The Impact of Compensation Structures on Employee Performance

Scott Dahl, Senior Vice President – Sales, Marketing, & Revenue Management, The Wurzak Hotel Group, HSMAI Sales Advisory Board Member

In a recent HSMAI Sales Advisory Board meeting, we explored how compensation structures influence employee performance. Below are five insights from our discussion.

I will be talking about this more during my lightning round presentation at the HSMAI Sales Leader Forum, November 13, in Washington, DC. Hope to see you there!

5 Key Insights:

Current Compensation Trends: Although staffing and spending have returned to pre-2019 levels, the quality of talent, especially salespeople, has lagged. This indicates that companies may still be adjusting to shifts in workforce dynamics.
Team vs. Individual Performance: Balancing team and individual performance metrics is critical. One company is exploring the idea of creating a high-performing tier, where top achievers earn significantly higher bonuses. This strategy aims to reward excellence and motivate others to elevate their performance.
Thresholds and Payout Frequency: Determining bonus thresholds and payout schedules sparked debate. A ZS study shows how timing can affect motivation—employees begin earning bonuses at specific thresholds, with ceilings to cap maximum payouts. While some firms use quarterly payouts, others are considering monthly payouts, despite potential accounting complications.
Gatekeepers and Bonus Reductions: The role of gatekeepers in bonus payouts raised concerns. For instance, one company reduces bonuses by 50% if its hotel does not meet quarterly revenue goals. Critics argued this penalizes employees focused on long-term performance, not just immediate results.
Evolving Workforce and Hybrid Work: Surprisingly, the shift to hybrid work and flexible schedules has not significantly impacted some companies. However, it is essential to keep monitoring these changes as they may reshape workforce productivity eventually.

To succeed, hotel companies will need to continuously refine compensation strategies to aligning with shifting workforce dynamics.

Questions for Your Team:

Team versus individual versus mixed bonus criteria. What works best?
What are the optimal Minimum Threshold, Maximum Payout, and Payout Frequency? Why?
Do gatekeepers really work to align the interests of staff and ownership? Is there a better way?
Are more intangible benefits, like hybrid work schedules, flex-time, and wellness programs having the positive impact that was predicted. Are there others?

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