Updating compensation practices or redesigning a plan? Like any other Human Resource effort, there are good, better and best options about the way you go about it. "Real Simple" is one approach and sometimes that's the best, most cost-effective option. But not as often as you would think and it's important to know that it's not the only way to go.
I often get asked why I suggest "taking things apart to put them back together again." The underlying message being, I think, "Why do all of that? You're going to end up in the same place anyway." What do your demographics matter when you haven't updated your midpoints in too many years? Why ask managers and employees about how they understand pay for performance, when you're not planning to change the performance management process any time soon?
I've finally come up with a good comparison that I want to share with you. Think birthday cakes.
You can buy a boxed mix and canned frosting. The cake will come together very quickly and you'll probably smile while you're putting on the frosting. Everyone will take a piece and someone will ask for the piece with the most frosting. It won't take long before they'll head back to the Kettle Korn and your big screen.
You can also make the cake from scratch. Lots of planning, ingredients and technique. Lots of time. You'll smile when the butter and sugar are creamed, when you watch the cake layers rise in the oven and when you lick the beaters. Everyone will take a piece and someone will ask for the piece with the most frosting, but this time they'll hang around chatting and enjoying themselves before they check out.
Whether you are evaluating or pricing jobs, creating an incentive or new salary ranges, here are some "ingredients" that will help you cook up a cake that gets more attention -- because you're paying closer attention.
Demographics -- which always hold surprises, in my experience. Length of service, age, departmental comparisons and such all offer insights into how compensation has been used in the past. In other words, the trends you see are clear predictors of future performance -- unless you plan to influence executives' and managers' habits in an active way.
Merit increase practices -- when you look at them over the past three years, for instance, they show you the truth about how rewards actually work vs. how you've explained them year by year. How have most employees ended up being treated? How many managers have insisted on the "peanut butter" approach of spreading increases thin and wide? Again, clear predictors of what will keep happening unless you plan to do something about it.
Position in range -- How many are in the top third of the range? What's their job tenure? How about the bottom third? Is it being used at all? Why?
There are lots of other ways to "take things apart" that are useful for putting them back together again, better than ever. I'm sure some Compensation Cafe readers can kick in more examples.
Mainly I'd like to suggest the "good, better, best" thought process, so you are clear what you'll end up with each time you start. And if the birthday cake example hasn't gotten your buy-in yet, think cinnamon muffins . . . pizza . . . bagels . . . and so on, and so on, and so on.
Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.