Compensation and performance programs

One of the things usually missing from the small employer repertoire of offerings is the feedback mechanism it provides to its employees. Often you’ll hear a small employer say “we’re too small for that here” or “our employees already know how we feel about them”. That’s not always the case. There is definitely a distinctive difference between what the employer thinks and how the employee feels when it comes to their job performance and/or standing within the organization. Bottom line, performance feedback to your employees (either good or bad) is necessary and wanted by the employees.

If performance appraisal/salary/bonus formalization is something you are undertaking for the first time at your company, the best thing to do is start by obtaining as many salary surveys you can that outline each of the job positions you have within the organization. It’s a good idea to try to have some type of job description for your positions.

Small employers sometimes don’t have the time to do this. At the very least, try to obtain at least a couple of paragraphs from managers outlining what each of their employee’s job function is. You may not know firsthand, but they will (and should).

You can formalize the job descriptions later (to include more detail and statements about essential job functions) but in order to make the comparison between salary survey results vs. job functions; you’ll need to have some type of a baseline of job functions to work with. This task can be time consuming so be sure to plan ahead as much as you can and offer as much help to your managers as they need from you. Explain how this will ultimately provide a benefit to them and their employees (and the company overall) and again, offer as much help as they need with the task.

Salary surveys aren’t as easy to obtain as many people think they are. Obtaining meaningful salary surveys will take much leg work on the part of the person handling the HR function within the company. Formalized salary surveys obtained from large reputable organizations can be costly; sometimes too costly for the small company to justify the expense. If that is the case for your company, begin your search for some lower cost alternatives. Start your inquiry with Human Resource professional organizations, try to source through your networks, and then work your way through to speaking with your state and local Departments of Labor. At the very least, they will be able to point you in the right direction.

Most state Departments of Labor have placed their statistical data online and even drilled down that geographical salary data to the county level where you can make relative comparisons. You can also perform the obligatory internet search yourself; see where that takes you. Once you start on this path, dedicate at least a few days to the cause. It just takes perseverance and the absolute faith that the time you will be spending on this arduous task will lead you to the ultimate path of getting some really good salary surveys to work with. Try to be patient and keep in mind that each step you take will lead you in the right direction and will eventually yield some very good sources for you at some future point in time.

So, now you have your salary surveys in hand. What’s next? Start to draft the feedback form (sometimes referred to as the Performance Appraisal Form) that you think will work for the type of industry you operate within. Be prepared to get a lot of pushback from others on this within your organization. It’s only natural. It’s new; it requires commitment from the Executive team and ultimately effects the entire organization. It may be like hitting a nerve at first. Continue on your path. Prepare your draft and tweak it based on the comments you receive however, if what they are proposing doesn’t make sense or doesn’t sound right to you, it probably isn’t.

Remember, your job in HR is to be that voice of reason and to make sure you guide and counsel in the appropriate manner. Explain to those who are pushing back, your reasons for why you believe that it may not work (in the appropriate manner). If pushback persists, you may have to create a formalized flow chart process to explain how you envision that process from start to finish so they can visually see this process through to the end and where the rough spots may be at points somewhere in the middle.

So, now that you have your salary surveys (and hopefully that perfect employee feedback document that’s ultimately finally been approved), you’ll need to know how much money you will be allocating to the performance appraisal and/or bonus pools. Again, this may be a tough one to nail down. Timing is absolutely “key” on this. Know when to approach the Executive with your request. Take a gauge on how this works for your company. It works differently for every company (small or large) so the point here is “it’s all in the timing”.

You’ll have to really give this some thought. If it’s poor timing, just know you’ll learn for next year. If it’s good timing, you’ll know how and when to obtain your funds next year. This is a moving target; no one size fits all here. Again, you are an HR person, you’ve learned at this point in your career how and when to time your initiatives. If you’re new to HR, this is another step on that path of learning how and when to time your initiatives.

Next, you will need to create the mechanism of how you’ll structure your salary surveys, performance appraisal program, and bonus pool against some type of salary grading system. This is an extremely important step for the small employer because it begins to set the baseline for your future payroll expense. I know that sounds huge. It is huge!!! Think about this, if you don’t have any salary grading structure in place now, what do you think will happen year after year with those salaries over time? What happens if you can’t afford to give generous increases you had been giving to your employees if you experience sudden growth and need to use funds that were previously allocated to employee increases to that growth?

What happens if your business sees a temporary decline with sales? What happens if business conditions suddenly change outside of your control? These issues will almost certainly escalate to a point where you (and your company) will be dealing with it as a negative Associate Relation issue later if you have to put the brakes on providing increases to the employees that had been above average for your industry. Are you getting it now? This point can’t be emphasized enough. It’s a very real story for a lot of small employers. Start to formalize your processes now before you experience your company’s growth and begin to feel those growing pains. This will be one of those processes that you will be glad you started to formalize while you are still a relatively small company.

Another forgotten area; report generation. How do you do that now? What could it look like once you have all of your formalized processes in place? What tools could you use to help you? There are many parts to consider but one of the most important items is to generate reports against some structured input values. Automated reporting is something you will eventually not be able to do without; especially once you have defined the process. Historical reporting will also help you and your Executives make better business decisions. How can you help them perform “what if” scenarios and be able to drill down to the management direct reporting levels? How can you show them how they handled the performance and/or salary/bonus processes the previous year? How can you collectively show the progression of your program once performance ratings have been included? How can you show the financial impact of management decisions that may need to be refined?

There are tools available where you’ll be able to do all of this without searching through spreadsheets or Personnel files. You’ll no longer deal with “sorting accidents”, pivot tables, missing papers and or the possibility of providing inaccurate (or too much) information to your management team. You’ll also find that once your process has been systemically integrated, you’ll feel much more confident about report and documentation requests you need to generate for audits that may arise throughout the year (whether internal or external).

Putting a formalized process in place isn’t as hard as your imaging it is. Sage HRMS products can accommodate this need very easily for you. Even if you don’t have your plans in place, their processes and system setup can help to identify and address the needs within your program. There are many other additional internal resources and learning tools available to assist you with whatever process you need within your company (www.sagehrms.com). Check it out!