By Anne Howard
Anne Howard- Human Resource Consulting
One of our HR Experts, Anne Howard, answered the following question from one of our Employer members:
How do we initialize and implement a compensation program, to encourage employee growth and retention?
1. Understand your current situation
To develop an appropriate solution (whether it is compensation, reward or a different solution) it is necessary to have a clear verified understanding of your current situation. If there are organizational problems like a lack of clear expectations for performance, poor supervision and management, an absence of constructive feedback, or other problems affecting the work environment, adding a new compensation program is unlikely to produce the sustained positive results.
2. Identify the options
Assuming the other problems do not exist, the first decision you must make is how you will attempt to encourage employee growth and retention. Your options include: You can increase base pay, you can add some new benefits and/or a variable pay program.
When base pay levels are much lower than others in your industry and overall environment, increasing your base pay could have a positive impact on your retention. I can also improve employee interest in growth and development when they perceive that their effort is fairly rewarded.
These are non-cash based rewards provided when specific targets are achieved. For Example:
Vacation entitlement is the labor standards base of 2 (10 days) weeks after one year. For each additional year of service an additional 2 days paid vacation is provided to a maximum of 20 days up to completion of 10th year of service. Add time on five year increments after that.
Growth and Development Improvements
Establishing and communicating clear career paths, and career progression programs and ensuring that employees understand the opportunity to move along the various career paths is an initial step in creating interest in growth and development.
Career progress and planning require sound performance management programs, supported by mentorship. Financial support for the training, education and development programs increase their attractiveness.
Variable Pay Programs
Because you are interested in obtaining specific behavioural changes (Stay instead of go and learn instead of remaining at current knowledge/skill levels) an incentive based pay program can produce the desired results. An Incentive Based program is designed on the basis of If you achieve these specific results, then you will be provided with a specific amount of money.
A variable pay program that is cash based simply provides a bonus at specific points if the employee remains with the company to a point in time. Program design is very important to ensure that unintended negative consequences are minimized.
Knowledge/Skill Development Bonuses or Base Pay Increases
Providing a bonus or skill enhancement base pay increase for completion of training, development or education programs that contribute to improved productivity and increased capacity to perform has the potential to encourage growth. Again the program design will be important to ensure that desired productivity improvements and/or capacity are achieved.
3. Select the approach (or combination of approaches)
A decision about the approach, whether it the addition of one or more of the options available, needs to be made based on:
existing reward strategy
existing compensation programs
what makes sense based company culture
capacity to administer the program
ability to measure the success of the selected program
4. Identify your success measures and monitor progress
Along with developing the clear understanding of the current situation, it is important to define success and to ensure the right measures are used to gauge success. For example: Having 50% of employees participating in training, education and development programs could be a partial measure of success. If the real desired outcome is to improve productivity today there must be a mathematical formula for establishing productivity and capacity for improved productivity so that changes can be tracked.
Establish the time frame required to call the program a success or failure.
Establish what will occur if the program does not deliver the results desired.
5. Develop the ‘marketing plan’ for communicating the program to employees
Ensuring that employees understand the value of the new program, what it takes to obtain that value and communicating it as a desirable outcome for the behaviour(s) the employee must exhibit is crucial to the success of the program.
6. Implement the plan
Establish the time and way the program will be implemented.
Establish the length of time necessary to identifying the success or failure of the program.
Ensure the details are covered – for example: if a years of service program is introduce to reward people beginning in 2010, the start dates and correlating rewards need to be set up for every employee.
7. Monitor success
Set-up the timeframe for measuring results and then carry it out.
Anne Howard is a Human Resource Management Consultant based in Calgary AB.
Anne Howard- Human Resource Consulting
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