You may already have a mission statement in place at your organization. But do you have a formal compensation strategy document—a comp-specific mission statement, in other words? You need one, says Chuck Csizmar of CMC Compensation Group. Read on to find out why.
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What’s a Strategic Compensation Plan?
Csizmar is talking about:
- A plan, method, or series of maneuvers for obtaining a specific goal or result
- A guideline or road map that lays down a series of principles to be acted on
- A term used in our daily lexicon
Mission Statement = Not the Same Thing
Even if you already have a general company mission statement, he says, it is simply not useful from a compensation perspective:
- Tends to include broad, aspirational phrases like market leader, shareholder value, supplier of choice, etc.
- Your company is generally referenced as an “employer of choice” or as providing competitive programs.
- Written for an external audience and designed to function as a brief company identifier.
Many employers, unfortunately, shy away from the idea of clearly communicating with employees about pay—due to fear of raising employee expectations, concerns about political correctness and cultural sensitivity, and so forth.
However, Csizmar says, this reticence comes with a high price tag: “Your largest single company expense is left without a guiding principle.” Unclear corporate-speak may send out inconsistent or contradictory messages, and reward costs will rise at a higher rate than anticipated or desired.
In short, your compensation strategies will fail if your workforce doesn’t understand—or is confused about—their value.
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Commit to Two Primary Aims
So what’s the solution? Committing, in writing, to two primary aims: your main goal and how you plan to go about getting there.
Examples of the main goal:
- “We will be market driven; market competitiveness will be given priority over internal equity.”
- “We do not seek to use benefits as a strong differentiator in our reward programs.”
- “We believe it is important to share the cost of benefits with employees.”
How you plan to go about getting there:
- Lays out the overall statements of belief around which to design, administer, and
- communicate reward programs
- Becomes the “stake in the ground’ that reinforces the culture and management style
- “This is what we stand for.”
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8 Design Considerations for Your Strategic Compensation Plan
#1: Statement of Overall Objectives
- How rewards support the needs of the business, employees, shareholders and/or customers.
- Each reward element should have a defined role.
#2: Relative Importance
- How rewards compare with other company identifiers.
- What does an employee tell a friend?
- Image can be the identifier.
#3: Performance Measures
- Identify performance criteria to be rewarded.
- Define measurement levels.
- Degree that rewards are expected to drive employee actions.
#4: Competitive Reference Points
- Describe the comparator group for your rewards package.
- Industry / geographic competitors vs. signature program benchmarks.
#5: Competitive Positioning
- Describe your desired position vs. the market.
- Honest is a positive message
- Be sure you walk the talk.
Tomorrow, the rest of the 8 design considerations, plus some additional insights from Csizmar and an introduction to the timely webinar, Employee Perks: How to Enhance Your Compensation Strategy to Boost Job Satisfaction and Engagement.