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- Many organizations experience an inconsistent application of compensation programs due to a missing or outdated compensation philosophy, resulting in internal and external inequities.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 onsite 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
Identify and discuss compensation challenges.
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
Identify competitors for talent.
Uncover fundamental compensation principles.
Determine market positioning strategies and targets.
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
Select strategically aligned factors.
- Strategically aligned point factor tool
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
Weight the factors.
Check for bias.
Allocate points to each level.
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
Review tool testing results.
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
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