Effective Compensation Management: Not Just a Numbers Game Anymore

Numbers

Quick! When I say the word “compensation” to you, what is the first thing that pops into your head? For me, and for a lot of others, it’s a very important number or series of numbers that help to dictate many major decisions in life. Indeed, this number is personal, emotional and controversial to us all. I admit that, at times, I have had a strong emotional reaction to the compensation discussion. I have never met anybody yet who hasn’t been in the same boat at one time or another.

As compensation management executives, this is the challenge we must deal with on a day-to-day basis. There is always going to be “that guy” who is going to challenge decision-making and will want specific, minute information on how a compensation adjustment was calculated. There is always going to be “that candidate” who negotiates salary with no end in sight.

In order for us to combat these challenges and sleep well at night, we must accept that compensation management is not just a numbers game, but a perception game as well. We must manage this perception by providing our employees with evidence that they are getting paid fairly and equally and respectfully. It is not enough to say we are doing it, we must prove it by good communication skills. This means showing our employees the specific math used to calculate their compensation. This also means encouraging our line of business managers to become more interactive with compensation systems, so that they feel they are part of the process. The result is a feeling of comfort with the compensation process that makes the numbers digestible, real, and calms nerves.  Engaging employees during the compensation management process is critical.

Last week, Tom Sykes, Peoplefluent product manager for Peoplefluent’s compensation management suite and skilled compensation orator, presented a compensation webinar (the replay of which is available here) in which he touched on this very subject. During the presentation, he quoted an interesting statistic from Aon Hewitt’s 2012 Total Reward Survey. According to that research body, 69% of top performers consider “employee engagement” as critical to measuring the success of a total rewards program. Employee engagement, he argued, can be achieved by embracing the following steps:

  • Adopt pay for performance. Coordinate with Performance management systems to encourage achievement-based compensation.
  • Ensure compensation compliance. Align compensation practices with workforce compliance and diversity systems to ensure compensation management programs are in sync with necessary local, state and federal law.
  • Focus on actionable data for all levels of the organization. Deliver specific, intelligent compensation-related variable information for all level of user for actionable decision-making.
  • Keep it simple. Provide a simple, easy to use interface that is globally accessible on an anytime, anywhere basis.

Compensation is about as personal a matter as can possibly be in our professional lives. There is nothing wrong with that, given how much influence it carries into our personal lives. Be that as it may, though, the more direct we are with our employees, the easier it is to keep people happy and energized.

What types of strategies do you go through at your workplace to manage the compensation perception challenge?

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