The 9 Compensation Tasks You Must Do

Missouri. (He also handles compensation.) His remarks came at the recent SHRM Annual Convention and Exhibition in Las Vegas.

Here are his top 9 tasks for compensation:

1. Create a Total Rewards Philosophy or at least some “guidelines”

Why do you need this?

1. To share with external applicants & associates
2. To create internal leadership alignment
3. To reference it in communications to associates
4. Because it is a popular management topic and an expected document

How do you get started on this? Hold meetings, Tanis says. Break up the meetings into four buckets of conversation:

• Benefits
• Salaries
• Development
• Performance

To get the meeting rolling, come up with 5-7 critical discussion questions, for example, If the company had the same sales but double/half the net income, what benefit would we offer more/less of?

A typical statement would mention that the compensation system consists of base pay, benefits, incentives, and stock.  The elements and the mix are regularly reviewed. Our intent is to be sure that the mix and levels of the components will allow the organization to attract, retain, motivate, and reward high-caliber team members.

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2. Create an Annual Compensation Plan

Reduce your plan to writing, says Tanis. The moment you complete this, you will have given concrete form to the intangible desire.

• List out current compensation projects
• List out last year’s compensation projects
• Identify critical delivery dates
• Flag “Big Rocks” and other impediments
• Define who the customer is
• Define what the outcome is

201X Compensation Plan
Quarter 1 (Jan-March)	Quarter 2 (April-June)
Compensation Structure Changes Performance Management Process Performance Training Goal Training Bonus Payouts & Announcement Total Rewards Statements	Merit Increase Effective Equity Awards Equity Training Succession Planning (Bench) Salary Survey Participation Minimum Wage Review (Monthly)
Quarter 3 (July-Sept)	Quarter 4 (Oct-Dec)
Individual Development Plans Mid-Year Reviews Update Position Descriptions Merit Increase Planning Succession Planning (HiPo) Review Compensation Practices Executive Compensation Review	Total Rewards Philosophy Review Merit Increase Budgeting Department Budgeting Compensation Analysis Review Bonus Plan Changes Equity Plan Changes Targeted Departments Planning for Next Year

3. Communicate to Your Associates

What should you communicate? Tanis suggests:

• Offer Letters
• Rewards “Field Guide” that explains compensation practices in an informal way:
• Merit Increases
• Performance Review Process
• Promotions
• Produce the field guide annually when you do your benefits open enrollment communications, says Tanis.
• Classic Training, Internet, Company Newsletters (Minimum: 1 Item per Quarter)
• Total Rewards Statements / Conversations
• HiPo’s / Critical Positions – Twice a year
• Organizational Wide – Once a year
• How do you make the rewards statements effective?
• Arm your supervisors to distribute and communicate the statements
• Draft your communications and bounce them off other leaders to create organization alignment

4. Create a ‘Comp Book’

What is a Comp Book? Tanis uses the term to refer to a quick access binder that includes a summary of your compensation programs.

• Who should have a copy?
• President / CEO
• Head of HR
• Limited books and information for other department heads
• What’s in a Comp Book?
• Pay Plans
• Base
• Bonus
• Equity
• State Minimum Wages
• CPI or Automatically Adjusted
• Future Announced Increases
• Current Wage Rate
• Position / Associates with Pay Exceptions
• Offer Letters
• Agreements or Details of “Special Deals”
• Compensation Plans/Programs
• Official Company Abbreviation Lists
• Complete Position Listing
• Grade
• Range
• Bonus Percentage
• Succession Planning Information

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5. Create a Succession Plan

A succession plan is a process to identify and develop internal talent, and to determine internal talent needs. It’s justified because the ROI of retention of even one High Potential or Critical Position employee is large.

Identify Critical Positions within the company. Discuss with Department Heads and ask: “If this position is unfilled would the organization be significantly at risk to achieve short term or long term goals?”

For Directors & above, ask, “Will we need to hire externally?” Who are our “bench” players? Which leaders might leave the company within three years for any reason?

During the “April to August” timeframe:

For High Potentials:

• Do a  Gap Analysis of skills needed to fulfill the needs of the position
• Lay Out the ADP (accelerated development plan)
• Consider out of cycle adjustments or equity grants

For Critical Positions:

• How can we assist the person in the role to do his or her job better?
• Is the person competitive within our compensation plan?

In tomorrow’s Advisor, the rest of the Top 9, plus an introduction to a very helpful collection of pre-written policies (17 of them about compensation).