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Metrics for Compensation Allocation

Posted by Anadi Upadhyaya on February 24, 2013


Simon would like to allocate performance bonus to his workforce who got performance rating of 5/5 and 4/5. People who got 5/5 rating will get (X) % of their base salary as performance bonus where as 4/5 will get (X-1) %. He would like to define compensation metric for the same so that he can apply it, with his decided % amounts, on his entire workforce rather than allocating to each one of them. He would also like to share it with his peers or subordinates in case they would like to use same metrics with their own numbers.

Compensation Allocation Metrics for Managers

Neither the use of organization wide published metrics is new to compensation process nor is the desire of a manager to build his own metrics for distributing compensation. Only question is whether your current (or potential) adopted compensation solution supports it or not.

As a manager, you would always like to create metrics that you can use to allocate compensation to your team as it will facilitate a smooth process and help you in well-informed decision-making. From ages, managers are using off-line tools to flag and store decision attributes which helps them in making compensation as well as other decisions. What they actually need is a system which not only allows them to build their own metrics based on various person related attributes but also allows them to share it with their peers or subordinates. Manager owned metrics supplements the organization wide metrics (aka HR established Metrics) and not really replace them.

Some managers will be happy if system supports basic attributes like performance rating, work location, Job/Grade whereas others may need more specific attributes like years in Job/Grade, compa-ratio and grade ranges. It will be beneficial to have embedded support for all the possible decision attributes as well as custom attributes (an extension to store business specific values) so that managers can build robust metrics for compensation allocations with great ease. It will result in compensation allocation process to reach the next level.

One Response to “Metrics for Compensation Allocation”

  1. Parag Jain said

    It would be great if the HRMS is able to provide managers/ recruiters a comparative view of the proposed compensation with:

    1) Industry benchmarks (Independent Compensation Surveys, such as Hackett, E&Y etc.)
    2) Org benchmark
    3) BU Salary Matrix
    4) Intra Team
    5) What if Analysis (of taking away one dollar from one person in the team and giving it to another person)
    6) Predictive Analysis of increment/ bonus on the team (would 8% to P1, and 10% to P2 is better than 8% to P1, and 7% to P2) – Sometimes a key performer might decide to look outside just because another team member got something better

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