The Importance of Being Current
With the economy still lulling, many organizations may overlook the importance of keeping their salary structure current, posing the question, why is developing a comprehensive compensation program so important?
Throughout this piece, we will discuss why an organization should become involved in a compensation design project.
Compensation strategy is important. A comprehensive compensation strategy offers an organization a competitive advantage over other organizations in the same market while helping to manage jobs within the organization. Forming a strategy keeps jobs in the right pay brackets and keeps the personnel budget under control. By controlling pay brackets and the personnel budget, the organization will become more appealing and begin to attract more top talent. Compensation strategy may also help the organization boost its recruitment and staffing capabilities.
Compensation strategy will also define the position of the organization within the job market and define the pay market for the organization. It will also drive compensation and benefits processes while defining clear goals for the development (or redesign) of the compensation method.
So, when should my organization participate in a comprehensive compensation strategy project?
When there is a need for review of internal equity:
Internal equity should generally be reviewed at least every two (2) years in order to consider whether strategic organization goals have impacted the content of certain jobs, job families, or disciplines.
When there is a need for external equity:
Changes in the industry are causing more jobs to become and making organizations more streamlined; market comparisons need to be performed for organizations to know what to pay the top talent.
When the organization has set goals:
Set goals and ideas of what the organization would like to see are crucial to the completion of the compensation strategy/design project.
When your organization can provide the needed internal information to the consultant:
Consultants will need internal resources. These resources may include a list of employees, salary information, and internal grades to best understand how to help the organization.
When your organization has the time to be involved in the project:
The organization human resources (HR) team and others as appropriate will need to have time to stay involved with the consultant in order to complete the project. Regular correspondence to make sure things are on track and that the consultants and the organization are on the same page is crucial to compensation strategy project details.
My organization is ready to do develop a comprehensive compensation program! Should we hire a consultant?
Yes. Below, are a few reasons why hiring a consultant will make developing a compensation strategy easier for your organization.
Compensation strategy design and development requires a specialized set of skills that consultants utilize daily.
The external information that can be gained from hiring a consultant is a valuable resource for the organization (i.e., market surveys and benchmark compensation comparisons).
Compensation consultants save time for the organization’s staff.
Consultant can provide useful input and recommendations while in the process of designing the compensation strategy.
The organization will gain the ability to outsource touchy topics. It may be easier for an outside source to deliver feedback that may be difficult to present internally (i.e., when an executive position is being overpaid).
Consultants have already subscribed/purchased the needed resources for the project; for the organization to do the same, would require significant cost if conducted internally.
Effective use of budget dollars:
Salary budget increases are sparse. Good pay structure provides a defensible method of the decision to allocate pay to the most highly performing employees.
Boosting employee retention, motivation, and morale:
Employees are more fulfilled if they believe their employer has made and investment toward the equity of pay and the fairness of the work environment.
Communication with employees:
Hiring a third party demonstrates to employees that their employer cares about the employees needs and benefits as well as the needs and benefits of the employees families.
To recap, some key things to remember when your organization is considering how to stay current in the marketplace, include review of internal and external equity within your organization and its market, having set goals for your organization, and hiring a consultant to do the dirty work.
Staying current and developing a comprehensive compensation program can make your organization competitive and be cost effective.