COVER STORY

I have never worked with a firm that sets out to create an unfair compensation plan . Yet in my consulting work , I constantly hear

employees and even owners say , “ My compensation is unfair !”

I read somewhere this anecdote where a teacher was trying to explain the concepts of good and bad to a child . He tested the child ’ s knowledge , and the child said confidently : “ Bad is when someone takes my toy … and good is … when I take someone ’ s toy .”

Is it perhaps that our versions of fairness are more selfish than we think , or are we perhaps bouncing among too many different frameworks when we ’ re making our evaluations ?

Actually , all these things can be true at the same time . Which means the creation of a fair compensation system will require you as a business owner to answer some very difficult questions . At the same time , you ’ ll have to confront ever-changing codes of ethics and morals . In fact , you ’ ll possibly face multiple and unclear moral codes — one within your firm , one in our society and , finally , the ones held by each person you employ .

What Is Fair ?

Most businesses strive to be meritocracies , places where those who contribute the most benefit the most . It seems like a straightforward idea , yet it requires every firm to very carefully articulate what it means by “ contribution ,” which is not so straightforward . More important , for a meritocracy to work , it must establish an “ exchange rate ” for these contributions . What ’ s more valuable to you — business development or operations management ? How much more valuable is someone who brings in $ 100 million in new assets than someone who lays down a compliance process ? This is where the tires of the meritocracy truck meet the road .

IMAGERY VIA GETTY IMAGES NOVEMBER 2024 | FINANCIAL ADVISOR MAGAZINE | 33