Compensation Best Practices: What Do Top Performers Do Differently?

In our latest Compensation Best Practices Report, which gathered responses from 7,100 respondents on their pay practices, we took a look at what really sets top performers apart.

For this report, we defined top-performing organizations as those who are number one in their industry and who met or exceeded their revenue goals in 2017.

What we found is that compared to typical organizations, top-performing organizations often make different decisions about compensation, culture and pay brand. We identified four sets of behaviors that set top performers apart:

  1. They consider pay to be an ongoing practice, not an annual event.
  2. They build their pay brand with intention.
  3. They trust their managers and train them to talk about comp with employees.
  4. They listen to their employees.

Pay as an Ongoing Practice, Not an Annual Event

Top-performing organizations tend to consider pay to be an ongoing dialogue with employees, not an annual event that comes and goes. In our survey, we found that top-performing organizations do these things more frequently:

  • Complete a market study: 56 percent of top-performing organizations have completed a market study within the past year vs. 51 percent of typical organizations.
  • Give bonuses: 31 percent of top-performing organizations give bonuses or incentives at least quarterly vs. 28 percent of typical organizations.
  • Check market data for individual jobs: 37 percent of top-performing organizations get market data for individual jobs at least monthly vs. 33 percent of typical organizations.

Build Pay Brand With Intention

pay brand

Top-performing organizations are also more likely to connect the dots between compensation and culture. They recognize that the way they pay, including how much and why, matters to their potential employees and current employees.

They start by being intentional about how they spend their compensation budgets: top-performing companies are more likely to have a formal compensation strategy (46 percent vs. 35 percent of typical). In practice, this means they:

  • Reference market data for their jobs. Only 18 percent of top-performing organizations do not complete full market studies (vs. 24 percent of typical). They are also more likely to let that data drive their pay higher for competitive jobs (58 percent vs. 50 percent of typical).
  • Give base pay increases. 87 percent of top-performing organizations gave increases in 2017 (vs. 78 percent of typical). They also budgeted higher increases: 33 percent of top-performing organizations budgeted higher than 3 percent raises (vs. 27 percent of typical).
  • Use variable pay more often. 79 percent of top-performing organizations use variable pay vs. 70 percent of typical organizations. When they do, they’re also more likely to budget their variable pay (only 18 percent of top-performing organizations don’t budget variable pay vs. 27 percent of typical).
  • Fight to keep their talent. Only 28 percent of top-performing organizations don’t counter-offer if an incumbent gets an offer, vs. 32 percent of typical, especially if the employees are high-performers (25 percent of top-performing organizations vs. 19 percent of typical).
  • Top-performing organizations are actively addressing pay inequities due to gender (25 percent vs. 17 percent of typical) or ethnicity (18 percent vs. 15 percent of typical).
  • Have greater aspirations for being transparent with their pay practices: 62 percent of top-performing organizations aim to be transparent about pay in 2018 (vs. 56 percent of typical).

Trust Their Managers and Train Them

Top-performing organizations are more likely to trust their managers to have difficult pay conversations with employees.

In fact, 67 percent of top-performing organizations are either confident or very confident in their managers’ abilities to have tough conversations about pay (vs. 57 percent of typical). They are also more likely to train managers to talk about pay (36 percent vs. 27 percent of typical).

Finally, top-performers are more likely to report that their managers have a say on pay for their direct reports, understand the pay increases approved for their direct reports, can explain the rationale behind increases and believe their direct reports are paid fairly. In short, they give their managers credit for knowing both how comp decisions are made and how to communicate comp across their organization.

Listen to Employees

Top-performing organizations get a pulse on employee engagement much more frequently. Twenty-four percent use ongoing or real-time surveys to measure employee engagement, vs. 16 percent of typical organizations. What’s more, they actually pay attention to results: 32 percent of top-performing companies have changed their pay strategy as a result of employee feedback (vs. 26 percent of typical).

Find out why your compensation strategy has the power to make or break your business this year. Download the full Compensation Best Practices Report here.

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