Entrepreneurs and workers, essential link in the transformation of companies towards the new model of inclusive economy

During the pandemic, employers recognized that, by maintaining their workforce they took care of their first source of value creation, it is time to plan the performance of this effort.
Entrepreneurs and workers, essential link in the transformation of companies towards the new model of inclusive economy
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7 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
Opinions expressed by Entrepreneur contributors are their own.

By Jorge A. Silva, Head of Wadhwani Advantage LATAM  

If the only constant is change and to adapt to it we have to move our perspective from one extreme to another, in times of pandemic we observe employers and workers “ pulling” on the same side, there were many cases in which both took care of their own interests through empathy. This situation will prevail and must be sustained with paid work during the indispensable return of business productivity.

In the main programs that emerged exprofeso for the protection of employment, a myriad of complications were experienced that, although not in all cases could be avoided successfully, they reflected the tacit agreement to watch over the worker and his family. This situation is a clear reflection of the vision of various authors who need to expand the scope of the business value proposition, establishing them as the primary factor to reduce social inequality within what is considered the new inclusive economy model.

The uncertainty has not ended and we do not even know how far we are from reaching a stable environment , countries like India have been tragically affected later to a phase of relative calm which is a call to plan considering adverse scenarios, such as the return to the economic activity without the necessary health or before a depressed level of productive activity.

Salary and its relationship with productivity

Within the labor trends that accelerated during the pandemic, it is convenient to consider remuneration schemes that clearly compensate the worker's performance for their contribution to the creation of value in the business for which he works. Traditionally, SMEs have found collaboration links that are a means to improve their competitiveness, however, when we see how to link with their workers, certain practices are common that keep the company from linking closely with them, such as dealing with profit sharing as an expense more subject to being cut, or subsidizing executive bonuses with low salaries of operating personnel, losing sight of differentiated compensation schemes that are an incentive for the productivity of their workers.

The path to creating value through compensation

By definition, a salary is a fixed amount in exchange for work and is determined by a market rate of remuneration for similar jobs in similar industries in a region, usually affected by the supply of available workers. In the context of a new configuration of work and the purpose of the companies, the salary can be compensated with a portion of the value it generates, which appears as a solid mechanism for the permanence and growth of the businesses.

As this is a strategic definition, the steps that allow an adequate implementation are the following:

  1. Strategy review . Whether it is documented or not, periodically reviewed or not involving managers, it exists and therefore it is of particular relevance to understand how it is affected in the new context. Scenario management becomes relevant.
  2. Selecting an alternative of action , needless to say the complexity involved, however, one must choose to close the gap between the current state of the business and its desired state, be it adaptation, reconfiguration and / or transformation. Ultimately, the relevant element will be the emphasis on action and this is where the interests of the business should be aligned with those of the workers, through remuneration agreements based on productivity.
  3. Work with your team to define the objectives, the operational plan and the measurement of its progress . To generate the desired value we must establish the objectives that drive the results to later link them with the objectives that enable organizational capabilities, that is, the “how” and “with what to achieve them”.
  4. Measure the efficiency of execution with technological support. Technological adoption is probably the challenge that can reconfigure the business model itself, and in the case of personnel, it requires new and greater skills for which it will be necessary to invest in training and follow-up. In adaptation it is even more profound for both the company and the workers since both will require acquiring new skills.

The previous steps are implemented by confirming if you are aligned within your business towards the strategy that you propose, focusing on your vision and making a performance measurement deployment, within a culture that emphasizes execution.

Aligning jobs with strategy

Starting from the premise that we seek to synchronize salary with productivity, it is understood that we want to make remuneration variable, instead of a fixed cost, in other words we must show workers why it is good for them that they want to earn more to his employer. This is achieved through remuneration models whose design establishes the incentives to exploit future profits from the cooperation of the contracting parties.

In the aforementioned design, the negotiation of individual and team results is necessary and for this the following is convenient:

  1. Communicate how the worker's work contributes to the strategy, sometimes general metrics are applied that may not be the objective of the work in themselves, let's think about the value that the capture and interpretation of data currently has, so applying a metric Of sales generated to someone whose purpose is to know consumer habits will only lead to frustration and poor remuneration. To whom to communicate the strategy.
  2. Establish clearly the remuneration criteria . Depending on the work, a greater or lesser weight can be established for the individual and collective contribution, in any case there must be planning, tutoring during the term of the work, performance evaluations and clearly set the elasticity of the increase in performance. regarding compensation.
  3. Motivate innovation , that is, ask for constant feedback to achieve learning for improvement.

Conclution

Faced with an unusual situation such as the pandemic, companies naturally emphasized their efforts to protect the employment of their workers despite the fact that the external context demanded more severe alternatives such as the termination of the employment relationship. This implied the acceleration of new forms of the link between companies and employees, which is why new compensation schemes are also required at present and that is why managing to link compensation to the performance of workers is a viable alternative that, if implemented correctly, will help you. It will allow you to compensate for the risks assumed at the beginning of the crisis.

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