Winning Compensation Strategies for Organizational Sustainability

Dorothy R. BergerPartner, Lance A. Berger & Associates, Ltd. Based on Chapter 4 sixth edition of the Compensation Handbook Copyright © 2015 by McGraw-Hill Education

Sustainability Definition

Ongoing success resulting from timely and effective adaptations to changes in the competitive environment

Adaptive Compensation Strategy Elements

Vigilantly monitor pay markets

Rationalize competitive pay levels

Link mix of pay to stage of growth and culture risk tolerance

Allocate pay based on employee contribution, recruitment, retention and engagement

Vigilantly Monitor Pay Markets

Identify/monitor current and future sources of recruitment

Identify/monitor destination organizations of employees who leave

Acquire/develop high quality surveys that match pay markets (see above)

Implement multiple salary structures based on distinctive pay markets

Rationalize Competitive Pay Levels

Assess level of competitiveness for people in each pay market based on recruitment needs, upward mobility and turnover potential

Assign competitive level of total compensation based on talent competition (see above) for each pay market salary structure

Link Mix of Pay to Growth Rate

Determine rate of growth of each business unit

Apply higher leverage (more variable pay) to faster growing units within selected pay markets at predetermined total compensation competitive level

Increase leverage in compensation mix at a pace tolerable by unit culture (more risk oriented cultures will accept leverage more easily)

Allocate pay based on employee contribution, recruitment, retention

and engagement Install salary administration system that

regularly adjusts all base salaries based on pay market change

Introduce non-fixed annual achievement awards to replace merit pay (for all employees) for 20% of employees

Introduce special awards for exceptional contribution

Ensure that pay packages involved in the selection, advancement and retention of key employees accelerate faster, and with higher competitive levels, than most employees

Adaptive Compensation

Strategy

Vigilantly monitor pay markets

Rationalize competitive pay levels

Link mix of pay to stage of growth and culture risk tolerance

Allocate pay based on contribution, recruitment, retention and engagement