It is often believed that “money talks” when it comes to hiring senior executives. But does a salary alone provide motivation to senior executives?
When it comes to senior executives, many businesses believe by paying a significant salary they will obtain the best out of the employee. However, this is not necessarily always correct. A number of other options should be considered by organisations to motivate their senior executives. It is a fact that the culture and success of any business starts with its people and most notably its senior people. If the senior managers are engaged, motivated and have the relevant leadership skills, the business is much more likely to succeed.
In this week’s article, we consider how best to motivate your senior executives and consider a number of ways to do so. In addition, on the topic of executive employees, our next article will look at the factors responsible employers should be considering to ensure the business protected when senior people wish to resign or the business chooses to remove them.
Motivating Senior Executives
Let’s talk about money first. The standard components that make up an executive’s remuneration package usually include salary, superannuation and some sort of short and long term incentive payments. Incentive payments can include:
Share or Options Scheme:
Employees share schemes are a way of attracting, retaining and motivating staff as they align interests. Specifically, employees can benefit financially if the company performs well. These are generally a form of long term incentive as they vest over a period of time, encouraging senior employees to remain with the business.
A range of conditions generally applies to determine when and how an employee can access those shares. For example, commonly an employee may not have full access to the shares until they have been employed by the company for a certain number of years or until they have satisfied certain performance targets. The benefit of long term incentives such as these, is that it encourages employees to remain with the business, but they do little to motivate behaviours. This is usually done by the use of short term incentive plans/bonuses.
Short-Term Incentive Plan (STI)
STI are designed to primarily reward overall outstanding performance over a shorter period of time, against performance goals, but may also take into account behavioural expectations. For example, this may include an annual performance bonus. The use of short term incentive payments should be carefully considered such that it actually operates to motivate excellence rather than merely making up an appropriate remuneration. If the latter is in fact the case, such bonuses will be more demotivating than motivating.
Any monetary incentive payments and plans should be carefully considered to ensure that they enhance and encourage a culture of excellence rather than mere expectation.
Non-Monetary Benefits:
While money is a motivating factor, money alone may not motivate your employees. As such, non-monetary benefits to inspire and engage employees are becoming increasingly popular in the workplace.
Effective non-financial incentives for employees can assist employees feel welcomed, appreciated and valued. These benefits may include:
- Motor Vehicles;
- Housing or accommodation assistance;
- Mobile Phone and laptop;
- Paid training and development;
- Promotion;
- Enhanced decision making;
- Additional leave;
- Flexible working arrangements;
- Paid parental leave;
- Child care reimbursements for working parents;
- Gym memberships;
- Volunteer opportunities;
- Rewards based on specific personal interests e.g. tickets to the latest theatre show.
However, if employers wish to consider such non-monetary benefits, they must understand that they will inevitably create fringe benefits tax (“FBT”) consequences. As such, employers often offer these benefits as part of an over-all remuneration package which includes the cost of FBT.
The most valuable motivating factors for employees at this level are opportunities to make a difference and to learn and grow. As such, training programs, further education (such as MBA opportunities) and the ability to shape their own contribution may be more motivating, than money alone. It will also set the tone for the culture more generally and encourage employees to value the investment the business makes in them.
However, what motivates individuals differ from individual to individual. The biggest misconception is that one size fits all. In fact, employers that take the time to actually understand what its employees want and more specifically the senior management level, are far more likely to have employees who are aligned with the business and want it to succeed. Like anything, the amount of effort and care the employer puts into its employees is reflected in the time and effort the employees are likely to put into the business. If an employee feels they are being heard, rewarded appropriately and have the opportunity to grow and contribute, they are likely to be successful and bring those under them along for the journey.
In order to assist you create a high performing executive managing team within your business, we suggest employers undertaking the following:
- Review your remuneration policy and incentive plans to ensure they are achieving the desired outcomes.
- Organise one on one time to set consistent clear goals and expectation. It will also strengthen relationships and allow for discussions regarding suggestions, ideas, concerns and/or issues.
- Establish interest in your employee by taking time to understand what motivates them including their interests and goals.
- Ensure they have the resources to do their work well. A simple question may be ‘What do you need right now to ensure you succeed?’.
- Praise and recognise your employees including senior management. Recognition can be a powerful motivator for many employees.
- Many employees including management like to feel that their work has purpose and is meaningful. Allowing managers and senior staff to create purpose in their work can in turn boost drive and productivity.
- Allow managers and senior staff to continue to learn and develop new skills to enhance their natural skillset and demonstrate an interest in their advancement.
- Involve your staff so that they feel heard and valued. Not all information and decisions should be made from the top down and by allowing staff to be involved demonstrates the business appreciates and respects them.
If you require assistance in relation to how you may motivate your senior level employees or require general employment law related advice, please feel free to contact our office.
This alert is not intended to constitute, and should not be treated as, legal advice.