COMPENSATION STRATEGIES

Organizations need a well-designed compensation program to align the human resources with the business strategies.

The typical compensation strategies are:

Provide "total pay" opportunities to attract the best qualified employees. Organizations must have a compensation program that allows them to pay for superior talent and reward superior performance. "Total Pay" encompasses salaries, bonuses, incentive programs, and non-cash awards.

"Drive" the business goals of the organization by paying for performance. Organizations that know their business goals can design a compensation plan that focuses on achieving those goals.

Provide a clear link between goals and individual performance criteria. If a company's goal is to improve customer service, the compensation system must establish specific criteria to measure performance in that area.

Communicate performance expectations in terms of business goals. Most managers fail to tell their employees what they expect and why. If management communicates performance expectations at all, they often do so after the fact. Before any significant organizational changes are made, management should prepare and implement a communication program for all affected employees.

Ensure fairness. One way to guarantee fairness is to eliminate secrecy. Explain how the pay system works, and open up channels for questions and complaints.

Establish policies and stick to them. Without clearly stated compensation policies, whim can interfere with good judgment. Employees want to be treated fairly, and written policies guarantee that the company intends to do just that.