Are You Paying Too Much? And What to do About it — NOW

"Entitlement" is a term that gets thrown around a lot these days. Although it comes from the root word entitled, meaning "having the grounds to lay claim," today it is often used as a pejorative to describe just the opposite situation. When used in its derogatory sense, an entitlement is something of value one claims without having actually earned it. Possessing an entitlement mentality means to believe you're owed things just for being, well, you.

If you run a successful business, an entitlement mentality may be affecting your employees. If it is, it is likely to have a negative impact on both them and your bottom line. 

So, What is Employee Entitlement?

Employee Entitlement can occur when a person is paid significantly above market value for their position or when compensation falls out of sync with an individual's skills and performance. Very quickly, an employee can come to believe they are actually worth this overpayment ― after all, market forces determine value, right? ― then does little to improve their productivity or output.

This situation is obviously bad for your company's profitability because what you pay this employee (and potentially others) may not reflect the actual value they bring to your organization. It’s also harmful for your staff because while your workers may be making more money in the short run, they can't seek employment elsewhere without suffering a pay loss. Without the recourse of mobility, this employee is effectively stuck in a position that does not make best use of their talents and abilities, much less offers room for advancement.

Seeds of Employee Entitlement

One or more factors can lead to this situation. Perhaps the most common is nepotism. Employers, especially those who run small to medium-sized companies, often hire children, relatives, or friends, then overpay them to strengthen their familial or social bonds. 

In other situations, employers overpay to be "competitive," even though they are unsure of the local market value for a specific set of skills and experience. Meanwhile, some job candidates can manage to oversell themselves through their charisma or persuasive abilities. Yet, even when their lackluster performance reveals them to be lacking, employers can find it difficult to fire or adjust compensation downward to be more in line with their actual value. 

Last, some companies are just so darned successful their magnanimous owners choose to "share the wealth" and pay their people above market value. While such generosity is laudable, especially in this era of growing economic inequality, such a largesse can come back to haunt a company in its lean years and, once again, trap employees in their current positions.

Are Some Employees "Worth It"?

Some employees are, in fact, worth overpaying. Or at least paying above market value for a particular position. We're talking about the industry super-stars, the Don Draper-level A-players whose unique combination of talent, experience, and productivity puts them in a league of their own. But be warned: these people are unicorns. They're the exception. Recognizing not everyone fits the exemplar bill — and the pitfalls of overpaying, let’s now discuss how to prevent this insidious danger from harming your company.

How to Overcome Employee Entitlement

As an employee compensation expert, I have spent years helping companies overcome ― or better still, avoid ― the issue of entitlement and its associated problems. I do this in three steps:

Step 1: Determine the proper salary range for each position within the organization based on market pay data adjusted for the size, industry, and location(s) of the company, and internal comparisons of jobs.

Step 2: Identify anyone in the organization that’s being overpaid and create a plan for improving their job performance and capping their pay within the relevant range determined in Step 1.

Step 3: Develop periodic bonus programs to encourage employees to "up their game" and earn more money in exchange for delivering greater value.

The Bottom Line 

Without a doubt, employees must be paid what they're worth. No more. No less. They also need to be encouraged to improve their skills to increase their value to their employer and for their own career growth. Determining these protocols is not easy. It requires a great deal of knowledge and experience. Which is why it's always smart to call in a professional compensation expert.

For more information on how my team and I can help your business overcome the pitfalls of employee entitlement, please read about me in Forbes or email me: laura@conoverconsulting.com. I look forward to helping you develop compensation strategies that reward your staff for their hard work — while also protecting your profitability.