Carroll talks of one CEO who was frustrated about compensation. He had his 12 top people that he wanted to compensate well, but he couldn’t seem to afford to do it. He thought that setting up a formal comp program would interfere with his ability to do what he wanted, but Carroll said to him, “I want to rework pay so that you can afford to compensate the 12.”
“I’m on board,” the CEO said.
Carroll is Director of Professional Services & Education at PayScale, Inc.
HR and comp managers hear “I’m leaving because of pay” often, says Carroll. And most of them take that at face value believing that pay is the problem. But that’s often not the case, says Carroll.
“Leaving because of pay” is just the easiest thing for departing employees to say, but pay probably is NOT why the employee started looking for a new job, Carroll says.
Always see if you can find out what the real motivation was that got the employee looking. There may be another problem (like an overbearing, ineffective manager) that won’t be solved with pay increases.
Compensation analytics include:
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Carroll offers several reasons why it is important to spend the time on analytics:
Compensation administration is all about asking questions, says Carroll. Her five key questions are:
1. Do Your Compensation Ranges Need Adjustment?
How often do you want to move ranges?
Many compensation managers assume that they have to move the structure every year, but that’s not the case, says Carroll. Don’t just do it automatically, she adds.
Do you have positions in the right pay grades?
What is happening in the market?
Look to the market (some clients are rebenchmarking every 6 months, she says). Remember, she says, “the market has no judgment.”
CFOs ask, what’s everyone else out there doing for raises? It’s a broader issue than that, Carroll says. Yes, you look at the market, but you also consider proficiency level and performance level.
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2. Are You Compensating Your Top Performers According to the Company’s Stated Philosophy?
If you are using a standard formula of making COL adjustments and then merit on top of that, but your entire budget is only 4-5% and the market is moving an average of 3%, how can you move top performers through the range?
You can’t, says Carroll. You need to:
If your company says that they have pay for performance, do your pay practices support that? Ask yourself, What is the comparison of top performers’ compa-ratios to other compa-ratios?
In tomorrow’s Advisor, more of Carroll’s compensation tips, plus an introduction to a unique, checklist-based audit system.
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