You know your company has a problem and needs help.
Perhaps you're losing employees who claim their salaries are not competitive with those offered by your competitors.
Perhaps you need an employee incentive plan but don't know where to start. Maybe your performance management program is not producing the desired results.
It's time to partner with a proven compensation consultant to help you define your objectives and lay out a plan for achieving them. The first step is ensuring your objectives are SMART – Specific, Measurable, Achievable, Relevant and Time-bound.
Here’s how to set up SMART objectives when working with a compensation consultant:1. Determine what types of projects that require consultant expertise
These can include compensation analysis and surveys, performance management, organizational designs, executive assessments, and job descriptions.
In a previous post, I talked about how business leaders too often look at compensation policies as a silo, failing to recognize it is one of many intertwined operational components that contribute to a business' success or failure. Everything should always tie back to your business strategy. It is important to work with your compensation consultant to:
- Relate your company's business strategy to your human resources and compensation plans
- Determine your operational needs to support that strategy
- Identify which of the above types of projects is required to support your needs
2. Clarify the end-game
Do you want to improve employee satisfaction to increase retention? Do you want employees to trust senior management more and buy into the company's business strategy? Work with your compensation consultant to clearly identify your key objectives for the project. Without clearly stated objectives, you’ll be wasting time and money.
3. Identify Key Performance Indicators – KPIs
Determine the KPIs that are most important in measuring the success of the project. For instance, if the project’s goal is to improve employee retention, you will need to measure employee turnover before and after your project is completed.
4. Tie It All Together
Once objectives are crystal clear, your consultant will typically provide a scope of work that includes a project methodology and timeline for achieving results. Review the methodology and timeline thoroughly to ensure nothing has been omitted or overlooked.
5. Be Prepared to Succeed
If you’ve followed the steps outlined above, you’ve positioned your project for success. Now what? Work with your consultant to plan for next steps and/or follow-up to ensure whatever policy or operational changes you implement remain relevant and time-bound.
6. Tune into the Opportunities
One of the benefits of partnering with a compensation consultant is the fresh perspective they provide that helps you see opportunities for improvement you might otherwise miss.
For example, one of your goals might be to improve customer service and you've identified what you think are three key steps for achieving that goal. Your consultant may point out that empowering employees to make decisions to solve customer complaints may the most effective means for improving customer satisfaction, an option you had not initially considered.
Setting SMART Objectives for an Executive Compensation Program
The owner of a mid-sized company wanted to change how raises and bonuses are awarded to executive team members. He retained McDermott Associates to design a better compensation program.
Clarify the end game. We started by asking a simple question: Why did the owner want to give these individuals raises and/or bonuses?
We determined that, in the past reasons, included:
- The executive asked for it or expected it;
- It has been a long time since the last raise, or
- It has always been policy to provide increases at regular intervals.
Setting KPIs. Next we asked: What is the real justification for increases?
Did the executives:
- Bring in new clients?
- Improve efficiencies or profit margins?
- Purchase new products or sources of materials?
- Serve a strategic role on the executive team?
Tying it together. Following these conversations, we recommended a Senior Management Executive Compensation Plan linked to the company profitability. A key plan feature was that a minimum profitability threshold must be met before any additional compensation would be awarded.
Achieving company success. In the first year on the new plan, the minimum threshold was not met and no raises or bonuses were awarded. In the second year, the minimum threshold was exceeded as members of the executive team were now focused on driving the company's profitability.
Need help setting SMART objectives for your compensation plan?
We can help. Contact Don McDermott at email@example.com to set up a complimentary initial consultation.