ECI consultants help organizations clarify their compensation strategy. Here are a few thoughts on strategies and philosophies:

Drucker, Deming, Juran, Lawler and others have challenged the thinking about management styles, performance appraisals, merit pay, team and individual reward systems, and the general way that we do business. In doing so, they have changed the problem from just selecting a compensation plan that "feels right", to first developing relevant, sound management and compensation philosophies.

Developing the right philosophy, then implementing the best, most supportive compensation programs, requires thoughtful planning that involves the right, bright people from throughout the organization.

An effective compensation philosophy must:

• be as relevant to employees in the mail room as it is to the officers,
• fit the organization's decision making and managerial style, and
• become part of the corporate culture.

In the past, practices have often been made by top management, based on their own judgement about how they feel about the program. Today, more effective compensation programs can be designed by:

• starting with a coherent philosophy,
• considering sound fiscal practices and the broad range of alternatives available, and
• involving employees at all levels to determine how realistic alternative programs are and to identify what behaviors and attitudes various programs will encourage.

Obtaining input from those who will be affected by the program is not a democratic activity, since the final decisions still must be made by management. It is, rather, good business, just as market research is good business, since both help the company avoid costly mistakes.

The key is to design programs that will be effective, not just to emulate those programs that have worked elsewhere, that are easy to manage, or that are attractive to top management . . . although some programs may have all of these attributes.

The resulting philosophy or strategy should provide guidance for a wide range of issues, such as:

• alignment of compensation and corporate objectives
• compensation program objectives
  • more than attract, retain and motivate
  • role of different pay components
• desired competitive posture
  • relevant competitors
  • base salary/total compensation
• internal equity considerations
  • relevant differentiating factors
  • performance, seniority, skills, responsibilities, interpersonal abilities
  • individual vs. team vs. organization roles
• regulatory compliance objectives (meet or exceed), EEO, ADA, FLSA, JCAH, etc.
• economic factors
  • sharing of risks
  • limits of ability to pay
• responsibility for program design, administration
• differences by function, levels

In addition, the philosophy should consider the leadership and followership styles that exist within the company, the organization's quality efforts, and the types of employees that will be covered by the programs.

For more resources on developing a compensation strategy to fit your organization, see our resources section under the "Articles & Speeches" menu option.