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4 Secrets to Building an Employee Value Proposition that Wins

March 20, 2018 • By Ken Gibson

You are in a final meeting with a new recruit.  This person has everything you’re looking for—and more.  She has nailed every interview and your whole team is raving about her.  You are confident that she will effectively fill a gap that requires strategic leadership and could quite possibly alter the growth trajectory of your company in a significant way.  You are about to lay out your offer to her.  Question: What are you feeling?  Are you confident in what you are about to show her or is your stomach churning because you think she could very well be entertaining a “better” offer somewhere else?

For a business leader, there is little worse than losing in a talent competition.  And nowadays, things are more competitive than ever.  Skilled candidates often walk into your interview with two or three other options in their back pocket.  They know their value and are in a strong negotiating position.   As a result, if you are not prepared, you will either end up “giving away the farm” to secure a person you desperately need or you will find yourself throwing your hands up in defeat—again.  Either way, you lose. 

There is a better approach—and you will need to learn and use it if you don’t want this scenario playing itself out over and over again.  To avoid the stomach churning experience I just described, you must gain confidence in the value proposition you have to offer.  Once you do, you may still lose some people to the competition.  But much of that will be your choice instead of theirs, because your offer will be rooted in a strategic approach designed to help you secure the right people, not just the most skilled or experienced. 

There are four keys (secrets, if you will) to building an employee value proposition that strengthens your competitive position and properly reflects what you have to offer.  While each key by itself will help you improve your current approach, all must be applied if you actually want to start closing the talent you’re trying to hire.  

The 4 Secrets

Secret #1—Establish a Performance Framework

Most organizations dive into the development of their value proposition without laying a strategic foundation for what they are doing.  They begin without establishing a performance framework in which their pay and talent strategies should constructed

A performance framework links a company's business, compensation and talent frameworks together with an eye towards the development of a high performance culture.  These three parts are separate but interdependent.  Within the business framework, a chief executive identifies the company’s growth expectations (vision), defines the organization’s business model and strategy, and clarifies roles and expectations.  In constructing the compensation framework, the company leader envisions a pay approach that will support the business model of the company, allow the organization to compete for the best talent and promote an ownership mindset on the part of the employees so they will perform and succeed.  The final piece in the performance framework focuses on talent.  This level of planning has to do with identifying key producers already within the business and then defining where potential talent gaps might exist, so a recruiting strategy can be formed.  For both existing talent and that being recruited, it includes the identification of performance standards that each role should meet as well as the kind of rewards that should be attached to their fulfillment.

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Secret #2—Have a Philosophy

Developing a performance framework should naturally transition to the formation of a philosophy about your business.  On a macro level, you should articulate in writing why your company exists (the purposes it serves) and what it believes (why those purposes are important).  You will want to define your philosophy about the kind of culture you are trying to develop and the types of people who will best thrive in that environment.  How do you define success within your business and what are the performance standards you expect people to meet?  Addressing these issues with clarity will naturally lead you to your philosophy about talent and the kind of relationship you wish to forge with those who join your organization.  Finally, you must have a pay philosophy; a written document that clearly identifies the following:

  • How the business defines value creation.
  • What the company believes about sharing value with those who help create it.
  • How the company thinks it should balance guaranteed and variable compensation.
  • What balance the company wants to maintain between rewarding short versus long-term performance.
  • What form the company believes long-term value sharing should take (giving stock vs. other methods for recognizing value creation efforts).
  • How performance will be evaluated in determining employee earnings increases and capabilities.

Secret #3—Share Value…Generously

In today’s talent environment, a company’s approach to incentive pay is the most critical part of the compensation equation.  It is the part of your pay strategy that defines the financial partnership you want to have with your employees.  It is also the piece that is most directly tied to the performance standards you defined in Key #2.

At VisionLink, we believe incentive plan is an improper term to use for describing the variable component of pay.  It carries a manipulation connotation that can instill an unproductive mindset (think Wells Fargo).  Instead, we prefer the term value-sharing.   That wording implies you want to have a partnership with employees in growing the company and, therefore, they will be compensated for their contribution to that growth; and that rewards will come out of the increase they help create.  This does two things: 1) It communicates to employees that they are stewards over certain financial outcomes and, therefore, their performance impacts their earnings, and; 2) It makes all variable pay self-financing—meaning benefits are only paid if sufficient value has been created to finance them.  This then makes them “earnings” in the truest sense of the word. 

To highly skilled people, value sharing is the most critical part of the compensation package you offer.  They want to know that if they positively impact the growth of your business, they will have a financial opportunity that mirrors that of shareholders.  This does not mean they have to receive stock in the business, necessarily (though you may choose to share equity).  What it does mean is that they expect their pay to reflect both their contributions to making the revenue engine of the company perform well and leveraging the company’s business model for sustained growth.  This means all value sharing should include both a short and a long-term performance component. 

Secret #4—Market a Future

As a business leader, you should never take for granted that your people understand what their future in your business looks like; where you are trying to lead them.  You need to help them envision the journey on which they are embarking by joining your organization, what the destination will be and why that matters (purpose, mission).  Your value proposition to them needs to be placed in that context.  With that in mind—and with your objective being “winning” the talent you want—here is what your dialogue should probably include when presenting your company’s value proposition to either an existing or prospective employee:

  • Here’s our future.
  • Here’s how we’re going to get there.
  • Here’s the role we picture for you.
  • Here’s how we encourage our people to grow and contribute—and how we support them.
  • Here’s our philosophy about pay and rewards.
  • Here are the specific pay programs in which you will participate.
  • Here’s how our pay programs will benefit you if we achieve our plan.

Certainly, all businesses struggle with the development of their employee value proposition and will forever be imperfect in its design.  Let’s be real, nobody completely nails it.  What’s important is that as a business leader, you recognize the need to provide leadership in its development so it achieves its strategic purpose you intent for your organization.  You can’t just copy what your competition is doing if you expect to…well, compete with them.  Your attraction power is diluted at best if you all can do is tell a candidate that you will “match the offer” the other company is making.  Hopefully, what we’ve covered here makes that much obvious.

You can count on this realm of strategic planning to be forever evolving and changing.  As a result, your pay approach and all other aspects of your employee value offering must be agile and adaptive, yet sustainable.  That means you will always need to be at the forefront of trends that are driving talent acquisition and management and stay in tune with the ongoing thought leadership that occurs in this arena.  To the end, subscribing to this blog would be a good place to start. 

Ready to Get Started?

When it comes to building a compensation strategy, you can trust that VisionLink knows what works and what doesn’t. We are ready to share that knowledge with you.

Ken Gibson

Ken is Senior Vice-President of The VisionLink Advisory Group. He is a frequent speaker and author on rewards strategies and has advised companies for over 30 years regarding executive compensation and benefit issues.