Because skilled workers are scarce these days, you may have to hire people with high potential but minimal skills. Skill-based compensation systems work best when employees participate. The more employees know about their work, the more productive and valuable they are to you.

By participating in a training program, an employee has an opportunity to learn, to become more productive and to get paid for it. Make sure a new employee is clear about the skills that need to be acquired. Agree on a time frame for starting and completing the various parts of the program. Record everything that you've agreed to in writing.

Excerpted from Attracting & Rewarding Outstanding Employees