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Simple Steps to Create an Effective Compensation Plan

falling dollarsHow do you create a compensation structure that is fair to all employees, attractive to new hires, creates excitement and loyalty amongst your team and engages their learning development while increasing productivity? Reinventing the wheel is not necessary, but creativity, communication and evaluation of your existing plan are essential.

In my years of creating compensation plans for organizations, I have found the overall goals of the firm lack a link to a compensation process. For example, one of my clients would like to establish their firm as “the best place to work in town”. I love the goal but found that it doesn’t link to any current processes.    When employees read this statement every week in their staff meeting, it is fruitless, stands alone and has become meaningless. Linking the goal to various processes, specifically a compensation plan, would benefit this firm across the board.

Creating an Effective Compensation Plan

Follow these steps to create an effective compensation plan.  Communicating your compensation plan is extremely vital. Communication provides team members with a thirst to stretch themselves to reach higher levels within the compensation structure; therefore increasing engagement, productivity and development.

Compensation Analysis

  • Perform a SWOT analysis of your existing compensation plan by studying the strengths, weaknesses, opportunities and threats of your current structure.
  • Complete a cost analysis by focusing on your overhead and human capital costs. Determine the affordability of new hires if desired

Job Evaluations

  • Create an organizational flow chart or review and update your existing chart.
  • Review job descriptions and create, clean-up and re-align to match roles.
  • Determine roles for new hires if applicable.

Performance Management

  • Audit your current performance management system.
  • Establish goals expectations and incentives.
  • Collect and conduct 360 degree appraisals.
  • Analyze data.
  • Create professional development plans.

Compensation Plan

  • Integrate individual performance with compensation.
  • Base/Benefits/Incentives/Extras – If you haven’t read our blog  Compensation Conflict? What Employees Really Want, please do! You will find some great ideas on establishing your compensation plan.

Cost Analysis Update

  • Perform an overall cost analysis of your firm.

 When compensation plans are effectively communicated, morale and retention will improve significantly. DownloadIronstone’s Compensation Planning Checklist for use at your firm. 01.15.13IronstoneCompensationPlanningChecklist

 Question: What compensation challenges are you facing at your firm?

Let us know by leaving a comment! We want to hear from you!   

 

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020
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Compensation Conflict? What Employees Really Want

Is your compensation and benefits package aligned with your firms goals and designed to attract and retain a winning team? Firms with a mediocre compensation plan are likely to lose potential qualified job candidates and deal with high turnover. Costs involved with employee turnover are high. Retain your team by giving them what they want.  Incorporate fundamental components into your compensation package to enhance morale, performance and employee retention.

In addition to salary, an employee benefits package should be standard. It is expected by today’s leading employees. Employees equivolate their value by how you compensate them. They are more productive, focused on common goals of the firm and acquire loyalty.

Most business owners are in denial when it comes to what employees want and what it takes to retain them. A new study by MetLife found that employee loyalty has dropped steadily since 2008, but employers mistakenly believe it’s on the rise.

What employees really want in a compensation package:

Base Salary Provide a base salary along with a structure of ranges. Employees want and need something to strive for. If they can’t visualize “moving-up” and advancing in the firm, chances are they will find another place where they can excel. No one wants to be in a dead-end career.

Bonuses- Bonus dollars based on performance are a great incentive to increase productivity. Set goals that are measurable and attainable, yet stretch your employee to develop and reach new heights. Performance based bonuses don’t need to be a competition in the work place, use bonuses individually or as an entire group effort.

PTO: Employees need time away.  Without it comes burn-out resulting in reduced productivity. Many firms are choosing to offer a Paid Time Off program or PTO. PTO offers a flexible arrangement that give employees a set amount of days off to be used at the employees discretion for vacation, sick leave, personal days, etc.

Health and Wellness If your firm is not offering a complete health and wellness package, you are going to fall short in attracting and retaining qualified and loyal employees. A total health and wellness package should include health insurance with dental and vision benefits, long and short term disability and life insurance. The good news for employers employees would rather pay for a portion of their benefits rather than not have them at all.

401(k) or Other Retirement Plans Employers are in the dark when it comes to determining what benefits are key drivers to employee loyalty. As referenced earlier, the study by MetLife revealed more than half (52%) of employees named retirement benefits as a vital payback. Financial insecurity has become more widespread, therefore, employees are looking for ways to plan and enhance their retirement years. Retirement plans give employees a compelling reason to remain loyal.

Flexibility- Offer some flexibility and your employees may be willing to give up some of the other “perks”. Telecommuting’s popularity is on the rise. Working from home has never been easier with the growth of mobile technology. Employees, particularly those raising families, are in desperate need of flexibility. Place trust in your employee and provide flexibility. The trade off could benefit your bottom line by lower costs of “housing” another employee along with increased productivity from your telecommuter.

Your firm’s compensation program will need continual reinforcement. Communication is vital between managers and employees to keep your compensation strategy alive. Plan frequent reviews of your firm’s compensation plan as well as frequent communication with each team member. Talk open and honestly. Encourage feedback and be willing to make changes. As a successful leader, it is important to know in today’s economy you will need to reach and maintain high levels of employee motivation, engagement and contribution.

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Using a Job Description as a Multifaceted Tool at Your Firm

Effectively developed employee job descriptions summarize the roles and responsibilities of each team member in your firm providing them with the foundation needed to reach desired goals and outcomes.

We outlined the components job descriptions should include in our blog, “Learn why Job Descriptions are Essential for Overall Effectiveness at Your Firm.” https://aeschlapia.wordpress.com/2012/03/30/learn-why-job-descriptions-are-essential-for-overall-effectiveness-at-your-firm/

Understanding each component and realizing their value will aide you in modifying and updating job descriptions by:

  • Establishing the role that each position plays in attaining overall firm goals
  • Determining how critical each job is
  • Deciding how positions in your firm interact with one another
  • Defining current employee roles and identifying the characteristics and skill base needed
  • Attracting qualified new candidates and aide in hiring
  • Evaluating performance accurately based on the expectations of the position

A job description needs to provide a positive impact fostering consistency and clarity for everyone involved.  Creating, reviewing and updating job descriptions should be included in your overall business strategy.

Using Job Descriptions as a Multifaceted Management Tool

Although job descriptions are utilized as a valuable hiring tool, a well-crafted job description should be used as a communication tool and a means to review other workplace functions such as:

  • Performance management:  Set measurable and attainable performance goals      based on the duties included in the job description.
  • Training and team development:  Review each job description      for areas that can be used in training and team development workshops.
  • Salary:Outline a compensation program that shows      minimums and maximums for each position in your firm.  Doing so will demonstrate growth      potential for your team member resulting in increased production, loyalty      and overall job satisfaction.    
  • Incentive Plans:  Use your job descriptions as      a baseline for salary;  include      incentives and rewards for employee’s performance levels that go above and      beyond.  
  • Discipline:  If an employee is not meeting      the requirements set forth in the job description, schedule a meeting to review      the requirements and focus on areas to aide them in      achieving goals effectively.

Flexibility is the key when it comes to creating and modifying job descriptions.  Consider creating broad-based descriptions utilizing attachments which delve into the specific tasks required of each employee.  A more generic job description is easier to maintain and won’t require a complete modification as minor changes that takes place.

How often do you use or refer to the job descriptions at your firm?  I’m curious?

Contact us for assistance in developing job descriptions that can be used as a multifaceted tool at your firm.

Follow us as we explore each of Ironstone’s Fundamental 4™!

  • Strategic Planning
  • Business Development
  • Operational Effectiveness
  • The Human Element

You won’t want to miss our next in the series:  Strategic Planning-Business Plan

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020
• Connect with us:


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Is Your Compensation Plan Boring Your Employees?

It’s not surprising that one of the most frequently asked questions of advisor firms is how to attract and retain talented people and reward them effectively with a remarkable compensation plan. Compensation packages are one of the largest line items in a budget. Ironstone finds that many firms are struggling to stay abreast with changes and new trends in salary and compensation beliefs while experiencing confusion on how to properly control organizational costs and remain viable.

Today’s compensation trends are moving from a base salary package to plans that include:
• A measurement system for variable pay
• Less emphasis on increasing base pay
• Overall firm goal achievement
• Flexibility

By implementing a compensation plan that includes the directives listed above, both the employee and the firm benefit. Compensation plans that incorporate these strategies foster teamwork that focuses on the concrete goals of your firm.

In order for firms to stay competitive, you must frequently change your compensation program and have a plan in place to do so. Your imagination is your only limitation to retaining and motivating the kind of people who are catalysts for the success of your firm.

We recommend that your firm be pro-active in developing and refining your firm’s compensation plan. Recognize that “quality of work life” rewards and appreciation play a vital role in the value of your firm’s benefits package. Your firm can be pro-active and creative by adding an array of perks to the overall benefits package you offer. Consider the following:
• Recognize results with a one-time monetary payment
• Offer opportunity for flexible work arrangements
• Write thank you notes to acknowledge a team member’s “above and beyond” actions
• Present pre-paid legal, education, and insurance benefits
• Place an emphasis on training and development of your team
• Introduce employee wellness initiatives

Lastly, remove the dead-end sign. Your team needs to see a clear and concise view of the opportunities within the firm for growth. You can add a suite of perks to your compensation package, but without the chance for growth and development, your dazzling compensation package won’t work.
As you contemplate the strategic changes you want to make in your compensation plan, do not forget that your team can be your most valuable asset. It is in your best interest to focus on reducing stress at work and in your employee’s personal lives. Reward your team, without hesitation, if you hold a team of energetic, talented and growth oriented individuals.

Developing and offering a compensation plan to your employees with traditional and non-traditional elements is both egalitarian and accountable.  Download Ironstone’s Compensation Planning Checklist!  CompensationPlanningChecklist

Contact Ironstone for more information and additional strategies that will assist you in developing and strengthening your compensation plan.  You can find more information regarding compensation in our blog- “Human Capital Strategies.” https://aeschlapia.wordpress.com/2012/03/19/human-capital-strategies/

Follow us as we explore each of Ironstone’s Fundamental 4™!
• Strategic Planning
• Business Development
• Operational Effectiveness
• The Human Element

You won’t want to miss our next in the series: Business Development-Marketing Plans

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020
• Connect with us:


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Implementing Team Development Programs-Often Overlooked

Learning management is a strategic component to the overall human capital mission of advisory firms and is paramount to team development.  Advisory firms should start by integrating team development programs in order to enhance employee performance.  Forward-thinking executives are continually improving the effectiveness of their teams by refining roles, expectations, and interpersonal communication in order to create accountability for results.

Your goal should be to apply and utilize a team development method that impacts your firm’s bottom line in order to gain the highest return on your learning and development investment.

Ironstone focuses on four major components that are necessary for a fully functioning workforce and implements the performance approaches to drive development.

By implementing a team development program you eliminate the need for micromanaging.

Preparation — in order to create great teams, you need to prepare to support the success of your team.  Design a culture that fuels passion, purpose, and growth.   Deliver a clear message to your team that their job is important and that you stand behind them.  Give employees the basic knowledge and skills to excel within the culture that you have created.  Share with them effective forms of communications, encourage them to ask questions, and acknowledge their contributions to the overall goals of your firm.

Incentives – Incorporate compensation into the successful execution of the firm’s goals.  One of the most powerful motivators is through the use of a performance incentive compensation plan.

Benefits –  You can become creative with the benefits that you offer to your team.  In addition to the traditional benefits such as medical insurance and retirement plans, many firms are finding that creating a flexible work environment is a good employee motivator –  increasing the desire for individual skill development for the employee.

Technology –  Providing the proper technology and training for your team to perform their job is essential to overall team development.   We have found that many firms do not take this component seriously or place much effort in assuring technology and training needs are met for employees.    Obsolete or barely functional technology tells employees their job is not important and their time is not valued.

Once you have put these components into your human capital mission, you will find that employees are capable of managing their position in the firm.  Support your team members and empower them to be as great as they can be.

“A company that does not support, empower and provide proper development

 to employees can take a great team to a problem in a very short time.”

Ironstone can assist you in developing a team development program.   We specialize in identifying gaps in your existing plan and will collaborate with you to develop solutions that are parallel in achieving the results your desire.

Contact us for assistance in starting and improving developing or starting your team development program.  We want to hear from you!   Share your best ideas here!  What does your firm do to promote team development?   We always love hearing from you!

Follow us as we explore each of Ironstone’s Fundamental 4™!

  • Strategic Planning
  • Business Development
  • Operational Effectiveness
  • The Human Element

You won’t want to miss our next in the series:  Strategic Planning-Business Model


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Learn Why Job Descriptions Are Essential For Overall Effectiveness At Your Firm

Learn Why Job Descriptions Are Essential For Overall Effectiveness At Your Firm

Updating and writing job descriptions are one of the most effective employee communication tools for managers, hr personnel, and prospective employees.  Job descriptions are beneficial to both an employee and your firm.    Employees will understand what is expected of them and how they will be evaluated.

A job description provides consistency and clarity for everyone involved.

Creating job descriptions results in a thought process that will help your firm:

  • Establish the role that each position plays in attaining the overall firm goals
  • Determine how critical each job is
  • Decide how positions relate to each other in the firm
  • Define current employee roles and identify the characteristics and skill base needed
  • Attract qualified new candidates and aide in hiring
  • Evaluate performance accurately based on the expectations of the position

Each job description should include the following components:

  • Job Title
  • A summary statement– two or three sentences describing and summarizing the purpose or objective of the position.
  • Functions and responsibilities of the position- details of what the job entails. Include details about all roles the employee will hold including any supervisory roles and the reporting structure. An important feature to include in a job description is “other duties as assigned.”   By including this in a job description, the employer can add new tasks when the need arises.
  • Skills and qualifications- list the required attributes and education needed for the position & insights into how they match the culture of your organization.
  • Evaluation methods- identify what is most important for the employee and the organization.  Include details on when evaluations will take place.
  • Compensation- provide a concise view of how the employee will be compensated broken down into base salary, benefits, and other investments in the employee such as training. Listing a range instead of a specific figure will give you more flexibility.  If applicable, include information about how employees are eligible for advancement within the range, sales commissions, bonuses, and annual raises.
  • Work Location and Schedule- include the physical location, days & hours, vacation and/or PTO structure, & potential overtime that may be required.
  • Employment type- full-time / part-time, temporary, employee, or contractor.

Ironstone will help you develop quality job descriptions and identify important gaps that you may be missing in each description.  We will collaborate with you, and execute a solution to help you get the results you are looking for.  We will work with you in creating detailed goals that go deeper than the surface.

Do you value  clear, up-to-date job descriptions at your company? How is your current system working?   We want to hear from you!   Let us know!  Contact us for assistance in starting and improving your firm’s job descriptions. 

Follow us as we explore each of Ironstone’s Fundamental 4™!

  • Strategic Planning
  • Business Development
  • Operational Effectiveness
  • The Human Element

You won’t want to miss our next in the series:  Strategic Planning-Incentive Plans!


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Human Capital Strategies

Human Capital Strategies

A successful compensation plan ensures that you pay for what you get while you get what you pay for.  Industry research heavily supports the benefits of investing your interests in Human Capital that will directly affect your bottom line.  Based upon Ironstone’s work with multiple advisory firms to establish hiring, staffing, and compensation systems/plans, we have established the following key components to consider while building your compensation plan:

A Compensation Model Is Determined By The Following:

  • Firm goals (Rev, AUM, Households, Client Retention, etc.)
  • Available firm resources (Business and Human Capital costs – i.e. budget)
  • Competitive environment (demographic factors – NYC vs. Small town USA and hiring competition)
  • Solo, Silo, Ensemble Firm

A Compensation Plan Structure Is Based Upon:

  • Well-defined roles/responsibilities of each position (Job Descriptions for Producer and Non-Producer)
  • Salary ranges for each role
  • Clear incentive opportunities (% of Net Rev, % of salary to pay out for performance)
  • Established benefits – paid time off, medical, 401k, career development
  • Outlined performance goals for each position
  • Regular performance reviews (quarterly recommended) to determine if individual goals are being met and what type of incentive to pay

Compensation Structure Types Include:

  • Non-producers are paid salary only, while Producers are paid salary plus incentives
  • Non-producers and Producers are paid salary plus incentives to drive performance
  • Non-Experienced employees are paid higher salary with career path incentives – i.e. acquiring licenses 7/63/65, CFP, – moving towards a higher % of Rev pay with experience and in turn, salary becomes lower
    • Attraction of non-experienced is the ability for a firm to “mold” and align the individual to the practice
  • Experienced employees are paid lower salary with higher % Rev incentives because of experience

Common Mistakes Are:

  • Lack of structure around compensation – IDEAL GOAL – disciplined, transparent, and explainable structure – avoid subjectivity
  • Paying out bonuses regardless of whether firm has reached goals
  • Lack of conducting consistent performance reviews or aligning performance with pay
  • Using line of credit to pay bonuses
  • Incentives only being monetary – money does not motivate everyone – time off, personal development, wellness programs, awards, working virtually, etc…

While the benefits of an outstanding compensation plan might be clear-cut, the components and drivers can be somewhat of a mystery.  A clearly defined and well communicated STRUCTURE is the key to your successful compensation model!  Disciplined compensation plans are crucial for top-performance.

Develop strategies for effectiveness without paying too much and maintaining competitive compensation.  Ironstone can help you attain this and help you gain insight into how to make sure that performance meets firm standards, which align with firm goals and ultimately results in success.

Follow us as we explore each of Ironstone’s Fundamental 4™!

  • Strategic Planning
  • Business Development
  • Operational Effectiveness
  • The Human Element

You won’t want to miss our next in the series:  Business Development-Marketing Plans!