The corporate world has changed, and how we approach compensation needs to change with it. Pay-for-performance, variable pay and the increased focus on transparency that comes with younger workers in the workplace have created a need for a more specialized approach to compensation planning. So how do you modernize your compensation strategy?
There are three core tenets that define a modern compensation program. These tenets correlate directly to business success across all major key performance indicators.
1. Comp Smarter, Not Harder
Most companies theoretically understand that pay should be personalized to the individual. No two people perform exactly the same; it’s only fair to judge a person on their own performance, and avoid drawing broad conclusions that don’t take the critical nuances of individual contribution into account.
However, personalizing pay is nearly impossible when you don’t have the right technology. Trying to personalize pay with spreadsheets is like trying to lose weight by manually counting your steps instead of buying a pedometer — the tech makes it so much easier, and so much less of a headache. By using software to automate the administration piece of compensation, you can free up time to focus on the strategic work that really propels your business forward.
2. Utilize Data (and Not Just Any Data)
Your employees can easily get access to salary data. If they’re paid below market, they’re aware of it. If you don’t explain to employees how they are paid, they’ll likely create a negative story to explain it.
Using data shows your employees that well-reasoned rationale went into their compensation, and that there is nothing biased or personal about the pay decision. However, not all data are created equal. Free data off the internet are dubious quality and should not determine mission-critical business outcomes. You’ll want to select the data that best reflect your own circumstances, but make sure your data source is well-vetted before basing any decisions on it. There are a few questions your company needs to ask of your data:
- Do the data truly reflect your target market (industry, company size, target locations)?
- Is the sample size large enough?
- How current are the data?
Once you have the data, make sure to be transparent with the numbers. While transparency doesn’t have to be all or nothing, PayScale data conclusively found that greater transparency correlates positively with employee satisfaction. In fact, 82 percent of employees said they will stay in a below-market-paying job, as long as the reasons are clearly communicated. This is an astounding statistic, and one that demonstrates how employers sometimes make incorrect assumptions about what employees value.82 percent of employees said they will stay in a below-market-paying job, as long as the reasons are clearly communicated.Click To Tweet
3. Empower Managers
Front line managers have the best idea of how their employees are performing, yet often receive no training on how to have pay conversations with employees.
Salary conversations sometimes turn into a game of telephone. Line managers deliver salary messages they got from their department head, which the department head got from HR, and so on and so forth.
The message inevitably gets diluted. And organizations are not blind to this issue. In fact, our Compensation Best Practices Report found that fewer than one in five organizations (19 percent) say that they’re “very confident” in their managers’ abilities to have tough conversations about pay with employees.
Compensation should not be “just an HR job.” Managers are the messengers of salary decisions, so let them be the arbiters as well. Train your managers to talk about pay, set them up for success and then put them out into the field.
By incorporating these three tenets into your compensation strategy, increased business success will follow.
To learn more about the reasons you should make modernizing your comp a priority, the value and ROI of implementing modern compensation software and specifically how PayScale’s modern comp solutions work, download the entire guide here.
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