How to Align Your Pay Strategy with Business Goals and Objectives

How your pay strategy aligns with your goals and objectives is something that can make or break the success of your organization. For a business to run smoothly, it requires funds to pay for labor and expenses to return profits which can then be used to expand the company and compete with market trends.

Integrating performance management and incentives with business goals is a powerful tool. You’ll need to build a cohesive and calculated pay strategy that can align with the organization’s business goals and allow for holistic growth. If you do so successfully, your employees will have a clear purpose and be motivated to grow as an organization. So how can you achieve this?

What is Pay Strategy & Why is it Important?

You've heard the old saying, you get what you pay for. That's definitely true when it comes to attracting and retaining top talent for your organization. Pay strategy is the goals and framework used to calculate your employees’ salaries. It is the most important step you can take to ensure that you're getting the best team for the success of your organization.

Your pay strategy should be based on research and data. Combining market information, salary surveys, and workforce analytics will help you design a plan that can serve both your business and your team. You’ll have the funds to pay skilled workers who can best contribute to the growth of your organization.

Now let’s look at how you can align your pay strategy with your business goals.

Step 1. Develop Your Pay Strategy

Planning your compensation is essential in attracting and retaining top talent. The happier your employees are, the more productive they’ll be. Satisfied employees are more inclined to produce quality work for the greater good of the organization. Your pay strategy must consider several factors.

• Market value – Research what the market and competition in your industry are paying for a position. Then, decide whether you want to be paying the average, less, or more. This will depend on your requirements and how in demand a certain skill is.

• Internal equity – It’s your responsibility to ensure you’re paying your workers equally for equal work. This includes positions with similar levels of responsibilities and value to the success of the company. It’s important to establish pay ranges so you can justify why one employee receives different pay than another.

• Budget – Liaise with your HR and finance team so that everyone understands the organization’s payroll budget. Ensure to account for statutory obligations such as insurance, pension plans, and holidays.

• Benefits – Benefits are a crucial aspect of a compensation package. Determine what types of benefits employees will be eligible for depending on their pay grade and calculate that into your budgeting.

• Long-term incentives – Decide whether you want to offer long-term incentives that will tie employees into positions. Based on their tenure and performance, these incentives can be in the form of bonuses or shares.

Step 2. Assess Your Business

You want to look back at your business performance and see success and growth. Setting actionable goals with clear timeframes will help you achieve this. You’ll need to set priorities, discuss the goals with the team, monitor progress, and facilitate a productive environment to achieve them. Your goals and objectives should align with your company’s mission.

Start by assessing how your business is performing. A SWOT analysis is a common tool used to identify a company’s strengths, weaknesses, opportunities, and threats. Do this before you set any future goals to maximize efficiency and overcome existing challenges. It’ll help you identify what your organization does well, and what needs improving.

Step 3. Set SMART Business Goals & Objectives

Identify where your company has opportunities for growth and establish clear goals and objectives. You’ll want to set SMART goals – Specific, Measurable, Attainable, Relevant, and Time-Based.

Here’s an example:

• Specific – Increase sales of x product by 10%
• Measurable – Track the sales, when and how rapidly they grew, and what marketing strategies boosted their movement
• Achievable – Start by growing the client list by using existing clients for referrals. Create a marketing campaign for social media platforms and collaborate with related brands to grow exposure
• Relevant – Selling more of this product will raise brand awareness and increase overall company profit
• Time-Based – We should see a 10% increase of x product year on year (2022-2023)

This is a conversation to have with your team. Your employees are working with your product and clients every day. They know what’s running smoothly and what’s holding your business back. Involving them in the decision-making process will make them feel valued and encourage personal touches to projects.

Step 4. Track Your Progress

Track your progress to ensure you’re meeting timelines and following your objectives. It helps to break major goals down into smaller ones you can tick off daily or weekly. This also requires regular performance reviews to monitor how your team is getting on so leaders can provide guidance when necessary.

It’s worth using spreadsheets or tools such as Asana or Trello where your whole team can track their individual tasks. You can also include spreadsheets for key performance indicators (KPIs). With each employee recording their progress, everyone is held accountable for the completion and success of each goal. Use these KPIs to identify areas of improvement and celebrate every milestone, big or small.

Goal tracking will offer insight into how your pay strategy is motivating your employees. It allows you to identify strong team members that are going above and beyond, and who require more support or are simply dragging their feet. Regular check-ins will also mean that when it comes to formal appraisals, everyone is on the same page regarding why they are or aren’t progressing in their pay grades.

Final Tips

You can’t develop a pay strategy and align it with your business goals once and think that the job is done. The workforce and market trends are constantly shifting. Employee expectations change as the economy drives inflation. New technology creates the demand for certain skills and therefore impacts on salary averages. Your business takes unexpected financial hits or sees new market competition that shifts your entire focus.

Revising your pay strategy and business goals is essential for your organization to remain competitive and attractive to top talent. As you track the progress of your team and whether you’re achieving the goals you’ve set, you’ll likely find yourself making adjustments. Schedule these reviews regularly so that you don’t miss out on opportunities or lead your team astray. Remember to provide praise and financial rewards when they’re deserved.

If done right, aligning your pay strategy with your business goals will support your team in making meaningful contributions to your organization to achieve business goals efficiently.