Benefits and Compensation

Why Should You Conduct a Compensation Audit?

There are many reasons to conduct a compensation audit, and the benefits in employee productivity and retention can ripple through the organization. In a BLR webinar titled “Compensation: How to Effectively Manage Base Compensation with Pay Grades,” Dan Kleinman outlined some of the answers you’ll get by conducting a compensation audit. Are you ready to see where you truly stand?

Compensation Audits: What Questions Need Answers?

“More and more companies, executives, comp committees, and the board are asking for this – a compensation audit. Basically it answers what you have and how you use it. It should be a best practice in assessing all your compensation components.” Kleinman advised. Here are the questions you will answer when conducting a compensation audit:

  • Is your compensation program appropriately divided between base pay and variable opportunity?
  • Is the manner in which you use compensation economically justified?
  • Is pay distributed and balanced effectively?
  • Are pay structures aligned with your business structure?
  • Do pay plans help keep your most productive employees? “Compensation is usually an issue for your most productive, your best employees when they feel undervalued, or feel that someone is being overvalued relative to them,” Kleinman explained.
  • Do pay plans help keep you out of legal trouble?

Why Are Compensation Audits Important?

“Compensation is an extension of your management belief system.” Kleinman told us during the webinar. As such, compensation:

  • Is managed by the company and not the marketplace
  • Sends a value message to everyone connected with the company
  • Is a huge influence on staff productivity
  • Needs to be consistent with the values and operating priorities of the company
  • Does not stand alone; it is an essential element of the strategic plan
  • Is relevant and meaningful only when it is part of the company’s culture

“One of the keys of being an effective staffer or consultant is being able to speak truth to power. If you were to ask for a reaction to these bullets from your senior players and they disagreed with any of these bullets, would you be able to ask why? Would you be able to challenge them?”

If they don’t agree with them, there should be something they can put in their place. A compensation audit will help you determine where you’re at on these points.

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. For the past 18 years, he has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services.

2 thoughts on “Why Should You Conduct a Compensation Audit?”

    1. I suspect the elcteoral abstainers will be a sliver of the broad movement, and that most Occupy advocates will haul themselves out to the polls and make a choice from the options in front of them. Call it the lesser of two evils, or call it doing the best you can in a real, rather than imagined, world. This whole idea, of choosing the lesser of two evils, is the very problem people have with the 2-party system in the first place. They don’t want to live in a world were they have to chose the lesser of two evils. Americans have been hauling themselves to the polls to choose between the options in from of them for decades and it’s clearly not working, so people are fed up. Occupy is not about building a new political party within the same system, or reinventing the positions of the Democratic Party. It’s about rejecting the lesser of two evils’ choice all together. It’s about constructing a system that does not claim to represent’ the voice of the people, but IS the voice of the people.I’m not saying no to Occupying Office, or that if a representative candidate with an actual platform for reconstructing the system came along I wouldn’t vote for them. What I am suggesting is that this article is quite derogatory towards those of us who are opposed to representative politics. You deride them as living in an imagined world, as if the end of representative politics is some kind of impossible fiction that can only be from a dream, instead of treating them as what they are: A group of people who have an idea about how to govern themselves. No one, absolutely no one, has any clear idea of how this idea will spread, or how successful it might be. Maybe they will disappear and along with them any dream for getting as close to a direct democracy as possible, or maybe over the next few years or decades they will steer the path of American governance towards a non-representative government that everyone can agree on. Or something else totally unpredictable.So, instead of deriding these people about how they are not participating, suggesting how few in number they are, or how they are somehow not attached to reality, why don’t you write an article that actually explains their position and compare it, in a non-bias way, to the occupiers who don’t mind participating. Perhaps you can try to understand and then explain how some people believe that representative systems are an ineffective method of producing an intelligent governing body and how this idea has a foundation in Heidegger and Merleau-Ponty’s rejection of Cartesian assumptions about how we interact with reality. Or to understand why some people don’t want someone speaking for them and instead want to speak for themselves. Or perhaps you can try to understand the new ways they have developed to participate without representatives. After all, the totally shifted the political focus of the country from debt to inequality without a single candidate standing and claiming to speak for them.

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