A company's compensation system is a clear reflection of its corporate values and culture. The leaders in a business need to be intentional about what they value, and create compensation plans that reward those activities that define "winning." Any team member will gravitate quickly toward how they get paid, so make sure to pay for winning activities.
Dave Ramsey has devised an extremely effective comp plan for his business where everyone participates in some way in the winnings. To oversimplify, there are two types of animals in his company: Tigers and Koala Bears.
1) Tigers get straight commission. They love to eat what they kill, walk the wire with no rope and they would rather take a chance at no income in order to have the chance to make a great income. Each one has a uniquely crafted comp plan to let them prowl through the jungle with their destiny in their own hands.
2) Koala bears are cuddly and cute but they have the ability to kill when you least expect it. The goal with Koala bears is to learn how to share in the profits while making sure they "count it" as part of their comp. Recognition is big with Koalas and paying bonuses monthly helps them recognize and "count it" more than quarterly or annually. In order to make an effective profit sharing plan for the Koalas, they kick out all the Tigers so there are fewer people to share the pie. The ratio for each person's profit share is weighted: 50% tenure, 33% personal score given for attitude and effort and 17% is based on the profitability of the department the person works in. They pay out monthly to make sure the profits of the business are always front and center.
Dave reminds everyone that profit sharing is him sharing "his" profits. Therefore, it should not be viewed as an entitlement. Profits happen when revenue goes up and expenses go down. This reminds everyone that ultimately they are all self employed, so anyone who keeps expenses down is to be celebrated as much as anyone who brings revenue up, because it effects everyone's pay check.
My big takeaway is the need to develop a comprehensive comp plan that rewards winning. Not a plan that tolerates or over pays underperforming people, but rather a plan that is generous to the people who cause the team to win. Comp is tricky because no two people are motivated the same. But if everyone wins when the team wins, the result should be happy Owners, Tigers and Koalas.