Risk vs. Reward

When designing employees compensation it is important to understand the Risk vs. Reward concept. Employees, due to human nature, would always prefer the employer to take all the risk, while they receive all of the reward. Click the buttons below to move the RISK and REWARD controls. Think about the right and wrong ways to approach risk and reward.

RISK

EMPLOYER: 100% EMPLOYEE: 0%

REWARD

EMPLOYER: 100% EMPLOYEE: 0%

Unbalanced Compensation Plans

Unbalanced compensation plans lead to friction
and dissatisfaction, usually for both parties.

What most employees want

What most employers have

If employee goes to straight commission

Balanced Compensation Plans

A balanced Compensation strategy requires
Risk and Reward to be tied together!

Middle of the road approach

Risk averse employee approach

Risk motivated employee approach