Your compensation strategy is critical to attracting and retaining the best talent. But, no matter how well that strategy is working today, it’s important to remember that it’s not a “once and done” function.
To be relevant and effective, your approach to compensation has to evolve over time, as your company grows and the marketplace changes.
So, when is the right time to consider upleveling your compensation strategy? Although the answer will be different for every company, based on its business strategy, culture and approach, here are most common drivers.
Mergers and acquisitions
Anytime your company acquires a new organization or merges with another established organization, it’s critical to revise your compensation strategy. The goal is to create one, harmonized program that aligns with the new organization’s business strategy and needs.
For example, Payscale recently went through a compensation upleveling after our merger with Payfactors and acquisition of CURO Compensation Ltd. Not only were we blending three different organizations, but we were also moving from a national company to a global company. Our strategy had to reflect our new organization.
External influences
The events of the world can also impact compensation strategies, as evidenced, most recently, by the COVID-19 pandemic.
In 2020, some organizations held back merit increases and bonuses, laid off people, and saw some employees, primarily women, leave the workforce altogether. Then, 2021 ushered in the era of The Great Resignation, which evolved to The Great Reevaluation.
“Employees are leaving en masse and getting jobs elsewhere that pay more and offer more flexibility and better pay. So, companies have to consider what this means for their compensation strategy,” explained Kate Biljan-Reichert, a Compensation Partner at Payscale.
“Do we adjust our position in the market and target higher than the market media? Can we even afford to do that? Should we do it for all of our organization or just the areas where we’re seeing the greatest churn?”
Ultimately, the path companies take comes down to how they answer this question:
“Where do we, as an organization, need to invest in order to continue being a successful business?”
Emerging trends
Although the idea of working remotely began as a pandemic pivot, the “work from anywhere” model has quickly become the norm.
“Companies have to decide how they are going to continue paying for their talent, and where their talent can sit,” Biljan-Reichert said. “Should we allow folks to work from home or should we create more of a hybrid environment? What does remote work mean for our business strategy and our compensation strategy?”
All important questions.
As you review and uplevel your compensation strategy, make sure you don’t work in a vacuum. Compensation impacts your entire organization. So, make sure the stakeholder involvement extends beyond compensation managers to include:
- HR business partners, who will be heavily involved in supporting your people leaders and socializing your new strategy
- Recruiters and talent managers, who will be communicating the strategic to prospective job candidates
- Finance team, who has to understand the financial impact of the comp strategy, the costs, as well as any potential savings
- People leaders, who will be delivering the message around the compensation strategy
“You’ll need final approval from your executive leadership team, who will want to know the why you’re making a change, what research you’ve done to get to this approach, how it aligns with the business strategy, and how it will be implemented,” Biljan-Reichert said.
Finally, make sure you have a strong communications plan in place when you roll out your new compensation strategy. Train your people leaders, create supporting materials and FAQs, and develop an email to introduce your new strategy that tells your employees “what’s in it for them.”
“It’s important that your employees understand the methodologies around how they are paid and the different ways they can earn money—whether that’s salary, spot bonus or other variables, and what the timing and frequency of merit programs are,” Biljan-Reichert said.
Ensuring your compensation strategy keeps up with market demands, business strategy changes, and what’s happening in the world around you is critical to attracting and retaining the talent your business needs to thrive.
So, when was the last time you’ve taken a long, hard look at your compensation strategy? If you can’t answer that question, the time to get started is now.
Watch the full video here.
