Jorge Ponga
Humanólogo Consulting
Expert Contributor

Reinventing Total Compensation in the New Reality

By Jorge Ponga | Fri, 09/11/2020 - 09:00

We are all or have been users of some kind of compensation, perhaps as a collaborator, entrepreneur or independent professional. That's why today, I want to focus on organizations. 

Companies have focused on facing this crisis by being highly innovative in issues such as supply chain, digital transformation, exploring sources of liquidity and also reducing costs in many ways. Among the changes to face the crisis, many times the companies incur in untying personnel or reducing in some way payment schemes. Either by lowering salaries, not paying variable schemes or impacting other benefits. 

Today I want to raise a different idea. I suggest to take advantage of this juncture that drives us through facing the "New Reality" as an opportunity to transform the payment models in our organizations and really connect business results based on the Employee Experience. 

The reality is that our life has been brutally transformed in a very short time. As a result, the interests and needs of employees, and also the existence or rather survival of many industries and sectors in the world, are being put to the test with things that we thought had already been overcome.

How do you do it?

It seems basic, but let's start with a "Remuneration Dialogue" with the people. Let's have talks or collect more structured information through questionnaires or sessions to understand what employees in your payment scheme value or don't value. It is not a question of measuring whether they feel well paid, but of delving into how they can feel well paid. That is to say, understanding the schemes that fulfill personal, group or business objectives.

We must also recognize that segmentation through "people" is key. Let us understand that "people" as groups of individuals share similar life characteristics and would therefore value an ad-hoc treatment. Just as we identify and work on the Customer Experience in our organizations, we must put the same or more seriousness in our collaborators. They are the engine of our results and the center of the energy of the value chain.  
What about business results?

Today, more than ever, business results dictate the survival or otherwise of organizations. As professionals, we have a responsibility to know, understand and influence business results through people - collaborators on all fronts. 

The differentiator of a company in the market and in the impact with the customers, goes beyond the traditional actions. This means that it is necessary to have focused and motivated collaborators in the name of the company and its mission.

Compensation is not the only means to achieve this, there are others and it is enough to review any serious approach to Employee Experience, but especially we must recognize that it is an important pillar as a motivator and driver of results.

Some organizations have opted for models that reduce salaries by 10 to 50 percent in order to sustain short-term results. However, the associated questions are: how do you go back to the initial point of pay and how long will this process take? 

But will high-performing, high-potential employees wait that long? Will they not have more attractive opportunities in the market along the way? With our competitors? 

It is time to deepen a total remuneration strategy and communicate it quickly and clearly. Such a strategy must be holistic, not only containing aspects related to the base salary, but also including the results of a previous analysis of issues arising from the "Remuneration Dialogue" and about what really matters to employees.

This analysis will surely include the chapter on variable compensation.In its various manifestations, incentive for our sales force, operational excellence bonuses for our administrative staff and its linkage to the performance management model and short- and long-term bonuses for executives who link expected results not only this year but in the 5-year plan. 

A variable compensation model should be the driver of expected group and individual results. However, these results and the way to reach them are being strongly challenged in these unprecedented times. 

Let's put our payment at risk schemes to the test by addressing these questions with solid answers: Do variable payments really address the current business strategy? Do they cover key value chain impacts? Are eligible staff directly involved for this purpose? Are key eligible positions missing? Do those eligible for the program understand it? Do leaders assume their communication role? Do employees do what is necessary and more to achieve the results and consequently meet and exceed the expected objectives?

Although many questions surround our environment and our responsibility, in the short and medium term it is important to get answers and develop assertive solution plans. Faced with events of such magnitude as Covid 19, we are key players in helping organizations move faster from a "Response" to a "Recovery" level. Let's not lose this moment in history.

Photo by:   Jorge Ponga