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Execution-MiH ENCYCLOPEDIA →
Functional Management →
SECTION - Human Resources Management →
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CHAPTER -
| Compensation |
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Compensation design, its fulfillment and servicing is core to driving employees' performance & capabilities. An execution-focused compensation structure will reward both on goals & leadership. It will provide a reasonable differentiation across levels of performance. It will work on near-term to long-term retention and consistency of performance.
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Topics
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Measured vis-a-vis mark to market based on job-wise benchmarking
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An organization must decide as a matter of policy the kind of pay-master it will be. Depending upon it’s own individual circumstances, it may decide to pay above-market, below-market or at par. In any case, it is important that the organization is aware of this aspect and has a conscious policy towards it.
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Performance Bonus- Variable Pay linked to Goals
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Performance bonus is a lump sum amount which is paid for achieving a specified annual rating in the Performance Management System. It is paid for all such ratings falling in specified ranges and is not as variable as incentives are.
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Increment-Growth Linked to Competencies/Potential
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It is the leadership competencies which determine the vertical growth and increments. These are differentiated from increase in increase in incentive pay-outs which are primarily given for meeting or exceeding the achievement in short term goals.
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High Differentiation of variable pay vis-a-vis performance
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It is important to have a broad range in the variable pay component at all levels. It provides the earning potential as an immediate opportunity which drives the employee to meet or exceed his/her short term goals. It also creates a criteria for distinction based on performance.
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High min-max range to allow a person grow within a level
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Having a broad range of compensation at all levels provides the vital “running track†for the employee. It provides opportunity of growth in the near future for the employee and can be the driver for high performance in the short term.
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Accelerated Variable Pay
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Accelerated variable pay is an essential requirement in sustaining the culture of progressive performance. In fact, variable pay should dominate the cost-to-company at senior levels.
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Flexibility to Manager to play within range given the budget & guidelines
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Providing the hiring manager a sufficient playing field to decide the compensation of the new hire can be an effective hiring tactic. Empowering the recruiter in this manner can drive him/her to go the extra mile to get the right candidate.
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Short Term and Long Term Incentives - A Balance
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Long term and short term incentives need to be carefully balanced as the proportion between the two will have significant impact on the employee engagement. It is important that incentive payouts are consistent and based on accurate calculations.
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Level progression
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As an employee moves up the organizational hierarchy the level of intensity and the expected maturity in the demonstrated behavior of the leadership competency also rises. In other words, there are various grades in the competencies themselves.
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Job family wise percentile marking
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The organizational policy on compensation can be structured down to the level of a job-family as well. An organization may decide whether it wants to pay above market, below market or at par for a particular job family.
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All Chapters in "Human Resources Management." Section
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