Communicating Compensation: Gaining Executive Support

Jennifer Ferris, CCPCompensation Professional

Mykkah Herner, MA, CCPManager of Professional Services

www.payscale.com

www.payscale.com

14,000 Positions 3000 Customers 13 Countries

250 Compensable Factors40 Million Salary Profiles

COMMUNICATING COMPENSATION

Part I: Gaining Executive Support

Part II: Equipping Managers

Part III: Talking with Employees

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Agenda• Communication Basics• Compensation Basics

Communicating Compensation to Executives

• Understanding the Executive Audience• Align compensation to business goals• Incorporate leading edge practices• Keep executives up-to-date with quick snapshots

Next in series: Equipping Managers

Communication Basics

Communication Basics

KNOW YOUR AUDIENCE!

WATCH THE JARGON

PRESENT A WAY FORWARD

FOCUS ON RESULTS

BE DIRECT AND EMPATHETIC

Managing Conflict

Prevent

Resolve

ContainPower

Struggle

Overt Conflict

Latent Tensions

Stages of Conflict

The Bridge-Builder

The Teacher

The Provider

10 Roles in Managing Conflict

The Healer

The Equalizer

The Arbiter

The Mediator

The Peacekeeper

The Referee

The Witness

Source: www.thirdside.org

Levels of Transparency

Employees know…o Only their own salaryo Their range and where it caps outo All grade assignments for jobs up to a

certain levelo All grade assignments for all jobso The ranges associated with grade

assignments to a certain levelo The ranges for all jobso Everyone’s pay

Managers know… Only their own salary The salary of their direct reports The salary of all those on their team The grade assignments & ranges of their direct

reports The grade assignments & ranges of all those

on their team The grade assignments of all positions up to

their level or up to a certain level The ranges of all positions up to their level or a

certain level All grade assignments for all jobs The ranges for all jobs Everyone’s pay

Communication Roles

• Approve program• Communicate program to org at a high level• Perform manager/supervisor role

Executives’ Role

• Get program ready• Ongoing communication to Execs• Train managers

HR’s Role

• Understand the program• Communicate with employees• Get support from HR

Managers’ & Supervisors’

Role• Agree to the program• Communicate with manager/supervisor

Employees’ Role

Compensation Basics

Compensation is a keystone

Good compensation design ensures organizational success

The Compensation “Mix”

Start with the right questions

Why do you want to have a good comp plan?To pay people well

Why do you want to pay people well?To attract and retain top talent

Why do you want to have top talent?To accomplish our business objectives

What are your business objectives?

COMP DESIGN ELEMENTS

PHILOSOPHYSTRATEGY/IES

STRUCTUREPOLICY

GLOSSARY OF COMP TERMSTALENT MARKET(S) o Industry, Size, LocationoMarket-Ratio

PAY GRADES & PAY RANGES oRange WidthoRange PenetrationoCompa-RatiooRed-Circled | Green-Circled

PAY FOR PERFORMANCE

Schedules + Differentials

Purpose

Preserve both competitive pay and internal equity.

Support simplicity of structure.

Implementation

Schedule = set of ranges + grades

Markets are grouped in 5% increments; schedules are adjusted to reflect markets.

TAMPASchedule C:

-5%

NEW YORKSchedule G:

+15%

PORTLANDSchedule D:

Main

Advantages of Pay Structures

Provide alignment to business strategy

Clarify relative worth of the position internally & externally

Ensure fair pay (legally defensible)

Define a pay range for a position

Create clear career paths

Room to reward your employees based on performance, tenure, etc.

Understanding the Executive Audience

Executive Audience

o Leaders don’t want to be told what to do

o Leaders can be distrustful of change

o Leaders are decision-makers

o Many leaders have access to

information

o What matters to your leaders?

Align Compensation to Organizational Objectives

THE COST OFGETTING

COMPWRONGPayroll is by far your biggest expense; the cost of getting it wrong is tremendous.

Align comp plan with business goals

THE REASONSYOU’RE

CREATING A COMP PLAN

1. IT MAKES GOOD BUSINESS SENSE

2. IT HELPS ATTRACT AND RETAIN TALENT

3. IT SUPPORTS THE MISSION, STRATEGY AND CULTURE OF THE ORGANIZATION

Incorporate Leading Edge Practices

Return on Comp Investment

Leading edge practice: Pay for Performance

o Exceeds expectationso Meets expectationso Does not meet expectations

Comp trend of yesterday: COLA

Pay Ranges

Leading edge practice: Pay Grades & Rangeso Ensures competitive pay to market & internallyo More control over costs

Comp trend of yesterday: Broadbands

Compensation Strategy

Leading edge practice: Targeted Strategyo Target segments of your organization differently based on value to the

organization

Comp trend of yesterday: Singular Strategy

Market Definitions:Location:All positions have been targeted to their local metro area of Dallas, TX.

Organizational size: Key Contributor positions have been targeted to organizations of 10,000 employees

Core positions have been targeted to organizations of 1,000 employees

All other positions have been targeted to organizations of 150 employees

Industry:All positions have been targeted to the IT Services industry.

Competitive Positioning:Key Contributor positions target the 75th percentile.

Core positions target the 65th percentile.

All other positions target the 55th percentile.

STAY NIMB

LE!

Keep Executives Up-to-Date

Report High Level Info

o Get them familiar with a dashboard (Compa Ratio, Market Ratio, etc)o Report these on a regular basis

Report Relevant Info

Execs are also Managers

Give them tools for success:

o Flight Risk report & the inverse report

o Disparate Pay report

Give them insight into what employees care about

o Am I making enough money to cover my basic needs (entry level)

o Am I being paid fairly (professional level)

o Am I being paid enough to deal with managing people (Mgrs/Dirs)

Give them talking points for comp conversations with employees

Immediate Actions•Determine Transparency•Understand Business Goals•Know Your Audience•Review Current Pay Practices•Share Key Reports•Stay Nimble!

EQUIP MANAGERS

Set expectations

Educate them

Give them the big

picture

Give them tools

PayScale Delivers Where Other Compensation Providers Fall ShortPayScale leads the world in compensation knowledge with the freshest and most detailed data from over 40 million salary profiles. More than 3000 organizations use PayScale’s software and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and motivate their people.

Visit our blog: www.payscale.com/compensation-todayJoin our Group on LinkedIn: Compensation Today: HR Best Practices

Jennifer Ferris, CCPCompensation Professional

Mykkah Herner, MA, CCPManager of Professional Services, PayScale, Inc.

www.payscale.com

Appendix

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Basic Comp Language: Understanding Ranges

o Range Width [=(max-min)/min] o How much flexibility do we give our managers in setting pay?

o Midpoint Differential [=(midpoint grade2-midpoint grade1)/midpoint grade1)] o Do we have a more or less hierarchical org structure? Positions with multiple

levels?

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Basic Comp Language: Using Ranges

o Range Penetration [=(EE Pay-min)/(max-min)] o How well are employees moving through their ranges – do the ones at

the top deserve it?

o Green-Circled Employees [Below bottom of range]o We may be untruthful and/or paying un”fair”ly.

o Red-Circled Employees [Above top of range]o These are employees we decide to pay more, even though the data

doesn’t support it.

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Basic Comp Language: Measuring Plan Performance

o Compa-Ratio [=EE Pay/Mid]o Are we on track with our pay philosophy?

o Market Ratio [=EE Pay/Market] o How are we doing vs our competitors?

o Midpoint to Market Delta [=(Mid-Market)/Market]o Are our ranges current to market?