The Do's and Dont's of compensation management

by on June 16, 2009 · 0 Comment POSTED IN: HR Info Center

Compensation management is about communication and transparency

Talk to employees about compensation management like adults
Don’t use your parent voice to talk to them. Talk to them like they’re adults and you’re an adult. That’s a good thing.

Build a compensation management system that stands up scrutiny.
Realize it’s not in anybody’s best interest by the way to be overpaid. As much as you’d like to be paid more. If somebody is paying you, $200,000 to do a job and the market would pay $150,000 for that job, as much as you like that extra $50,000, my goodness, that’s awfully dangerous.

And I was working with one organization. She wasn’t an HR VP and she was a department level HR person. She got in there and calibrated her compensation management system, found out there was $5 million in all for the dept. budget.

If you red circle all the people above the top of the range in that department and froze them, so that over time, they would just catch up, didn’t take any money back. Just the amount of money they were paying above the top of the market, above 120% a midpoint was $5 million. At the end of five years, they wouldn’t all be back in range. The company is 75 years old. They’ve never had any system like this.

When they froze all these salaries, you know, do you think that the people who are being paid at a 160% of midpoint, you think those people quit when their salaries are froze? Are you out of your bloody mind? Of course, they didn’t. Where the heck would they go? They didn’t quit and leave anyway. Some of them tried to quit and stay.

In part of what I try to teach you, when I was involved is I tried to tell them, “If you’re going to quit and stay, that’s a very dangerous profile. Because if we’re paying you well above market and you are not even working as hard as your colleagues next door that are being paid market, you know, you might as well draw a bull’s eye on your forehead and the dance around the firing range.”

Talk to each person about where they fit in the larger compensation management picture.
Give them a feel of where do they fit relative to the whole.
Give somebody an indication of where they are relative to where they could be, you know, what a promotion might mean for them financially and that kind of stuff, I think that’s only respectful and adult.

These days in the internet, if you don’t think your people know what they should be paid, you’re not paying attention, okay. It’s out there.

So, do talk to them about where they fit in the larger picture, you know. Do talk to them about their future and their salary is part of their future.

The edited remarks from the Rapid Learning Institute webinar “How to Drain the Drama from Salary Reviews: A Conversation Roadmap” by Gary Markle

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