Presented by Julie Caspar

The Strategic Side of Compensation

Welcome!

Cris Wildermuth, Ed.D., SPHRAssistant Professor

Drake UniversityAdult Learning &

Organizational Performancecris.wildermuth@drake.edu

www.drake.edu/alop

Kitchen Table

• Use the question & answer feature

• Participate in polls

HRCI

Where can I find this PowerPoint?

Presenter

Julie CasparPresident, HR HotlineAnkeny, Iowa(515) 635-0180julie@hrhotlineinc.netwww.hrhotlineinc.net

Agenda

• Welcome• Defining Compensation• Business Strategy and Compensation

Philosophy• Compensation Specialties• Additional Strategic Considerations• Cases• End Session

Poll• TRUE or False:

– Compensation is cash provided by an employer for services rendered

AnswerTRUE

Poll• TRUE or False:

– At the beginning of the 20th century the focus of compensation was pay for work; by the end of the 20th century the focus of compensation was more on pay for results.

AnswerTRUE

At its most fundamental

level…

Compensation is pay for work

Compensation EvolutionDomestic

Competition

1900

2012

GlobalCompetition

Pay for Work

Passage of Fair Labor

Standards Act(1938)

Benefits (Compensation)

Drive Performance

Longer Term Strategy

Achievement & Pay

Equal Pay Act (1963)

Equity

Market Based

Merit

Ongoing Legislation

e.g. Lilly Ledbetter

Davis-Bacon Act 1931 Pay for Results

Total Rewards

American Compensation

Association (1955)

Work-Life Balance

Development

ACAAmerican

Compensation Association

WAWWorldatWork

Total Rewards

TR Model: Created by WorldatWork © 2007

Cash provided by an employer to an employee for services rendered. Cash is

comprised of ….

Compensation is …

Base Pay• Wages• Salaries

Variable Pay• Bonuses• Incentives• Stock Options “At Risk”

Focus of compensation today?

MARKET-BASED

INTERNALLY EQUITABLE

PERFORMANCE DRIVEN

Where Compensation and the Business Imperative Meet

Vision & Mission

Goals

Strategically Aligned Compensation Objectives

• Legal compliance• Cost effective• Internally, externally, and

individually equitable• Drives performance and results

Compensation Philosophy

• Seniority Basis• Across-the-board raises• Pay scales raised annually• Industry comparisons of

compensation only• Holiday Bonuses

• No raises for length of service• No raises for longer service

poor performers• Market adjusted pay

structures• Broader industry comparisons• Bonuses tied to performance

results

Compensation Philosophy Continuum

Entitlement Performance

Mathis, R.L. & Jackson, J.H. (2006). Human resource management 11th edition. Mason: Thomson South-Western.

Poll

• What is your compensation philosophy like?

Some QuestionsTo Ask

Compensation Goals

Market Positioning

Market Positioning

At Market Compensation programs are valued within close proximity to market.

Lag

Compensation programs are at an affordable level for organization. Takes advantage of abundant supply of potential employees in a loose labor market.

Lead Paying for higher qualified, more productive workers by positioning pay above market.

Compensation Mix

Performance Based

Alignment

Decision Making

Communications

Changes

Compensation PhilosophyShould include….

Pay level position against competitors (or market)

Amount of fixed vs. variable pay

Balance between external vs. internal equity

Link to business strategy

Poll

• At what market level does your organization position your compensation programs?

Surveying the Market

• International • Sales• Executive• General o Baseo Incentive

CompensationSpecialties

Additional CompensationConsiderations

Competency Based Pay

Individual vs. Team Rewards

Pay Openness vs. Secrecy

Equity

Job Leveling / Pay Structures

Team

Compensation Programs

“Fitting” into the bigger picture

Research milestone achievements

Case 1

Case 2

Power Company Skilled Worker Retention

Take Aways

• Compensation is cash provided by an employer to an employee for services rendered.

• Compensation is one of multiple variables of what may drive a business strategy based on the Total Rewards Philosophy.

• A clear depiction of company mission, vision, and goals need to be made before a strategic compensation plan / program can be developed.

• A compensation philosophy is critical to the successful alignment of the business strategy.

• Organizations need to decide whether their compensation programs are to be more entitlement or performance based and how either will advance the business strategy.

• There are multiple and various considerations to be made in determining compensation programs that will ultimately lead to business achievement.

Thank you!

Julie CasparPresident, HR HotlineAnkeny, Iowa(515) 635-0180julie@hrhotlineinc.netwww.hrhotlineinc.net

Next Webinar

• Presenter: Jennifer Soma• Title: Career Development and Happenstance• Date: December 12, 2012• Time: 12:00 PM - 1:00 PM CST • Register:

https://www3.gotomeeting.com/register/176333630