Welcome to ‘Compensation Insider’ – an initiative by HireSure.ai that helps you navigate the murky waters of total rewards. Our vision is to decode and optimise practices related to compensation philosophy, appraisal planning, compensation & benefits planning, ESO planning, pay parity, the nature of rewards, job structure and so much more.
You’re here because you want to minimise the learning curve of org and compensation planning and make sure that you lead people first. Our aim with this newsletter is to provide you with all the arsenal (real-time data and insights) to help you put your people in the driver’s seat, and supercharge your company growth.
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An evolution of how companies view their people function
There’s an adage that goes, ‘It’s better late than never’.
But in the age of GPT-4, Generative AI & democratization of the internet and opportunities, “Can you truly afford to be late today?”
The answer is a resounding NO.
And the pace at which the HR industry is evolving, being late can get you tangled up in the alarming trends of the HR industry.
The digitisation induced by the covid crisis is a prime example of how quickly you need to adapt to ensure your business survives.
A testament to that is the growth of the technology sector (more than 33%) compared to other industries.
Given this trend, the companies had one choice ‘Go Digital or Go Home’.
Along with this, predictable business was further disrupted by the storm of the ‘Great Resignation’ with 2022 seeing as many as 50 million workers quitting their jobs (federal JOLTS data).
This led to the concept of offering inflated salaries to new hires who were switching jobs due to a lack of viable solutions.
In all of this, you also have to factor in the restlessness of the GenZ workforce that has materialised in the form of ‘Quiet Quitting’.
Christina Banks, Director of the Interdisciplinary Center for Healthy Workplaces at the University of California at Berkeley has described the culture of quiet quitting as people losing their intrinsic motivation. Yikes. Sounds like a recipe straight out of an HR nightmare.
“Quiet quitting makes a lot of sense. People are losing that intrinsic motivation and not wanting to work as hard as they did before,” Banks commented.
And though we consider these struggles to be tributaries of the Covid crisis, these dormant disturbances have always been a part of HR history (only propelled to the surface by the mortal realisation of the pandemic, and employees becoming increasingly aware of archaic corporate exploitation).
A motive to resolve these roadblocks is now leading the HR industry towards:
🏃 A proactive, rather than a reactive management structure
🧑💻 Data-driven decision making
🤖 Streamlined operations (with the latest technology, i.e. AI and ML integrations)
These are the ultimate weapons you need in your arsenal to reform your people’s function.
To put it in other words: Stay ahead of the curve, and don’t fall prey to yet another Great Resignation. Or perhaps, something a lot worse.
But where do you strike first to create the greatest impact?
The answer is more obvious than you might think:
Compensation and Benefits Planning
With 66% of employees leaving their jobs in 2021 due to low pay, compensation and benefits is a primary area that needs to be optimised for running a smooth people function. Even, the lowest hanging fruit – that incidentally, might move the needle the most.
Moreover, effective compensation and benefits planning can help you:
🧑🤝🧑Employee Engagement: An competitive compensation and benefits plan is like a sweet reminder for your employees that their efforts are appreciated.
🙅Reduce the attrition rate: When your team members feel valued, supported, and rewarded, they’re more likely to stick around and grow with the company.
💯Enhance employee NPS: The power of compensation and benefits helps us create a team of brand ambassadors proud, and eager to share their workplace love with the world.
🤔 What is Compensation Philosophy? And when do you need to start implementing it for your startup?
A compensation philosophy is a mould that shapes your total rewards structure and pay practices within your organisation.
It is “your strategic blueprint for making compensation decisions,” commented Elliot Dinkin, President & CEO of Cowden Associates.
Removing the chains of chaos and instinct, a compensation philosophy establishes consistency in your compensation and benefits framework and eliminates the potential for all biases.
It not only levels the playing field for all workers but also aligns your people’s objectives with the business outcomes of your organisation.
So, if you don’t already have a compensation philosophy to organise your pay practices and structure for the most optimised results, then you must act NOW!
Here are some real-life examples of businesses that have nailed their compensation philosophies.
- Amazon prioritizes stock-based compensation that vests over many years to encourage employees to think and act like owners.
- At Citi, the compensation philosophy is designed to align with stakeholder interests so their executive pay program is based on a policy of goal setting and performance assessment.
- Eastman Kodak’s philosophy revolves around being market competitive and inducing a performance-based culture into their compensation objectives.
- Ford has a strong equal opportunity philosophy when it comes to compensating their employees and their compensation decisions are based on creating competitive pay for their workforce.
💡 Hot Tip
Your compensation philosophy should NOT be etched in stone.
In the world of GPT-4 where everything is changing in the blink of an eye, being married to a philosophy is not a great long-term strategy. Ensure that your philosophy is rooted in the same core values, but that its strategic implementation may evolve to adapt to the demands of the changing tides.
❓ What happens if you SKIP strategizing on your comp philosophy?
Three Mercer Consultants, Richard Guzzo, Haig Nalbantian and Luis Parra have discussed the example of Digitt to stress the need for evolution. At Digitt, they strongly focused on hiring freshers and filling positions internally through promotions (solid internal labour market).
Also, their reward structure was primarily group-based. And they rewarded employees based on their tenure and position. So, the difference in pay was more evident within different functions rather than in individual performance.
So, these factors erected some barriers in their paths:
Firstly, the new joiners were at a disadvantage because of a reward structure that was significantly inclined towards tenure and position.
Secondly, Digitt was lacking in market sensitivity when it came to detecting fluctuations in the industry.
⤴️ Stay Ahead of The Curve
Crafting a robust compensation philosophy is like a strategic game of chess in the business world and staying ahead of the curve needs a future-focused compensation plan that has all the comprehensive elements.
At HireSure.ai, you get real-time compensation data that can help you make informed decisions about compensation planning and appraisal planning.
Our platform offers relevant information within your peer basket so that you can compare your compensation practices with those of similar organisations.
We also provide insights into market standards based on key parameters to help you stay up-to-date with industry trends.
You can also use this data to make informed decisions about performance appraisals and promotions, ensuring that your employees are recognized and rewarded appropriately for their contributions.
Try HireSure’s CompUp platform today and see how we can help you optimise your compensation practices.
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