Employee compensation: Tying your compensation strategy to corporate goals

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Employee compensation: Tying your compensation strategy to corporate goals

This is part of a new blog series with NTT Centerstance, where Ken Steinman is a Senior Consultant and Certified Performance Technologist. NTT Centerstance is a market leader in implementing business-friendly technologies such as Salesforce and FinancialForce.com to help companies achieve a high rate of adoption and maximum ROI.

In our last post we discussed goal setting and performance management. The last rung of the retention ladder is compensation. Employee compensation is very often the largest single line item in a company’s budget. Research shows that many companies lack the tools and skills to link employee compensation to their corporate goals and strategy.

Throughout this series we’ve stressed the importance of employee engagement to retention. Competition is getting tougher and employees who are discouraged by what’s perceived to be an unfair performance appraisal and compensation system could easily be tempted by a competitor to jump ship. In the recently published Deloitte 2015 HR Factbook they shared the following stats: “…employee turnover 
is on the rise. Our study found that turnover averaged 20 percent in 2013, up from 17 percent in 2010. The majority of these separations are voluntary, at an average of 13 percent across all organizations.”

Beyond the perceived fairness of the performance appraisal process, employees look at promotions as another key indicator of their success and the company’s willingness to develop talent from within. Companies should track the relationship between promotions and retention. Metrics could include the ratio of employees who are promoted and the average time employees have between hire and promotion or between promotions.

Research is mixed on whether to tie performance discussions directly with compensation discussions. In my opinion they’re hard to separate regardless of how the link is presented to the employees. The key is communication, done in a way where the employees realize they’re valued members of the team and feel like they are being treated fairly.

From an organizational standpoint a majority of respondents in Aberdeen’s research stated that the primary goal of their compensation strategy was to retain top performers. A large percentage accomplish their strategy through performance bonuses. A key takeaway is that the HR team should carefully track how their reward system motivates their team and pay attention to retention rates between top performers and low performers.

As stated throughout this series, this starts with proper strategy and planning, the technology will then help your HR team administer the process and track the trends through measurement and reporting. Getting the process right will make your HCM technology implementation that much better!

Check out the others posts in our series with NTT Centerstance: 
Performance Management: Employee retention and the power of the feedback loop
Onboarding: How can technology take us beyond compliance to connection?
Recruiting: the role of technology in the employee lifecycle

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