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HFA Reports: The Right Employee Compensation Strategy

Furniture World Magazine


Ideas to help you stay competitive and increase productivity

When you think about what differentiates your store from the competition, your products, pricing, promotion and service may come to mind. You’ve invested a huge amount of thought and effort into getting these just right.

The same degree of effort should be applied when creating an employee compensation strategy for your business. This includes commission plans, bonuses, profit sharing and benefits.

A well-designed compensation plan should include consideration of the degree of transparency you are willing to offer employees regarding compensation, including raises, promotions and the anticipated timing for merit or performance-based pay increases.

Your employee strategy should touch on several other factors as well, including:

  • Ways to motivate employees to achieve the company’s mission, vision, and values.
  • A plan to create an attractive and comprehensive rewards system and compensation package.
  • A strategy that demonstrates your practices will ensure fairness in pay, promotions, and increases.
  • Adjusting policies to use compensation to edge closer to becoming a performance-driven organization.

You may consciously decide that you want to lag, lead or match current compensation in your trading area. You may feel comfortable paying less than the market rate if eligible workers are abundant in your trading area or if you offer an all-encompassing benefits package. Paying more than the going market rate, on the other hand, will allow you to compete for more qualified candidates, reduce turnover and enhance morale and productivity.

“A well-designed compensation plan should include consideration of the degree of transparency you are willing to offer employees.”

If you do not offer a competitive benefits package, higher wages can offset this disadvantage. Companies that match often have to play catch-up when market conditions change. Consider a combination strategy if you have both skilled and unskilled labor in your organization or challenging and easy-to-fill roles.

If the compensation packages you offer to new employees are similar to or higher than what senior people in similar positions within your company earn, be sure to address this issue quickly. Even if your present compensation system isn’t highly transparent, senior team members are likely to find out and become dissatisfied.

Regularly review and update your strategy to address market conditions. Turnover metrics such as “time to hire” and “days to fill” as well as exit interviews can help you spot trends and reasons why employees quit. It’s important to find out if the cause is your compensation or benefits. The formulas for these metrics were defined in Bill O’Malley’s excellent Furniture World article, “Re-recruiting Works” that can be found at www.furninfo.com/authors/bill-o’malley/65.


Having a strong compensation philosophy will not only help to keep your store adequately staffed, it will increase morale and allow you to recruit and attract top talent.

Balancing workers’ needs with the company’s needs can be a rewarding experience. The transition will also cause some growing pains. Do not quickly throw in the towel, as it may take time before the new way of doing business catches on.

For more information on what HFA is doing to empower furniture retailers for continued success, join the community at www.myhfa.org.


Find other resources in the area of Human Resources at go.myhfa.org/hr. The Home Furnishings Association is a non-profit trade organization dedicated to helping furniture retailers improve their business. Learn more at myhfa.org.


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