Clean Up Your Compensation Plan!
As we inch closer to summer, let’s discuss cleaning up your
compensation plan.
Huh? What does my organization’s compensation plan have to do with spring cleaning?
The ritual of reviewing and editing your stuff, cleaning everything thoroughly, ensuring your lawnmower is ready to go, and starting fresh with the season makes sense. It keeps our homes and garages in good working order and feels good when it’s done.
We should bring the same discipline to our compensation plans. Our human resource strategy and execution demand it. How you retain and recruit ideally aligns with your overall organizational strategy. Much of how your strategy adapts with the times, so should your compensation plan.
Why now? You have likely finished communicating goals, and your bonus plans to your teams. It’s not yet time for a mid-year review, so dust off your most recent comp plan, and get started.
It’s important that you know how your pay scale aligns with the market average. Whether your strategy is to pay at the high end of the market because you want to be known for having the best people, or whether your strategy is to pay at mid-range because your other benefits are fantastic, you still need to understand how you compare. Also, you need to know how to rank your people. Salary bands will help you do this.
First, ensure your job descriptions are current, and all employees have a copy, with one signed and returned to the HR team, of course.
Second, start Benchmarking. Here’s how to obtain relevant and reliable data:
• Utilize a good website full of data such as salary.com, jobs.com, glassdoor.com, and, of course, LinkedIn.
• Start by comparing your roles' average pay and other pay data, and similar roles with slightly different names. For example, personal assistant, administrative assistant, and secretary are fairly synonymous, as are sales representative and territory manager. Same for Key Account Manager and Strategic Account Manager.
• Take into account regional differentials. Compare Chicago to Chicago, and not to downstate Illinois.
• Review at least 3 salary data points to level out any potential discrepancies.
• Collect the data and note the date and the source.
moderate experience/competent, experienced/excels in the role. The pay ranges obviously should differ, based upon the caliber of performance.
• Use the salary range from your research to build a range for the role.
• Start with the median, then move to a minimum and a maximum salary.
• It’s okay to have overlap in the ranges.
o For example, your inside sales team minimum may pay $60-$70k per year, the medium may pay $65k-$75k per year, and the high range may pay $70-$80k per year.
o The entire range for inside sales would be between $60k and $80k per year.
• Now, compare your bands to the current rate of pay by role, and the performance evaluations of your people.
• What you pay your current employees should mirror the going market rate, and the results they deliver, especially if you want to keep them.
It is worth noting that you have to face facts if your pay plan is unorganized and not in sync with the market. The mid-year performance review is an opportunity to correct any compensation that is under market rate, especially for your high performers. Ideally, it shouldn’t take more than 1-2 performance cycles to correct any discrepancies.
At least once per year, block out time to review your compensation to stay current and competitive. If the market is rapidly changing, you might want to increase the cadence to twice per year.
Sourcing other details such as vacation packages, benefits, 401k match, Flex Time, and so on is also worth your time. That type of detail is harder to obtain, but if you make the time and expend the effort, you can learn much of it. Talking to headhunters in your industry will help. Add that detail to your spreadsheet, too. Think of those details like the storage system you add to your garage to organize your tools. It helps complete the spring cleaning and sets you up for future success.
In closing, a lot of elements help with recruitment and retention, but compensation is always top of mind for both candidates and incumbents. Know where you stand, correct any discrepancies, and reap the benefits. If this is too much for your internal team to address, outsource the project. It’s important. Some people hire professional organizers for their garage or home, so don’t be afraid to get the help you need when cleaning up your compensation plans.
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