Integrating Compensation Planning With Financial And HR Objectives For Better Employee Retention

For most organizations today, the ability to attract and retain top talent in a highly competitive environment is at the forefront of their business development efforts. Contrary to the popular belief, attracting, motivating and retaining a highly-skilled and diverse workforce in a limited budget is quite possible. For this, companies need to have a more strategic approach to compensation management.

Taking A Closer Look At Compensation Management

Compensation management is the process aimed at ensuring that any investment decisions related to paying the employees of an organization are made in an effective manner. In this context, organizations generally seek the help and advice of HR strategy consultants and compensation professionals for developing a well-defined compensation management process. The processes focus on the key objectives of ensuring appropriate compensation to professionals with different skills and experience levels, generating a return on investment and maximize the productivity of employees with the help of rewards and benefits. In addition, the process also uses compensation data to accurately predict the likely contributions of the employees to the organization in the future. This data is provided by managers based on their understanding of individual employees and their complete skill set and capabilities.

Developing An Efficient Compensation Management Program

An efficient compensation management program aims to enhance employee engagement besides aligning the business objectives of an organization. However, developing such a program is not an easy task as it involves the alignment of compensation plans with the financial and HR objectives. This helps in placing compensation as the key component of the overall talent strategy of an organization and fostering a culture based on performance. According to the experts from strategy execution consulting firms, employees feel valued in an organization that follows trusted performance feedback and promptly delivered reward system. This, in turn, helps in driving performance and ensuring better returns on compensation investments.

Promoting Manager- Employee Communication

An important aspect of developing an efficient compensation management program is efficient communication between managers and employees. Promoting a transparent dialogue between managers and employees helps the leaders to efficiently communicate the basis of staffing and pay decisions. It also helps them to explain any compensation discrepancies to the employees with the support of reliable and fair data. Professionals offering leadership consulting services also stress on the importance of promoting a coaching dialogue between managers and employees. Such dialogue helps the managers to gain a better understanding of the employee capabilities and their significance towards fulfillment of business objectives. This information can then be used for taking more accurate and effective compensation decisions in the future.

Significance Of Rewards And Recognition

It has become important for business organizations to ensure that they invest in employees, who contribute more to the organization while staying within their compensation budget. Moreover, frequent and informal rewards and recognition also need to be factored in for efficient compensation planning. A well-planned compensation program aligns award categories with employee behaviors that the organizations need to encourage. For this managers need to gain a clear understanding of both the financial and HR objectives of the company. It helps in incorporating a company culture where rewarded behaviors are supported by organizational values.