A Compensation Philosophy

Why is it so important to have a philosophy around compensation early on? As a company is growing and establishing its culture and values, it needs to make sure that its compensation philosophy is aligned with the company’s overall mission and values. For example, a company that identifies with “transparency” as a value, needs to make sure that its compensations practices are transparent. Anyone involved in the decision making part of the hiring process should be able to communicate what the company’s compensation philosophy is and how it aligns with the company’s overall values. The people involved in making the offer and negotiating salary or equity should know all the steps and data points it takes to arrive at the final offer. They need to be able to explain the “how” and “why.”

Every company needs a compensation philosophy that supports the company’s mission and values. Your compensation plan should be able to attract, motivate and retain employees. You’re going to be in a position to talk about why you are doing certain things as a company and need to be able to convey these thoughts clearly and consistently to candidates. Some questions to consider:

  • Are you a “pay for performance” company? If so, can you explain your bonus plan or sales compensation plan to a potential candidate.
  • How do you want to reward your employees? Through public recognition? Equity? Personalized gifts, spot bonuses or peer bonuses?
  • Will a manager have discretion regarding the type of recognition or is this up to the executive team?
  • How often are spot bonuses awarded?
  • Are bonuses different for revenue generating employees vs. non-revenue generating employees?
  • Are you committed to maintaining internal equity on the team?
Like this content? Why not share it?
Share on FacebookTweet about this on TwitterShare on LinkedInBuffer this pagePin on PinterestShare on Redditshare on TumblrShare on StumbleUpon

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.