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Article | Beyond Data

3 ways to improve your compensation strategy using market data 

Compensation Strategy & Design
Beyond Data

By Hatti Johansson and Claire Lawford | May 27, 2021

If you aspire to create a rewards program that is competitive and cost effective, it’s important to continually review and challenge your market data needs. 

With the right compensation plan, an organization can attract and retain talent to drive profitable growth. However, setting your compensation strategy is only half of your journey. If you aspire to create a rewards program that is competitive and cost effective, it is just as important to continually review and challenge your market data needs.

Up to date market data is critical to crafting a successful rewards strategy that’s aligned to business strategy, financial long-range plans and other unique requirements of your organization. It ensures your organization is investing wisely and in line with the latest market practices, allows you to test how you are doing against your plan and objectives and identify emerging or hidden issues. When powered by technology, market data can help you generate actionable insights that guide your organization in making impactful and data-driven rewards and business decisions.

Here are 3 essential activities where organizations can leverage market data intelligence to their benefit:

  • Review your total compensation strategy
  • Benchmark your rewards programs against the market
  • Market price your jobs
  1. 01

    Review your total compensation strategy

    A regular review of your total compensation strategy will help your organization attract and retain the right talent given its business objectives, changes in government laws and regulations, and emerging pay trends. Revisiting your strategy gives you the opportunity to check if it’s still anchored to your organization’s pay philosophy or if your pay philosophy still supports your business goals and objectives. Note: There’s no one right answer but a range of possible solutions in a dynamic market condition.

    Know

    Start by doing a quantitative analysis to understand to what organizations you’re losing talent and from where you are attracting talent. You can then look at the market data specifically for this peer group to understand if there are any significant gaps. Your talent peers differ by factors such as employee segment, job family, organization size, location or even critical skills. You may discover that you’re competing with organizations outside your industry for certain talent with broad, transferable skills. As each organization is unique, it’s less about mirroring a competitor’s approach and more about clearly communicating how your offering is different and the value it brings to your employees.

    Align

    Engage your business stakeholders to understand their strategic objectives and where they want to be in terms of talent acquisition, internal equity and market competitiveness. Review current total compensation practices and target market positioning for base salaries, bonus targets, salary structure design, benefits policies, allowances and any other pay programs you offer. You can also review the overall pay mix – and articulate what’s different and why. Don’t forget to include the non-monetary rewards and perks that you offer to your employees that your competitors might not! Look at what’s working and what’s not working in areas of your business with high turnover and long lead times to fill positions and explore deeply seeded issues impacting your ability to attract and retain talent. Once you have identified the problem areas with your business partners, align on the compensation strategy and prioritize the areas of focus for action.

    Now you are ready to bring in the data.

  2. 02

    Benchmark your rewards programs against the market

    Using market data not only enables organizations to compare their rewards offerings with their peers; it can also provide insights on market trends. Benchmarking puts into perspective where you compare to your competition and any gaps that might exist.

    You’ll want to compare your pay against multiple factors to get the total compensation picture. Be sure to look beyond base salaries and include bonus targets, actual payouts, eligibility, allowances, and benefits policies. Ask your business leaders to share trends they are seeing in the market, including for emerging or hot job families, industry developments or challenges in talent acquisition.

    After you’ve done a full sweep of your current state, you can start to look at the gaps and diagnose where the pain points may lie. With this information in hand, it’s much easier to make data-driven pay decisions.

    Benchmarking rewards can give you a better vantage point for knowing what combinations of rewards works best for employees.

  3. 03

    Market price your jobs

    Not all jobs are created equal. Segmentation is often required to make sure your programs support your business objectives.

    Once you’ve defined your talent market, do a high-level analysis to understand the overall competitiveness of your organization against the market. Look for trends like certain job families that are consistently paid lower than the market or certain levels that are consistently paid above the target market. This will help narrow down where you should spend more time focusing the next level of your analysis.

    Identify key roles critical to achieving your business’ strategy and objectives. These roles should receive special attention and additional in-depth analysis of current state and pay trends. Organizations usually adopt a different pay strategy and mostly at a higher percentile to effectively attract and retain critical talent for these roles.

    Critical talent these days is often synonymous with highly demanded, digital talent across all industries and geographies. According to our latest Artificial Intelligence and Digital Talent Compensation Survey, 90% of organizations are having difficulty in both attraction and retention of digital talent. The same study also shows that 85% of organizations compensate for their skills. This explains why compensation levels for these roles change quickly as in-demand digital skills can be very dynamic. Digital talent may be found in a different industry or location and what attracts and retains your other employees, may not work for this segment.

    With this type of specialized talent, it’s also important to understand the specific skills your business requires before assuming compensation is the only issue. As mentioned, certain skills may be more in-demand than others. Our research shows that premiums can range widely. To understand the entire picture, you need high-quality compensation market data that has both wide and deep data coverage across all industries to create a competitive rewards program for this segment of your workforce.

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    Communicating your compensation strategy

    Before you roll out any changes to your compensation strategy, consider and plan your communication strategy. Map your total compensation strategy to your vision, values, inclusion and diversity strategy, employee value proposition and employee experience. There should be a well-concerted effort among teams in your organization to effectively carry out the communication plan. It starts with leaders creating awareness and communicating the value of your programs throughout the years. Then it is supplemented with HR teams supporting and training managers to deliver and support the message. Identify opportunities and adjacencies to embed pay messages (e.g., career development, performance and talent management) and measure and link strategy to attraction, retention and employee engagement KPIs (e.g., feedback loops). Look for technology platforms that help you communicate the value of your Total Rewards programs efficiently and effectively while also creating a great employee experience and enhancing their appreciation of your rewards offering.

    Leveraging market data intelligence means utilizing pay data to its utmost potential. It draws strength from the vast amount of data points of high-quality compensation data, thus creating a complex network of insights and solutions that your organization can explore and use to their advantage. Such enormous amount of data allows you to be liberal with ideas and ways in performing complex tasks such as compensation strategy reviews, benchmarking, market pricing jobs and creating an effective communication plan.

    With your survey results now available, it’s time to put that data into good use, maximize your data investment and complete the other half of the journey towards having a responsive, competitive, and cost-effective rewards strategy. Get your data now!

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