Been thinking a lot recently about weaknesses’ of traditional salary admin systems in an extended down market, and doing some periodic research … and wanted to give you an update on what I am seeing :

One of biggest constraints on traditional approach with broad based employee comp is that all forms of performance typically rewarded by one vehicle, base salary … another challenge in recent years is that in addition to a slower economy (resulting in lower salary budgets), there have been big increases in amount of total comp going to health care (and unfortunately employees tend to view HC as an entitlement, so company not always getting relative credit for those $) …

Executive compensation on other hand has become much more developed … in terms of companies have gotten better at using different forms of compensation to reward various types of performance … Amounts devoted to Exec base salaries have actually shrunk like that for rank and file, but due to use of other components overall exec total comp has grown … but Exec comp is now almost all performance based (value created, Financial performance, Team performance, Individual performance)…

Typically takes several years to fully build out and implement the following ideas, but successful ‘alternative compensation practioners’ appear to be looking at things like:

  • Making sure bulk of any base increase dollars go to key strategic roles and top performers … using two pools type approaches, and/or direct intervention.
  • Looking more closely at performance, and Improving “line of sight” by education managers at all levels on how their roles impact corporate success … examining the metrics more deeply.
  • Connecting roles deeper in organization to “other” comp components … typically using profit sharing and or short and long term incentives more broadly … cascaded goals from above with rewards that often change historic rewards mix levels ….

CEO pay question – Not sure I would say rank and file paid poorly relative to execs in terms of amounts, as overall productivity still low … but does appear possibly so in terms of alignment to performance …

Just a few ideas for consideration ….. we will continue to watch trends and innovation … As we can assist your compensation planning efforts in any way, please do not hesitate to let me know.

All the best!

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