Pay for Performance: Top of the Market Isn't Always Necessary

July 1 saw the beginning of the NHL’s annual free agency period, which is often filled with lots of great stories from the HR perspective, including the Vancouver Canucks’ signing of the Sedin brothers just prior to the beginning of free agency.

We often consult on our client’s pay strategy: we tell them that they don’t have to pay at the top of the market, but they do have to pay their employees fairly. Case in point is the signing of the Sedin twins by the Vancouver Canucks for $30.5 million each over 5 years – an average of $6.1 million per season. Compare that to the subsequent free agent signings of Marian Hossa with the Chicago Blackhawks for $62.8 million over 12 years, Marian Gaborik with the New York Rangers for $37.5 million over 5 years, and Mike Cammalleri with the Montreal Canadiens for $30 million over 5 years.

The point production and the durability of the Sedin brothers was greater than these other players, yet they signed for the same or less money than these other players. Why?

“We never said we were guys that wanted to go for the big money,” said Henrik Sedin, who added that no-movement clauses in the new deals were a key component. “Our families are important to us and we’ve been there a long time. For us it’s important to find a place we were happy. But at the same time we wanted to be treated fairly, and I think we have been.”

The Sedins wanted to be treated fairly – they didn’t need to be paid at the top of the market, but they did need to feel like they were treated with respect. The happiness and stability of their families was also critical, and so they sought and received no-movement clauses (i.e. they cannot be traded to another team without their consent).

Bottom line – regardless of the level of compensation your organization is paying your staff, they need to be treated fairly when it comes to compensation. Understand what the market is paying, clarify how you want to pay in relation to the market, be fair, and offer other non-financial incentives to make your organization a desirable place to work.