« Dear Bonus Plan: Are You Distributing Value or Creating Value? | Main | Is Your Profit Sharing Plan a BINO (Bonus in Name Only)? »

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Hi Ann

Great article, some good points. It's a pretty strong underlying message to send out.

As a sidenote, I was hoping you could advise on something related to base pay management and salary ranges. In the past we've created our salary ranges in the standard way, i.e. median (control point) at 50% spread (80-120%). However, the senior leadership have now requested we create our salary ranges by using median TTC and backing our variable pay out of it to reach our median effectively. My concern around this is consistency, as we have so many commission plans and bonus plans across the business that it's quite time consuming to back out each one and be confident that you've reached the right result. Have you ever encountered this and if so, what would be your advice?

Thanks in advance.
Carmen.

Carmen:

It is a strong underlying message - and my hope here was to generate some reactions to it. Does it hold water? Is it off base?

On the sidenote, it sounds like you've been requested to follow an interesting approach. The question I'd want to have answered, and I would think your senior leadership would want to know, is where does this position you competitively? A pre-decision competitive analysis, which parses out the salary versus variable pay pieces of your TCC, would have been a wise step (and perhaps you've taken that step). How do your TCC and variable pay targets/actuals compare to competitive norms? And to what extent is this uniform - or different across the business? When you back your own variable pay targets/actuals out of median TCC, what are you left with? Base salary levels that are consistently above market median? Consistently below market median? All over the map competitively? Does this match senior leadership's compensation strategy and intent? Does it create any talent or equity risks?

It isn't a step I'd want to take without the information that comes from a careful competitive analysis.

I'm not aware of any organizations that have designed their program this way, but it wouldn't surprise me to find a number out there. I have a few clients who have chosen to use TCC ranges rather than salary ranges to guide compensation decisions - but these choices were in response to very specific situational circumstances and were based on careful pre-decision competitive analysis, which is repeated every few years to assure that the program is delivering pay in the manner intended.

Can others weigh in?

Think of those "boundaries" as HURDLES. They can be overcome and surpassed, in one way or another. They supply context to content. For each they "constrain", another is challenged to break through (or achieve above) those frequently arbitrary parameters. They only limit those without imagination and courage.

Good points Jim - thanks!

The comments to this entry are closed.

About The Author

  • More Info Here
    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

Compensation Force Spot Survey

Enter your email address:

Delivered by FeedBurner

Search This Site

Widgetbox

  • Get this widget from Widgetbox