Yesterday, Diana D. Neelman and Mary A. Rizzuti of Compensation Resources, Inc., provided some insights on crafting an innovative compensation strategy. Today, they reveal a key piece of the implementation puzzle: how to get top management on board with new initiatives.
Business Strategy Considerations
Compensation plan designs should consider the following, say Neelman and Rizzuti:
- Employee engagement
- Skill development
- Total rewards philosophy link
Key Questions to Ask
- Who are your best employees—the people who can drive you to be a high‐ performing company? Retention is key; a comprehensive pay package can help retain them.
- Before you can be innovative, you need to ensure that your compensation program is correct:
- Are you paying competitive wages?
- Is your mix and amount appropriate?
- Do you have the right programs?
- Are you getting the greatest impact with the dollars you spend? It’s important to learn how to be creative with fewer resources.
- Finally, advise Neelman and Rizzuti, you should ask if you can effectively communicate your expectations.
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Garnering Support from Top Management
Research shows that plans are successful when top management supports them, Neelman and Rizzuti note, and engaging top management is important to ensure an ongoing understanding of the thought process for any new compensation plans.
However, executives may challenge new ideas for a variety of reasons, including:
- Paternalistic culture
- Entitlement mentality
- Lack of commitment to share information
- Difficulty in defining appropriate performance metrics in the past
- Fear of turnover (even if this is justifiable for poor performers)
The key is tying compensation to the overall goals of the business as a whole. Your direction on compensation begins with understanding the company’s strategic plan, say Neelman and Rizzuti, and metrics and milestones can help drive goal setting.
Once you have identified the key individuals who will most effectively drive the strategy, you can look at how to use various compensation vehicles to reward employees who contribute to the company’s success. This overall direction can then be translated into an effective and innovative compensation philosophy.
From getting top brass on board with your comp plan to determining merit increases to evaluating your company’s market position, compensation and benefits are never easy. “Maintain internal equity and external competitiveness, with benefits and compensation, and control turnover, but still meet management’s demands for lowered costs.” Sound familiar?
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