Compensation planning can strike fear in the hearts of even the bravest HR and compensation managers. It can become a recurring nightmare of trying to stick to your budget and merit matrix, and chasing down supervisors for recommendations and approvals.
Then there’s the cold chill that fills the office when employees feel they haven’t been recognized for achievements or rewarded fairly. If looks could kill, many managers would — well — you get the picture…
Before you even get to the point of having to deal with a resentful Ruth, bitter Bob or passive-aggressive Paul, what can your organization do to ensure compensation is accurate and fair — and less of a frightful activity for your managers and compensation team?
Let’s start by looking at what employees need from a compensation program.
Ruth, Bob and every employee out there ideally need a system that:
- Is fair, transparent and consistent across the board;
- Is linked to performance; and
- Rewards desired behaviors (and discourages the opposite).
So how do you implement a compensation system that addresses employee needs and reduces scariness levels for HR and managers?
The answer is pretty straightforward. Make sure your organization has a pay-for-performance model in place — a system that will enable your organization to make pay decisions based on merit and achievement, not just filling a seat.
Help your managers make good decisions
When it comes to helping managers make more informed decisions about pay-for-performance and ensuring that your organization’s compensation system is fair, check out these three fundamentals:
Fundamental #1: Nurture a
Ensure your managers have the training they need to provide continuous and effective feedback to everyone their team. This includes being able to clearly and effectively communicate which tasks, projects and behaviors employees are doing well and not doing well — and why it’s so important.
Fundamental #2: Accurately and fairly reward employees
Make sure your organization’s pay guidelines are clearly defined and easily accessible. By providing visibility into the process and ensuring employees understand how pay strategies are set, it raises their level of accountability to make performance an ongoing priority. Your management teams also need access to certain types of data to be able to make informed decisions. Examples include:
- Company’s overall compensation budget
- Pay scales for each job code
- Employees’ compensation and performance histories
- Employees’ performance ratings for the year
Fundamental #3: Measure overall effectiveness
Constantly monitor your pay-for-performance program and recalibrate on a regular basis. Some important questions to ask managers to ensure the system is delivering in the way it should include:
- Is compensation given to your highest performers and to your high-potentials differentiated meaningfully?
- Do you feel appropriately trained on how to effectively communicate pay adjustments so that employees will feel motivated and engaged?
- Do you understand compensation basics (salary scales, job codes, bonuses, variable pay, etc.) and how to use them?
- Do you have the tools you need to track progress?
- What are the reasons for under-performance and how will you address them?
Keep these fundamentals top of mind if you’re looking to implement or improve your compensation system.
Now, just some parting words of wisdom…
When you look at rewards and recognition in the workplace, it’s not always just about the money.
While critically important (after all, we’ve all got to eat), compensation is only part of the total rewards package that, among other things, includes employee recognition, benefits, development and career opportunities and, one of my personal favorites — work-life balance. These are all important too when it comes to building an engaged high-performing workforce.
With that, I’ll sign off and wish you and your managers happy compensation planning.
Your turn: How do you make compensation decisions less frightening for HR and compensation managers?