Download - Cost Effective Compensation

in partnership with Aspatore Books

™ ExecBlueprints

www.execblueprints.com

Copyright 2012 Books24x7®. All rights reserved. Reproduction in whole or part is prohibited without the prior written permission of the publisher. This ExecBlueprints™ document was published as part of a subscription based service. ExecBlueprints, a Referenceware® collection from Books24x7, provides concise, easy to absorb, practical information to help organizations address pressing strategic issues. For more information about ExecBlueprints, please visit www.execblueprints.com.

The HR VPs from Red Robin International, Menasha Corporation, and Covidien on:

Cost-Effective Compensation: Orienting Salaries and Rewards

Toward High-Performing Individuals

Bill StreitbergerVice President, Human Resources, Red Robin International

Rick FantiniVice President, Human Resources, Menasha Corporation

Greg KayataVice President, Human Resources, Covidien

Determining the right level of compensation for every position in your company generally requires more consideration than just follow-ing the benchmarking data for your industry and region. First, the

authors of this ExecBlueprint recommend, you need to be aware of your company’s financial situation and your shareholders’ profitability expecta-tions: you can only afford what you can afford. You also need to identify those positions that are most critical to your company’s business strategy and goals, and be prepared to pay these roles more than prevailing market rates, especially if they have proven difficult to fill. (However, you may be able to pay other jobs less.) You should also observe your employees: Are they leaving the company owing to low compensation? What are they reporting on satisfaction surveys? Then, assess performance against goals. Would providing performance-based compensation (such as spot bonuses or merit raises) boost results? Finally, be prepared to repeat this process often. After all, norms — and finances — can change quickly, and your compensation strategy will need to stay in sync. ■

Action Points

I. In Setting Compensation Levels, What Challenges Do Companies Face?Unfortunately, the question of what to pay employees can be tricky and sensitive — and the informed answer may not please everyone. In order to strike the right balance, HR will need to seek potentially conflicting guidance from three sources: shareholders’ profitability projections, the market’s prevailing rates, and employees’ expectations.

II. The Bottom LinePayroll may be a big expense but, ultimately, it should drive — not drain — your organization’s profitability. That’s why HR and leadership need to continually review com-pensation practices to address the following: what do you need to pay top performers? Which incentives will drive growth? Maintain profitability for all products?

III. Must-Have Practices for Evaluating Employee PerformanceYour organization only has so much money for merit increases, so how do you identify the most worthy recipi-ents? To effectively assess each employee’s contribution, managers should not only conduct an annual performance review, but also periodically sit down to talk about prog-ress with their people — and stakeholders who know their work.

IV. The Golden Rules for Determining Appropriate Compensation for All EmployeesWhile you might think that setting pay levels at the 50th percentile of the market will be a wise strategy, such a “cookie-cutter” approach may not ultimately serve your business goals. You should also consider: which positions are most valuable? Which take the longest to fill? Are employees leaving your company because of inadequate pay?

V. Essential Take-AwaysIn general, high-performing organizations reward their top employees with more than a generous compensa-tion package. Strategies discussed here include cash bonuses, stock purchase plans, and rewards of stock equity. Finally, employees can also be motivated by non-financial factors, such as a company culture that gives them opportunities to succeed.

Contents

About the Authors . . . . . . . . . . . . . . . . . . . . . p.2

Bill Streitberger . . . . . . . . . . . . . . . . . . . . . . . p.3

Rick Fantini . . . . . . . . . . . . . . . . . . . . . . . . . . . p.6

Greg Kayata . . . . . . . . . . . . . . . . . . . . . . . . . . . p.9

Ideas to Build Upon & Action Points . . . p.11

© Books24x7, 2012 About the Authors ExecBlueprints 2

About the Authors

Greg KayataVice President, Human Resources , Covidien

Greg Kayata joined Covidien as vice president of human resources for the Vascular Thera-

pies Global Business Unit in December 2006, bringing over 20 years of human resources leadership to the role.

Before joining Covidien, Mr. Kayata had a variety of business partner and center-of-excellence roles in Invensys and General Dynamics.

Mr. Kayata completed his bache-lor of arts degree in psychology from

Providence College and his master of science in industrial relations from the University of New Haven.

Rick J. Fantini is the vice president of human resources for Menasha Corporation, where he focuses

on leadership development, succession planning, and compensation and recruit-ing strategies. Menasha Corporation is a leader in providing specialty packag-ing and solutions to a wide variety of industries.

Before joining Menasha, Mr. Fantini spent 25 years in the paper industry, where he held a number of

executive positions in business develop-ment, human resources, procurement, and, finally, served as vice president of operations. As VP of operations, he was responsible for customer service, distribution, manufacturing, and pro-curement. His scope of responsibility included approximately 2,200 employees and a budget of $650 million.

Mr. Fantini’s business development responsibilities required him to spend considerable time in Washington, D.C.,

where he made numerous presentations to senators, members of the house, Con-gressional staff, and agency directors. He also had the opportunity to provide Congressional testimony on the subject of manufacturing job losses to offshore competitors.

Rick FantiniVice President, Human Resources , Menasha Corporation

In September 2008, Bill Streitberger joined the leadership team of Red Robin Gourmet Burgers, a 400-plus-

unit public restaurant chain, to build staff capacity to deliver superior results. Mr. Streitberger is a business leader with expertise in managing organizational and human resources processes that drive bottom-line results. His areas of exper-tise focus on creating organizational

capability and stability, developing high levels of employee commitment and loyalty, and achieving results from share-holders, team members, and guests.

As vice president of human resources, Mr. Streitberger oversees the day-to-day functions for all HR areas, and is organizing key strategies and proce-dures to build the foundation for the entire human resources function. He

has implemented and refined systems and administrative procedures through-out the company with an emphasis on benefits, compensation, recruiting, and employee relations.

Bill StreitbergerVice President, Human Resources , Red Robin International

☛ Read Greg’s insights on Page 9

☛ Read Rick’s insights on Page 6

☛ Read Bill’s insights on Page 3

© Books24x7, 2012 Bill Streitberger ExecBlueprints 3

Bill StreitbergerVice President, Human Resources , Red Robin International

Establishing Pay ScalesWe subscribe to several different compensation surveys, which we use to review total compensation — not just salary — in our markets. We consider the ranges for differ-ent jobs from the low to the high end and the factors that define the different levels of compensation in our competitors’ scales. These lev-els usually include cash, long-term incentives, benefits, and so forth.

We always compare ourselves to our competitors and major mar-kets. We also review our exit inter-views to determine if people are leaving us because of compensa-tion. Fortunately, we find that com-pensation is not the driving factor for leaving our company; usually it is more about individuals looking for a change. This helps us confirm that our pay rates are competitive.

We also look at the Chain Res-taurant Compensation Association (CRCA), which is a national com-pensation benchmarking organi-zation. Because our home office is based in Denver (and we are drawing from the Denver market), we then review a local group and compare our talent here against accounting, IT, and marketing in other local companies.

As for how our compensation packages are structured, on the cash side we have base starts and, depending on the level of opera-tions, we offer quarterly bonuses

and an annual bonus for the rest of the organization. We have long-term incentives, which are a combi-nation of cash performance plans, stock options, and restricted stock units. Our benefits plan includes vacation time, medical insurance, and stock purchase plans for our team members, to which they can contribute via payroll deduc-tions. Twice a year, depending on the amount they have in their

account, we will buy stock at a discount. Because we want peo-ple to be familiar with what our restaurants are serving, we have discount plans for meals at the res-taurants. Finally, we have a retire-ment program available and we match contributions.

Rewarding High-Performing EmployeesWhile there are many different components to our compensation scales, of course we look at the basic norms in terms of salaries to determine if we are considered competitive for each job and expe-rience level. For our bonus plans, we review measurements such as performance goals against enter-prise goals. Then there are sliding scales, so that the more success-ful you are, the more rewards you receive. We also compensate our people for attaining long-term goals. Since we are public, this

might mean through stock or equity grants, which we balance with cash incentives for different levels based on the organization’s success as a whole. In sum, to reward high-performing employees, we match individual performance against the organization’s success, and we use different types of rewards such as cash, quarterly bonuses, and equity. Finally, we also offer spot bonuses in the form of either equity or cash to celebrate the accomplishments of those who have gone above and beyond on a certain project or task.

We feel these compensation strategies motivate employees to

Bill StreitbergerVice President, Human Resources

Red Robin International

“In short, there are a lot of different methods we review on an annual basis to ensure we are positioning ourselves competitively and taking care of our folks.”

• With company since 2008

• Over 25 years of experience in HR

• Previous HR leadership experience at BJ’s Restaurants, The Cheesecake Factory, and Brinker International

• Graduate, University of Central Florida

Mr. Streitberger can be e-mailed [email protected]

You can only afford what you can afford in your space, but you still want to be creative and address what people are looking for.

Bill Streitberger

Vice President, Human Resources

Red Robin International


Bill StreitbergerVice President, Human Resources , Red Robin International (continued)

perform at their best. Our key members provide us with feedback, and we continue to monitor turn-over and so forth to ensure that this does not become an issue. As a company, we are healthy and per-forming well. Based on this feed-back, we feel like we are in a good place; however, this does not mean we can sit back and rest on our lau-rels. It is important to always moni-tor your position in the market and make adjustments when needed.

Top ChallengesThe biggest challenge we face in setting our compensation strate-gies is just making sure we remain competitive. Red Robin is a siz-able casual dining organization, and we have targets that we can hit based on the size and wealth of the company. Now, take an engi-neering company that is five or six

times our size; they will have a lot more flexibility in their comp lev-els because of their size and volume of income for the organization. You can only afford what you can afford in your space, but you still want to be creative and address what people are looking for. It is a challenge, but you just have to work within your means to deter-mine what is important to your people now as opposed to what might be important to them down the road.

Changing Compensation StructuresChange is always a possibility when it comes to compensation; we adjust as we grow. In fact, we just increased our long-term incen-tives this year. Our organization is growing — we had a great year last year, and we are off to a good start this year — so we are consid-ering what it will take to drive and improve performance. We do not necessarily revamp our plans every year, but we do adjust them as

Expert Advice

HR’s Role We work in conjunction with the finance team to establish our com-pensation strategies. We will review our current philosophy, and our metrics and rewards, and then we balance them against our G&A and G&S expense. We consider things such as, what are the ranges we can afford to pay for median top performers? What are the up- and downsides if we should breach that range? We review these questions every quarter to ensure we have the right balance and we remain competitive.

Cash compensation:• Competitive salaries

and merit increases

• Quarterly bonuses

• Annual bonuses

• Spot bonuses for exceptional individual performance

Benefits:• Vacation time

• Medical insurance

• Stock purchase plans for team members

• Discounted meals

• Matched contributions for retirement programs

Long-term compensation (based on company performance):• Stock options

• Restricted stock units

• Equity grants

Compensation at Red Robin: Multiple Components for Staying Competitive for the Short and Long Term


Bill StreitbergerVice President, Human Resources , Red Robin International (continued)

necessary to evolve with the direc-tion of the organization as a whole.

As the enterprise evolves, our compensation strategies must evolve with it; we want to reward our individuals more heavily on per-formance versus tenure. Tenure is

important, of course, and we want to retain our team members, but we also want to make sure we are rec-ognizing performance. Because we are continuing to work on improv-ing our talent management and per-formance management, we have

the appropriate metrics and meth-odologies in place to recognize our top performers. Rather than simply operating on the level of gut feel-ings, we are making sure that these rewards are applied with metrics and science. ■

© Books24x7, 2012 Rick Fantini ExecBlueprints 6

Rick FantiniVice President, Human Resources , Menasha Corporation

Determining Competitive Compensation Through BenchmarkingWe spend a great deal of time to ensure that our compensation phi-losophy is aligned properly with our business strategy and goals. This means that our total com-pensation package is competitive, motivating and, most importantly, provides appropriate incentives to align the interests of management and shareholders.

Establishing pay scales is one part of this process and we do not take a cookie-cutter approach. Many companies have decided they want to set target pay at the 50th percentile of the market. But this approach discounts the reality that some positions are much more crit-ical to helping a company achieve its business strategy and goals. While the 50th percentile is a good starting point, we spend consider-able time evaluating the internal importance of positions. This anal-ysis may lead to the conclusion that it is perfectly appropriate to pay some positions at the 25th percen-tile, while other positions need to be pegged at the 75th percentile or even higher. This type of approach allows a company to allocate tight budgets in a cost-effective fashion.

To establish our compensa-tion grades and targets, we per-form extensive benchmarking. We do this benchmarking at two lev-els. For executives, the Board of Directors’ Compensation Commit-tee oversees and approves all com-pensation issues. I work with the committee and Towers Watson, a compensation-consulting firm, to provide the appropriate bench-marking data and develop alter-natives to ensure compensation packages are competitive and align

the interests of management and shareholders. This information is then reviewed by the board to ensure that the shareholders are being treated fairly and that Mena-sha is providing competitive com-pensation to attract and retain good talent. Our second level of benchmarking is for all positions below the executive level and we work with Kenexa’s and other benchmarking data. Two critical issues for this type of benchmark-ing are to ensure that the positions are matched correctly and then determine the internal importance of the positions to your business strategy and goals. The internal importance evaluation provides us with guidance on which bench-marking percentile to use.

Our benchmarking practices for the non-executive roles have changed a bit over time, as we have become more consistent in our formal processes and proce-dures. It is important to have a con-sistent policy in place because you need to make sure you are being fair to both your shareholders and your employees. We’ve spent a lot of time and effort to put this pro-cess in place, which also involved verifying all of the job profiles and making sure they are accurate. If you don’t take the time to do that step, you will be benchmarking

Rick FantiniVice President, Human Resources

Menasha Corporation

“I do not feel our compensation strate-gies are particularly cutting edge or dramatically unique from other orga-nizations, but one of our strengths is that we apply consistency and rigor to the process.”

• 25 years of experience in business development, HR, and procurement

• Previously owned HR consulting business for the manufacturing sector

• B.A., M.A., Michigan State University

• M.B.A., Kellogg, Northwestern University

Mr. Fantini can be e-mailed [email protected]

I prefer to evaluate jobs at an individual level, decide which ones are particularly key, and adjust compensation levels accordingly to ensure we are getting the best results from a strategic perspective.

Rick Fantini


Menasha Corporation


Rick FantiniVice President, Human Resources , Menasha Corporation (continued)

against bad information and draw-ing incorrect conclusions.

Assessing the Importance of Each PositionOf course, we have to make deci-sions on compensation levels based on our organization’s needs and strengths. Some positions may not be as strategic for us, so we might not need to be at the high end of the compensation range (though of course we cannot be too low — we do not want turnover or poor engagement levels). On the other hand, we might choose to over-pay on other key functions if they are critical to business results. For those positions, we will realize that it could take nine months to find

the right replacement, so it makes sense to adjust compensation lev-els accordingly. Ultimately, it is about what is right for the partic-ular needs of the business.

We spend a lot of time to ensure we get the right matches and set up the right profiles so we can bench-mark effectively.

How Compensation Motivates EmployeesOne of the ways we inspire all of our salaried employees is by provid-ing them with a total compensation statement. While this is something many companies do, it is a fairly new practice here at Menasha. We provide this statement to ensure

Expert Advice

Performance Evaluations For our performance evaluations, we use a com-pany called Success Factors, and internally we refer to this process as the total management system, or TMS. At the beginning of the year, every employee is required to sit down with their manager and set their goals for the year. Then they will have periodic reviews to check progress, and an annual review to discuss performance for the year. This process is all documented in the system, which helps us determine merit increases. In that respect, we are like most companies; increases are primarily linked to performance and the overall budget that is avail-able for merit increases.

Executives:

Beyond Marketplace Percentiles: Using Benchmarking to Set Compensation Levels

Towers Watson (compensation-consulting firm):• Provides benchmarking data

• Develops alternatives to ensure compensation is competitive and aligns with interests of management and shareholders

Findings are reviewed by the Board of Directors’

Compensation Committee.

All other positions:

Benchmarking data is provided by Kenexa Corporation and other sources.Two critical issues are addressed:• Are the positions matched correctly?

• How critical is each position to the company’s business strategy and goals?

The appropriate marketplace percentile is then chosen as the basis

for compensation.


Rick FantiniVice President, Human Resources , Menasha Corporation (continued)

employees are educated on the cost of all benefits as many employ-ees do not realize the total cost of employing them. They do not always understand what portion of the money goes to medical, 401(k), Social Security, and so forth. So the statement shows them the value of their total compensation — not just the base salary.

We just did an engagement sur-vey, and the results indicate that people believe they are being paid fairly. The most important thing we strive for is “employee engage-ment,” which is defined as the level of discretionary effort employees are willing to give the company in order to be successful. Employee engagement is driven by a combi-nation of a lot of factors, including

not only compensation, but the way we treat people and the over-all culture of the company. We have a great culture where people are treated in a way that lets them know they are valued and have the opportunity to make a difference. People work hard, but they have a great deal of fun with what they do. We want to maintain and build on this culture.

Top ChallengesIn terms of compensation chal-lenges, one of the most difficult aspects is striking the balance between being competitive in the market while also being fair to our shareholders. What do we need to pay to ensure we have the right,

productive talent to achieve the results we need? As I mentioned above, I think some companies take a cookie-cutter approach to com-pensation levels and decide to pay according to prevailing market-place percentiles, but I don’t think that’s the right approach for us. I prefer to evaluate the jobs at an individual level, decide which ones are particularly key, and adjust compensation levels accordingly to ensure we are getting the best results from a strategic perspective.

Compensation is a sensitive issue, which is why it is so important to stay on top of it, review best prac-tices, and explore innovation practices to see if they are good for your business strategy. ■

© Books24x7, 2012 Greg Kayata ExecBlueprints 9

Greg KayataVice President, Human Resources , Covidien

Working as a Team to Establish Compensation Strategies To establish our pay scales, we use market-price benchmark surveys to ensure that we are aligned with our relevant labor markets. Our pay-delivery ranges allow for the flexibility to pay for performance.

To determine the most effective compensation scales for our busi-ness, HR works with the hiring manager to appropriately scope out the nuances of a particular role. In conjunction with the hiring man-ager, we determine the appropriate pay package needed to attract tal-ent to the role. Working together, the HR generalist, the staffing per-son, and the hiring manager then make an offer. HR is involved at

every step, from scoping and gen-erating the job requisition through the offer and acceptance.

Additionally, the C-level team meets annually to review our strat-egies for deploying field equity or bonuses. This discussion is then reviewed by the board of directors. While the board is not necessar-ily involved so much in deploying

the direct reports, they do have to sign off on the budget as part of the internal governance process.

How Compensation Motivates EmployeesTo get a general sense of how our compensation strategies are being received by our employees, we include a survey question on our bi-annual engagement survey that

gauges perception of the correla-tion between pay and performance. The responses to these questions have been favorable; however, we do recognize that people tend to be guarded when responding to com-pensation questions. We actively track exit interviews for root causes of attrition and monitor time-to-hire as another measure of the effectiveness of our compensation approach. We also offer company-wide bonuses that reward employ-ees when the business is doing

Greg KayataVice President, Human Resources

Covidien

“We have an obligation to our employ-ees to set goals that are attainable and relevant to their work. Correspond-ingly, we have an obligation to our shareholders to ensure that we are motivating people and rewarding the appropriate results.”

• With company since 2006

• Over 20 years of HR leadership experience

• Previously with Invensys and Gen-eral Dynamics

• B.A., Psychology, Providence College

• M.S., Industrial Relations, University of New Haven

Mr. Kayata can be e-mailed [email protected]

In essence, our compensation strategy is to align our incentives and targets in such a way that will drive performance and effectively motivate employees relative to their peers elsewhere in our markets.

Greg Kayata


Covidien

Expert Advice

Establishing Pay Scales Based on Market Trends Our compensation strategies have changed slightly over time as we have de-emphasized some of the product lines that are farther along in their respective lifecycles and, hence, sensitive to the pricing pressures that naturally accompany the late stages of a lifecycle. Accordingly, we need to continue to ensure that costs, including salaries, support the respective business plans.

Generally, those areas with more nascent technologies involve greater clinical differentiation and, correspondingly, customers express greater preference for these particular products in our pipeline. So for these product lines we have had to adjust our pay structures upwards to compete in our target markets. All in all, these changes have proven favorable for talent acquisition and retention.

© Books24x7, 2012 Greg Kayata ExecBlueprints 10

Greg KayataVice President, Human Resources , Covidien (continued)

well. The bonuses vary based on role and, in some cases, local prac-tice. When benchmarking our pay delivery, as appropriate, we look at base/bonus mix — not simply at target compensation — in order to maintain competitiveness.

Performance ReviewsOur employees complete self-assessments at the midpoint and end of our fiscal year. After receiv-ing key stakeholder feedback, man-agers evaluate these assessments and then engage in a collabora-tive discussion with the individ-ual employee. The performance reviews conclude with a rating that encompasses behavior/competency and performance-based results. We determine merit increases based on

the results of that conversation, which are relative, of course, to our established pay ranges.

Although this formal perfor-mance review takes place twice during the year, it is important that manager–employee feedback occur consistently throughout the year — not just on this semi-annual basis. In the past, we had suggested an interim review to keep the discus-sion going, but we are now man-dating a formal discussion at the six-month mark just to ensure that these conversations are actually taking place.

The Compensation PackageOur compensation packages essen-tially vary based on the employee.

For our hourly, non-exempt, and entry-level employees, we have a results-based program that contrib-utes to a small percentage of pay-on-target. This eventually becomes an annual bonus incentive scheme. As people move to higher levels, we also include equity rewards, which serve as long-term incentive.

In essence, our compensation strategy is to align our incentives and targets in a way that will drive performance and effectively moti-vate employees relative to their peers elsewhere in our markets. We spend a significant amount of time ensuring that we have achieved the appropriate alignment between metrics and results with proposed payouts. ■

Covidien’s Best Practices for Motivating Employees Through Appropriate Compensation

Step 1: Ask.

Include compensation question(s) on

employee surveys.

Track exit interviews for root causes of

attrition.

Monitor time-to-hire as another measure of compensation.

Step 2: Reward performance.

Companywide bonuses when the business is

doing well.

Hourly employees: Results-based

programs

Higher-level employees:

Equity rewards

© Books24x7, 2012 Ideas to Build Upon & Action Points ExecBlueprints 11

Ideas to Build Upon & Action Points I. In Setting Compensation Levels, What Challenges Do Companies Face?Compensation is always a sensitive issue — and one on which the board, manage-ment, and employees can disagree. This is why it is so important to stay on top of it, review best practices, and explore new ways of making everyone happy. Concerns that can arise (and which orga-nizations will need HR’s help to address) include:

• Given revenues and profitability targets, what can the company rea-sonably afford to pay its employees?

• How can you determine that your compensation packages align with market rates for your industry and geographic area?

• How can you ensure that employees are sufficiently motivated by the compensation to remain with the company and perform at their best?

• How can your company maintain that delicate balance between being competitive in the market and satis-fying the needs of shareholders?

II. The Bottom LineAt most companies, payroll expense is one of the largest items in the budget and, accordingly, will require contin-ual review to make sure prevailing com-pensation practices meet the reasonable requirements of all stakeholders. Given that, at the end of the day, you can only afford what you can afford, important areas to consider with your finance team and company leadership include:

• What is appropriate to pay your median top performers in your market?

• What are the up- and downsides to breaching those market ranges?

• How do your incentive programs align with the company’s growth strategy?

• How can you ensure that compensa-tion continues to drive profitability in all your product lines, regardless of their stage on the life cycle?

III. Must-Have Practices for Evaluating Employee PerformanceLike many companies, your compensa-tion decisions are most likely driven — at least in part — by what each individual actually contributes to the work product. That’s why managers need to set goals for each of their people that are attain-able and relevant to the work, and then track outcomes by:

• Conducting periodic one-on-one conversations to check progress and share feedback

• Asking employees to complete self-assessments at the middle of the year

• Attaining feedback from other key stakeholders

• Holding formal annual performance reviews that include ratings encom-passing behavior/competency and performance-based results

• Documenting all findings

IV. The Golden Rules for Determining Appropriate Compensation for All EmployeesTo ensure that your compensation phi-losophy is properly aligned with busi-ness strategy and goals, you need to develop a consistent policy that is fair to both shareholders and employees, i.e., one that will meet business plans for growth because it’s high enough to motivate retention and performance but not so high that it threatens profitability. Moreover, because market conditions are always shifting, you need to review this policy regularly. Essential steps for devel-oping the right compensation plan are:

• Researching total-compensation ranges for your particular posi-tions in your markets by reviewing industry benchmarking surveys and publications

• Basing compensation structures on the internal importance of various positions to business strategy and goals, the positions’ requirements,

and the time it takes to fill those positions

• Monitoring overall turnover and time-to-hire rates

• Eliciting employee feedback on compensation through engagement surveys

• Conducting exit interviews with departing employees to discover root causes of attrition

V. Essential Take-AwaysAs your enterprise evolves, your com-pensation strategies will need to follow suit so that your policies will continue to meet the needs of your business and employees — and send a clear message that high performance will be recognized and rewarded. Cost-effective practices that meet these aims include:

• Total compensation statements that educate employees on the actual value of their remuneration

• Full complement of benefits, includ-ing health insurance, paid time off, and matches for contributions to retirement plans

• Revenue-based quarterly and annual bonuses

• Stock options and restricted stock purchase plans

• Individually targeted incentives composed of cash bonuses (includ-ing spot bonuses) and stock equity for top performers

• People-oriented culture where every-one has the opportunity to make a difference ■

© Books24x7, 2012 Ideas to Build Upon & Action Points ExecBlueprints 12

Ideas to Build Upon & Action Points (continued)

ExecBlueprints is a subscription-based offering from Books24x7, a SkillSoft Company. For more information on subscribing, please visit www.books24x7.com.

10 KEY QUESTIONS AND DISCUSSION POINTS

1 How does your company establish pay scales? How are your compensation scales designed to reward high-performing individuals?

2 Have your company’s compensation strategies and policies changed over time? What was the net effect of the changes?

3 What is HR’s role in determining the most cost-effective compensation solutions for the company? Has this role changed over time?

4 What challenges does your company face when it comes to setting the right compensation equations? How can orienting rewards to high-performing individuals help address some of these challenges?

5 In what ways do your compensation policies motivate your employees to perform at their best?

6 What process do you use for conducting performance evaluations and pay reviews? How often are these completed? How do they help determine compensation scales?

7 What are your company’s best practices for setting compensation levels? In what ways are your levels comparable to those for your industry and locality?

8 In the next 12 months, how do you plan to leverage your workforce to generate higher profits? How can productivity be linked to compensation?

9 How do you measure the ROI for your compensation equations? How does a performance-based reward system affect the company’s bottom line?

10 What other benchmarks can be used to determine the efficacy of performance-based compensation? What is measured? How often?

?