Small firms in US not paying incentives based on performance

NEW YORK: At a time when companies are trying to motivate workers left after layoffs by performance based incentives, a survey shows that most small companies in the US are just paying employees to "show up" and that incentives do not necessarily guarantee profitability.

According to a survey of 1,000 small businesses in the US by consulting firm George S May International Company, more than 40 per cent of the small business owners are not paying their employees based on performance. They are merely paying employees to "just show up", which is killing profitability.

"Too many small businesses still reward employees for just showing up, for being a warm body everyday when they should be paying them based on performance related to specific, measurable goals.

"You are setting the stage to destroy profits when employees expect compensation for participation in collaborative activities, regardless of results," George S May International Managing Director Paul Rauseo said.

The survey revealed that 45 per cent of small businesses say they are not profitable and the relationship between the compensation and profitability data is not a coincidence.

"The similarity of those numbers shows how closely your compensation style and profitability are linked. Small businesses can no longer turn a blind eye to that connection. They need to shake off their complacency and commit to making real changes in operational efficiencies," he said.