Is your company’s compensation plan shortsighted?

These days, employers need to put their compensation plan through the
same thorough analysis as their capital spending, pricing and other elements
of strategic planning

Senior managers who think a compensation plan just salary and benefits, and
don’t let their HR professionals view the plan in a wider way, may be
shorting themselves by ignoring some of the key factors that motivate work.

Of course, a compensation plan must include a fair salary. And it needs to
offer benefits at least up to industry standard. But in creating it, consultants
recommend that your compensation plan be given the same level of thought and
completeness as, say, your capital planning, product development and pricing.

That means that, instead of constructing a compensation plan piecemeal, your
company think about implementing the plan in strategic terms the same as those
other elements of your business.

A strategic approach involves, first, checking whether your compensation
plan is designed to drive the goals of your business, rather than
just satisfy your employees.

Do you, for example, reward your people in concert with those aspects that
are most critical to desired business targets, or just in terms, as many compensation
plans do, largely in relation to an employee’s position in the hierarchy?

Second, are you making full use of every strategic advantage in designing
your plan?

A compensation plan is more than just monetary

You know, for example, that a superior compensation plan can make the difference
in hiring the people you really want, but realize that compensation is more
than just monetary.

Work challenge, autonomy in authority, training offered, speed of advancement
and lifestyle in your area should be considered part of the total compensation
plan as well, and stressed to applicants.

Management probably looks hard at your company’s competitive position
in terms of product and marketing strategies. The compensation plan should
be positioned against your prime competitors no less. Who are they? How do
their compensation plans look against yours? What can you offer that they
can’t, and, in what areas do you need to beef up your compensation plan
to meet their challenge?

Recognition as part of the total compensation plan

Finally, don’t lose sight of the intangibles in designing a compensation
plan. Human beings are, by nature, emotion-driven and they respond positively,
sometimes totally out of proportion, to praise, expressions of gratitude and
signs of recognition. Have you taken such simple steps as sending out thank
you e-mails for a job well done or reserving a prime parking spot for the
Employee of the Month? These are part of a well designed compensation plan
too. They probably won’t cost you a dime, but from the employee’s
viewpoint, this form of compensation may well be priceless!