Compensation Planning


Comp is like a jigsaw puzzle …

Puzzle1I love jigsaw puzzles! I can while away hours of better-spent time sorting out the pieces and putting them together to reveal a pretty picture. Maybe that’s one of the reasons I like working with compensation so much. Putting together a compensation plan can be a lot like solving a jigsaw puzzle. Often, all the pieces are there but jumbled up so the overall picture isn’t clear.

In my day job, I talk with HR professionals wanting to know where to begin and how to corral, sometimes, ill-fitting, elements into a cohesive compensation plan. Sticking with my jigsaw puzzle analogy, there are just a few easy steps:

  • Sort the border
  • Group the pieces
  • Fit the groups together
  • Verify the fit
  • Create the big picture

Well, maybe it’s not quite that simple, but it’s not really difficult either. It is time-consuming and, like any good puzzle, takes a bit of patience.

Puzzle2Sort the border

Simply stated, this means clear away all the clutter. Get all the elements of your current comp plan together and “sort the pieces” by separating framework from details. For example, a written comp philosophy is framework, while actual salary rates are details. If there is no framework, you’ll need to create it, beginning with a comp philosophy.

Puzzle3Group the pieces

Compensation strategy is one group of pieces that includes cash compensation, non-cash compensation, salary management, performance management, salary increases, and incentive pay.

A job grade structure is another group of pieces, with its own framework—job grade families—and pieces that include grade levels, as well as, the min, mid, and max for each.

Puzzle4Fit the groups together

If I’m working a jigsaw puzzle, for example if the puzzle portrays a flower garden, I corral the sky, trees, grass, and flowers into separate groups—easy-peasy. With compensation, however, it’s not so easy. The “groups” may be strewn across multiple spreadsheets with no logical order. In that case, you’ll need to group together all the data you have for each area (e.g., base pay, sales commissions, incentive pay, etc.). Which bring us to …

Puzzle5Verify the fit

Here’s where it can get a little tedious. With a jigsaw puzzle, I can look at the pieces and decide if/where they fit, with spreadsheets, it’s a bit harder to see how they fit into the big picture. Some may be nothing more than a list of jobs and/or employees with current or even earlier pay rates. Some may not make any sense at all. You have to check each one to decide if it’s a viable piece of the compensation plan. If it’s not current data, set it aside. If it doesn’t fit the big picture, don’t try to force it in.

Puzzle6Create the big picture

With a jigsaw puzzle, the finished picture is obvious. All of the pieces are in place and it looks pretty, or interesting, or maybe amusing. Some folks mount them on backer boards, frame them, and hang them on a wall. Not me. I break up the pieces, dump them in the box and move on to the next puzzle. Yeah, I’m weird that way.

With a comp plan the big picture is really a document. I suppose you could frame it and hang it on a wall but probably better to keep it in a binder or in a digital file. With that said, however, you do need to share it with your workforce, after senior management has approved of course.

You don’t have to give each employee his or her own copy of the entire plan but you do need to share the gist of it. For example, if your plan includes job grades, particularly in an organization where job grades had not been used before, you need to let employees know their jobs are being categorized that way, along with the job grade pay ranges. In other words, you can be selective about what you share but it helps no one to keep it all a big secret within human resources.

So, if you’re new to compensation planning or new to a company that has no clear picture of its compensation program, think of it as a puzzle and start with the border …

Puzzle8

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2 responses to “Compensation Planning

  1. Holly K. Jones, JD

    Wow, talk about kindred spirits! I really enjoyed this post because I also use a “puzzle” approach to tackling complex problems, whether legal or HR problems or even figuring out how to fit everything in the pantry.

    Like you, I just love puzzles. So approaching a complex “big picture” one piece at a time, sorting out the known elements (the border), looking for patterns (grouping the pieces), then making sense out of the remaining parts has helped me through some of the most tedious and overwhelming tasks and projects.

    Like

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