Performance Compensation Plans

Creating Better Performance: Compensation Plans Behind the Scenes

By Staff WriterToday we hear from Brent Egbert, an account manager at PayScale who works everyday with HR professionals who are improving their organization’s compensation structure in order to save their company money and improve employee performance. Compensation Today asked Brent a few questions about what he sees happening on the front lines of compensation planning for better performance.

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Q: What are the greatest challenges for HR professionals in communicating their compensation plans to company leadership?

A: The challenge for HR pros with leadership, hiring committees and executives is getting their buy in with the actual compensation structure. Yes, it’s great to create the structure and do all of the work that these HR pros are doing. But, to actually utilize the structure rather than give arbitrary annual increases across the board requires broad support. HR pros have to work out the best way to deliver all the bottom line improvements possible so that they can help with the CFOs who want to know, “How are we saving money? How’s this helping us, bottom line?”

Q: Is it hard for them to get the budget and time to do the work or is it harder to get the buy-in once the work is done?

A: Buy in. For most of the companies that are coming to us it seems like they don’t have a lot of structure in place. Creating a strategy and structure takes a lot of time. So, they’re trying to figure out, “How am I going to get this to be implemented and utilized?” These HR folks know that their company needs to do a better job than just give arbitrary, annual increases at three percent a year across the board. Because, what happens then is, employees move out of their ranges and they’re overpaid and red-circled and kinda stuck.

Q: What about communicating the new pay structure to employees? How is that going for them?

A: Some companies make their improved pay strategy transparent and some don’t mention any changes at all. I have a lot of clients who are trying to be more transparent about their approach to pay. They want to have something to stand behind. They want to say, “Here’s the range for your position. Here’s the minimum through the maximum, with the midpoint in the middle. Here’s where you could move.” They want to then stay within that structure, making increases based on pay for performance, so that it makes sense why they’re getting an annual increase. Not just because the company is doing well, but making it more individual-performance based.

Q: Have you seen any dramatic changes take place at companies due to new pay strategies going into place?

A: Well, you’re not going to take someone’s pay backwards about 98 percent of the time. So, not too much drama. But, that’s what a lot of these HR professionals are trying to communicate. We can’t go backwards so we need to stop doing this non-structured, based-on-a-feeling approach and put more of a science, data and structure into it. This can mean rewriting job descriptions. As well as getting input from hiring managers about, “What do these jobs really do for us? What are the stand-out skills? If you recruited for this job today, would the candidate need a certification? Would they have a bachelor’s degree because the market has changed since you’ve had Joe in this job for the last 10 years.” Things like that. It can be a lot of work for these HR leaders so having their work pay off is key. It can be frustrating if it doesn’t happen.

Q: Do you have any success stories to share?

A: I have a story of an HR pro at a company based in Seattle. They were trying to fill a job position and she had someone she was interested in from out of state. He was a great candidate. They wanted to hire him. He asked for $10,000 more than what they initially offered. She said, “I felt pretty confident in my data and the way I priced the job that I could say, ‘This is what this market pays and I have data to back it up.’ Whereas, I don’t know where he’s getting his number from.”

She had a discussion with the candidate, she stood by her number and the guy accepted the job at the price they offered. Then, she went to the COO with the good news. “We just saved $10,000 on an employee because of actually having data and structure in place and standing behind it.”

It’s those kind of scenarios that will help people in HR get noticed at the big meetings. People will know that HR’s work is saving the company money and isn’t just a “nice to have” contribution.

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