In this economy, the idea of compensation can be harsh when it turns on the underlying philosophy of "Just be glad you have a pay check."
A step above that sledge-hammer concept, best used by bullies, is the quid-pro-quo, labor for money, approach, which has the advantage of at least being honest, although it is rather a blunt instrument in human resources.
Andy Rosen, who heads ORC Worldwide's compensation consulting practice, thinks the best approaches tie compensation to career development. "Compensation management is a talent management tool," he said. "It's not just a quid pro quo." (ORC is a big human resources consulting company -- headquarters in NYC, although Andy works at a suburban Philadelphia office.)
Over lunch (he had the Mediterranean wrap), he explained the idea: Companies sort jobs into "job families" and then carefully consider what it takes to rise from a step one grade to a step two and so forth within each family. What are the analytic skills required? What responsibilities are undertaken? By carefully delineating these requirements including soft skills, the employee can talk with supervisors about getting the skills and assignments to move up -- both in responsibility and in pay.
"Organizations that use career-based compensation programs tend to have better integration between growth and development and compensation," he said.
A key component is to understand compensation as part of the general strategy of the company. Is the goal to reward top performers at the risk of alienating the rest of the staff? How competitive can a company be, or should a company be, in the marketplace? Does the compensation structure fit in with the general "vibe" of the company?
In general, he said, companies are looking at a concept called "total rewards." Beyond pay and benefits, the "total rewards" concept looks at other factors that create a "magnet" company -- the kind of company that attracts good employees and keeps them. Other elements are the general environment, the proficiency of supervisors and the ability of the company to both challenge and recognize its employees in a meaningful way.
Whatever the philosophy, "the most important part is implementation, which is all about communication," he said. It's better to have a poorly designed plan implemented and communicated well than to have a beautiful plan thrown out into corporate abyss without support.