive salary for middle–office and back–office employees. Most staff positions you fill should be compensated between £25,000 and £50,000 per annum, depending on your hire’s role, experience, and qualifications. Management will command more; this is where you can get creative with a mix of other compensation models with a base salary.
Commission is traditionally the number one compensation model for sales personnel, with some companies experimenting with a mix of a base salary and profit–sharing or bonuses.
3. Pay Expenses
The MREA rule of thumb for expenses – pay all expenses for salaried staff and some base expenses for commissioned staff. This can change depending on needs, performance and budget.
While bonuses can be paid monthly, quarterly or annually, The MREA recommends the latter as it will allow you to assess your finances before paying out bonuses. You can set several expectations or criteria that your staff must meet to receive a bonus, which may also relate to broader company targets.
5. Profit Sharing
Profit sharing can be an excellent way to focus your staff on company finances so that their actions are even more focused on driving revenue for your business. However, this model requires a fully open book, meaning you should not pursue this option if this idea makes you uncomfortable.
6. Retirement Plan
While there are numerous avenues to pursuing a retirement plan for your employees, The MREA recommends that the best approach to this model is through outsourcing. Consider outsourcing as leveraging the entire process to one of many companies that offer excellent standardised packages to cover a number, if not all, of your staff.
7. Insurance Benefits
Much like the retirement plan model, The MREA recommends you outsource this service to an organisation specialising in standardised employee benefits packages. The MREA also encourages installing an initial ninety-day period before your staff can receive access to these packages.
8. Vacation Time and Sick Leave
Unless outsourced, every company has a unique approach to vacation time and sick leave. Some organisations grant both from the outset, and some will require staff to work a minimum amount of time (traditionally six months) before they can begin to receive access. In 2021, many large organisations take more experimental routes towards vacation and sick leave, such as unlimited holiday time and flexible working hours to accommodate for mental and physical wellbeing.
9. Equity Opportunities
Equity can come in many forms, but in most cases, it does not refer to giving staff equity in the business they work for. Instead, equity options may come in the form of a real estate investment or equity in another company you are starting. This is perhaps the most elusive of the compensation options and should only be handed out to outstanding employees who have earned the right to participate.
Read The Nine Major Compensation Models (pg. 205-212) for a more detailed look at Gary Keller’s perspective on the matter, along with the accompanying graphs that further illustrate the different compensation philosophies.