Ensure that your organization gets its money’s worth from compensation management
Compensation management is like a house of cards. Every aspect of a comp program is connected. And that’s why the foundation of your compensation program is very important. Without a sound foundation for your compensation management, you’ll have problems.
There are alternative approaches to compensation management that can be considered in good and bad times. These ideas don’t really cost anything but can be worked on to ensure that your organization gets the most it can from the dollars you invest in compensation management. And for at least 2009, you’re going to be asked to do more than you have in the past with fewer resources. And in these times pay for performance becomes even more important.
A Bad Environment
The environment we have to work in right now is not real good for business or workers. Nationwide, unemployment rate is 8.1%, a 25-year high. The private sector cut 697,000 jobs last year. Twenty percent of homeowners have mortgages that are under water, US record deficits in debts, and fewer consumers qualify for credit. And we don’t even know if we’ve reached the bottom yet on this whole thing. So it’s not a real good economic environment that we’re working in. But there are in fact some ways you can do more with less. And pay for performance is actually more important in this kind of environment than any other environment.
There are seven sins in employee compensation plans that are fairly easily fixable. The first sin is failure to control job titles. Sin number two, failure to accurately define the competitive labor market. Sin three, failure to concentrate on the performance appraisal process and performance rating distributions. Sin four is failure to design effective incentive plans. Sin five, failure to communicate compensation effectively. Sin six, failure to look for and use nonmonetary rewards. Sin seven, failure to train and trust your managers.
Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri
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