If you’re trekking up a mountain, you’re better off if you have a map. Be it GPS, paper, or a pocket compass, you need something to guide you along the trail. Without a map, at best it can be easy to lose sight of the forest for the trees. At worst you can end up stranded in the wilderness.
The same is true for the compensation journey. When faced with competing priorities, employee expectations, and economic fluctuations — managing compensation can be overwhelming. You may even lose sight of the bigger picture.
An organization’s compensation journey will be much easier with a map that illustrates where you’ve been, where you currently are, and where you’re headed. And, if backtracking is required, a map will help reset your direction.
To visualize how to advance the maturity of compensation management practices, we’ve created this metaphorical “map” to guide you on your journey.
Embarking on the journey
In the past, compensation management involved deciding what benefits and salary you were willing to pay for an employee in exchange for their service. That’s still true today; however, compensation is a much more controversial topic. That makes the path more complicated to traverse. More organizations than ever before are undertaking this complex compensation journey
Even as companies face a tight talent market, potential economic downturns, and an increasingly distributed workforce, they still need to attract, hire, engage, and retain employees. Today’s total rewards packages (compensation and benefits) are essential elements in employment agreements, but also in building engagement and trust with employees.
While it is ideal to have a solid strategy in place when you hit the trail, you may not have time to fully map out the journey in advance. That’s why some organizations begin with the basics when they begin the journey to becoming more strategic about compensation. Rather than focusing just on hiring at the right salary, you need to think about all aspects of compensation management that result in a positive employment experience. This includes job management and using salary data and market pricing to assess and evaluate what you should be paying for the jobs in your organization.
Taking stock of the view
As a business starts growing and maturing, so should its approach to compensation. That’s when a strategy is vital in order to moving ahead.
A compensation strategy begins with analysis of the labor market and the organization’s philosophy on how they will compete for talent. A modern approach to compensation should also include the organization’s pay equity objectives. The strategy should also define your compensable factors, definitions for the pay programs you will use, and why they are in place.
When faced with changes like remote work, organizational changes, and talent shortages, a compensation strategy will help your business flex and adjust as needed. Events such as mergers, acquisitions, or external factors such as pay legislation also necessitate that organizations have a strategy in place or can be the impetus to change your organization’s strategy.
Just as a map will help a hiker find an easier route, so will a comp strategy enable your organization to flex and adjust your approach to compensation management to meet the constraints that impact your business.
Making it to the peak
Avid mountaineers say they learn something with every step. The same is true for as organizations progress and grow in maturity along their compensation journey. With a compensation strategy and structures in place, you are taking steps that will enable more mature compensation programs such as pay equity and pay transparency.
With pay structures in place, HR professionals are better prepared to undertake pay analysis, which can help you understand inequities in how you pay and where you have flight risks. To make an impact, it is also important to know how to share this information and have alignment and collaboration with senior leadership and people managers so that you can take meaningful action.
Good communication and transparency builds the trust required for organizations to fully engage and deliver results. Commitment to transparency should also extend to pay communications with employees so that your workforce is informed, and employees feel comfortable asking questions and are able to understand why their compensation is fair.
Building a journey that works
Some compensation strategies will take months or years to build and fully execute. Others may fall into place quickly. Tackling compensation challenges requires thought, data-driven decisions, and intentional collaboration. Take time to map out your journey and regularly review your route. Don’t be afraid to reset your direction when necessary. Go at your own pace while keeping an eye on and adjusting to pay trends and legislation as needed.
Once you’ve reached the summit, the trek isn’t over. Once you’ve put practices and programs in place, planning for ongoing pay increases comes into play.
Want to share the journey? Download the full resolution infographic on compensation challenges.