Your organization’s management style and values drive pay ranges. Hierarchical organizations use many narrow grades while a team-based flat organization may have very broad bands.
If you don’t align your compensation programs with your pay philosophy and strategy, your workforce will not be aligned to your company.
In a previous article, we wrote about how compensation philosophy, policy, and strategy drive organizational culture. Our main point was that transparency and open communication will drive a culture of trust.
Executing the strategy requires the same transparency and openness. People want to know about the mechanisms you use to value their jobs and reward performance. If they don’t have the answers, they will make assumptions based on how much they trust management.
Putting the compensation strategy in place requires a framework to define how your organization benchmarks
Most organizations benchmark pay against market rates using compensation surveys, BLS statistics, and online companies that collect data from employees. These studies enable you to evaluate market trends and labor availability based on two assumptions:
Using these data sources enables you to compare your current pay with market rates to help pinpoint areas where pay rates may make it difficult to attract the right talent. Or, you might overpay for skills that are no longer scarce. These data also enable your compensation team and business leaders to make better decisions about resource allocations and your competitive position.
Tips for Success
Pay structures give you a way to match compensation to market rates, manage costs, and handle the complexity of compensation planning.
Ranges enable you to decide how you will lag, match, or lead the market. For example, your philosophy might be that to be a competitive leader, your company will lead the market by 15%. This means that the midpoint of the pay range will be market + 15%, and that a performing, seasoned employee should be at or above the midpoint.
Tips for Success
Job structure or job leveling is the process of evaluating positions to determine their value to the organization, and it is the primary tool for determining job equity.
Creating a common language and comparisons across the organization make internal movement easier. For global organizations, a consistent structure across the organization makes career mobility easier, where companies can institute career paths that cross boundaries.
Most organizations use several of these methods for different employee groups such as executives, and different methods for union and non-union employees.
Tips for Success
Consistency, transparency, and communication are the main components of a successful compensation program. When it comes pay, conversation matters more than cash.
Pixentia is a full-service technology company dedicated to helping clients solve business problems, improve the capability of their people, and achieve better results.