Compensation: Risk, Reward, and Impact

What can account for half of an organization’s annual budget, is critical to motivating organizational and personal performance, is often poorly understood, and is almost impossible to get right?

Yes, it’s compensation, one of the thorniest people issues organizations must face. Everyone has opinions about compensation, and they often conflict. Even the dominant philosophies of the day – market-based compensation and pay-for-performance – are much more complex and subjective than they may appear. And in addition to being hugely expensive, compensation is highly risky. Pay too much and you will go broke; pay too little and you may use your most valuable people and . . . go broke. Pay everyone equally and you will lose or demotivate high performers; pay unequally and you can cause internal dissension and demotivate teamwork.

Compensation means really different things to different people, and employees value the various components very differently, too.

But you can’t run a professional organization, whether for- or not-for-profit – without paying people, so this is a crucial topic for every manager to understand and seek to influence, within the limits his or her position and organization will allow. And the good news is that the HCO process of setting goals, building and testing hypotheses, trying to break the model, experimenting, gathering data, and iterating is one of the best approaches you can take. This module will help you understand the crucial elements of compensation, from values to tactics, so you can build, implement, and influence your organization in the most effective way possible.