Welcome back to the GrowPerform blog series, where we continue to explore the challenges organizations face when it comes to managing their most vital resource – their people. We deliberately scheduled our last post on Performance Management and this week’s blog to align with year-end activities, so let’s get to it and challenge some norms as we take a deep dive into Compensation.
Perpetuating Unspoken Injustices
Implementing a competitive and equitable compensation package has acquired a reputation for being corporate smoke and mirrors. It’s a challenge many organisations struggle with as they try to balance factors like budgets, market norms, and employee performance. This situation leaves many people wondering: Is the compensation system rigged? So, what's the way forward?
The Deceptive Mirage of Market Benchmarking
Most HR teams rely on market benchmarking, but how fair is it when the market itself is swayed by inequalities and prejudices? The truth is, that relying solely on market benchmarks can perpetuate unjust pay gaps. It's like trying to fix a leaky roof with a band-aid.
Take action: It’s time for us to look beyond market benchmarks and the easiest place to start is on home ground. Conduct regular internal equity audits to identify and address disparities within your organization.
Pay Equity: The Skeleton in the Closet
Addressing pay disparities based on gender, race, or other demographics isn't just a matter of corporate social responsibility; it's a matter of social justice. It's about time organizations confront the skeletons in their compensation closets and make amends. As leaders, we should be making a firm commitment to closing the gender and diversity pay gaps within a specific timeframe.
Take action: Implement a pay equity review to identify and rectify any disparities within your workforce.
Performance-Based Compensation: The Illusion of Meritocracy
Linking compensation to individual and team performance sounds great in theory. But in practice, it often falls short. Hierarchies, biases, and office politics can taint the process. True meritocracy remains elusive, leaving many high-performing employees unrewarded.
Take action: Take a look at our previous post on Performance Management where we discuss the importance of a transparent performance evaluation system that includes regular feedback and ensures that promotions and compensation adjustments are based on merit, not favouritism.
Unmasking the illusion of "total rewards"
Organizations proudly present their comprehensive "total rewards" packages and we’ve spoken before about the illusion of token rewards look shiny on the surface but don’t have a meaningful impact for your employees, yet the promise of career development remains a distant dream for many.
Take action: Post-pandemic, it’s more important than ever to re-evaluate your total rewards package to ensure it aligns with employee expectations and needs. Consider offering flexible benefits that cater to diverse employee requirements.
Transparency: The Taboo of Openness
Being open about how an organization handles compensation has traditionally been seen as risky. Many organizations have worried that it could lead to discontent among employees. However, there's a changing trend, especially with the younger generations entering the workforce.
Companies like Glassdoor are at the forefront of challenging this status quo and they practise what they preach. They've recognized that a lack of transparency in pay can breed negative sentiments among employees, which, in the long run, can erode trust. On the flip side, companies that embrace transparency in their compensation practices tend to not only build trust but also enhance employee engagement and satisfaction.
Take action: If total transparency feels too radical, consider developing a comprehensive compensation transparency policy that provides employees with insight into how their compensation is determined, including factors like market data, performance evaluations, and pay scales.
Employee Input: Voices in the Wilderness
Some of the more progressive organisations we have worked with now involve their employees in the compensation process. But at many companies, such involvement is an afterthought at best. Isn't it ironic that the very people who are directly impacted by compensation decisions are left out of the discussion?
Take action: Speak to your employees, we guarantee you will get some insightful feedback especially if you put in place a structured mechanism like regular surveys or focus groups where employees can provide input on compensation-related matters, ensuring their voices are heard.
Compensation Reviews: The Forgotten Promise
Promising a compensation review is one thing, but following through on that commitment is quite another. This not only affects your compensation strategy but also erodes trust within your organization which is detrimental to your bottom line.
Ideally, companies would schedule regular compensation reviews and adjustments to ensure their strategies align with market trends and shifting organizational goals. However, we understand that this might not always be feasible, especially for smaller organizations or those with budget constraints.
Take action: If frequent reviews are not an option, the least you can do is fulfil the promises you make about compensation. For instance, if your organization experiences significant changes, such as an influx of new team members, ensure that you follow through on commitments like normalizing compensation for legacy team members to maintain fairness and trust within your workforce.
In conclusion:
In this ever-evolving landscape, understanding the truth about fair and equitable compensation is essential for organizational growth and employee satisfaction. By learning more about systematic injustices, challenging norms and taking concrete actions that support diverse employee requirements we can pave the way for real change. If you are ready to lead your organisation into a more equitable future, get in touch. GrowPerform are here to help.
Stay tuned for more thought-provoking revelations in our blog series as we continue to expose the realities and strategies for optimizing your organization's most valuable asset—your people.
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