In the fall of each year, I conduct a survey of compensation strategies, practices and trends in my marketplace. My favorite question on the survey is this one: "What compensation strategy or tactic did your organization find most successful in attracting, retaining and motivating employees this year?" Analyzing these responses is always a fascinating exercise as they reveal interesting information about the most pressing reward needs and priorities for the year. And now that I have been asking this question in the survey for a number of years, I have the ability to watch this shift over time.
- For 2004, the top strategy/tactic was variable pay. It seemed that, following a few years of economic difficulty (and, for some organizations, tight constraints on salary increases), everyone's "pay for performance" energy was going into incentive plans.
- In 2005, the number one strategy/tactic was market competitiveness. After falling behind market as a result of several years of financial and business constraints, many organizations were taking steps to restore their compensation programs (and, in many cases, actual employee pay levels) to competitive levels.
- In 2006, two strategies/tactics floated to the top, one barely ahead of the other. Variable pay regained its number one spot, but only by a small margin. Coming in a close second was improvements to benefits. As the job market began to tighten, employee benefit programs (many of which had languished or even been cut back during years of fiscal difficulty) were now seen as key tools for attraction and retention and were becoming the focus of improvement and new investment.
- For 2007 - tah dah - it's variable pay again, this time by a sizeable margin. All manner of variable pay initiatives are mentioned: creating new and improving current employee incentive plans, implementing and updating employee recognition programs, and putting in place new hiring or referral bonuses to support staffing efforts. My interpretation? It's all about rewarding performance - and performers. As the war for talent rages on, we want to pay our best people well, and we are losing faith in our ability to do that with merit increases.
WorldatWork's 2007/08 Salary Budget survey, released a few months ago, confirms the continuing interest in and attention to variable pay as a compensation element, reporting that 80% of participant organizations are using variable pay (up from 79% in 2006 and 76% in 2005).
Will variable pay continue to dominate our compensation attention into next year - or will business, economic and/or political circumstances pull other elements into the spotlight? It is always interesting to watch!
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