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2016 Resolution #1 – Educate Key Players on Compensation


Resolution #1 for 2016 –

Educate all of the key players in your organization about how employee compensation works, and how it should be used to improve organizational performance.

Moving to a more effective compensation program will improve performance throughout the organization, but Human Resources may be challenged in showing how the rest of the organization will benefit.  Rather than simply fighting with senior management every year explaining that the market has moved and we have to pay more, consider instead showing the value of actually managing this significant expense.

Make your financial executive your best friend rather than your enemy.   Finance folks deal with data, so speak their language.  Show that you have a sound and logical approach to compensation planning by defining exactly how each employee is to be compensated and why.  Give your CFO a way to budget for compensation by showing the current value of each employee.  Thoroughly analyze pay, and show how your approach will:

  • Reduce turnover by minimizing the opportunity for employees to leave for simple financial gain, or because they feel their pay is unfair. Compare your turnover to benchmarks, make a reasonable estimate of how much turnover might decrease, analyze the costs and show how “paying right” will actually cost less.
  • Minimize waste by limiting compensation growth above the employees’ value, while ensuring that you can effectively attract, motivate and retain. Use effective ranges that provide for “above market” pay for your best employees, but does not allow pay to exceed a limit that reflects employee contribution.
  • Improve performance by improving employee engagement. The cost of employee disengagement are out there.  Compare your engagement level to the benchmarks and show the difference – in both savings and opportunities that can be gained.  Even if you don’t have your own data, look at the cost from “typical” dis-engagement… that should at least give you a start.

Enlist your operations executives and jointly make a case for improving compensation opportunities.  Regardless of the nature of your products or services, your operations management team needs to rely on people to get things done.  They need the right people – people with the right skills who are focused on their jobs.   How many times have you heard “if only we paid more we could get the right people?”  Ask them how many people they would need if they had the “right people.”  Work together to show the rest of the team that a smaller number of people, paid the right way, will cost less and achieve more.

Bring all of senior management on board.  When managers want a cop-out to explain why they couldn’t get the raises their employees want, they usually blame it on Human Resources.  Why?  Because it’s easy, and because they don’t know how pay opportunities are determined.  The solution?  First of all, explain it thoroughly.  If there are any questions, give them the answers they need in order to answer their employees.  Second, make them part of the process.  Whether it is as members of a job evaluation committee, reviewing the wage structure as part of a task force, or requiring them to recommend compensation levels for individuals, make them part of the process.  Get them to approve it, so that they are part of the solution, not part of the problem.

Create tools to explain the program and use them frequently.  Even though pay may seem simple, the process of creating and maintaining an equitable compensation program may be quite complex and hard to explain.  Create tools, like presentations, brochures, and worksheets that not only describe the process, but show exactly how the program is applied to each employee.  Get management together at least once a year for a refresher session, and:

make explaining the compensation program an integral part of every manager’s orientation.

Every constituency in your organization not only needs to understand how pay is set, but should have both an opportunity and an obligation to participate in the process. Resolution #10 will go into detail on communicating your program to the rest of staff.  Make sure to check back to this blog every Monday, Wednesday and Friday through January for more information about each of our 10 compensation resolutions for 2016.