Three Signs It’s Time to Update Your Compensation Program
A well-structured compensation program is an essential part of any organization’s talent strategy. However, with so many competing priorities, it’s common for organizations to fall behind in updating their compensation program design, leading to challenges in recruitment, employee satisfaction, and overall company performance. Mission-driven work plays an important role in our society, and as leaders, it’s important to know how healthy your program is. Stay ahead of any potential challenges by keeping an eye out for these three signs – and if it’s time for an update, learn what advice our team has to help you get started.
1. Your Organization Struggles to Attract and Retain Staff
One of the sure signs it’s time to review your program is if your organization is finding it difficult to hire or keep employees. While the “Great Resignation” is over, many economists are warning of a frozen job market, and although this signals a challenge for employers and employees, it’s important to understand that highly skilled and talented employees will always have options. For mission-driven organizations, attracting and retaining the right team is key to ensuring the work continues. So if you’re starting to see a pattern, it’s time to review your current program.
2. Internal Parties Have Serious Concerns About Compensation
Pay compression, inconsistent salary structures, or a lack of transparency can lead to disengagement and low morale. And if your employees are starting to voice their concerns with pay, this is a strong signal that you may be overdue for an update. However, if team members continue to express their concerns and you have an updated compensation policy in place, you might need to review how it’s being communicated and make adjustments. Transparency and trust are paramount in these conversations!
3. Your Compensation Program Is Outdated or Lacking Structure
Finally, if your compensation plan hasn’t been updated in several years—or if your organization lacks a structured plan altogether—it’s time for a change! The job market, industry trends, and cost of living evolve, so regular analysis and benchmarking is crucial. Without periodic updates, your compensation strategy may no longer align with market demands or your organization’s goals.
Is it time for an update? If so, you might be feeling slightly overwhelmed, but don’t worry! We’ve got you covered. Read on to learn what your next steps are.
What to Do Next: How to Update Your Compensation Program
Talk with your staff
Assumptions are the enemy of any partnership, and that includes the one between an organization and its staff. Take the time to truly understand what is working for your team and what isn’t. If the conversations around compensation are challenging, or if you just want to ensure that the conversations with staff are mediated in a fair way – consider bringing in a third party, like Edgility, who can act as a neutral party and provide fair, balanced feedback and recommendations. This can be an excellent way to build trust and create buy-in for your new program.
Build your compensation philosophy
Chances are that your organization is clear on its external mission-based goals, but it’s possible you haven’t had the opportunity to explore what your compensation philosophy is. A compensation philosophy helps you get clear on your internal goals around staff attraction and retention which then helps to spearhead the structural work that follows. Edgility’s Compensation Philosophy Worksheet is a free resource designed to help you build a compensation philosophy that translates into a functional, sustainable compensation program aligned with your values.
Stay current by keeping information up-to-date
Job descriptions should be accurate and updated annually. It might save time to use the same one over and over again, but a clear, up-to-date job description is a strong tool for attracting the right candidates to apply and is vital to ensuring that roles are benchmarked correctly. Regularly benchmarking your compensation against similar roles in the industry will help your organization stay abreast of shifts and changes in salaries and is less in-depth than a full market analysis. It’s important to keep those job descriptions up-to-date so that when you do this work, you can easily compare and review the job functions of similar roles, doing so will help ensure that you’re comparing roles appropriately and not just by their titles.
Get the data
To truly understand where your compensation falls compared to industry norms, you’ll need to perform a market analysis. A market analysis is an in-depth process that uses data to determine if employees are being paid fairly for their work, and can help determine salary ranges. While benchmarking can often be completed in-house, to do a thorough market analysis most organizations will need the support of a third party. The right expert for your organization will be one that has deep industry knowledge, not just expensive software. In addition to their expertise, facilitating the process with an unbiased consultant can help build trust within your organization, thus smoothing out the roll-out when ready.
Design a Custom Compensation Program
Now that you’ve held the discussions, you’ve updated your job descriptions, and you’ve gotten the data, it’s time to build your new program. We believe strongly in transparent and fair salary practices, and we know that a strong compensation strategy can only work when it’s sustainable. Which is why we recommend letting these four principles guide you as you rework (or create) your compensation program.
It’s Competitive
To ensure your program will be competitive, leverage the data to understand what the market rate is for your industry and geographic location.
- It’s Sustainable
Make sure it’s a longer-term fix, and offer salaries that you can sustain based on current funding. Remember, you don’t have to make the salary adjustments overnight, if necessary, create a plan that prioritizes changes based on current findings, and brings all salaries up to your goal rate (at market or above) within a few years.
- It’s Personalized
Every organization is different and your compensation program will reflect that. Ultimately, your compensation plan and philosophy should align with your organization’s goals, values, and vision, and budget.
- It’s Fair and Transparent.
Whether we like it or not, perception can hold more weight than reality. This makes it crucially important to be transparent with existing and incoming employees about how you compensate and why. Be realistic with what your organization can provide, and you’ll be rewarded with a good reputation that brings in the talent you want and need.
Moving Forward
Talking about money can be challenging, especially for mission-driven organizations that can feel they don’t have enough funding to be competitive. Through our team’s combined decades of experience in the mission-driven sector, however, Edgility has found that a good compensation program that is well communicated is key to employee loyalty and longevity. Keeping your compensation program up to date ensures your organization remains an attractive option for highly skilled, and talented people, fosters employee satisfaction and trust, and supports long-term success. By taking proactive steps, you can create a compensation structure that benefits both your employees and your business.
