Compensation plans are not simply a way of organizing paychecks and maximizing talent acquisition. In addition to its many other benefits, a thorough, intentional compensation strategy can also serve to drive the central goals and values of your business.
In the life of a business, overarching goals are set at a high level, and broken down into actionable pieces for various sections of the organization to work towards. The clearer the goal is at the top, the smoother the alignment as information moves down the line.
This same strategic planning process can be applied to compensation. Check that pay packages promote a way of thinking about compensation that is in sync with company goals, particularly when it comes to salaries at the executive level.
To see how compensation can really affect business goals, it’s important to trace the ways the two can be linked and make those connections clear to employees and operational teams.
- Link Compensation Analysis to Bottom Line. Assess frankly how pay incentives drive profits. Is there sufficient motivation for employees to take on business goals as their own? Adapt compensation planning tools to business planning to partner the two in one cause.
- Integrate Compensation. Compensation should not be an island, and can be a more effective tool towards any and every end when incorporated with other HR processes and with broader financial and operational plans.
- Minimize Conflict Between Long- and Short-Term. Executives should not be tempted to put off important preventative maintenance–or other investments crucial to the long-term–in order to generate short-term results. Emphasize organizational productivity as strongly as you do numbered results.
- Communicate Through Compensation. When pay is linked to the whole of the business, it can be used to communicate the importance of other business priorities, connecting salary to the success of the organization more directly. It’s one thing to know that a successful employer is better able to pay you; it’s another thing to see it.
- Collaborate With Finance. Work with the finance team to identify key cost drivers that can help reduce the budget impact of any potential adjustments. Understand how offering above-market pay can reduce costs of turnover and future acquisition when searching for key talent, and be willing to make that concession.
- Match Sales Goals with Compensation. Check to ensure that your organization is emphasizing the right high-margin products, and not over-incenting for low-margin sales. Coordinate to award incentives appropriately for the business impact.
A well-thought out compensation plan keeps you competitive, helps you retain key talent, and fosters greater productivity in the workplace explanation. By strategically designing a compensation plan to also help you drive central business goals, you are leveraging each of your employees on an individual level, while also maximizing the effect of compensation company-wide. Incentivize your employees appropriately, and then clearly direct them to the goals you have established.
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