Aligning your compensation philosophy with business priorities

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As an HR leader, you play a key role in your organization's success. It's crucial that you work with your company's executive leaders to develop a compensation strategy that supports company business objectives.

In this free, one hour webinar session, Stacey Carroll, SPHR, MBA will present the basics of leading an organization through the steps to align its compensation philosophy with its mission, and values. This webinar will give you a core understanding of the connection between business and compensation strategy.

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Aligning your compensation philosophy with business priorities

  1. 1. Aligning your Compensation Philosophy with Business PrioritiesStacey Carroll, M.B.A., SPHRDirector of Customer Service & Education
  2. 2. PayScale is a market leader in global online compensation data.With the worlds largest database of individual employeecompensation profiles, PayScale provides an immediate andprecise snapshot of the job market.Our patent-pending, real-time profiling system indexes customemployee attributes (such as industry-specific certifications) andspecific job titles for every industry.Our secure, on-demand business solutions, PayScale MarketRateand PayScale Insight, provide employers with accurate, reliablecompensation detail never before available. 7,000 Positions. 50 Major Industries. 11 Countries
  3. 3. Do you believe . . . . How many of you think  How many of your companies employees are the company’s have started buying cheaper most important asset? products (less quality) in the last 2 years? How many of work for an organization that has a pay for  How many of you gave at least performance compensation 10% of your employees in your philosophy? organization a increase of larger than 8% last year? How many of you believe that 20% of your employees do 70%  How many of you have given a of the work? “cost of living” increase to employees? How many of you think your compensation program is aligned  How many of you have RE- with your business priorities? DESIGNED your compensation program in the last 5 years?
  4. 4. Agenda Step 1 – get SMART Step 2 – Analyze your compensation program  Not all jobs are created equal  Common Myths Step 3 – Align your comp plan with the business Step 4 – Present your findings/reccomendations
  5. 5. Step 1 – Get SMART Know your business – what is the plan?  Read your balance sheet, income statement and cash flow statement.  Talk with your business leaders about where the business is going in the next year, 5 years and 10 years.  If you don’t understand something, ask someone (even if it’s google).  Think through the implications on talent within the organization. Know where you stand relative to your current compensation philosophy  Benchmark  Employee Feedback Meet with Senior Leadership  to seek permission to align talent strategies with business priorities  Ask for any resources needed to get the project started
  6. 6. Step 2 – Analyze your compensation program Have we accurately defined our compensation strategy?  Considerations include: industry, geography and organizational size.  Blog Post: Employee Compensation Plan Design  Webinar: Defining Your Compensation Policy & Philosophy  Pharmaceutical CFO Story Have we positioned ourselves well relative to the market?  How competitive do we want/need to be?  Build pay ranges in alignment with competitive strategy
  7. 7. Not all jobs are created equal Where should you be spending your labor dollars?  What matters to your company (competitive advantage)?  Walmart vs. Nordstrom  What positions are going to have the biggest impact to your company’s bottom line?  Google’s “ad word” salesperson vs. data miner  What positions are the most difficult to fill?  The more specialized the profession – the more creative you need to be.
  8. 8. Common Myths People work for money - Money will never attract or retain talent on it’s own. Pay is going down with the recession - Contrary to what we hear about the economy, the market IS moving – dramatically in some industries. Employees will never be satisfied with their pay - You can improve an employee’s satisfaction with their pay by doing two simple things.  Communicating  Designing a pay structure that is “fair” Access to pay information is limited- Employees know their worth.
  9. 9. Step 3 - Align your comp program with the business Revisit your benchmarking strategy  Marketing Client Story Revisit the design of your pay ranges relative to business goals  Job are not equal – therefore, targets should not be either. Find out where you are  Salary Budgeting Matrix  Analytics - Budgeting Eliminate “across the board increases” Ask for the budget you need  Prioritize requests (next slide) Design compensation plans (incentive plans) that are in alignment with company goals  Examples (next slide)
  10. 10. Example #1 – Plan Design You are charged with  Base incentives on: designing a sales incentive  Increasing profits (more plan for a company that is sales while holding costs trying to grow fast and is down) cash sensitive. What would  Renewal or customer you base the incentives on retention and how would you design  Customer payment terms the program to be sensitive to the company  Design requirements?  Pay commissions upon receipt of customer payment and/or delay commission payments (i.e. quarterly)
  11. 11. Example #2 – Design Considerations You are charged with  Trade-offs (i.e. quality, designing a management safety) bonus program that is  Build incentives into the plan applicable across many that account for all company different departments with goals. a goal towards cutting  Cuts for the short term, not operating costs. What the long term. could be some potential  Limit staffing cuts pitfalls and how could you  Impact analysis design the program in  Cuts that have an impact mitigating these issues? on other depts./divisions  Have divisions work together on cost cutting  Make it proportionate to the overall budget of each dept.
  12. 12. Step 4 – Present your findings/recommendations Get agreement from your executive leadership team that your “competitive set” is right Get agreement from your executive leadership team that your degree of competitiveness is right Recommend changes to improve the overall structure of your compensation program Work with divisional heads to re-design incentive programs in alignment with company goals Prepare budget proposals for salary increases
  13. 13. Questions?
  14. 14. Save Time and Money on Your Compensation InitiativesPayScale is your key to saving money, recruiting talent at the right price, and retaining top performers with accurate, real-time compensation data matched to your workplace and workforce. Join our LinkedIN group: Compensation Today – HR Best Practices Visit our blog: http://blogs.payscale.com/compensation/ Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey

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