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Why CEOs Should Be Compensated Based on Employee Engagement

Kenneth Freeman, dean of the Boston University School of Management, recently published on Harvard Business Review his proposal: “To Create Long-term Shareholder Value, Start with Employees.”

A key component of his proposal is compensating employees based on their ability to engage employees:

“Evaluate and compensate CEOs, at least partly, on their ability to create a culture of aligned, engaged employees. … Through leadership development programs, Six Sigma, and constant communication we made long-term investments in our people. Significantly, we made improvement in employee satisfaction an important component of executive pay. …

“That means not only treating all employees with dignity, respect, and fairness but also helping them see how critical they are to the enterprise.”

Compensating CEOs (and managers at all levels, for that matter) is something we’ve long advocated at Globoforce.

For this to be a success, however, CEOs must have a method for:

1) Encouraging employees at every level to show their appreciation for each others’ contributions

2) Tie that recognition to the company values as a very practical way to make those values come alive in employees’ daily work

3) Critically – measure and report in real time on the status of values-based recognition across the company.

The information gathered through such a strategic recognition program gives you the ability to proactively create and manage a culture of recognition.

In our book on the topic, Winning with a Culture of Recognition, Globoforce CEO Eric Mosley and VP of Strategy and Consulting Derek Irvine explain in detail how to make employee appreciation a sound management methodology that moves recognition from anecdotal morale-booster to data-driven business discipline. Following Six Sigma practices like DMAIC is a critical component of that – another tactic discussed in the book.


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