Mykkah Herner, MA, CCP, Compensation Consultant at PayScale
It’s the end of the year! I’m wrapping up a bunch of client
projects, getting them all set to launch their brand new compensation plans in
the New Year. As I’m doing so, I’m realizing how helpful the tried and true New
Years’ Resolutions are when thinking about best practices for managing
compensation plans. Below are some of my favorites.
Get Fit
There are a number of things you can
do to get your comp plan fit.
- Take stock of your current compensation plan,
including the strategy, philosophy, and policy. Are they still in alignment
with your business goals? - How are you performing relative to the market? Are
there any areas that need your attention? Some departments that have grown out
of proportion to the rest of your organization? - If you have ranges, do they need adjusting? Do
you need to shift them to account for shifts in the market? Or do you just need
to shift some positions that may have moved faster in the market than others? - What other adjustments do you need to make this
year to create a healthier comp plan?
Get a Better Job
As the
market is slowly beginning to curve up, and more jobs become available, more
and more people are considering switching jobs. How does this impact your comp
plan? For the first time in a few years, you will have to really think about
retaining key employees, not just attracting them. Are you giving
performance-based bonuses to your star performers? Does your base comp plan
take performance into account? What are you doing to retain your staff with
your compensation plan?
Lose Weight
It’s time to
trim the fat. Do you have underperformers to whom you’re still giving regular
increases? Companies are starting to have increased budgets available to them
again. How are you allocating those precious dollars? Many companies are using
pay-for-performance as a way of targeting their increased budgets for the best
return. In non-profit arenas, where pay-for-performance has been slow to catch
on, leaders are increasingly finding pay-for-performance appealing as a way to
be good stewards of their resources. Typically that means rewarding your high
performers, and setting clear performance expectations for your
underperformers.
Save Money
This popular
New Year’s Resolution is sort of obvious, but I couldn’t resist. It’s pretty
clear that saving money is crucial for your compensation plan. The comp budget is usually the single largest
expense in organizations. The way you manage the comp budget, then, becomes
suspect. What are you doing to save money? Or, what are you doing with the
existing budget to allocate it more strategically?
Manage Stress
Finally, one
of the ways to improve your comp plan for 2013 is to manage stress…
- For your exec team: show them how you’re spending
the compensation budget wisely by providing regular, high level, reports.
Provide regular analytics showing how your organization is performing relative
to the market and relative to your internal ranges—use different cuts of your
data so they can see a well-rounded view of the big picture. Let them know that
you’ve got it handled so they don’t have to stress about it. - For your managers: develop a simple and
streamlined comp plan. If you can’t explain your base pay plan in a few
sentences, there is probably too much going on. Put yourself in the shoes of
each manager, trying to explain each compensation decision to their employees. Also,
consider giving team leaders a flight risk report (showing high performers that
are underpaid). - For your employees: most employees want to know
that they’re being paid fairly for the work that they do. They notice their
compensation when they’re not being paid fairly. Help your employees avoid
stress by benchmarking your positions to market—and also by ensuring that you
are aligned internally. - For you: do you know your way around a comp plan
or does it cause you stress every year when it comes time to make those
critical compensation decisions? Consider using a comp expert to support you in
developing and managing your comp plan.
Whatever
resolutions you make, I wish you a happy and prosperous new year!
More than 2,300 organizations use PayScale’s subscription software to:
- Allocate raises. PayScale Insight allows you to allocate raises based on employee performance and labor budget.
- Attract talent. Price jobs based on your local market and competition.
- Retain employees. Get pay right and show them how you did it. Your employees will be more satisfied to stay.
- Drive performance. Get their salary right so they can focus on doing a good job.
- Be confident. With know-how to talk about comp with anyone.
What are you waiting for?
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