Three strategic recommendations for your compensation management strategy

by on June 12, 2009 · 0 Comment POSTED IN: HR Info Center

Key compensation management decisions cannot be made without a strategic plan

In order to have a meaningful conversation about compensation management, you got to have a meaningful compensation strategy to talk about. Your company needs to be able to answer the question: How are you going to meet your compensation management goals?

Here are my strategic recommendations. What I’m telling you here is very basic but important to your compensation management strategy.

  1. Build a salary system that stands up to scrutiny and straight talk.
  2. You have got to be able to talk to people about compensation management. If you’re going to talk to them about it, you got to have something to talk about that’s going to pass the bulletin board test.

  3. Be boring. Be middle of the road with design in compensation management
  4. I don’t like creativity in compensation systems. I don’t even like it in bonuses. Every time I got creative, it always came back and bit me. I bet there are people out there right now laughing, okay, that say, “Yeah, I’ve done that”. With bonuses, it’s even worse. You say, “Okay, we’re going to pay for what we believe in and we’re going to incentivize sales.”

    The next thing you know, they’re selling more than you can produce. Or, “We’re going to incentivize on time delivery.” So they deliver on time stuff that is not fully what the customer needed. But golly, they get a bonus for things that they’re doing to short sheet the bed because there’s money there. And you’re paying extra to get silly things. Now, compensation-wise, every time I’ve tried to get creative, it doesn’t really work. I don’t know many – I’ve looked at a lot of systems, I haven’t found anything creative that really works.

  5. Make it a great place to work.
  6. Talking to them creatively about it is cool but gee, salary is not the reason most good people come. It may be a reason they leave if you don’t keep up. Differentiate with other things like your culture. The best companies out there, I mean the ones that we all read about in all the magazines that are the best place to work, they don’t differentiate by paying everybody higher than everybody else does. They make it by being a great place to come to work. So have better working conditions. Talk with your people. Listen to your people. Build a better culture, okay? And pay them fairly.

You big companies, you better be doing this. Small companies, this may be a little out of the box for you. But I guarantee you, all the big companies listening are already doing this. And if you want to be a solid small company and maybe be a medium size company eventually, this is what you got to do.

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