How to Create a Comprehensive Compensation Framework to Attract and Retain Talent.
As workers consider switching jobs, prioritizing flexibility and other perks, the time is perfect for companies to define a compensation philosophy and framework to guide promotions, hiring, and pay raise decisions.
The world of work shifted significantly within the past year, and employee turnover is on the rise. In an Achievers Workforce Institute report, 52% of surveyed employees were planning to search for a new job, while Microsoft’s Work Trend Index found that 40% of participants “are considering leaving their employer this year” (Inc.; Forbes). So as people think about moving roles and companies, it’s an ideal opportunity for companies to define why they’re competitive, how they pay relative to the market, and how their compensation plan helps attract and retain the right talent.
A compensation framework is a structure based on the company’s philosophy to facilitate competitive, consistent decision making for new hires, promotions, and ongoing pay decisions. Proactively creating a framework for informed decisions eases the administrative burden on hiring and helps avoid reactive or uninformed pay decisions that sometimes lead to costly mistakes, over hiring, or even unintentionally furthering the wage gap.
At White & Gale, we work closely with clients to identify their compensation philosophy and framework. The first stage involves gathering information using an approach we call D.O.O.P.: Discovery, Overview, Objectives, and Plan:
DISCOVERY
In speaking with the leadership team, we gather objective and subjective information about their initiatives or goals. To start, we learn about the organization and its culture and values. What makes them different or unique? Are they a traditional organization, progressive, remote-first, or a combination? What stage of business are they in, and how might that impact their philosophy? What are their existing comp practices, or what have they tried to date? Finally, by understanding what offerings they’ve already provided, we get a sense of their overall philosophy around employee experience, base salary, wellness, equity, and more.
OVERVIEW
At this point, we provide an initial impression of the situation based on the facts and analysis collected in our previous meetings. We provide our assessment of the current state and the areas of focus that we believe will have the most significant impact on our clients.
OBJECTIVES
Once we have gathered all the facts and created an assessment, we state the leadership team’s objective, goals, and outcomes. And based on all this information, we’ll begin to clarify what the organization can implement.
PLAN
Lastly, we provide a concrete and multifaceted plan to support the objective. Sometimes companies have a few options, in which case we’ll outline the pros and cons of each approach.
Once we have identified their compensation philosophy, we create the framework, which determines how many levels exist within the organization, how to create a process to determine when a new role is created, at what level it should exist, and how to hire into that level. This framework ensures you are hiring for the roles you need, hiring fairly and equitably across the organization, and having greater transparency to explain hiring and compensation decisions.
With a solid framework in place, we then compile a data-driven market analysis, make recommendations based on the compensation philosophy, and determine the company’s positioning relative to the market. Finally, after bringing together the comp philosophy, the framework, and market data, we help develop pay ranges by level and role for specific locations and specific types of roles.
In some cases, a company realizes they’re overpaying, and this will be cost-effective. In others, they’ll see they can afford to be more competitive than they initially thought. So, while helpful from a financial standpoint, the framework is also critical to help leaders convey why their hiring and compensation practices are competitive and fair.
According to PayScale, how you perceive yourself to be paid relative to the market is over five times more impactful on satisfaction than how you are actually paid. But unfortunately, most companies haven’t taken the time to create a comprehensive philosophy, framework, or strategy that would allow them to communicate this to their employees or prospective talent.
At White & Gale, we create guidelines and educate leadership on utilizing the framework for job-level decisions on promotions, hiring, and salary increases — including F.A.Q.s for change management, spreadsheets for senior leadership, and the best way for the organization to share this information internally.
How employees feel about their organization’s approach to pay, and fairness has a higher impact on job satisfaction than their paid amount. It sets a foundation to ensure workers understand how wage levels are set, whether they’re receiving competitive compensation, and if they are paid well. As the workforce continues to evolve, now is the perfect time to determine your company’s compensation philosophy and how best to communicate it to the world.