GPS for Compensation Management Mark Tocco Blair Johanson
GPS for Compensation Management Mark Tocco Blair Johanson
Compensation Trends and Best Practices “ GPS for Compensation Management” Latitude 36º 08 N FAYETTEVILLE Blair Johanson ARKANSAS Equator Longitude 94º 17’ W Equator
Mapping Methodology to Pinpoint the Optimal Coordinates of an Effective Compensation Management Program EXTERNAL Market Pay Data Blair Johanson INTERNAL Job Evaluation Process
Agenda • Compensation Management - Defined? • Total compensation management components • Creating a base pay structure – Two variables Longitude: Internal analysis & alignment Latitude: External pay competitiveness • Pay for performance/contributions • Compensation management
Too Many Terms • Compensation management • Pay for Performance • Performance management • Salary administration • Total Rewards • Human Capital Management • • Base pay Variable compensation Commissions Benefits Bonus: Lump-sum, Spot Gain, profit, risk sharing L. T. incentive plans Merit, COLA, ATBI
Compensation Needs Survey Results (Aon Hewitt 2011) • Emphasis on Pay for Performance • Control and consistency still high • Complying with new regulations
Organizing Principles Framework Clarity Consistency Methodology Process Alignment Architecture Structure Relationships
Total Rewards Value Chain Business Objectives Corporate Divisional/Group Core Compensation Variable Compensation Job Evaluation Market pay studies Commissions Merit Bonus Awards Governance - Equity Compliance Services Compensation analysis Market analysis Technology Supporting applications Integrated systems Performance Management Review/Align Decision-making Metrics Audit Maintain
Typical Methodology Flow Strategic Approach Methodology Typical Inputs Typical Outputs Compensation Management Alignment Strategy Job Evaluation Financials Constraints Core Base Pay Variable Commission Performance Management Review Market Studies Regulations Compensation Philosophy Salary administration model Decision-making criteria Evaluate
Information Architecture Total Rewards Business Objectives Variable Compensation Commission Job Evaluation Internal Influences Core Compensation Market Survey Data Benefits Regulations External Influences
Strategically Aligned Compensation Management Corporate Objectives Strategic Plans, Vision and Values Business Unit Strategies HR Strategies Social, Competitive and Regulatory Environment Strategic Comp. Decisions Compensation Systems Employee Performance Attitudes & Behaviors Competitive Advantage
ASSESSMENT Aligning Compensation Strategy with Pay Structure Design Strategic Business & Operating Inputs Employee Inputs & Preferences Industry & Labor Markets Practices & Trends DESIGN Compensation Philosophy and Objectives Based Upon Business, Operating, and HR Requirements Base Pay Delivery Organization Performance and Variable Pay, Nonmonetary & Other Monetary Rewards & Recognitions Fringe Benefits Compensation Administration
Process Orientation Job Descriptions Employee Data Evaluate Assess Manage Regulations Market Studies
Formalize Compensation Plan? Components Internal Analysis (X) External Analysis (Y) Create a Pay Structure Assessment: Strategic Business Goals and Employee Inputs • Compensation Philosophy & Objectives • • Benefits Recruitment & Retention Pay Equity - Fairness Compliance Human Capital/Resources Base Pay Foundation Take Care of Top Performers • Link Incentive Pay to Results – S. T. IP’s 95% • • •
Internal Analysis & Alignment COMPONENTS • Identify job titles and organization chart • Methods / procedures to collect job data • Select and implement job analysis methods • Review, Sore-thumb and final analysis
Internal Analysis & Alignment Job Based • Job Analysis • Job Descriptions • Job Evaluation – Job Ranking – Classification – Point Factors • Job Structure Person Based • Skills Analysis • Competencies • Matrix Competencies – Behaviors – Structure……. – Phases……. • Organization Structure
Core Compensation - Internal Job evaluation • 15 factor methodology • Process – Complete PAQs – Review and approve – Sore thumbing and fine tuning – Final approval Ø Ø Ø Ø Experience – General Experience – Management Education Initiative and Ingenuity Mental Demand Problem Solving Supervision Ø Ø Ø Ø Responsibility for Funds Accuracy Accountability External Communications Internal Communications Machine & Computer Ops. Physical Demands Working Conditions
Core Compensation - External Market Pay Studies • Benchmark position titles • Published and unpublished data used • 8 -12 comparisons per title • Results Market Pay Analysis • Internal pay line compared with external pay lines • Market average pay variance analysis impact and inclusion in the organizations pay policy decisions • Graphical and tabular results
Current Trends - External Market Pay Studies National Market Pay Aggregators • KENEXA – Comp Analyst • ERI – Salary Assessor • Pay. Scale – Market Rate Blair Johanson • Towers Watson – Industry Based Surveys • Hay. Group – Pay. Net • Culpepper Compensation Surveys
Current Trends - External Market Pay Studies Challenges: • • Market movement Quality and Quantity Two variables (X & Y) better than one Blair Johanson Hybrid positions on the rise post recession period • Total costs for annual surveys • More pay emphasis on variable pay
Compensation Management Compensation Analysis • Internal and external pay impact analysis • Proposed core base pay structure and current actual pay • Comparative analysis between old and new structures • Identification and evaluation of pay risks and outliers • Recommendations and supportive documentation • Implementation plan and associated costs
Compensation Management Results • Aligned and defensible core salary policy • Salary grade and ranges • Basis for decision making Governance • Equity • Compliance – ADA, OOECP, Do. L, etc.
Variable Compensation • Typically more complex • Formula-driven – Budget constraints – Performance – Compa-ratio • Visual tools for – Departments – Individuals – Reporting
Variable Compensation Results • Differentiated pay for performance • Uniform and consistent application • Control of costs Governance • Complying with new regulations
Commissions • Highly customized • Mix of performance factors • Formula-driven • Separate administration 100% 80% 60% 20% 80% 30% 40% 70% 60% 40% 20% 0% Base Salary Commissions
Commissions Results • Aligned and integrated to core salary policy • Improved accuracy • Analysis and updates Governance • Auditing for compliance • Management and support overrides
Services - Technology HRIS Platform Payroll Time and Labor Benefits Administration Core Compensation Variable Compensation Commission
Balanced Latitudes and Longitudes • Internal understanding of job values – greater appreciation for unique jobs and base pay equity in comparison to the internal average pay line • External understanding of job values – improved attraction and retention and motivation for flexibility, greater responsibility and capabilities • Behavioral Results: Ability, Motivation, Environment
TOTAL REWARDS DESIRED BY TOP PERFORMERS Security Status & n Recognitio Social Interac tion Work Variety ack Feedb Advanc ement Base Pay Structure Develo pm Opport ent unity ty & i r o h Aut trol Con Benefits Work Condit ions Work nce e d n e p Inde Autonomy Work Load
QUESTIONS mark. tocco@dbsquared. com blair. johanson@dbsquared. com
- Slides: 30