Compensation is a critical component of attracting, motivating, and retaining your team members. It’s not the only component (and sneak peek – #7 below encourages you to address those other components with your team members). However, when compensation isn’t at the level expected by recruits or existing team members, it can reduce the attractiveness of your firm. According to a survey of HR professionals conducted by the Society of Human Resources (SHRM), the #1 reported reason turnover occurs is inadequate compensation.
When you implement the following ten compensation strategies, you will build a more competitive compensation program. Before you dive in, please note that these ideas aren’t perfectly linear, and they are connected to each other. Be sure you read all the way through the ten. Then assess with your leadership team how your firm is doing in these ten areas.
- Pay at or above market. Ask your HR resources to benchmark compensation using surveys like the AICPA MAP Survey, Inside Public Accounting’s National Practice Management Report, Payscale, and Robert Half. Gather and document data from job applicants and interviewees about target compensation. When team members depart, request details about any competing offers and compensation if they’re willing to share. These various data points will broaden and strengthen your compensation analysis and ensure you don’t lose your people due to your financial model.
- Stay in touch with wage inflation. This statistic is a component of market adjustments to salaries (along with supply/demand impacts) and an essential factor influencing your regular market adjustments.
- Make regular MARKET adjustments. Market adjustments are just that – adjustments that take a salary closer to what the market is currently paying. These adjustments are not about performance. Be sure you are clear about that and differentiate between market and performance adjustments. And note that compensation benchmarks ordinarily measure base compensation plus bonuses. There are exceptions, so read the details to ensure you’re measuring “apples to apples.”
- Reward your best and brightest. Parity in people management will not promote the retention of your most talented team members. Don’t run the risk of losing these key contributors. Instead, start today to identify and invest in your most important talent. Use an evaluation tool like the 9-Box to assess your people for performance and potential (see How Strong Is Your Team? Use a 9-Box to See for more details on implementing a 9-Box).
- Don’t reward under-performers. In talent discussions, you’re aiming for straight talk provided with care and concern. When team members aren’t meeting your expectations, don’t increase their compensation with performance adjustments or bonuses. If retention is your goal despite lackluster performance, make judicious market adjustments. Recognize that treating under-performers as regular, performing team members could make it trickier to let them go later and can be confusing for the under performer. It can also send the wrong messages to the rest of your team about what performance is acceptable.
- When base salaries increase past the comfort zone, implement bonuses to make up the difference. This is especially true when salaries are already at market levels, and you’re continuing to receive signals from a team member or their distinguished performance that compensation should increase. Be sure any bonuses are tied to specific and measurable goals for the individual and the firm.
- Understand that comp is only one of many things that motivate your people. There are nine professional motivators that all team members value, although people don’t put them in the same order. And over time, the motivators can shift. When you know about someone’s top motivators, you can more readily help them achieve those things successfully. Talk to your team members to uncover specific one-size-fits-one elements that engage and excite them.
- Be realistic about the fact that “people talk.” It’s common for team members to compare notes on compensation both internally and externally. The internet is full of official and unofficial data about compensation. Ultimately, it’s unlawful to prohibit discussions about compensation, so expect it to happen and be prepared to rationalize any disparities.
- Take a careful look at starting salaries. Follow other professions and learn how your offer for straight-out-of-college students compares to those of competing professions like actuarial services, private accounting, data analytics, finance, supply chain services, technology consulting, and more. Stay in touch with research that compares compensation of various technical professions. Comparisons aren’t necessarily apples-to-apples but can provide a measuring stick for changes your firm could implement to be more competitive.
- Strive to create more transparency about your compensation system. Explain distinctions that drive compensation decisions – which might include market adjustments, distinguished performance, and unique contributions. Be clear about who inputs to salaries and bonus decisions, as well as which metrics drove those choices. For larger firms, consider developing ranges for different levels and positions based upon the market. Realize that nationwide, there is a drive to create more pay transparency, so steps in the direction of more clarity will put your firm where it needs to be or even ahead of the curve.
Now that you’ve walked through these ten recommendations, consider which step your leadership team must implement first to “shore up” gaps in your employee compensation program. And let us know how it’s going for you – we’re interested in your success!