How To Keep Compensation Management Aligned With Business Needs

Business goals require regular planning and adjusting. Within this planning should be scheduled compensation reviews to ensure they remain effective and aligned with the needs of your business. Compensation management and alignment is an unmissable step in business planning. How you’re paying your employees will determine whether you’re remaining competitive in the market and attracting and retaining top talent.

In this article, we’re going to explore how to schedule regular compensation reviews, company budgets, and the checklist of focal points in your review.

Identifying Your Business Needs

You’ll need to start by identifying your business needs. These are what your organization requires to reach its goals. To identify them, you’ll need to conduct regular analysis of what your organization is doing successfully and what seems to be helping achieve that, as well as any ongoing challenges.

Ask your management team for feedback and suggestions for improvements. Open-ended questions will allow you to pinpoint what’s causing any issues within departments. You should also turn to data for insight. Customer surveys, social media insights, and sales statistics are all relevant sources of information.

Identify areas where your business could improve. Is there anything you could remove or alter to be more efficient? Maybe certain departments require more assistance. You could be spending money on resources that aren’t producing results. Compiling this research will shed light on what your business needs. Once you know, you can turn your attention to your compensation management.

Compensation Reviews and Compensation Management

Your compensation management program should reflect the needs, goals, strengths, and culture of your company. A poor compensation management strategy can create profitability issues or a skills and talent shortage. Rather than waiting for disaster to strike, schedule regular compensation reviews to ensure your practices are effective and aligned with what your business needs. You can combine these with performance reviews.

Rather than a standard annual review, reflect on your compensation management programs every six months. “That’s overkill!” you say? Well, consider this – you can frequently monitor employees’ performance and how your company is progressing toward its goals, update your job descriptions and responsibilities on the go, address employee dissatisfactions before they lead to turnovers, and assure you’re in line with budgets. At the annual review, it’s more likely that employees are performing as expected, company goals are being met, and satisfaction rates are high.

Determine who will lead these compensation alignment reviews. It’s best to have team members from management, HR, and the finance department. Identify the objectives and brief everyone so they’re on the same page. Combining compensation management and performance reviews will also help to make employees feel more comfortable in having honest conversations and build overall trust.

Following Your Budget

You want to keep your employees happy and have the best of the best working for your organization. Realistically, however, you can’t overspend. If you do, you may restrict your financial flexibility in other areas of business. Budgets need to be in place to guide your compensation choices.

The best way to assign this budget is to understand your goal. Do you want to offer salaries that compete with inflation and the cost of living? Maybe you’re really concerned with attracting top talent by offering more than your competition. Perhaps your strategy is to reward hardworking employees and incentivize others to do the same.

Whatever your goal, budgets depend on several things. Consider the size of your company, internal policies, market rates, company growth rates, and financial projections. Your budget can set boundaries for your compensation alignment.

Compensation Alignment Checklist

When you’re conducting your compensation review, there are a few things to check off to maximize the effectiveness.

• Performance Reviews

Are your employees performing as expected? Use this time to check in with your team and ensure they’re on track to achieve their targets. Some may need more guidance or be getting off-track. This tactic helps to increase productivity and improve future performance. It’s also a great way to evaluate how new hires are adjusting to their roles.

• Job Descriptions Management

During compensation reviews, you may also find that some employees are performing different responsibilities than their original job description. A key element to compensation alignment is ensuring you’re paying workers for their actual work. When conducting the reviews, access existing job descriptions and adjust them when necessary with your job description management software.

• Benefits & Bonuses

Compensation reviews are also a great time to judge how effective the benefits in employee packages are. What benefits are most appreciated? Do any go unused? It’s easiest to go straight to the source for these answers – your workers. You should also use this to remind your employees (and yourself) of upcoming bonuses and whether they’re on track to receive them.

• Market Rates

As you review your compensation program, adjust your market benchmarking. Are you offering competitive compensation? Has there been a shift in trends or is there a certain role in high demand? Likewise, ensure that no employees are being underpaid. Always assume your employees are aware of what their skills and experience are worth on the market.

• Pay Equity

When you make compensation adjustments, you should continuously be analyzing for pay equity. Using software can really help you manage this as you’ll see any discrepancies in pay based on certain variables across the board. It’ll also help you identify diversity gaps in your team.

• Feedback

The final thing to have on your compensation alignment checklist is that you’re asking for feedback. There’s no better way to retain staff and achieve a positive company culture than to facilitate open communication. Show your employees you care about what they have to say. Ask them how they feel about their compensation packages and whether they have suggestions for improvements.

Review, Adjust, Repeat

Regularly reviewing and adjusting your compensation program helps you achieve your business goals. Scheduling six-month reviews will allow you to build trust among your team. You’ll be more likely to pick up on any issues before they lead to dissatisfaction or underperformance. A more engaged team, reassured by their employers’ attention to delivering on compensation, will have higher productivity levels and benefit your business best.