Swiss psychiatrist Carl Gustav Jung once famously said "You are what you do, not what you say you'll do."
With this in mind, I always smile when someone says: "We've never had a compensation philosophy." The fact is, they've always had one, since the very first time the organization paid an employee. They just haven't committed it to writing yet. Or, perhaps more likely, owned up to the truth of it. But it's there.
Even better is this: "We've never communicated our compensation philosophy to employees." You don't need to, friend - they know what it is. Or at least they think they do. The question is ... do you?
Your compensation philosophy isn't what you say. It's what you do.
Like many a politician, it can be easy for us to get caught in the trap of falling for our own rhetoric. We allow ourselves to believe that the act of saying something makes it true. We lose sight of the messages that our organizations' actions are sending. Your employees may or may not know the words in your compensation philosophy, but they are watching it in action and drawing their own conclusions.
Here's one of the lessons we can take from this reality. Whether "creating" a compensation philosophy or reviewing an existing one, it's a smart move to start the process by taking a good look at what's really going on. What is the reality of your compensation plans and practices, particularly as perceived by your managers and employees?
To answer the first, you may want to do some traditional compensation benchmarking and analysis. How competitive are your pay structures, plans and actual practices against the norms of the labor market(s) where you compete for talent? Does your competitive reality match your competitive intent? If not, better get a good sense of where it falls short.
Next, it might be wise to get some data on perceptions. Some of this may be captured in a regular employee survey effort. Or it may be worthwhile to convene a few manager and/or employee focus group sessions (or engage an outside facilitator to do so on your behalf). The purpose of this is to understand how managers and employees experience your compensation philosophy, on the ground every day. What do these groups believe are the top priorities of the current compensation program? What should they be? What do these groups believe are the organization's competitive goals for pay -- and how well are those goals being met? What gets recognized and rewarded? What should get recognized and rewarded?
A lot of work? Yes it is. But a reality check like this can be critical if you want your compensation philosophy to have any hope of credibility.
Actions speak louder than words, as they say. We all know that employees understand the difference.
Image "Cinema Clapboard" courtesy of renjith krishnan / FreeDigitalPhotos.net
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