Outside-of-the-Box Compensation

It’s that time of year when everything seems refreshed. The weather has warmed, the days have lengthened, and the next generation of newly-minted graduates is heading into the workforce, balancing optimism with a healthy dose of apprehension.

Like job seekers, employers acknowledge how competitive the marketplace has become and are increasingly working to set themselves apart. Organizations that are smaller and less well-capitalized, namely startups and nonprofits, are finding ways to create value for – and commitment from – employees in the absence of sizeable salaries.

At Navitance, we have deep financial consulting and management experience with startup and nonprofit organizations, having supported efforts to minimize impact on the P&L while maximizing engagement from employees. Following are 3 outside-of-the-box compensation approaches to consider this hiring season:

Incentive Pay

Empowering employees to succeed with the company deepens workers’ commitment to growth and allows employers to offer highly competitive pay while limiting fixed costs. As opposed to bonuses, which acknowledge past success, employers are best suited to offer employees more immediate gratification in the form of incentives tied to output or clearly defined business goals (in manufacturing sectors, this is referred to as a “piece rate”), sales compensation, or recognition awards. Rewarding both individual and team (or “gain sharing”) performance will help to enforce company values and culture. [New York Times] Finally, by establishing an incentive structure, firms can reorient employees’ expectation around bonuses and incremental raises – making compensation more of an individual pursuit. [HR Daily Advisor]

Stock Options

Sharing a piece of the firm can create a greater sense of employee participation, without the upfront cash outlay. However, options both dilute ownership and create risk for employees, who are ultimately being offered the future promise of buying company shares at discounted “exercise price.” Should the company go bust, the options would be worthless. However, for those passionate about and committed to the company’s vision, the reward outweighs the potential risk. [Fast Company]

Lifestyle Benefits

While ping pong tables and stocked beverage fridges are nice-to-haves, the rising generation is seeking a combination of autonomy and investment from employers. Granting employees independence through flexible hours and work-from-home options expresses a trust that employees find validating and an independence that is increasingly expected. What’s more, fluid in-office schedules reduce the need for office space and associated overhead.

As for employer investment, programs such as gym or activity tracker (e.g., Fitbit) subsidies or student debt relief communicate a greater commitment to employees’ well-being and typically offer productivity returns, thanks to healthier, happier employees.

FutureFuel, founded in 2015 by former Google executive and MIT MBA, Laurel Taylor, offers employers an online platform that streamlines hiring while turning student debt repayment into an employee benefit. By having applicants submit resumes directly to the FutureFuel portal, participating employers can make hires without the cost of a recruiter, putting monies saved from headhunting towards an employee’s debt repayment. With this approach, student loan repayment typically takes 3-5 years; however, employees don’t have tenure or repayment obligations. It’s a true win-win and a conceptual model that will likely gain traction as more firms invest in the employee recruitment and retention experience.

Across the spectrum of business, the attracting and retaining of top talent is a shared requirement for long-term success. Creating financial efficiencies to do so could further business model innovation and help buoy corporate culture.

We invite you to share your experiences with compensation alternatives, highlighting what has worked, what hasn’t, and why.