In your day-to-day life, you invest time and energy in certain things. Usually, because you know you’re going to get something worthwhile out of it in the end!
Like, joining a gym.
You’re probably not paying a monthly fee and taking time out of your day for the free mints at the desk (but, hey, no judgment if that’s your thing!). You’re hoping to get something valuable out of the experience.
In other words, a return on investment (or ROI).
Compensation — like most things — needs to be invested in at an organization. Money, resources, and energy have to go into supporting comp at any company.
So, what does a company stand to gain by investing in a comp team?
What’s compensation’s ROI?
What strategic value can organizations get from compensation?
You comp pros won’t be surprised to hear this, but a thoughtful and strategic approach to compensation can have a huge impact on an organization!
It’s all too easy for companies to blend into the crowd of competitors, by doing things like pricing jobs at the median.
(Something that, by the way, 80% of organizations do.)
That’s not strategic. That’s doing what everyone else does.
Here’s an example of how we can strategically break that mold, in an all-too-common compensation situation:
Connie is a great employee. She’s earning $75K annually — the median for her role. She’s not thinking about leaving, but a recruiter has reached out to her. The recruiter has offered her a similar role at a competitive organization and is offering to pay her 10% more than she’s currently making.
Sure, a 10% raise for Connie would cost the company $7,500 — but a Comp Strategist knows that recruiting her replacement won’t be free.
They know that replacing Connie would cost 21% percent of her annual salary in addition to whatever premium is needed to pay the new hire.
A Comp Strategist considers one more thing before making a final judgment — is Connie a critical player or a strong performer?
If she’s not, they might see this as a golden opportunity! This could be a chance to replace an average performer (sorry, Connie) with a stronger person who might provide, say, 20% more value to the organization for 10% more pay.
Now that’s a good ROI for compensation.
So, what does this mean?
When comp pros are thoughtful about strategy, they can look at who they need to retain based on what’s going on in the market. Comp Strategists are experts at tying these two things together, to make intelligent decisions that will improve the value of their organization.
The ROI on one employee may not be huge to a bigger company, but it can be big to that employee’s line manager (which is a win for the compensation manager who facilitated it).
And if repeated across the company?
We’re talking about a serious impact. One that your CFO and CEO are going to notice.
So, it’s clear that comp can offer a strategic edge against competitors — but only if we measure how compensation affects important company goals.
But are we measuring comp pros in the right way to do this? Are we helping comp map to big company goals?
Well, we were curious.
So we surveyed the comp community to see exactly how comp pros are measured — and if those measurements help prove how valuable comp truly is!
All our findings are compiled into our latest survey report, “How is Comp Measured?”, which you download for free right now.