Your compensation strategy should answer these three key questions:
- What talent market(s) do you intend to use for comparison for your organization?
- How competitive do you plan to be relative to your talent market(s)?
- What do you want to reward with your compensation dollars?
Identify Talent Markets
A talent market is defined as the combination of industry, size, location and organization type. The markets you select should reflect where you compete for talent, not where your business is located.
You may find that you need to use more than one market to cover all your jobs. For example, healthcare organizations might use different talent markets for their office and medical staff. They may also compete in another market altogether for their physicians.
A common misstep with market data is to think of it as only right or wrong. Market data should be interpreted in the context of what you’re trying to accomplish — your overall market strategy. Take the opportunity to examine market data and consider how it is applicable to your organization, and when you may consider deviating from market to prioritize or de-emphasize pay for some jobs.A common misstep with market data is to think of it as only right or wrong.Click To Tweet
Decide How Competitive You Want to Be
You may, again, have different targets depending on how competitive you need to be to get the best people for your jobs. Some jobs are hotter than others, so decide on the percentile you’re willing to pay for certain positions to help you keep and attract talent. Review your strategy regularly to ensure you are staying current with your goals and market trends.
Get Buy-in from Company Leadership
Help your executives understand the value of having a current compensation plan. Including input from key players at your company is a sure-fire way to get them invested in the success of the plan. You can send out a questionnaire or hold meetings with certain groups or individual decision makers.
Follow these steps to gain your executives’ support:
- Identify pain points. Understand the major business priorities and how your comp plan ties closely to those priorities.
- Understand the ROI. Be prepared to explain how an increase (or decrease) to payroll will impact the bottom line.
- Calculate the cost of getting comp wrong. Show the impact of under/over-paying using language that all execs know fluently: money.
Complete Your Job Descriptions
Make sure you have job descriptions for every position in your organization. Your descriptions should cover the high-level basics of each job. They don’t need to be 100 percent complete, but they will be essential for matching skills, responsibilities and experience to each job position.
Reward Your Talent
What are the goals of your compensation program? Some organizations reward performance and results. Others aim to reward experience, hot skills or tenure. What you choose to reward should reflect the goals of your organization. For example, if you want to grow your organization by adding state-of-the-art products, you’ll want to reward skills and performance that will help you accomplish that goal. Check that your compensation strategy aligns well with the culture of your organization.
Before you move to the next step …
Think about the various functions and levels within your workforce. Where do you compete for talent for each segment you’ve identified?
Answer these three main questions for each segment:
- What market do we compete in for this segment?
- How competitive do we need to be to get the best talent for this segment?
- How can we best reward talent for this segment?
Up next: selecting comp market data sources. For all the steps and takeaways, grab your copy of the full Comp 101 guide today!
Tell Us What You Think
Does your compensation strategy answer these questions? We want to hear from you. Share your story in the comments.
Image: Anastasia Petrova/Unsplash