Compensation Plans

Develop a program outline.

*Set an objective for the program.
*Establish target dates for implementation and completion.
*Determine a budget.

Designate an individual to oversee designing the compensation program.

*Determine whether this position will be permanent or temporary.
*Determine who will oversee the program once it is established.
*Determine the cost of going outside versus looking inside.
*Determine the cost of a consultant's review.

Develop a compensation philosophy.

*Form a compensation committee (presumably consisting of officers or at least including one officer of the company).

*Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, incentive-based versus noncontingent pay).

*Determine whether the company should set salaries at, above, or below market.

*Decide the extent to which employee benefits should replace or supplement cash compensation.

Conduct a job analysis of all positions.

*Conduct a general task analysis by major departments. What tasks must be accomplished by whom?

*Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each.

*Interview department managers and key employees, as necessary, to determine their specific job functions.

*Decide which job classifications should be exempt and which should be nonexempt.

*Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary.

*Develop a final draft of job descriptions.

*Meet with department managers, as necessary, to review job descriptions.

*Finalize and document all job descriptions.

Evaluate jobs.

*Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.

*Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary.

*Prepare a matrix organizational review.

*On the basis of required tasks and forecasted business plans, develop a matrix of jobs crossing lines and departments.

*Compare the matrix with data from both the company structure and the industrywide market.

*Prepare flow charts of all ranks for each department for ease of interpretation and assessment.

*Present data and charts to the compensation committee for review and adjustment.

Determine grades.

*Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.

*Determine the number of pay grades, or monetary range of a position at a particular level, within each department.

Establish grade pricing and salary range.

*Establish benchmark (key) jobs.

*Review the market price of benchmark jobs within the industry.

*Establish a trend line in accordance with company philosophy (i.e., where the company wants to be in relation to salary ranges in the industry).

Determine an appropriate salary structure.

*Determine the difference between each salary step.

*Determine a minimum and a maximum percent spread.

*Slot the remaining jobs.

*Review job descriptions.

*Verify the purpose, necessity, or other reasons for maintaining a position.

*Meet with the compensation committee for review, adjustments, and approval.

Develop a salary administration policy.

*Develop and document the general company policy.

*Develop and document specific policies for selected groups.

*Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.

*Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule).

*Meet with the compensation committee for review, adjustments, and approval.

Obtain top executives' approval of the basic salary program.

*Determine and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.

*Present Date to the compensation committee for review, adjustment, and approval.

*Present data to the executive operating committee (senior managers and officers) for review and approval.

Communicate the final program to employees and managers.

* Present the plan to the compensation committee for feedback, adjustments, review, and approval.

*Make a presentation to executive staff managers for approval or change, and incorporate necessary changes.

*Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc.

*Make presentations to managers and employees. Implement the program.

*Design and develop detailed systems, procedures, and forms.

*Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers.

*Have the necessary forms printed.

*Develop and determine format specifications for all reports.

*Execute test runs on the human resources information system.

*Execute the program.

Monitor the program.

*Monitor feedback from managers.

*Make changes where necessary.

*Find flaws or problems in the program and adjust or modify where necessary.