Traditionally, total wages are divided into direct wages and indirect wages. According to WorldatWork, the total compensation includes all the investments made by the enterprise to solve the human resources problems and all the things that employees think are important in the employment relationship. It includes five aspects: salary, welfare, work-life, performance and recognition, development and career opportunities. Overall compensation is more about the idea and practice of salary incentive from the perspective of employees' overall incentive experience. It is the synthesis of all the tools managers use to attract, motivate and retain employees.
Nowadays, more and more enterprises claim to attract, motivate and retain key talents through comprehensive compensation. However, the total salary of many enterprises is only a random combination of the above five salary factors, and the so-called total salary often has limited effect. In addition, the management of the overall compensation elements in many enterprises is scattered, and the management departments of different compensation elements may be different. Therefore, this so-called overall compensation method is even worse, and the return on investment of corporate compensation is also very limited. Enterprises need to integrate these different salary contents strategically and systematically through the overall salary strategy.
The overall compensation strategy is a part of the enterprise's human resources strategy, which integrates five types of compensation contents, clarifies the objectives, elements and the relationship between elements of the compensation plan, and forms a road map to attract, motivate and retain key talents. Effective overall compensation strategy describes the thinking behind all compensation incentive schemes in enterprises, provides a basis for the formulation and implementation of compensation schemes, and ensures the synergy between compensation concept and practice.
How do enterprises formulate the overall compensation strategy?
When an enterprise formulates a comprehensive compensation strategy, it must consider from three aspects: enterprise, employees and external environment. It must decide the relationship between comprehensive compensation and enterprise strategy and culture, the expression of overall goal, the competitive reference point and competitive positioning of the compensation market, the types and combinations of compensation, outstanding compensation elements, the degree of internal fairness and external competition balance, performance evaluation and its influence, and compensation communication.
The overall compensation strategy begins with a clear expression of the company's values and business strategy. At the same time, it is necessary to analyze the influence of internal environmental factors (mainly referring to the company's strategy, financial health, enterprise life cycle, enterprise culture and human resources, etc.). ) and external environmental factors (mainly refers to the labor market and competitors, etc. ) on the company's salary plan, and finally focus on the needs of current employees and target talents in the employment relationship.
Excellent enterprise sharing
The following are the statements of two excellent companies on their "total compensation strategy":
"Our goal is to maintain our differences in recruiting and retaining employees by paying attention to the opportunities we provide, especially variable salary, development and career progress. We offer competitive compensation and benefits, but we don't seek to differentiate ourselves through the elements in these overall compensation schemes. "
"We strive to improve our reputation as an ideal place for career development. We provide employees with opportunities for personal growth, ability improvement, organizational progress and employment security. The responsibility of employees is to achieve career promotion with the help of managers. We encourage employees to develop and plan their careers in a forward-looking way. Managers who can develop employees will be recognized and rewarded. On the contrary, a manager who can't train subordinates needs counseling and is likely to be replaced. "
This is the expression of their "overall compensation strategy" by two excellent enterprises.
Steps and main points
Understand the company's business strategy. The company's business strategy is a plan for competitive positioning of products/services in order to realize the company's mission and vision. Business strategy promotes human resources strategy and concept. Business strategic actions of enterprises, such as mergers and acquisitions, layoffs or global expansion, will generally produce many human resources problems, which will affect the choice of salary mode, salary composition, salary payment method and performance appraisal.
"Link" human resource strategy and business strategy. "You inspired it, you got it!" An effective total compensation strategy can establish a link between human resources strategy and business strategy. The overall compensation strategy needs to subdivide the staff, determine the required ability and expected performance behavior and output to achieve the enterprise goals, find the gap of human resources, so as to clarify how to establish the relationship among salary incentive, personnel ability, performance behavior and business strategy in the compensation strategy, and clarify the role and function of overall compensation in the business strategy map of the enterprise. For example, an enterprise that regards teamwork as the key support of its business model should adopt the salary form based on team performance, and exclude the salary form based on individual performance from the overall salary strategy plan to support its business strategy and human resources strategy. At the same time, the human resources strategy related to the overall compensation scheme must be transformed into specific plans, and these overall compensation schemes must be able to support the concept and strategy of human resources.
Generally speaking, in order to link the human resource strategy with the business strategy, it is necessary to determine the overall salary strategy: the best overall salary combination for each employee group. In these combinations, you can maintain a high level in one salary content and a low level in another salary content. For example, many enterprises now pay more attention to the balance between work and life.
The decision-making basis or method for allocating various salary contents (performance or position, motivating individuals or motivating teams, etc.). ); Divide the labor market suitable for each employee group in the market divided according to the standards of industry, scale, geographical location and performance; Competitive positioning of salary expected by each employee group in the market.
practical application
High-tech enterprises that implement tail strategy in business generally require R&D team to have high flexibility and speed. Therefore, in order to quickly acquire relevant technologies, such enterprises are more inclined to recruit from the market with highly competitive salary, or even "dig corners" directly from competitors' R&D teams; At the same time, such enterprises pay more attention to short-term performance, and performance becomes the key decision-making basis for employee compensation. If we want to establish an effective "link" between business strategy and human resource strategy, the overall compensation strategy of enterprise R&D team must at least include the following key contents: market-leading overall compensation scheme; Creative salary incentive form; Salary mainly depends on personal performance.
Develop a roadmap for total compensation
When making the overall compensation strategy, enterprises can't be limited to individual project design, nor can they make systematic changes at one time. Enterprises should design the overall compensation strategy from a larger perspective, incorporate the overall compensation into the road map to attract, motivate and retain talents, determine the "blueprint" of the overall compensation reform, and clarify the salary content, the status of different salary contents, interconnection and reform timetable. In order to start the overall compensation plan on a solid foundation, it is necessary to list the existing compensation items, evaluate and rank the effect of each item, and analyze the relationship between these compensation items and enterprise strategy. A good salary project is very important, but it is the key to organically link the overall salary with the enterprise strategy. The following is the key work to evaluate the existing compensation items and make them related to the enterprise strategy.
List, list all items, plans, allowances and even salary items that are not used now.
Evaluate the ranking, evaluate the effect of each compensation scheme, and evaluate the gap with industry best practices. The effect of the project can be determined in many ways. For example, low participation usually means low interest, or maybe low understanding. Ask the line manager and list the five most effective and five ineffective compensation items.
This is a simple but very important step to build a relationship. Sort out the enterprise strategy and explain in what ways the salary project can drive the enterprise strategy.
Implement total compensation
At present, most enterprises provide various forms of salary items, such as fixed salary, floating salary, long-term incentive, various forms of benefits and allowances, various forms of employee development and recognition plans, etc. However, due to the division of management functions and other reasons, these plans often lack systematic consideration, and the functions of some compensation items may be contradictory, and the relationship between compensation items and enterprise strategy lacks analysis. For example, corporate strategy needs to change the current problem of "hardening" in some functional areas, but enterprises have been implementing "service awards" to encourage long-term service for the company. Therefore, it is very necessary to make an overall salary roadmap through the above steps.
Determine the financial impact and obtain the support of senior management. Even if you have finished all the previous work, it is just "homework". The real "exam" is that you need the support of executives. The support of top managers is the key to the implementation of the overall compensation strategy. Generally speaking, executives will decide whether to support a project according to their own demands. Therefore, after determining the overall compensation plan, it is very important to calculate the financial impact of the plan to ensure the reasonable investment, which is the vital information to get the support of the top managers of the enterprise.
Communicate and implement the overall compensation strategy. The implementation of the overall compensation strategy must include many actions to ensure that the strategy can successfully achieve its goals. However, in the implementation process, in addition to dealing with specific technical problems in operation, effective communication is very important for the realization of the overall salary strategic goal. When enterprises introduce the concept of total compensation for the first time, effective communication can integrate the concept and practice of total compensation into organizational culture; When enterprises push forward the comprehensive salary reform, effective communication can make employees fully realize the value of all salary contents provided by employers. Overall compensation communication can also increase the trust between enterprises and employees, reduce employees' mentality of taking compensation as their due rights, persuade employees to change their behaviors and choices, and better link the company's business objectives with personal efforts. According to the survey of Mercer Consulting in 2005, 96% of enterprises regard communication as the most critical factor to promote the success of the overall compensation project. The American Compensation Association has also formulated a series of strategic and tactical questions that should be answered in the overall compensation communication.
Monitoring and evaluation. It is necessary to monitor and evaluate the overall compensation strategy to ensure that it can continuously meet the business objectives of the enterprise and establish links with the mission, vision and values of the enterprise. In the specific implementation process, it may be necessary to adjust the overall compensation plan to find a balance between the cost and value of the plan. Enterprises can get a lot of feedback from employees through communication activities, and may find problems that need to be solved from the feedback and determine the priority of these problems. In the practice of overall compensation strategy, supervision and evaluation is a continuous process to maximize the strategic value of overall compensation.
In the highly market-oriented employment relationship, the relationship between enterprises and employees has become more fragile, the employee turnover rate is high, and the foundation of employees' loyalty and trust to enterprises is shaking. In recent years, as a key measure to solve the problem of talent absorption, motivation and retention, total compensation has attracted more and more enterprises' attention. However, total compensation is not a random combination of various compensation contents, and creating total compensation strategy is the key for enterprises to introduce total compensation scheme. Through the creation of overall compensation strategy, enterprises integrate the ideas and practices of various compensation elements, establish a clear and close relationship among overall compensation, human resource strategy and enterprise strategy, keep different compensation elements in harmony, and maximize the return on investment of overall compensation.