Employee Compensation: Tying Your Compensation Strategy to Corporate Goals

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This is the final post of a 4-part series on Human Capital Management and the application of digital technologies, such as cloud-based HCM tools.

In my last post, "Performance Management: Employee Retention and the Power of the Feedback Loop," I 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.

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!  

If you missed the previous posts in my series, you can find them here: 

January 13 - Recruiting: The Role of Technology in the Employee Lifecycle

February 16 - Onboarding: How Can Technology Take Us Beyond Compliance and to Connection?

March 14 - Performance Management: Employee Retention and the Power of the Feedback Loop

April 11 - Employee Compensation: Tying Your Compensation Strategy to Corporate Goals

Thanks for reading!

- Ken Steinman, Consultant and Certified Performance Technologist

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

Post Date: 4/18/2016

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