Pay Plan Operations Ensure Your Compensation Strategies Succeed

Too many good pay strategies fail because there is no cohesive operational plan holding them together. They are designed, announced and then revisited when someone in leadership asks the question, "Now why do we have this plan and what kind of results is it generating for us?" Often it's human resources that is asked to answer for a given rewards program, even though the plan might have been initiated by the CEO, CFO or owner of the company. Many times the problem isn't the plan itself (although some "tweeking" may be needed). It's just that there are no are no operational underpinnings to ensure the collection of rewards plans work as a unit and drive the outcomes they're intended to produce.

Pay plan operations is as important as plan design.

Properly constructed and implemented pay plan operations can preserve, protect and enhance the purposes your compensation programs are supposed to serve. To that end, an effective operations plan should include the following:

Operational Integrity

This element means that you have a means of assuring consistent, fair and wise decision-making for your plan.  If your plan has operational integrity, you have successfully navigated the following questions:

  • How do we validate the effectiveness of our pay programs?
  • How do we ensure our compensation approach is consistent with our pay philosophy?
  • What programs should we consider expanding or eliminating?

Financial Stewardship

This part means you have a means of measuring and maximizing the return you are receiving on your compensation investment. If your plan is effectively addressing the need for financial stewardship and accountability, you are able to answer the following questions:

Partnership Reinforcement

This area has to do with ensuring your employees understand and value their rewards proposition and feel more unified with ownership in their vision of the company's financial future. If your approach to plan operation is reinforcing a sense of partnership with employees, you will have addressed these questions effectively:

Operational integrity, financial stewardship and partnership reinforcement are the three legs of a stable pay operations "stool." When companies approach their rewards management in this framework, they ensure greater understanding, acceptance and endorsement of the financial partnership they are trying to forge with employees.  A sound operational plan communicates consistency and stability. As a result, even if a plan design is imperfect, the overall value proposition is given appropriate deference and respect by its participants. That result puts the company in a better position to attract and retain the premier talent it seeks.

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