Successful business owners know that having an effective compensation program involves far more than merely using “good pay” to attract good talent. It’s a strategy that impacts every employee, current and new, and forms the foundation for attracting and retaining great talent. As we continue to adjust to long-term social distancing and an increase in remote work across the globe, many organizations are taking a hard look at their current or non-existent compensation programs to better understand the deficiencies and opportunities.
Whether struggling to stay afloat or focusing on growth, all businesses should stay vigilant in their compensation strategy, ensuring that it stays relevant as the organization experiences economic highs and lows. Taking a structured approach to managing your compensation program, especially in light of the impact of the COVID-19 pandemic, will help produce better results.
How? Let’s start with a few basics.
Whether you have a formal or informal compensation program, job descriptions should always be a starting point. They are considered the foundation of compensation. In order to determine how much employees should be paid, you must have a clear understanding of the tasks they are performing.
The disruption caused by COVID-19 has had a negative business impact in many ways, but one positive note has surfaced: if you experienced layoffs in the spring, you probably had to shift duties across the organization; conversely, if you expanded your operations, you may have hired new positions with evolving tasks. Now is the perfect time to re-evaluate your job descriptions.
A well-crafted job description generally includes:
While this may appear a simple task at first glance, crafting an effective job description takes time and awareness of the bigger picture. When developing job descriptions, strive to have a good understanding of the job’s purpose and contributions to the business unit and its impact to the overall business strategy, and to understand the characteristics of the competencies needed for an employee to be successful in the role. Well-written job descriptions provide employees with clarity on what you expect of them and the level of performance they well be held accountable to.
Using free online sample descriptions and simply changing the company name is not usually a successful approach. Keep in mind, what works for another company may not work for you.
Once you have clear and concise job descriptions for all your positions, the next step is to define your compensation philosophy.
Your compensation philosophy is your way of expressing how your organization will compensate and reward its employees. The most common pay policies and philosophies include the following:
Many have argued whether compensation is a science or an art—we believe it’s both! Successful business owners understand this mix and include a thorough evaluation of the company’s financial situation and business strategy to determine how a compensation philosophy aligns with the growth plan for the organization. Making compensation decisions without taking the time to perform this evaluation could have a negative impact on the financial position of your business.
During pandemics and economic downturns, it is critical that companies set aside time to evaluate their compensation philosophy and ensure alignment with their current financial outlook.
Once your compensation philosophy is defined, you will want to evaluate your external competitiveness, which we’ll cover in our next article: Maximizing Your Total Rewards Strategy: Part 2.