Is your compensation philosophy robust enough to drive a strategic compensation plan?

Every strong compensation plan is built on a thorough compensation philosophy. The compensation philosophy clearly communicates how pay strategies support the organization’s business goals and live out its values. It’s the why that drives the plan’s what.

A shallow or hasty compensation philosophy can lead to misaligned pay decisions, missed recruiting opportunities and less-motivated employees. Does your compensation philosophy have what it takes to go the total rewards distance? Let’s find out!

1. Do you have a compensation philosophy?
2. Does your compensation philosophy address market position? What key roles need to be prioritized to lead the market? Which can lag? What can the organization afford?
3. Does your compensation philosophy cover pay mix? Which positions will use variable components to incentivize certain behaviors and how?
4. Does your compensation philosophy outline whether job values will be evaluated according to market value, internal equity, or a mix of both?
5. Does your compensation philosophy take a stance on collective versus individual reward focus? Do different positions receive different rewards and on what schedule?
6. Does your compensation philosophy define your organization’s pay structure? Is it traditional/formal or broad? How are ranges constructed?
7. Does your compensation philosophy include how benefits, well-being programs, recognition and development opportunities are used to reward, retain, and recruit employees?
8. Do your employees understand your compensation philosophy?
9. Has your compensation philosophy informed a compensation plan that keeps you competitive in the current market?