Social Icons

Promote Organizational Effectiveness Through Compensation Management

When you hear the term compensation management, you may simply think it applies to how much a company is willing to pay an employee, monetarily, for their work.

In today’s complex marketplace, however, it goes much deeper than simply addressing the base salary of employees.

Compensation management is absolutely vital to the organizational operations of any business, large or small. The focus of compensation management is often about striking that ideal balance between leveraging and retaining top talent and keeping the budget of a business in-line with expectations.

Why is Compensation Management So Important?

A thorough and comprehensive compensation management strategy is important for so many reasons.

First, it’s one of the primary ways to motivate employees and raise their level of performance and achievement. For this reason, many companies are implementing pay-for-performance strategies that incorporate a variety of components including training and development, performance management and compensation management.

This broad, robust strategy to manage compensation is proving time and time again to be an avenue to improve employee satisfaction, productivity, retention and ultimately the bottom line for companies willing to put in the time and effort to implement these strategies.

Ultimately a compensation management strategy should be one that has a positive influence on the behavior of employees, attracts new employees, and helps an organization keep their current talented employees.

Distinguishing Compensation Management

The term compensation management serves as an umbrella for two different branches: direct and indirect compensation.

Direct refers to the salary an individual is making in exchange for their service to a company and it also encompasses health benefits in many cases.

Indirect compensation can more broadly apply to anything that may serve as a positive motivating factor for employees, and is often thought of as part of a wide-ranging benefits package. For example, this may refer to flexible work options like telecommuting, a company car, the subsidizing of childcare, or free development courses.

The primary trend we’re seeing in compensation management isn’t just toward more pay-for-performance, but there’s also a focus on attracting and retaining the best and brightest through more indirect compensation offerings. Employees are increasingly reporting a focus not just on the amount of money they’re paid, but also the importance of work-life balance, and having a job that offers them things they value on a personal level.