Article

Unlocking value from effective compensation management

January 27, 2017
by Carole Hathaway, Willis Towers Watson Practice Leader, Rewards, Sarah Varney, Willis Towers Watson Senior Consultant, Communications and Change Management, and Tom Smith, Willis Towers Watson Compensation Software Product Sales Leader

As labor activity continues to pick up globally, employers face increasing pressure to deliver the right compensation to the right employee segments in the right way. At the same time, employers are looking to improve the efficiency and effectiveness of their Total Rewards programs overall. In the case of compensation, the stakes are especially high as base pay remains the leading driver of retention and attraction for employees globally. Employers need to make critical decisions regarding how to allocate their often tight compensation budgets in a way that delivers the best return for the organization, and attracts and retains the talent required to achieve their future business objectives.

As organizations begin to examine their compensation strategies and processes, they find considerable room for improvement. In this piece, we examine how an end-to-end approach focused on best practice in compensation design, delivery and communication can help organizations overcome these challenges. Included are findings from the Willis Towers Watson 2016 Global Talent Management and Rewards, and Global Workforce Studies as well as the 2015/2016 Global Staying@Work Survey.

Seven steps to creating a competitive and effective compensation management program

The following steps can help you get started on the path to an effective, end-to-end compensation management process that delivers value to employers and employees.

  1. Identify your key employee groups and their reward preferences.
  2. Determine how compensation should align with your strategy and culture.
  3. Prioritize pay design.
    • To ensure external pay equity, carry out comprehensive benchmarking but focus on critical roles.
    • To ensure internal pay equity, establish a global job-leveling system and salary structure.
  4. Revisit criteria for merit pay and incentives.
    • Adopt a more holistic view of performance and ensure that you align rewards with that view. Evaluate a broader set of performance dimensions that go beyond individual performance in the recent past and include such factors as achievement of team goals and future potential.
  5. Equip managers with the training, and the right tools and technology to make effective compensation decisions and have effective compensation discussions.
  6. Implement consumer marketing tactics using a strong digital analytics component to communicate your compensation program to employees in an engaging and tailored manner.
  7. Use compensation software with global job-leveling, benchmarking, and robust reporting and analytics capabilities to create a more streamlined and transparent compensation management process.