1 - Strategic Overview Flashcards
What are the elements on compensation?
Fixed Pay
Variable Pay
What is Fixed Pay?
Is non-discretionary in nature (e.g. base salary and allowances) and does not regularly vary according to performance or results achieved.
It’s consistent pay and it’s a fixed cost within the organization.
What is Variable Pay?
Refers to the incentives that are contingent on discretion, performance or results achieved (individual or organizational). E.g. a bonus program, a short term incentive
program, or longer term reward.
Called pay-at-risk.
Typically, there’s some level of discretion that’s involved in the payment of variable compensation.
Most of the innovation in comp occurs in this pay element.
What is the core element of pay for performance programs and why are they powerful?
Variable Pay
Variable pay programs are gaining popularity typically because they are a powerful tool in driving performance outcomes within organizations.
Total cash formula vs total rewards strategy
TC = Fixed pay + variable pay
When you layer on other elements like benefits and wellbeing and work life and culture and performance and recognition, that often is comprised of a total rewards strategy
List the total rewards design process
- Corporate Vision / mission
- Business strategy
- Human resources strategy
- Total rewards strategy
- Program design and administration
- Program evaluation: revise or enhance
Step 5-6 are circular before it feeds back into step 1
Purpose of a total rewards design process
it’s much more than just determining what programs should be offered within the organization.
It’s actually a systematic delivery model.
It’s all about syncing the strategies of the organization with talent strategies and translating that into rewards programs that are meaningful to employees.
TR Design Process: Corporate vision / mission
Why does the company exist and what is the organization’s mission?
TR Design Process: Business strategy
Business strategy is then set to really outline how that vision will be met. Because people are really at the core of most business strategies, the HR and talent strategies that are part of this cycle are critically important.
TR Design Process: HR Strategy
Is the big picture. Build on the business strategy and serves as a guiding light on the design of all HR programs.
HR strategy answers those difficult questions, like what talent is required to grow our business and meet our business goals? What will we do to attract and retain our workforce and how will we create meaningful work experiences for those within our workforce?
TR Design Process: Total rewards strategy
The total rewards strategy narrows the hr strategy specifically into the elements of total rewards (e.g. benefits, wellbeing, recognition, and career growth_
TR Design Process: Program design and administration & Program evaluation- enhance or revise
It’s actually an ongoing process. It’s not a process that has a definitive start and end time.
Certainly programs are created and designed, but that design also typically comes with a plan for administration, a plan for governance, and a plan to continually evaluate the effectiveness of the program to make sure that it continues to meet the business goals overall.
What must an organization set to answer questions like where does bay pay fit within the org’s business strategy?
Compensation philosophy
Compensation strategy
Compensation Philosophy
The compensation philosophy is what the organization believes about how individuals should be paid. It’s typically expressed in relation to the market.
Should support the business strategy and be a goo fit with the org’s culture.
Compensation Strategy
Includes the principles that guide the design, implementation and administration of a comp program in an organization.
It may also specify what programs will be used and how they will be administered.
The compensation strategy actually talks about how you will fulfill the the comp philosophy.
What are the goals a comp philosophy?
Is to reflect and drive certain business results. It may be a result of a workforce experience, business performance, or just a state of being, such as offering equitable compensation within your company.
Regardless of the philosophy that your organization chooses, there are often some common themes across companies related to compensation philosophies, and trying to figure out how to balance all of these and prioritize these is really what’s important in setting your compensation program design.
What are the objective of a compensation program (10)
- Internally equitable (most common)
- Externally equitable (most common)
- Affordable
- Understandable
- Legal / defensible
- Efficient to administer
- Capable of being reshaped for the future
- Appropriate for the org
- Attract, motivate, engage and retain employees
- Create alignment of employee efforts and business objectives
What are the steps involved in building a base pay program?
- Job Analysis
- Job Documentation
- Job Evaluation
- Job Worth Hierarchy
= base pay structure
Base Pay Structure Design: Job Analysis
Provides key information about the nature and level of work performed
Base Pay Structure Design: Job Documentation
Includes written information about job content or the functions of the job and required knowledge, skills and abilities (KSAs)
Base Pay Structure Design: Job Evaluation
Creates a job worth hierarchy using a market data or job content approach
Base Pay Structure Design: Job Worth Hierarchy
Illustrates where each job fits, relative to other jobs
Base Pay Structure Design: Base Pay Structure
After the job worth hierarchy is built, a base pau structure can be created and utilized as a framework for pay decisions
Job Analysis and Job documentation…
Provide the information needed to complete the job evaluation process
