Money talks, and it says a lot when it comes to attracting and retaining talent. Setting salaries is more than paying people for the work they do; your approach to compensation plays a large role in the kind of talent you attract and retain, and in your company’s reputation among potential employees. Is the money you’re offering attracting the right kind of people?
“Money isn’t everything, but it’s a big piece of why people will work with a certain employer,” says Jana Tulloch, owner of Tulloch Consulting, an HR consultancy.
Here are some questions to consider if you want to develop a top-notch compensation plan.
You may like to think that the compensation you offer is competitive, but if you find that your turnover rate is higher than you expect, compensation is the first place you should look, Tulloch says. Business owners too often rely on ballpark estimates, incomplete data or even gut feeling to set salaries, but it takes data to establish a plan that works.
Regularly research the compensation ranges in your industry, for the roles you have at your company and for your geographic market, Tulloch says. “When it’s a job-seeker’s market, when labor is tight and people are key resources, they can charge higher rates,” she says. She recommends researching compensation once a year, because markets can change quickly — a salary and benefits package that was competitive last year might be seen as second-best this year.
Whether you use bonuses, incentives and rewards to drive behaviors or simply take a leading role on offering competitive compensation, whatever you offer should reward the behaviors you want in your organization, Tulloch says. “You want to make sure that your compensation, however it is structured, is driving the right behaviors for your team.”
For example, if you want teams to work together to focus on the customer, don’t tie rewards to individual revenue goals that inspire people to focus on selling, she says. Instead, look for team-based metrics — such as customer satisfaction ratings — that can help reinforce the kinds of behaviors you want from employees.
Go back to your strategic and operational plans and revisit key tasks or goals for each role or department, as they will help you set your strategy for talent — and thus your strategy for compensation, Tulloch says. Revisiting these plans will help you determine whether to set a leading, lagging or middle-of-the-market compensation strategy. “It’s important for managers and performance management plans to consider those plans and goals when setting compensation,” Tulloch says.
Aligning these plans will help you set the right kind of compensation. “Employee engagement, job satisfaction and opportunity for growth play a part, but people need money to live,” Tulloch says, and getting the money right will help you get the right kind of people for your business.
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