Compensation Strategies

A strategy is a definition that helps us find the best way to compete. This definition seeks to achieve that we act in a different way, providing a competitive advantage.

Having a strategy becomes critical in all competitive environments, games, sports, war, and obviously in business!

However, in everyday life the word strategy is often used in the wrong way. Some people who want to emphasize something - or make it sound more important - abuse the adjective "strategic" often.

But if we talk about something "really" strategic, its definition must have a key characteristic which is to provide a differentiation, because - if everyone does the same - the desired competitive advantage would not exist.

For example, any definition based on "best practices" is likely to contribute to efficiency and productivity, but it will not be a strategic definition.

With this point clarified we can address the issue of Compensation Strategies. We must keep in mind that companies, besides competing for customers, technology, markets and other resources; compete to attract, develop, motivate and build loyalty to the Talent needed for the business.

But what do we call Talent...?

Talent is another word with several meanings and not always well used, but for the purposes of this description, and in general, we define Talent as the ability of people to achieve business results. This capacity is also called "Human Capital".

Business results are achieved through the use of the knowledge, effort and time of people placed at the service of a given employer. People invest their Human Capital in a certain employer in exchange for a return on that invested capital. And that return is what we call... Compensation.

As the business environment is a highly competitive one, it is necessary to have an adequate strategy to manage compensations. The return of the invested Human Capital -Compensation- does not only include the base salary and bonuses or incentives of different types, it is not even limited to the monetary part and the benefits package. The compensation includes all that the person receives from the employer in exchange for his or her Talent. And this includes aspects such as career and training possibilities, leadership quality, comfort in the workplace, recognition not necessarily monetary, prestige of the company and pride in working for it by making the work meaningful and aiming at self-realization (yes, there, at the top of Maslow's pyramid).

The Compensation Strategy consists of balancing all these elements based on a series of competitive and differentiating definitions (essential characteristics of a strategy). Each element mentioned has "its own life" but also relates to the others. To give an obvious example, a company with poor quality leadership - without euphemisms it would be with unbearable leaders - will probably have to compensate with other elements for this lack of leadership, either with higher salaries, retention bonuses or other measures.

There are several techniques to identify, evaluate and improve the Compensation Strategy, understanding and balancing the elements of the Compensation and considering the selection of tools that support the strategy and provide useful competitive information, as well as various organizational considerations to achieve a value proposal for the desired Talent, which is competitive, and at a competitive cost.

From CompStrategy we help organizations in the application of fundamental consulting techniques to identify, evaluate and improve the Compensation Strategy, understanding and balancing the mentioned elements, considering the selection of tools that support the strategy, provide competitive information of the salary market, the internal value of the jobs, as well as different organizational considerations to achieve a value proposal for competitive talent at a competitive cost.

Usually, the main analysis elements in the Compensation Strategy are:

• Assessment of the situation and needs of the company/organization
• Comprehensive Compensation Review / Employee Value Proposition
• Conducting interviews
• Review and generation of Job Descriptions
• Conducting Job Evaluations
• Definition of the competitive market
• Obtaining and analyzing competitive data
• Review/recommend/define the competitive level desired
• Design of Salary Scales
• Benefit Package Design
• Quantification of the impact of the recommended adjustments
• Administration Guidelines
• Documentation of conclusions and recommendations
• Bonuses / Incentives Programs
• Salary surveys (data source selection, interpretation and processing)
• Guidelines and tools for Salary Increases
• Welcome and Retention Bonus