Typical Platitudes Aren’t Enough for Your Compensation Strategy

Compensation Planning
by Stephen Bruce, PhD, PHR
"If you are like most companies, says consultant Chuck Csizmar, you have a compensation strategy that’s filled with broad, aspirational phrases like “market leader,” “shareholder value,” “supplier of choice,” and maybe “Employer of Choice,” or “competitive.”"

You need something more than platitudes to get and retain the people you want, says Csizmar, who is founder and principal of CMC Compensation Group.

What Are We Talking About?

When we talk strategy, we’re talking about “a plan, method, or series of maneuvers for obtaining a specific goal or result.” It’s a guideline or road map that lays down a series of principles to be acted upon, says Csizmar.

 “We Know What We Want To Do”

People think that everyone knows what the strategy is, but Csizmar asks:

  • Is it written down?
  • Who agreed to it?
  • Who knows about it?
  • Is it a road map or current objectives?

Choice of Strategies

Where are you going to operate? Csizmar asks.

  • Compensation: direct and indirect pay programs?
  • Total Compensation: compensation, benefits, and sometimes more?
  • Total Rewards: includes all programs that reward employees?

The Disagreement

Some executives can’t get the total rewards concept, Csizmar says.

You’ll say that the Total Rewards’ “big picture” helps attract and retain talent, but they respond that employees want mainly cash, so the effort to develop a strategy would be a waste of time. Unfortunately, without a consensus approach, your message is blurred, and the business value is lessened.


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Vaguely Worded Statements

Fear of commitment and fear of raising employee expectations, coupled with a desire to please everyone, means you end up with one of the following, says Csizmar.

  • Generic phrases so obvious they are meaningless.
  • A company vision for total rewards too broad and full of unfocused puffery.
  • Wording that makes your company sound like every other company.
  • Catchy phrases—they sound good, but they are usually short on specifics and commitment.
  • Highbrow corporate‐speak messages, wordsmithed by pros who don’t know compensation.
  • Cultural insensitivity in a global world (U.S.-centric language can get you in trouble.).

Strategies will fail if the workforce doesn’t see value or is confused.

What If We Do Without?

Why not do without a strategy? You’d leave your largest single company expense without a guiding principle, says Csizmar. That means:

  • Too much room for inconsistent or contradictory messages.
  • Reward costs will rise at a greater rate than anticipated or desired. (The vacuum left by no plan will be filled with inequity.)

OK, says Csizmar, you want a strategy. First commit to two primary aims:

1st Primary Aim

  • “We will be market-driven; market competitiveness will be given priority over internal equity.”
  • “We do not seek to use benefits as a strong differentiator in our reward programs.”
  • “We believe it is important to share the cost of benefits with employees.”

2nd Primary Aim

  • Lays out the overall statements of belief around which to design, administer, and communicate reward programs.
  • Becomes the “stake in the ground” that reinforces the culture and management style.
  • This is what we stand for.

Now you are getting more specific. Say you’re market driven? State where you plan to stand against the market.


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Eight Design Considerations to Keep in Mind

Here are Csizmar’s design considerations for your strategic compensation plan.

1: Statement of Overall Objectives

How do rewards support the needs of the business, employees, shareholders, and/or customers?

Each reward element should have a defined role. For example, “Career advancement is granted for performance that supports company goals and increases shareholder value.”

2: Relative Importance

How do rewards compare with other company identifiers (technology, cool products, global presence, market leadership)?

What does an employee tell a friend about your company? What image would your employee paint for a friend? Do you know how your company compares to others?

3: Performance Measures

If you are a pay for performance organization, say that. Employees have to deliver to get the reward, not simply occupy a chair. Make sure you:

  • Identify performance criteria to be rewarded.
  • Define measurement levels.
  • Determine the degree to which rewards are expected to drive employee actions.

In tomorrow’s Advisor, you’ll learn the rest of Csizmar’s tips, plus an introduction to the all-compensation-in-one website, Compensation.BLR.com.

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  1. Pingback: Strategic Comp Plan? ‘This Is Not Easy Stuff’ | Compensation Daily Advisor

  2. Barb        
    May 7, 2013 11:14 am

    It seems like many execs in the C-suite are scared of specifics–they don’t want to be held to those specifics later down the road. And they also often refuse to accept that money is the end-all-be-all for for most employees these days.