“We just revisited our employee compensation strategy…3 years ago.” Oops.

October 8th, 2014
Written by: Elizabeth Richards

“So, how much do you make?” said one director to another.  Or, “I’m sorry but I’ve decided to go with that other opportunity,” said the marketing candidate you thought was a perfect fit.

So begins the domino effect that leads to nagging, sometimes emotional and often costly issues in and around employee retention, morale and talent acquisition—and an organization’s eventual realization that something is wrong in its approach to compensation.

Most often, the cause is that nothing has happened: Your compensation strategy and/or plan are woefully out of date—if they ever existed at all. As a rule of thumb, you should assess and revisit employee compensation at least every three years.

Here are the two main reasons why you should revisit Employee Compensation Strategy at least every three years:

Things change! Or, better said, nothing ever stays the same. Especially in today’s economy where the pace and number of changes seems to increase every year or so. Compared to three years ago—or even just two—consider these questions:

• Are your business strategies and priorities the same?
• Have you hired any new people or replaced others?
• Has anyone been given new responsibilities or titles?
• Have any employees received raises?

It’s a virtual certain that your organization has experienced much change. And the chances are great that those changes have had or will have an impact on your Employee Compensation Strategy.

The Cost of Doing Nothing in Immense. Employee productivity, satisfaction and morale are, of course, critical. On top of those, there is an tremendous financial impact and opportunity cost of not knowing whether the hundreds of thousands or millions of dollars you spend on compensation and benefits—likely your first or second largest cost—are optimized.

Compensation Assessments and Strategies Cost Far Less than Bad Morale and Defections

As with many things—auto maintenance, dental care and hardwood floors come to mind—“an ounce of prevention is worth a pound of cure.” (Thank you Benjamin Franklin!) And while prevention may not be cheap, it’s nothing compared to the negative outcomes of poor morale, low productivity and decreased employee retention rates.

Like anything that’s worth doing, Compensation Assessments and Strategies are worth doing well. (Thank you, Philip Stanhope, 4th Earl of Chesterfield!) That’s why preventing compensation issues—or addressing them after they arise—requires a comprehensive expert process to understand what has happened and why, how to fix it and—critically—how to keep it from happening again.  To learn about TPO’s process, click here.

Compared to the cost of doing nothing with your biggest or second biggest cost line item, revisiting your compensation strategy is well worth the investment.