This article is part of a two-part series written with HR Gazette on compensation review. We’ve covered types of compensation strategies here, and you can read the first part on types of compensation strategies employed at organizations on the HR Gazette website.
Business Sherpa Group kicked off November with a discussion on Compensation Reviews at SMEs, hosted by Ward Verschaeve, Marketing Coordinator, and Sue Haywood, HR Associate at BSG and professor at Queens University’s Smith School of Business. The event, tabled as a discussion on businesses corporate strategy and the role compensation and benefits play in executing a strategy, covered a wide range of talking points that SME owners have for us when they want to discuss compensation review.
Compensation review is something that can fall on the back burner when businesses are renewing their corporate strategy, but it plays a vital role in taking the organization to where it wants to go. Why?
Compensation strategies can encourage skill development, sales targeting, or brand development, while playing towards the values and objectives of the organization. That’s why it should always be considered and discussed when businesses think about strategy. So what goes into a compensation review? Let’s discuss.
Impact of Compensation Review on Business Goals
Compensation review and business goals are closely linked, with the first having a direct impact on the second. It’s no secret that people like structure and something to aspire to, benchmarks and milestones. Compensation acts as a piece of the goal puzzle, rewarding employees for delivering results that further advancement towards a business goal.
There are a few approaches. For example, if your organization is looking to maximize market share, your compensation review might indicate that you need to incentivize sales, through commissions or bonuses. If your organization wants their employees to develop new skills, your organization should compensate employees who seek to develop new skills. We’ve recently collaborated with the HR Gazette to identify more approaches to compensation. You can find them all on their page:
Compensation strategies should also clearly state what is in it for the worker. Why are these the business’ goals? What do staff get for helping the business achieve these goals? By highlighting how this compensation works to the workers advantage, they’re likely to feel better about their work so far and produce the results the organization is hoping to see. A good compensation strategy has an impact on the corporate reputation as well. No organization wants to have a reputation as an organization that doesn’t compensate for work done, it only yields worse talent pools.
The Right Approach to Compensation Review
When an organization begins its compensation review, there are a few questions to ask:
- Why are you reviewing your compensation approach?
- What are the values of your organization?
- What are you hoping to achieve?
A business owner should also look externally to what competitors are doing to achieve their targets, and what their corporate reputation is, when reviewing compensation strategies.
When it comes to balancing needs, employers need to think about the offset of costs from compensation and benefit plans. For example, if a select benefit program is only being used by 1 or 2 employees in the workplace, consider directly compensating that specific employee rather than paying for the whole team. Think about the team wants and needs, and what your means are, to come to a middle ground that offers the right level of compensation at a level that is sustainable for the organization and plays to the objectives of the organization.
Compensation Review at your SME
Businesses often leave compensation review to a 5 year schedule; we suggest that a more frequent cadence than that. A light review every year, with a deeper introspection every few years, can help your business align compensation philosophies with corporate objectives. The world around us changes year by year, thus leaving your compensation strategy for several years runs the risk of setting your business back and being less competitive as an employer.
A business owner might read that and think, “…another task for me to do when I’m strategizing… things are getting complicated”. Fear not, we’re experts on compensation reviews! Our team of experts has helped businesses review their strategies to align them with corporate goals, all while helping organizations save money while still supporting employees in a way that is competitive for the market that they’re in. We’re experts at making compensation strategies a win – win. Want help? Learn more through the link.
Compensation Reviews with SME’s was our final event of the year, if you enjoyed it and want to get more free resources from BSG, we’ll be posting our event calendar for 2024 early next year. Follow us on Eventbrite to be notified when the events are published or subscribe to our quarterly newsletter to get the next event right in your inbox come January 2023.