The Elements

By Andrea Schlapia   |   March 13, 2014

How to Create an Effective Compensation Plan

Categories: Blog, Compensation, Strategic Planning

Photo credit: ©iStock/Thinkstock by Getty Images

Photo credit: ©iStock/Thinkstock by Getty Images

 

How do you create a compensation structure that is fair to all employees, attractive to new hires, creates excitement and loyalty amongst your team and engages their learning development while increasing productivity? Reinventing the wheel is not necessary, but creativity, communication, and evaluation of your existing plan are essential.

In my years of creating compensation plans for organizations, I have found the overall goals of the firm lack a link to a compensation process. For example, one of my clients would like to establish their firm as “the best place to work in town”. I love the goal but found it doesn’t link to any current processes. When employees read this statement every week in a staff meeting, it is fruitless, stands alone, and has become meaningless. Linking the goal to various processes, specifically a compensation plan, would benefit the firm across the board.

Create an Effective Compensation Plan

Follow these steps to create an effective compensation plan.

  • Communicate your compensation plan to team members. Communication provides team members with a thirst to reach higher levels within the compensation structure and will increase employee engagement, productivity, and personal development.

Compensation Analysis

  • Perform a SWOT analysis of your existing compensation plan by studying the strengths, weaknesses, opportunities, and threats of your current structure.
  • Complete a cost analysis by focusing on your overhead and human capital costs. Determine the affordability of new hires if desired.

Job Evaluations

  • Create, review, and update your hierarchical organization chart
  • Review job descriptions and create, clean-up, and re-align to match roles
  • Determine roles for new hires if applicable

Performance Management

  • Audit your current performance management system
  • Establish goals, expectations, and incentives
  • Collect and conduct 360 degree appraisals
  • Analyze data
  • Create professional development plans

Compensation Plan

  • Integrate individual performance with compensation.
  • Base/Benefits/Incentives/Extras: If you haven’t read our blog, Compensation Conflict? What Employees Really Want, please do! You will find some great ideas to incorporate with your compensation plan.

Cost Analysis Update

  • Perform an overall cost analysis of your firm.

When compensation plans are effectively communicated; morale and retention will improve significantly. Download Ironstone’s Compensation Planning Checklist for use at your firm.

Still need some help? Our focus is on practice management strategies to enhance and improve both business and personal life.  We support professionals who desire to make major and comprehensive improvements that examine all aspects, not just an isolated area for change.

Let us know what questions you have about strategic planning, business development, operational effectiveness, the human element at your firm, or whatever is on your mind! Leave us a comment or email the Ironstone team.

 


Andrea Schlapia
Organizational Development and Human Capital

Andrea Schlapia, RCC™, HCS, sHRBP, is the Founder and CEO of Ironstone, which represents the culmination of her 20+ year career within the financial services industry. Her experience began as a financial advisor evolving into a consultant coach for advisors entering the field. This ignited her passion to support others through learning and development of best practices in order to achieve substantial results. To this end, she followed her desire into positions of senior-level practice management specialists for Dreyfus, Prudential, and DWS Investments prior to the realization of Ironstone.  Andrea’s focus is on practice management strategies to enhance and improve both business and personal life.

Andrea identifies 4 key performance areas known as the Fundamental 4™, which are required to design, develop, and sustain a successful business. Through coaching sessions and speaking engagements, she captivates her audience with interactive, high-energy presentations which are built with “how-to” strategies resulting in real-world implementation for significant impact. Andrea has been featured in multiple publications and audio broadcasts as a specialist and distinguished spokeswoman in the financial industry.

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