In our last post we introduced you to Step # 2 of the Seven Step Compensation Diet - the need to lay out in your mind the general theme of how you plan to reward your employees. Without such a governing plan or broad strategy individual manager actions will continue to push your reward costs upward at a rate greater than anticipated or desired.
At the same time, if you don't know where you are heading (i.e., The Yellow Brick Road), any path will take you there. Odds are you'll end up right back where you started. So you had better set up some signposts along the way.
Step # 3: Prepare Compensation Guidelines
By "guidelines" we mean a series of written policies, procedures and how-to instructions that guide your management in dealing with compensation / reward issues. These compensation policies, programs and procedures should reflect and support the strategies you developed in Step # 2 - The Strategy. Commit them to writing and distribute widely to managers and employees. Have everyone get the word and don't let ignorance become an excuse.
This primer should be the policy and procedural instructions your managers will rely on when called on to make spending decisions. Educating your managers on the tactical application of your company's pay programs is a critical step; one that will help modify actions and decisions in a way that will support and encourage the enduring change your organization needs.
As you would anticipate, left to their devises Managers tend to fill an information vacuum (no guidelines) with precedent-setting decisions that will increase costs, foster inequitable treatment and over time alienate segments of the employee population. Guidelines (or rules, if you're strict) serve to rein in these ineffectual leaders by establishing parameters to their freedom and limits to their authority.
While aberrant behavior by rogue managers will cost you in terms of money, morale and productivity, giving managers policies and procedures to operate by will save you money, as well as time and trouble.
A suggested Table of Contents might look like this:
- Compensation philosophy (role of Compensation function, pay for performance, compensation strategy [as available])
- Brief description for each of your direct and indirect pay programs
- Step-by-step instructions to process every type of individual pay change
- Approval process for every type of pay change
- Hiring, promotion and pay adjustment procedures
- Administrative issues (pay dates, overtime, new positions, job evaluations, etc.)
You should create a greater visibility for the inevitable exceptions-to-the-rule by establishing a one-up approval process. Such a technique will highlight remarkable performance through transparency of reward. If you include templates and sample forms you can help ensure consistency of message while assisting managers to administer the reward programs.
When you shine a little light into those darkened, special interest corners the employees will notice - and applaud.
Have a rulebook-of-sorts will also help provide standards and structure to your reward programs, which in turn will foster greater employee engagement. As you begin to improve how reward programs are designed, implemented and now communicated you will inevitably:
- Reduce your overall labor costs
- Increase effectiveness of money spent
- Increase ROI of reward dollars
- Improve morale, engagement and productivity
Final note: make sure that all managers receive a copy of the compensation guidelines, and then periodically update and use them. Refer to them constantly and let employees see that they are to be followed.
Let no dust gather on these pages.
Next up: Step # 4 - Establish Position Control
Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations. He is also associated with several HR Consulting firms as a contributing consultant. With over 30 years Rewards experience Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation. He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.
Image: Creative Commons photo by alancleaver
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