One of the most critical management tasks is conducting compensation reviews for your employees. Most managers and companies do a poor job at this. So let’s talk about the do’s and don’ts and create an agenda for an effective compensation review.
So here are a couple of pointers. First, you must conduct your compensation reviews on a timely basis. You must always remember the scheduled review date and make sure you put it in your calendar. To be safe, schedule the meetings far in advance and tell your employees you are looking forward to them. Even if you are extraordinarily busy, acknowledge you are planning to conduct their review in the near future. Do not let these dates come and go. If you do, you send a powerful message to your employee… I don’t think your compensation is important. Second, you must be prepared for the review. Research the employee’s compensation history and market value. Layout your compensation methodology and develop a hypothetical three-year compensation opportunity for each employee. If you are not prepared for the review, you send a powerful message to your employee… I don’t think your compensation is important. Lastly, conduct a compensation review, not just a salary review. Every company offers different compensation packages and benefits to its employees. Make sure your employees understand the total compensation package they receive from your company and how it compares to other opportunities in the marketplace. Why? If any of your people are thinking about leaving your company for compensation reasons, you want to give them the information to compare. If you are compensating your people fairly, you should not be overly concerned about losing them.
Here is the agenda I use for a thirty-minute compensation review with every employee:
- Review the employee’s three-year compensation history
- Review the market value of the position
- Review our compensation methodology for the position
- Clarify the targeted total compensation for upcoming year and discuss any salary adjustment
- Discuss the employee’s three-year compensation opportunity (I never commit to it. I just discuss it as a potential scenario.)
Trust me this works. And, it sends a powerful message to your employee…I care about your compensation!