R.O.C. (Return On Compensation)

Compensation isn’t just something you offer to your employees, it’s also an investment that expects returns. Don’t believe me? Believe Jason Adwin and Jim Kochanski – Adwin is a vice president in the New York office of Sibson Consulting and Kochanski is a senior vice president in the Raleigh, N.C., office of Sibson Consulting. The pair recently published an article on the Talent Management website and offer some sound advice about managing your organization’s compensation systems.

Compensation is a mode of motivation for your employees. When this system is mismanaged, it can have the opposite effect. Some common mismanagement practices are lack of pay differentiation, pay system secrecy, internal inconsistency or inequity, less than competitive pay levels and a sense of entitlement to pay increases or bonuses.

Adwin and Kochanski came up with a list of six approaches that have a successful track record in motivating employees and increasing the organization’s return on employee compensation. To list a few:

Organizational goal alignment: Goal setting across the organization should be aligned at corporate, divisional, functional and individual levels.

Performance management calibration: Formal performance management calibration sessions, within and between functions, ensure consistent application of performance standards and ratings.

Pay system transparency: According to Sibson Consulting’s 2009 “Rewards of Work Study,” employees who are satisfied with their understanding of the compensation process and believe decisions are fair are substantially more satisfied with their compensation outcomes.

Other approaches include a compensation scorecard, manager empowerment, and high-performer pools. To learn more about how to implement some of these approaches into your compensation strategies, know that it is a slow and steady process. Slow change is often a good change. To read more about how to implement these approaches into your organization, click here to read the full article.

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