Selling Compensation Management Up and Across the Organization

Selling Compensation Management Up and Across the Organization Blair Johanson

Recommending a Formalized Compensation Management System Mark Tocco Blair Johanson

compensation philosophy and policies Formalized Compensation Management System v When to recommend v How to sell up and across the organization v How much formalization to offer v Case study examples regression pay lines, pay placement and equity classification and compensation studies grades, ranges, salary structures, career latters

Potential Problems/Drivers Lack of formal process – Class. /Comp. Transition of current process Automation of process with software Dated process – Comp. issues – compression Greater emphasis on business goals and compensation alignment – total rewards • Lacking or non-relevant market pay data • Compliance/DOL audit – pay equity analysis • • •

Triggers for Need • Lack of consistency – Div. & Dept. • Increasing ? ’s. Compensation complaints Fairness, equity, placement, squeaky wheel • Increasing hiring declines and counter-offers • Increasing questions about comp. effectiveness • Higher terminations due to competing pay • Human capital at risk – Stagnant comp. program and non-alignment with business goals.

Internal Environmental Assessment • • Benchmark your entire organization Classification and compensation history Compensation philosophy Internal readiness – prove or disprove triggers of need What is working or not working to drive results Automated HR software for comp. management CEO and executive team / leadership support Identified and stated objectives formal process

Gaining Support – Up and Across the Organization • CEO – COO – CFO: BEST • Top HR with VP’s, Directors and/or Managers • Objectives, examples results /outcomes, analysis and feedback • Do homework and build case for change • Expected costs and ROI’s • Internal or external expertise? CEO E. A. CFO VP -HR COO

Case Study – Energy Company Primary Objective: Automate & Convert Dated Classification (Point/Factor) and Comp. System v Driver (s) v Selling process v Major project milestones v Costs v Timing v Outcomes

Case Study – Transportation Co. Primary Objective: Develop and Implement a Formalized Classification & Compensation Program v Driver (s) v Selling process v Major project milestones v Costs v Timing v Outcomes

Case Study – Municipality Primary Objective: Internal Pay Equity Compliance and External Pay Competiveness v. Driver (s) v Selling process v Major Milestones v Costs v Timing v Outcomes

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

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% • • •

How Much Compensation Formalization to Offer? • • Base pay structure – grades/ranges Market competitiveness studies Internal pay regression line analysis Pay placement within range quartiles Annual, quarterly or real-time database Software and system resources Short and long term compensation plans

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

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

Technology Resistance to Change HRIS Platform Payroll Time and Labor Benefits Administration t Core Compensation Variable Compensation rne e Int n d o lou oluti C S Commission l rol y Pa ary d an ent RIS plim are H m tw Co Sof

QUESTIONS blair. johanson@dbsquared. com