Pay-For-Performance Compensation

Compensation packages are a critical component to the success of any business, and the pay-for-performance model is a popular option. In general, it can be an excellent tool for shaping the performance and behavior of self-storage facility managers. However, as with most things, there is also risk to be considered. Before implementing a pay-for-performance model at your operation, it is wise to be aware of the key elements involved and the most effective methods for achieving positive outcomes for both the business and the employees.

Measure The Right Things

One of the selling points for the pay-for-performance compensation model is its focus on measurement and metrics, and this helps to make it a good fit for many self-storage operations. Results-based management requires measurement. The challenge lies in measuring the right things, not the easily measurable things. Ask your facility manager to focus on the wrong tasks, and you risk unintentionally undermining behavior you set out to encourage and reinforcing behaviors that may be detrimental to the success of the business. It is important to remember that measurement can be qualitative as well as quantitative. From a risk management perspective, measuring the documentation of a daily premise inspection is an excellent measurement.

Set The Right Goals

As you might guess from the term “pay for performance,” it is critical to set goals for employees to work toward. Without them, performance may become too dependent on personal judgment. For business owners, this means taking the time to establish a series of clearly defined objectives that are challenging to encourage creativity, specific to encourage focus, and flexible to allow for modifications as new opportunities arise.

It has been said that goals are like a mountain in that they should be visible from many angles and provide guidance and inspiration for your managers however far along they are on the path toward reaching the primary objective. Allowing facility managers to participate in this process also promotes ownership in the goals and increases the probability of success. Obtaining evidence of insurance from 100 percent of your tenants is a good example of setting the right goal that can be definitively measured and monitored.

Communicate The Right Information

Communication about compensation is about more than numbers. Your communication should be clear and specific so that employees understand the facilitmy’s objectives and easily see how they fit into the plan and can contribute toward a positive outcome. Effective communication influences employee engagement, behavior, and performance, and enhances the person’s sense of how he is valued by the company. Working in conjunction with the right metrics and goals, communication helps to incentivize and influence the desired behavior.

The single biggest risk for pay-for-performance compensation models is human nature. The nature of individuals to apply their own definitions of good and bad combined with the risk of an employee becoming focused solely on the tasks being measured can lead to unintended results. This underscores the importance of strong management and oversight to ensure that the original intent of the plan is reinforced and negative outcomes avoided. Compensation plans are not a substitute for good management.

Mike Schofield

President and CEO

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