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