Benefits and Compensation

Making the Pitch for Your 2013 Compensation Plan

Csizmar, who is founder and principal of CMC Compensation Group, offered his tips at a recent webinar sponsored by BLR.

Start with your compensation strategy. Says Csizmar. You have to insure that what you recommend is in line with the company’s compensation philosophy.

Take into account management bias. Yes, every company has biases, Csizmar says. You don’t have to agree, but you have to understand. Trying to push something that goes against the bias will be an uphill battle.

Look Back

Next look backwards to see what you have done before. What’s worked and what hasn’t? What has been accepted or not received well by senior management?

Steps You Should Have Taken By Now

Here are the key things that should have been going on to get you ready to plan for 2013, says Csizmar. (If you haven’t done these yet, get going, he adds.)

Market Pricing Study

You must know how your pay compares to the marketplace. Not just your ranges but your actual pay practices

Use at least two surveys, three is better, Csizmar says. The surveys will also help you defend against second-guessing by particular departments that think they deserve special compensation treatment.

Review Your Metrics

There is a host of metrics and they can help you see if your programs are targeted correctly.

For example, if your average employee performance ratings are all higher than the business unit’s rating, that’s an issue.

If new hires are consistently paid more than current employees, that’s an issue.


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Kicking the Program Tires

Is your program doing what you want it to? For example, if 90% of your people are getting top bonuses, your plan’s not working.

Is your pay structure competitive but actual practice consistently falls below? Your top performers are tuning up their resumes.

If everyone gets a merit increase, that usually means that there is not enough in the budget to reward high performers. Who’s going to leave? Not the mediocre performers who are getting a bonus.

When you do notice problem areas, send up a flare to your boss or to management. At the same time provide assurances that you are working on the problem and will be back with recommendations. You’ve got a handle on it.

Know the People

As you approach problems and solutions, be careful, Csizmar warns. You could be stepping on political eggshells—a bad policy, a mistake, or some political maneuvering (boss’s nephew, etc.).

Reading the Tea Leaves of Turnover

Good employees always have an option to leave. Get to know who the high performers are. How are they paid relative to coworkers and market? 

Use Your head

Be sensible, Csizmar says. Say you want to move your pay structure to maintain competitiveness. You can’t move structure up so much that most employees are below range, unless you are ready to deal with that issue.

Recognize that you may not be able to fix everything within a single year.

Is it Affordable?

Of course, there’s always the question of affordability. This hangs like a cloud over many situations—if you don’t have the money, you don’t have the money. So you have to balance all your recommendations with affordability.

Management won’t be interested “because it’s the right thing to do.” Be prepared to show hat the cost is and what we are going to gain from these costs.

Prioritize your recommendations

Focus on two things:

  • What could cause significant impact—that shouldn’t be ignored for another year
  • What can be done easily—the low hanging fruit. Small changes can make a big difference

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The Battle with Finance

One key hurdle that’s easy to ignore—you have to get your ideas past the bean counters. All too frequently compensation pros don’t have a good relationship with the CFO. In many organizations, there’s no contact except once a year.

But whatever you propose, management will ask the CFO, Do we have the money? You need to get that answer sooner.

Often finance submits numbers to the budget before comp and HR are ready, and that number becomes sacrosanct and then it’s hard to change.

You have to talk to these people, Csizmar says. Work with CFO to find a consensus approach before the meeting. You want the CFO nodding his or her head as you make your presentation.

In tomorrow’s Advisor, making the recommendation to management, plus an introduction to the all-compensation-in-one website, Compensation.BLR.com.

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