2. PAY MORE THAN AVERAGE
If you have provided adequate baseline rewards and established internal and external fairness, consider borrowing a strategy first surfaced by a Nobel laureate. In the mid-1980s, George Akerlof, who later won the Nobel Prize in economics, and his wife, Janet Yellen, who’s also an economist, discovered that some companies seemed to be overpaying their workers. Instead of paying employees the wages that supply and demand would have predicted, they gave their workers a little more. It wasn’t because the companies were selfless and it wasn’t because they were stupid. It was because they were savvy. Paying great people a little more than the market demands, Akerlof and Yellen found, could attract better talent, reduce turnover, and boost productivity and morale.
Higher wages could actually reduce a company’s costs.
The pay-more-than-average approach can offer an elegant way to bypass if- then rewards, eliminate concerns about unfairness, and help take the issue of money off the table. It’s another way to allow people to focus on the work itself.
Indeed, other economists have shown that providing an employee a high level of base pay does more to boost performance and organizational commitment than an attractive bonus structure.
Of course, by the very nature of the exercise, paying above the average will work for only about half of you. So get going before your competitors do.
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