Your Contribution Equals Your Compensation

The Gist:

It’s natural for you to be paid for the value you create. More value, more compensation.
Your contributions to your clients and your company are going to determine your compensation.
The variability of compensation allows you to determine your income by making a greater contribution.

The Perfect Attendance award is a relic of the Industrial Age, where you were rewarded for showing up for work, allowing your company to be able to run their lines and manufacture their products. In some cases, showing up every day meant increased compensation, and occasionally a promotion of sorts, even if you did the same work. While the contribution you made might not have increased or improved, you were a loyal employee, and you deserved a raise for “time served,” an idea that resonated with people who found little meaning in their work.

Today, it’s easy to show up for work and do very little or to do a great deal of meaningless work, work that doesn’t contribute to any real or important outcome. There is no Perfect Attendance award in what Peter Drucker called “Knowledge Work.” While there may still be annual increases, your compensation is always going to match your contribution.

Your Contribution and Your Compensation

The more you contribute, the greater your compensation. The less you contribute, the less you can expect in compensation. That rule is a force of nature, and it isn’t one that is easily violated. Like gravity, it is always in effect, even when you wish it weren’t.

I have been a fan of Dan Pink since his first book, A Whole New Mind. He is an excellent writer and thinker. A few years ago, he wrote a book called Drive, in which he argued against variable compensation, like commissions and bonuses, at the individual level. But variable compensation exists outside of sales and executive compensation, which is why some employees earn more than their colleagues, even if those colleagues do necessary and important work.

Even within identical roles, those who make a greater contribution tend to receive greater compensation and rewards. This doesn’t mean that the organization doesn’t value its employees—it’s a natural result of some outcomes being valued more than others.

External Value Creation

In the client-facing functions of an organization, the contacts with whom you work are also measuring your contribution. The greater your contribution to their success, the more valuable you are to them. The reason salespeople are given a variable compensation structure is because the outcomes they create are equally variable. The top salesperson in an organization creates greater value for their prospective clients, converting them into clients. The bottom twenty percent, who don’t create enough value for their prospects, convert far fewer into clients and make a smaller contribution, even though their work is still important to the clients and their organization.

Those new to sales often believe that their struggles to win new clients are caused by things like their lower-priced competitor, their higher price, or some other factor they believe to be out of their control. None of these factors are responsible for their inability to acquire new clients. Instead, it is their inability to create value for the decision-makers and decision-shapers who make buying decisions. That’s why I always push the idea of value creation and helping your clients make good decisions for their business. The external value a salesperson creates leads directly to profit for their company, some of which they use to compensate the salesperson.

Internal Value Creation

The greater your contribution to your company’s success, the greater your compensation. Contribution is something different than “showing up for work” or “time served.” Opening your email and making yourself available to your company is not a contribution; instead, it’s the equivalent of punching a time clock. You should maintain the work ethic of the blue-collar worker and always have something to show for your day. In fact, you should have something to show for every hour of every day, ensuring that what you are doing contributes to your company’s success, both now and in the future.

In other words, showing up for work is not a contribution—it merely allows you to contribute.

The contribution you make must be something your company values more than your perfect attendance. If you’re not sure where you can contribute, start by helping your company grow, solving the problem of acquiring new clients or customers. Another place to make a compensation-increasing contribution would be leading others and helping them execute the things that create external value. There is always a contribution to be made by solving the hard problems of flawless execution in any area of an organization.

The value you create and the contribution you make are both inside your internal locus of control. By increasing the value you create, you increase your contribution and put yourself on the path to greater compensation. If you want more heat, you have to put more wood in the furnace.