Strategic compensation

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Strategic compensation

There are many research studies on what drives employee engagement. Interestingly enough, compensation is not usually at the top of the list, but, as an employee yourself, you know that people do care about how much they are paid. You could go online and see what the average American worker in your industry is paid, but that won't drive performance and it's not strategic. So let's look at some other options for setting up employee compensation. One option is called pay for performance. This means that employees and managers are paid for accomplishing a goal. Some examples are, maintaining a quality score of 95% on customer service calls, or completing some big project.

Another example might be offering raises in conjunction with your annual performance evaluations, where people who receive all fives on their rating scale receive a 3% raise, and anyone who doesn't gets a standard 2% raise. The idea is that employees are promised more pay for better performance. This option only works if the processes and environment make achieving the goals feasible.


Source: https://www.linkedin.com/learning/strategic-human-resources/strategic-compensation