Compensation Strategy
3.2.3) Analysis Compensation strategy:
Strategic Compensation Decisions Every Business Must Make
Pay can either be an asset or a liability to a company. Stated another way, it can either drive growth or hinder it– fuel performance or diminish it. Is that placing too big a burden on compensation to produce results? I don’t think so. In fact, my experience and observation has been that most businesses don’t set high enough expectations for their rewards programs. The evidence is they don’t involve compensation in other strategic discussions. The result is there is little to no link established between pay and the key success measures the company needs to reach.
To change this outcome a company must alter how it makes compensation decisions. Here I would like to suggest five of the key issues a business must include and successfully address in its decision making process if it wants to drive better results in the execution, productivity and performance of its people. Here are the five presented in the form of questions to be answered: 1- How can we reinforce our business model through the way we pay our people? Implied in this decision is a company’s ability to clearly articulate its business model and distinguish it from it’s business strategy. (For more information on this distinction, view our recent webinar entitled: Compensation Strategy and Business Strategy, An Interdependent Relationship.) Wal-Mart and Four Seasons Hotels have very different business models, so their approach to pay would need to reflect that difference. Presumably, your business will be equally distinct. So in this category two essential issues need to be addressed: A)What outcomes reinforce the core virtuous cycles of your business model? B)What kind of pay strategies will best reinforce those outcomes? 2- What kind of value-sharing approach best reflects the kind of partnership we want to have with our employees? I prefer the term value sharing to incentives because
Strategic Compensation Decisions Every Business Must Make
Pay can either be an asset or a liability to a company. Stated another way, it can either drive growth or hinder it– fuel performance or diminish it. Is that placing too big a burden on compensation to produce results? I don’t think so. In fact, my experience and observation has been that most businesses don’t set high enough expectations for their rewards programs. The evidence is they don’t involve compensation in other strategic discussions. The result is there is little to no link established between pay and the key success measures the company needs to reach.
To change this outcome a company must alter how it makes compensation decisions. Here I would like to suggest five of the key issues a business must include and successfully address in its decision making process if it wants to drive better results in the execution, productivity and performance of its people. Here are the five presented in the form of questions to be answered: 1- How can we reinforce our business model through the way we pay our people? Implied in this decision is a company’s ability to clearly articulate its business model and distinguish it from it’s business strategy. (For more information on this distinction, view our recent webinar entitled: Compensation Strategy and Business Strategy, An Interdependent Relationship.) Wal-Mart and Four Seasons Hotels have very different business models, so their approach to pay would need to reflect that difference. Presumably, your business will be equally distinct. So in this category two essential issues need to be addressed: A)What outcomes reinforce the core virtuous cycles of your business model? B)What kind of pay strategies will best reinforce those outcomes? 2- What kind of value-sharing approach best reflects the kind of partnership we want to have with our employees? I prefer the term value sharing to incentives because