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Craft a Compensation Philosophy

Lay the groundwork for compensation that is competitive, cost effective, and brand aligned.

  • Compensation is typically the number one operational cost in organizations, yet few have total rewards strategies in place to properly direct and control this expenditure.
  • Many organizations experience an inconsistent application of compensation programs due to a missing or outdated compensation philosophy, resulting in internal and external inequities.

Our Advice

Critical Insight

  • The compensation philosophy should be primarily driven by organizational strategy and support the achievement of strategic objectives.
  • A pay philosophy provides decision makers with guidance to ensure that compensation practices are consistent and aligned across the organization.

Impact and Result

  • A well-designed compensation philosophy clearly articulates the organization’s high-level approach to pay for each of its employee segments, including its target competitive position.
  • There are both internal and external factors that influence compensation, and these factors need to be explored to develop a compensation philosophy that fits your organization’s context.
  • McLean & Company’s approach guides HR through developing a compensation philosophy that supports organizational goals and is relevant for the operating environment.

Craft a Compensation Philosophy Research & Tools

1. Explore internal and external factors influencing compensation

Gather data and information on various factors, which will guide decisions in the following step.

2. Draft a compensation philosophy

Develop a compensation philosophy that aligns with your organization’s strategy and competitive environment.


Workshop: Craft a Compensation Philosophy

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Assess Current State

The Purpose

  • Discuss the organizational factors influencing compensation.

Key Benefits Achieved

  • Organizational insights that will impact the approach to compensation.

Activities

Outputs

1.1

Identify and discuss compensation challenges.

1.2

Discuss internal and external factors influencing compensation.

  • Compensation Philosophy Worksheet

Module 2: Craft the Compensation Philosophy

The Purpose

  • Conduct a competitor analysis.
  • Develop compensation principles.
  • Determine target market positioning strategies.

Key Benefits Achieved

  • Drafted compensation philosophy.

Activities

Outputs

2.1

Identify competitors for talent.

2.2

Uncover fundamental compensation principles.

2.3

Determine market positioning strategies and targets.

2.4

Draft the compensation philosophy.

  • Compensation Philosophy Worksheet
  • Compensation Philosophy Template

Module 3: Customize the Point Factor Tool

The Purpose

  • Select and customize factors aligned with the organization’s context.

Key Benefits Achieved

  • Customized and aligned point factor job evaluation tool.

Activities

Outputs

3.1

Select strategically aligned factors.

  • Strategically aligned point factor tool
3.2

Customize factor definitions and levels.

Module 4: Customize the Point Factor Tool

The Purpose

  • Weight the factors and allocate points across factor levels.
  • Test the tool for bias and accuracy.

Key Benefits Achieved

  • Tested point factor tool.

Activities

Outputs

4.1

Weight the factors.

4.2

Check for bias.

4.3

Allocate points to each level.

4.4

Test the tailored Point Factor Tool.

  • Customized and tested Point Factor Tool

Module 5: Next Steps and Wrap-Up

The Purpose

  • Ensure the point factor method is implemented and maintained effectively.

Key Benefits Achieved

  • Action plan to continue the job evaluation process.

Activities

Outputs

5.1

Review tool testing results.

5.2

Develop an action plan.

  • Action plan

About McLean & Company

McLean & Company is an HR research and advisory firm providing practical solutions to human resources challenges via executable research, tools, diagnostics, and advisory services that have a clear and measurable impact on your business.

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your HR problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Need Extra Help?
Speak With An Analyst

Get the help you need in this 1-phase advisory process. You'll receive 3 touchpoints with our researchers, all included in your membership.

  • Call #1 - Explore internal and external factors influencing compensation.
  • Call #2 - Examine potential compensation principles and market positioning.
  • Call #3 - Review drafted compensation philosophy.

Contributors

  • Diana Holec, Senior Associate, Performance, Reward & Training, Aon Hewitt
  • Jackson Lynch, President and Founder of 90 Consulting
  • Jason Rowe, Manager of Survey Services, American Society of Employers
  • Kent Flint, Chief Operating Officer, Real Estate Webmasters
  • Kristen Cifolelli, Director, Research Services, American Society of Employers
  • Megan Graham, Senior HR Advisor, Ross Video
  • Melanie Hall, Job Evaluation Analyst, London Health Sciences Centre
  • Michelle Edwards, Global Director, Total Rewards and Organizational Effectiveness, Agnico Eagle Mines Limited
  • Randy Ross, Regional Compensation Specialist, Danfoss Group
  • Syma Khan, Senior Manager, Compensation, Loblaw Companies Limited