November 23, 2010

Communicating Compensation Plans: How to Present Your Findings and Recommendations

I am a stickler on communication. I think that too often our compensation programs fail not because of the merits of the program but rather the ways in which we communicate or lack communication both with leaders and employees.

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In this post, I will cover how I think you should communicate with your company leadership about any compensation policy on the table, from incentive plans to merit increases.

1. Get agreement from your executive leadership team that a competitive set is right. Often times, your benchmarking or competitive analysis is something that you’re going to share with your executive team and they may look at the data and say that it’s wrong. They may think you’re over or under paying certain workers.

Are they right? Probably not. Your data is likely not wrong. Your team simply may have not properly defined what was necessary before you got to work. It needs to be very clear who the company is and who it wants to compete against.

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So, before you put a lot of work into compensation program design, make sure that you meet with your team to share your goals and make sure that everyone is on board with them. That way when the data comes back, everyone can agree that it’s telling the right story.

2. Get agreement from your executive leadership team that your degree of competitiveness is right. In reality, if you are doing compensation planning at your company for the first time, you probably need to sit down with your executive team. And, again, this conversation is all about tough decisions. It’s not to say that every position isn’t important to the organization. But, you need to get very clear on where the company wants to spend its labor dollars so that it can target it’s funds most competitively. There probably should be some variation between departments or employees with different skill sets.

And, this is a great conversation to have with your executive leadership team. It really does start to put you in that strategic player role, to sit down and say, “Listen, I don’t want to benchmark the entire organization at the 50th percentile. We have departments and divisions that provide our competitive advantage so let’s talk through those realities and agree on where we should be putting our resources.”

3. Recommend changes to improve the overall structure of your compensation program. What do all of the conversations about compensation strategy mean for you? Where should you be in the process? Should you be preparing recommendations for what merit increases should be?

In my tenure in HR, I was often handed a budget and told that the increase for the year would be 3.5 percent. But, we as HR practitioners, should be influencing that. We have access to the data that shows how far off of our compensation philosophy we are in certain areas. We know whether or not we are meeting the needs of the organization in terms of business priorities.

Let's influence that. Let’s provide the spreadsheets. Let’s provide the data. Let’s make recommendations on what the budget should be. That doesn’t mean that it will fly. There is an important consideration there and that’s that you only have as much money as you have, but there should, hopefully, still be a dialogue with the people who are setting the budget. Because the budget should be, in part, about where you sit relative to your philosophies.

4. Work with divisional heads to redesign incentive programs in alignment with company goals. Some of you may work where you get to design compensation programs by yourself, so you don’t need to work with divisional heads. A lot of places where I’ve worked, for example, the VP of Sales is heavily involved in the design of the sales incentive program. And, that may be the case where you work, but whether you are alone in designing these programs or your are influencing the designs being made by others, work hand-in-hand. Bring something to the table that shows that you have studied the business and you can bring some smarts to the conversation.

You should be able to say, “This is what I think the changes are that need to be made, in terms of the design, and here’s why. Let’s look at our business numbers and look at why I think that this is the case.”

Communication. Communication. Communication. Be excellent at it. Present your findings, make recommendations and be an HR voice for these issues. It is critical for your career and your company’s success.

Regards,

Stacey Carroll
Director of Customer Service and Education
PayScale.com

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