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Consulting Services • Published 9/16/2020 Maximizing Your Total Rewards Strategy: Part 2


In our earlier article, we covered two facets of a total rewards strategy: job descriptions and compensation philosophy. In the following sections, we’ll explore the four remaining steps to building a structured compensation program that helps your organization recruit and retain employees, even in an uncertain and rapidly-changing business environment.

External Competitiveness

Believe it or not, many companies skip this step or tackle it in the worst possible way. When evaluating external competitiveness, data should be compiled on comparable job duties and responsibilities, not job titles. What is “comparable” when it comes to job responsibilities? Look for jobs that are nearly the same as yours—also known as benchmark jobs. Consider companies that are similar to yours in various ways, such as geographic location, employee count, industry, revenue levels, etc. It’s unlikely that you will find data on all of your organization’s positions—this rarely happens due to the unique attributes a similarly-titled job may have at different organizations. Duties, responsibilities and performance expectations are seldom the same across the board for a single job title at different companies. Collecting and evaluating job description data specific to your organization is key to identifying relevant job survey data and determining external competitiveness.

Finding the Data

To identify the resource most closely aligned to your industry, and especially for those hard-to-define descriptions, compiling information from multiple sources or creating hybrid descriptions may be the best approach.

Once you have compiled your external data analysis, there are still a few steps remaining before you can arrive at your compensation destination. It’s time to take a deeper dive internally.

Internal Inequity

Even the most carefully-constructed pay policies can result in unintended pay discrimination. In today’s litigious environment, organizations are taking a harder look at their pay practices. Pay and pay ranges may appear fine from a bird’s-eye view, but at a detailed level that may be far from true.

When evaluating internal equity, successful business owners evaluate all factors such as age, citizenship, ethnicity, and other Equal Employment Opportunity (EEO) protected classes, including race and gender. These factors, within positions, departments, divisions, locations, company as a whole, etc. should be part of the analysis.

Anomalies are not an uncommon finding—most organizations have a few. It’s possible someone was hired with a higher level of education than was needed to perform the job, or with additional experience that proved to be an asset to the organization. Take the time to understand the root cause of the discrepancies and to document why the decisions made are valid. Explanations should be dependable, defendable, and well-documented in the event they are challenged.

Reviewing internal equity helps identify potential discriminatory issues, but just as importantly, it helps ensure employees are paid equitably based on their merit and performance.

This process can take a great deal of time to complete. However, it can improve your organization’s ability to attract and retain top talent.

Now that you have the data, the next step is building the compensation structure.

Compensation Structures

Compensation structures are not a one-size fits all solution. They are not intended to limit your organization, but rather, to create boundaries that help prevent avoidable inequities within the organization and questionable or unexplainable pay decisions.

Just like cars, they come in a variety of makes and models. The most common types of compensation structures include:

  • Market-based structures;
  • Grades and ranges;
  • Step structures;
  • Broadbands; and
  • Job ranges.

There are pros and cons to each of these structures, and ultimately, it comes down to your philosophy and what you are trying to achieve. A clear compensation program aligned with your business strategy can provide an edge in attracting and retaining talent. P&N has experience building a variety of structures for our clients, which we will discuss in more detail during our upcoming total rewards webinar.

Once you have constructed what you believe is the best structure for your organization, the next step is performing the ongoing maintenance and management required to stay current.

Ongoing Maintenance & Management

Now that you have:

  • A good understanding of your jobs;
  • Defined your compensation philosophy;
  • Gathered data to determine external competitiveness;
  • Identified internal equity within your organization; and
  • Constructed a compensation structure to your liking,

it’s time to develop metrics and key performance indicators (KPIs) to monitor the performance of your compensation program. There are a variety of pertinent metrics such as compa-ratio, market ratio, average compensation per employee, and many others. The key is to understand what data is important to your organization so that you can effectively track and develop metrics and steer your pay practices in the right direction. 

Back to Maximizing Your Total Rewards Strategy: Part 1

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