Determining the relationship of an organization’s pay structures and pay rates to those prevailing in the relevant labor markets is a critical part of its compensation management system. Getting it wrong can result in unnecessarily high compensation costs or non-competitive rates that can result in dissatisfaction and turnover. But getting it right is challenging. Compensation … Continue reading Surveys Are the “Rosetta Stones” of Market Pricing in Compensation Management
Economics: The conversion of what have been fixed costs to variable costs is an advantage of some significance. Variable pay awards do not compound the way base pay adjustments do, thereby lowering the escalation of rates over time. Assuming variable pay is tied to performance, it both allocates awards more optimally and is contingent on … Continue reading 5 Business Reasons To Consider Including Variable Pay In The Total Direct Compensation Strategy
The first step in creating an effective sales compensation system is to develop a strategy that is derived from the objectives of the organization and its business strategy and that is a good fit to the context within which the organization operates. The importance of sales will depend on that context. A monopoly with no … Continue reading Developing A Sales Compensation Strategy
Once the market of choice is defined and the prevailing levels determined an organization must decide how it pays relative to that market. Most organizations will define multiple markets, each selected for a specific skill set, occupation or category of employee. And the competitive posture may be different for different types of employees. It is … Continue reading Adopting An Appropriate Competitive Posture
There are programs that do not stand up under scrutiny and that will breed suspicion that the playing field has been tilted in favor of executives. These “third rail” programs should be avoided. They can be recognized by their characteristics: High Upside Potential; No Downside Risk: Adverse reaction is inevitable when certain types of programs … Continue reading Executive Compensation: Programs That Should Be Avoided
There are situations when an organization wishes to spin off a portion of itself into a stand-alone entity. The new entity can be completely separate or can remain a part of the parent but allowed to operate independently. When the newly created entity was a part of a larger organization there will likely be pressure … Continue reading Reward Strategies for M&As + Internal Start-Ups
Variable compensation can be suitable for all types of organizations. But the type of variable compensation plans that best suit the context varies across organizations and even across employee types within an organization. Whether or not an organization adopts variable compensation should depend on the type of environment it operates within, its culture, its strategy … Continue reading Is Variable Compensation Suitable for Your Organization?