Contemplating Compensation-How can you tell if it’s helping or hurting your business strategy?

September 5, 2017 in
By Sherean Miller, Jessica Milloy, and Cristina Horne

There are a lot of reasons that an organization might start questioning whether their compensation is aligned with their current business strategy and a fair number of tells that leaders or HR professionals may notice when it’s not. Once you begin to have that nagging concern, what do you do about it? Venturing down the compensation path can be tricky and, like most complex organizational strategies, it requires a clear understanding of what your program involves, how it impacts your business objectives, and what specific actions you should take to make it more effective.

Let’s start by looking at some of the common tells (some obvious and some a little less so) that may indicate that your compensation strategy isn’t doing its fair share to recruit, retain, and motivate your workforce:

  • You know exactly where to turn to find great candidates, but they just don’t seem to be biting on your vacancy announcements.
  • Exit interviews, employee survey data, or other feedback indicates that people don’t feel their work and contributions are adequately recognized or valued and, most obviously, that they don’t feel they are fairly compensated for the work they perform.
  • You’re experiencing turnover in key positions or career levels, more frequently to competitors than you’ve previously experienced.
  • You know you offer great benefits, a fantastic culture, and so many other intangibles, but you don’t know how to quantify those selling points.

If any of these sound familiar, then let’s think about how your strategy for compensating employees may be inadvertently hurting, rather than helping, your efforts. Let’s dig a little deeper into some of those tells and figure out exactly what they are trying to tell you.

Your job postings are getting crickets.

If you know that the vacancy announcements are accurate, engaging, and appropriately targeted to the candidates and skills you need, then maybe the candidates are getting lost at your bottom-line. Particularly in a crowded and competitive field, solid candidates have done their research to know what their value is in the market. Have you?

  • Conducting an External Market Review will provide you with insightinto what specific jobs are worth in the market and allow you to use that knowledge to strategically position your organization to attract and retain talent. By analyzing an organization’s existing positions; matching those positions to market salary survey data; and assessing how an organization’s pay is aligned with market pay, we have helped numerous clients not only re-align pay, but given them the insight to make specific changes to compensation and recruitment strategies for key positions to make those more competitive to transitioning talent.

People don’t feel valued.

While this is a pretty clear indicator that people believe they are undercompensated, a number of factors could be at play here. First, do you feel confident that people are paid fairly within their pay bands or relative to newer or older hires? Internal equity is a significant factor when it comes to perceptions of fairness and value within the workplace.

  • Conducting an Internal Equity Review will assess how incumbents in positions across the organization are paid relative to each other, many times revealing significant changes in compensation over time. We’ve had many clients who have grown, contracted, and recruited for different reasons and in different business environments, leaving them with a hodge-podge of salaries that may not make sense to an HR staff trying to create a more consistent pay structure. An internal equity review can not only rebalance any inequities you discover, but put the system back in alignment with existing or newly developed compensable factors (e.g., experience, education, performance) and pay ranges.
  • On the other hand, if people are being paid consistently (go you!) maybe what they are really trying to communicate is that their pay isn’t clearly connected to what they are contributing. In this case, you may need to assess your Performance Management and Pay System.Over time, even a well-designed performance and pay system may stray from the outcomes an organization wants to reward. Like all elements of a business strategy, these systems require periodic tune-ups. Aligning performance objectives and rating outcomes with pay, ensuring differentiation across performance levels, and developing motivating incentives and rewards, have all had substantial impacts on our client organizations. In addition to helping ensure that your workforce understands how and why they are being recognized, having a robust and transparent performance management and pay system will also articulate career paths for employees- always a win/win for employees and organizations.

Painful, painful turnover.

Ouch, it hurts to lose that talent that you’ve attracted, nurtured, and grown, particularly when they have just reached that sweet spot of independent competence that your business requires. Or worse, you just keep losing the same type of people, from the same positions, to the same competitors in a talent Groundhog Day. Regardless of what shape it takes, turnover hurts.

  • While all of the previously described steps will help address some of the causes of turnover, the results of an External Market Review can pay dividends in helping you better understand and potentially differentiate your salary structure to retain key, hard to replace talent. This may require a different positioning of your pay for these jobs relative to the market (maybe at a higher percentile than your other positions), or even differentiating Incentive Pay to motivate and target talent to key outcomes. To end the pain, we’ve worked with our clients to become savvy consumers of market data by helping them understand how their people were paid against the market, then using that data to make wise decisions that separated them from the pack.

Telling a compelling story.

You know you have great aspects to your culture or benefits that set you apart, but it can be hard to find a place to tell that story. More so, it’s not just what you currently offer employees, but what you might want to consider in order to remain competitive or better accommodate changing the changing demands of the workforce.

  • This is where it’s helpful to look at the big picture of your Total Compensation Program. Reviewing your Total Compensation Program requires taking a close look at your current benefit offerings, compensation system and philosophy, supporting policies and practices, and corresponding documentation. This holistic assessment not only allows you to see the complete package you’re offering to current and prospective employees, but also ensures that you’re packaging and communicating this information in a compelling manner. We’ve helped clients not only benchmark their benefits against their industry to determine whether their benefits were comparable to, better than, or lagging behind their comparators, but also highlighted fresh ideas that were a good fit for their workforce or culture and then made sure that candidates and employees alike understood these unique benefits through clear program documentation and marketing. We’ve also helped clients document their specific compensation policies and practices so that managers and leaders can clearly articulate and manage to the compensation strategy that best supports the business.

It can seem overwhelming to start down this path, but trust your intuition- if you worry that your compensation is hurting and not helping you achieve your business strategy, it’s time to dig in a little deeper. Just know that you don’t have to go it alone and that it can lead to some really valuable and exciting places.

Contact FMP to to learn more about how we can help you and your organization with compensation and pay for performance.