Beginning a compensation program is a major proposition. Whether you are dealing with a large organization that has a multitude of functions and jobs, or a start-up company with only a few key players who wear multiple hats, you will need to find somewhere to begin. Given that the only constant is change, there is no “right time” to do this. Although sooner is probably better than later, the most important thing is to be properly prepared.
Before driving the first stake in the ground, you’ll need to do some research to determine the nature of the beast that you’re dealing with. In addition to understanding the company’s external environment (industry, competitors, regulatory environment, economic, financial, geographic, social, legal and technological influences), you should have a core knowledge of the company’s internal workings (its mission, goals, objectives, products, resources, culture, management, and overall departmental structure). Of particular interest is where these two areas intersect as this is where the company’s future lies. In order to be successful, the compensation program that you create should build upon and enhance the organization’s strengths and opportunities, while recognizing and taking into account any possible weaknesses or potential threats.
If this seems like a lot of work, that’s because it is. It may take a village. This is the time to think about who is going to be on your project team. As an aside, one of the prerequisites for a successful compensation program is buy-in from top management. You will need support from key members of each department within the organization and if the CEO is not on board, you’re not likely to get this.
Assuming you have the backing of your CEO and that you’ve gained a foundational knowledge of your company, begin by analyzing the company’s organizational charts to understand the interrelationship of its departments and functions. If organizational charts don’t exist, and you don’t have the time or inclination to develop them, you can make an Organizational Outline that lists jobs in each department in a reporting structure. Every organization has a hierarchy, whether formal or informal, and it’s a lot easier to understand what that is if you have a visual representation. Another way of identifying your organization’s hierarchy is to look at how it “values” its human resources through its pay structure. Arraying an organization’s pay from high to low will give you a fairly good idea of the current value hierarchy.
Once you understand the existing hierarchy, you will be ready to delve deeper into each department through the process known as Job Analysis.