It's a good time to be a compensation professional because compensation is
growing in importance in companies' overall business strategy, according to
Kate Beatty of LKB Associates in Tulsa, Oklahoma, and Shari Dunn of CompAnalysis.
Beatty and Dunn discussed the trends facing compensation professionals in a
recent BLR audio conference.
They stressed that there is "no such thing as one size fits all"
when it comes to compensation, but they urged every organization to have a written
pay philosophy to indicate how pay is determined.
Internal Job Comparisons Versus External Market Pricing
When it comes to job evaluation, external market pricing is becoming more popular
while internal job comparisons are increasingly a secondary factor, according
to Dunn. She recommends a more balanced approach with a combination of internal
job comparisons and external market pricing.
Beatty and Dunn said compensation specialists should be wary of free Internet
sources of salary data because it is unknown from where the data comes and the
quality of them.
"You get what you pay for," said Dunn.
In the realm of pay increases, Dunn suggested a move away from the traditional
percentage-based raise. She said a percentage-based approach can be too slow
to address inequities in pay. Instead of focusing on the percentage increase,
employers should be looking at the resulting pay, Dunn said.
She said she has found success with an approach that looks at what the ideal
pay, which takes into account job value (range midpoint) and performance, would
be for an employee at that point in time. This approach requires employers to
have jobs classified correctly for determining job value and to have meaningful
ways to measure performance. In this approach, the employer determines the ideal
pay by using the performance measurement to calculate how much more than the
job value the employee should be paid -- and then adjusts the employee's pay
What if the employee is paid at or above the ideal pay? In this case, employers
could offer employees an incentive tied to performance or decide whether the
individual is a candidate for a promotion.
Beatty and Dunn said another trend in compensation is that employers are using
incentive plans with a broader range of employees. They said these plans show
employees how performance counts. They noted that when there are no ties between
pay raises and performance, employees can develop an entitlement mentality.
One task facing employers who link pay to performance comes in management of
the program. Many employers have found performance management is no easy task.
Beatty said a performance management program can only work with the commitment
of managers. She suggested a strong effort to train managers and also a communication
effort to "sell" the program to them.
Dunn discussed a program that looks at the "means" and "ends"
of how an employee performs. The employer uses the measurements of those two
areas to link pay to performance. The elements of the means include knowledge
and skills, traits, and behavior -- which are more subjective. These elements
can improve with training, coaching, and counseling. The elements of the ends
include outcomes and goal achievement, which are more objective.
Dunn also suggested that employers develop and use expectations of employment
as a management tool.