Compensation Connection

Published by Alice Snell, on 11/10/2008

Pay—and pay for performance—trigger perennially charged conversations. Often, the discussions and perceptions are ill informed or inaccurate.

Gallup reports that half of Americans believe they are underpaid. Many people don’t know the upper and lower limits of pay for their job, as Weddle’s reported:

The Hay Group surveyed compensation executives and managers to get their sense of how many employees actually know the minimum and maximum figures in the salary range for their position. Among the respondents:
• 24% said that few employees knew the salary range minimum and maximum for their job;
• 25% said some employees knew these figures;
• 18% said that that half of all employees were aware of such figures;
• 18% said that most employees had this information; and
• 14% actually said that all employees knew the figures.

To put it another way, almost half (49%) of the compensation experts in this poll felt that hardly anyone in their organization knew much about the upper and lower limits of pay for their job and barely one-in-seven thought that everyone was fully informed. With rising costs and inflation putting a pinch on almost everyone’s household budget, such an information vacuum poses a real risk to retention.

Pay for performance (…or poor performance.) has also become a popular topic lately as people look at the disasters of Wall Street. Compensation is one component of overall talent management. At best, a unified talent management platform supports three aspects working in harmony: recruiting, performance, and compensation:

• Recruiting to source, assess, and acquire talent.
• Performance management for goals, careers, and succession.
• Compensation with closed-loop pay for performance.

Fully integrated global compensation management makes it easier to align and reward talent. It provides better localization of total compensation with centralized control, plus a closed loop process between organizational objectives and individual contributions.

Compliant, competitive, and culturally appropriate global compensation models are a key structural element of successful talent – and business – management. Because this is what happens when compensation drives business strategy as opposed to the other way around:

“This financial crisis is a direct result of the compensation practices at these Wall Street firms,” said Paul Hodgson, a senior analyst at the Corporate Library, a governance research group.