Building a Compensation Plan Part 1: Strategy & Executive Support

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Your compensation strategy is the cornerstone of an effective compensation plan, and without one you’ll face more difficulty and opposition when it comes time to implement your plan. By investing time in defining your compensation strategy you’ll increase the likelihood of gaining executive support for your compensation plan as well.

Join us for part one of Building a Compensation Plan and learn:

Why a compensation strategy is so critical
The three questions that help define your compensation strategy
How to get senior leadership involved in your plan.
You’ll walk away from this session with crucial knowledge of how to build a foundation under your compensation strategy that supports business priorities and gets your executive team on board. Skip step one at your own peril.

Published in: Business, Technology

Building a Compensation Plan Part 1: Strategy & Executive Support

  1. 1. Building aCompensation PlanPart 1: Strategy &Executive SupportStacey Carroll, SPHR, CCPPrincipal ConsultantPayScale, Inc.
  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. 13,000 Positions. 50 Major Industries. 11 Countries
  3. 3. Agenda• Why a comp plan?• How to gain executive support• Compensation Strategy• Who is my market?• How competitive do I want/need to be ?• What do I want to reward?• Writing a compensation philosophy
  4. 4. Have you ever . . . .Had an employee come to youwith a ransom job offer fromdown the street?Had a hiring manager who insistson paying a new hire $10,000 abovethe market rate because “they must have this individual”?Worried about the equity among your employee’s when itcomes to compensation?
  5. 5. The solution . . .Create a formalcompensation program
  6. 6. Support for a plan has to be more than “HR” Unfortunately HR’s pain points are often different than your senior executive’s pain points So, to get executive support we MUST:  Identify the Exec’s pain points  Solve real problems  Address the costs and consequences of the plan  Report on ROI Most importantly, the process should be owned by the organization (not HR).
  7. 7. Why should you have a formal compensation program?• Good business sense • Compensation is one of your largest single costs of doing business • Attract, retain and engage the talent you already have within your organization • Supports the desired mission, strategy and culture of the organization.• Can ensure equity and fairness among employees • Improves employee morale • Can reduce risk to the organization
  8. 8. Creating Compensation Strategy Roles & Responsibilities  Exec Team  HR  Directors & Managers  Employees Process  Preparation  Decision making Timing
  9. 9. Preparing for the compensation strategy conversations Start with: Then: Where is the Where DoOrganization Now? We Want To Be?• Growth cycle • Importance of attraction, motivation• Demographics and retention• Culture/management style • Market competitiveness vs. internal equity • Competitors and degree of competitiveness • The right mix of compensation elements • Salary administration and decision making
  10. 10. Sample Questions to guide strategy conversations What companies make up the profile of our market and where do we compete for talent? How competitive do we want/need to be? What is it that we want to reward in this organization? Why is NOW the right time to change our pay philosophy? How will we change the mindset of employees to accept this change? What does success look like? How will we respond to employees who feel like we are disrespecting loyalty and/or their financial well-being? Who will be involved in driving this initiative? Do we have the right managers in place to reach a successful outcome? Can we afford this? What could go wrong or what outcomes are we unprepared to deal with?
  11. 11. Strategy Outcomes Clear idea on how to benchmark Clear idea on how competitive to be with salaries Clear idea on the right mix of compensation elements Clear idea of how people will be rewarded Strong executive support for compensation structure A commitment to clear communication
  12. 12. Communication Strategy• Communicate about the project • What is the organization doing and why • What is the process • Choose the right messenger• Be transparent about the process • Be realistic about the goal – no promises should be made • Don’t give employees the opportunity to assume what the outcome will be • Let employees know what to expect in terms of additional communication regarding the project.
  13. 13. Writing a compensation philosophy Recognize the goals of the organization Discuss how talent links to these goals Discuss how the compensation programs will support these goals The philosophy should be optimistic yet not unrealistic (representative of your organization) Demonstrates your commitment to ensuring fair, equitable and competitive pay practices
  14. 14. Sample Compensation Philosophy & StrategyCompensation Philosophy and Strategy The philosophy behind XYZ company’s compensation program is to provide an attractive, flexible and market-based total compensation program tied to performance and aligned with shareholder interests. Our goal is for XYZ Company to be competitive in recruiting and retaining employees through its high-quality compensation practices. Equally important, we view compensation practices as a means for communicating our goals and standards of performance and for motivating and rewarding employees in relation to their achievements. XYZ company competes in several different businesses, most of which are involved in helping individuals manage financial risk and secure their financial futures. These businesses draw their key people from different segments of the marketplace. Thus, our compensation programs are designed with the flexibility to be competitive and motivational within the different marketplaces in which we compete for talent, while being subject to centralized design, approval and control.
  15. 15. Questions?
  16. 16. 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. Visit our blog: http://blogs.payscale.com/compensation/ Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey

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