corporate policy that specifies how training, performance management and reward systems might integrate career-planning considerations.
What steps can a company take to align its compensation system with its general business strategy?
Today's compensation approaches, like the rest of the business world, are changing rapidly. As a result, the bridge that connects compensation strategy to the overall business strategy may have been weakened by the frequent shifts that characterize business today. The pace of change in both business strategy and compensation design are leading many companies to consider and implement changes to one side of the bridge without making changes to align it ...view middle of the document...
The business strategy should include specific financial and non-financial objectives for the company over three to five years that, in turn, can be translated into short-, intermediate-, and long-term initiatives necessary to help execute that strategy. Financial goals like increasing profit margin and net income can be translated into objectives that are relevant to people lower in the organization but still help achieve those higher level goals. For example, manufacturing teams have, at best, indirect influence on the company's overall profit margin. Therefore, these teams would instead be measured against goals, like operating and maintenance cost management and the results of customer satisfaction surveys that contribute to the company's profit margin.
Because the goal of a compensation strategy is to deliver the right amount of pay necessary to motivate the types of performance necessary to achieve the business strategy, it is much more difficult to identify and design appropriate reward programs without an articulated business strategy. In fact, in the absence of an articulated strategy, compensation professionals must often gather the planning information necessary to develop reward systems themselves. In these cases, compensation professionals should find out where the organization is headed, the goals and objectives for each level in the organization, and what behaviors are to be reinforced through the rewards system.
One manufacturer planned to shift from simply providing machinery, which has a long sales cycle, to providing more in-depth technical knowledge and customer support that required more consultative selling skills. This strategic shift to a service center required the current staff to refocus on the new direction and to become more sensitive to customer service. At the same time, altering the direction of the company also required a new hiring approach that would bring in the types of people necessary for the company to achieve its overall goal of moving up from ninth place in the industry to third place within five years.
To accomplish this strategic shift, the company's human resources and compensation professionals needed certain critical information:
* Could the company re-educate the affected employees in time to have the desired results within the immediate and intermediate time frames?
* How many new people needed to be hired?
* What are the desired background and experience required to do the job?
* Were the new roles clearly defined and articulated to the employees and the customers?
* How many of the new roles required team work versus individual contribution?
* How will the company know when it is attaining its goals?
* And will cash be the only or the primary means of recognizing the attainment of individual and company goals?
Without answers to these questions, the company's HR and compensation professionals would be unable to develop the people systems, particularly compensation...