There are many factors why employees seek to work for or remain with an employer, with compensation being a key element. There is research that suggests that compensation’s role is not to be a driver of attraction and retention but support the other areas of the employee and employer relationship. In creating an Employee Value Proposition (EVP), organizations also consider factors that optimize employee engagement, which is just as important as employee attraction and retention (see Gallup’s Q12 Employee Engagement Items).
Wilson Group consultants conduct interviews and employee focus groups to fully understand culture and the role of compensation when partnering with clients to design compensation programs. In our experience, there are several prevalent reasons why employees are attracted and remain with an employer:
- The reason the organization exists: Compelling mission or business strategy
- The future of the organization: Growing in a thoughtful manner and communicating how the actions support the growth strategy
- Organizational leadership: Senior leaders that are competent and demonstrate values consistent with employee values
- The people an employee works with: Working with smart, high integrity people who collaborate to efficiently meet individual and team goals
- The work that an employee does: Is challenging, interesting and rewarding
- Being supported: Resources are provided so that an employee can do his or her work effectively; in addition, the ideas and the work done is recognized
- Meets an employee’s financial and personal needs: A feeling of being paid fairly and competitively in total compensation, receiving the elements that are most meaningful, and having a flexible, safe and inclusive work environment
The elements that define employee compensation at an organization are customized to each organization’s culture and strategy and the type of employees it desires to attract, retain and engage.
BASE SALARY – A fixed amount of cash compensation received on a regular basis
- Increases to base salary are based on career growth and individual performance, the skills and competencies employed, and what is affordable by the company
VARIABLE COMPENSATION/SHORT-TERM INCENTIVE – Bonuses with established metrics and goals with a performance period of one year or less and usually paid in cash
- The amount one receives is based on the performance of the overall company, one’s business unit and/or one’s individual performance.
- The weighting of these measures will reflect the individual’s accountability for performance.
VARIABLE COMPENSATON/LONG-TERM INCENTIVE – Incentives that have a time or performance period that is longer than one year, paying most commonly in equity/equity-like vehicles or cash
- The type of vehicle used is based on what is meaningful, tax effective, and consistent with the individual’s role in the company.
- Long-Term Incentives encourage the retention of individuals regarded as critical talent within the organization.
PERFORMANCE RECOGNITION – One-time cash or symbolic rewards for demonstrating behaviors, results or values in doing one’s work
- Recognition programs provide timely and meaningful reinforcement of individuals and teams who go beyond their normally expected responsibilities to provide outstanding services or contribution to other areas of the company and/or customers.
- Performance recognition programs focus on “how” things get done so they reinforce our values and goals.
When these elements of compensation are developed and applied strategically, their role is to help create performance or desired behaviors and results, attract and retain employees and create engagement. Wilson Group consultants work with clients to develop compensation programs in the context of the EVP and the organization’s business strategy and values.