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Recently I received a request to submit an article to a newsletter about “Holistic Compensation.” Well, that’s a new one, I thought. I’ve used lots of terms to describe the uses of compensation systems, but that’s one I missed. We prefer the term “strategic compensation.”
Because of a tight deadline I sent along an article I already have ready to go. I didn’t even add the term “holistic.” I hope they won’t mind.
Now that I have a little time I started to think about the term. Webster’s online dictionary defines “holistic” as relating to or concerned with wholes or with complete systems rather than with the analysis of, treatment of, or dissection into parts. All of a sudden, I’m in love with the term. That’s exactly how compensation should be looked at by senior management company.
Most don’t. The salary budget isn’t connected to the short-term incentive plan isn’t connected to the long-term incentive plan isn’t connected to the hip-bone… (you get the idea). The CEO assumes that the HR leaders will handle all “basic” compensation issues and he or she will handle the senior management negotiations with the board or owners. This goes on in other areas. The CFO may handle the long-term plan. The Sales VP may handle her commission systems. It’s not coordinated. It’s not integrated. It’s not holistic. It’s dissected into parts.
The reality is that all elements of compensation and benefits reflect an investment by shareholders that is worthy of a measurable return. If so, they should be carefully orchestrated according to a central, guiding philosophy that is tied to the company’s strategic plan (thus “strategic compensation). All pay components should be accountable to the strategic plan. The bonus plan for the lowest eligible employee should be constructed with the same conditions and goals in mind as the CEO’s incentive plan. After all it’s one “complete system.”
Why isn’t this done? Traditions and bias. Unfortunately, it’s a waste of energy, direction and money. Holistic compensation is exactly how all companies should approach their biggest investment–at least if they want to attract better employees, build an ownership mentality, and improve overall results. I may have to go back and write a new article.
