Being competitive with the market is an important aspect of developing market-based compensation strategies. However, market-based does not mean market-mirrored. Sourcing from information in adjacent industries and companies does not mean you must necessarily follow those numbers to the letter, rather that this information is providing you with baseline research from which you will draw conclusions.
Consider approaching the question of compensation with the knowledge of what each salary is compensating for, rather than simply knowing what other parallel positions are being paid. By changing the angle of compensation discussions, you can manage how your compensation strategy will be accomplished most effectively.
Target Your High Performers
Many CEOs have expressed the opinion that it does not make sense to pay everyone competitively. Instead, they prefer to identify the highest-performing part of the workforce, around the top 30 percent, and ensure that group is paid very competitively, based on the value that they add to the organization, according to its ROI measurements.
Focusing on the individual and rewarding those who have done well by the company turns the spotlight onto the people rather than just the positions. Rather than assigning salary ranges based solely on the title they happen to hold, this method acknowledges hard workers in a very specific way, giving a morale boost in addition to financial compensation to demonstrate appreciation.
This approach also insulates your top talent and gives them incentive to stay loyal to your company. Then, even if competitors seek to take your employees during challenging business times, they will be more likely to win over lower-performing employees, while the top-performing employees will continue to work hard to earn their place.
Highlight Core Workforces
Other times, priority in compensation must be given to the departments whose work is critical to driving business success. When compensation funds are low, money must still be invested in critical areas, which will ensure your business begins to thrive again soon.
For some industries these core departments will be their development teams, for others it will be the sales teams. Wherever your company draws its lifeblood from is where you invest the most, and that may cover employee compensation, not just materials and equipment.
While these approaches will not work for every business in every industry, it is a viable way to approach compensation for many companies.
None of this means that competitive market realities are being “discarded”. It simply means that you prioritize how you compensate individuals and departments based on the value they add, even if it means being less competitive in other areas of the company.
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