| Issue: |
Over the past several years, you have made only minor changes to your company’s compensation program. Last year, you tweaked the measures in your variable compensation plan; the year before that, you adjusted eligibility requirements. The program is getting stale—you’d like to revamp it so that it clearly aligns with business goals. Where should you begin?
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Answer: |
Your organization is not alone. According to Towers Perrin, employers have been engaged in a pattern of making only incremental changes to their compensation programs, year after year after year. Unfortunately, these tweaks are often not enough to meet business needs.
To break the cycle of incremental change, employers need to identify actions that will have a clear and sustained impact on the bottom line. Consider the following steps:
- Think big, bold change. Shake things up, but in a way that aligns with core business goals for performance, cost, talent management and employee engagement.
- Identify required changes in terms of desired business outcomes, and prioritize and sequence those changes based on an analysis of the efficiency, effectiveness and impact or strategic relevance they will have in meeting specific business goals.
- Place calculated and systematic bets on specific programs and segments of the workforce that align with business objectives and priorities. Avoid the “one-size-fits-all” generic approach to rewards because it lacks focus and can marginalize the return on investment.
- Develop a balanced set of metrics that encompass the key outcomes needed, and measure results against those metrics, adjusting course over time as required.
Source: 2007 Towers Perrin Reward Challenges and Changes Survey, released September 5, 2007.
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