Getting Executive Buy-In for Your Compensation Strategy

This is an excerpt from our ebook collaboration with BambooHR “Getting Smart About Compensation.” Download the full guide here.

When you’re working through the process of building a compensation strategy and you have a formal plan mapped out, make sure you clearly explain it to your executives. You’ll get easier buy-in from managers and employees if you do.

Human nature is to oversimplify what we don’t understand. That’s why, among executives, HR often gets oversimplified. We sometimes take for granted that executives see the same value and complexity in things like compensation planning as we do, but often they don’t.

Many executives won’t realize that compensation is something that requires a plan or a strategy, and it may not be something they’ve included in their business plan before. When you open their eyes to the world of your discipline, its methodologies, strategy and importance, they will come to respect and value you. And it’s important they do, because their buy-in is critical to effective compensation planning; you can’t do it without their support.

Payroll Is a Company’s Biggest Expense

Payroll is by far a company’s biggest expense, so you’d expect it to be subject to the greatest amount of planning. It often gets almost none.

But the cost of getting payroll wrong is tremendous.

Executives must care about compensation if they care about retention, engagement, satisfaction and performance. It’s your job to help them connect these dots.

According to SHRM, the cost of replacing an employee is somewhere between 90 percent and 200 percent of their annual salary; researchers at Columbia University pegged it at 150 percent, depending on the position. That said, the true cost of losing an employee is more than your organization is likely to realize, because the costs are often hidden, delayed or difficult to attribute.

A BambooHR study found that pay is the number three reason people leave jobs, and for good reason. A Forbes report from 2014 noted the average raise an employee can expect is about 3 percent. Given the cost of inflation, that amounts to only about a 1 percent increase in actual spending power. If an employee leaves a company, however, they can look forward to a 10 to 20 percent increase in salary. In extreme cases they can even see a 50 percent gain.

That’s quite an incentive to leave, and a powerful illustration for executives of why they need to be scientific, disciplined and rigorous about keeping your company’s comp strategy current.


Want the step-by-step on creating and maintaining a modern compensation plan? Grab your copy of “Getting Smart About Compensation” today!

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