Are you paying employees just to show up?

Data suggest a correlation between compensation approach and profitability

Beware small businesses--you get exactly what you pay for. Such is the advice of management consulting firm George S. May International Company, Park Ridge, IL, in a press release issued August 26, 2009. The advice is based on the consulting firm's recent survey of 1,000 small businesses in the United States. Survey results indicated that 41% of owners pay employees just to show up, and that model is killing profitability.

"Too many small businesses still reward employees for just showing up, for being a warm body every day, when they should be paying them based on performance related to specific, measurable goals," said Paul Rauseo, managing director of George S. May International. "You're setting the stage to destroy profits when employees expect compensation for participation in collaborative activities, regardless of results."

According to the survey 45% of small businesses claim to be unprofitable. Rauseo feels the relationship between the compensation and profitability data may not be a coincidence. "The similarity of those numbers shows how closely your compensation style and profitability are...