Apr 19, 2024

Simplifying Compensation Planning for Small and Growing Organizations

3 Steps small and midsize businesses can take to simplify compensation planning

Simplifying Compensation Planning for Small and Growing Organizations

Simplifying Compensation Planning for Small and Growing Organizations

3 Steps small and midsize businesses can take to simplify compensation planning

Last week I co-hosted a webinar with startup recruiting firm Hustle Hunters about the complexities of compensation planning—specifically the topic was “demystifying compensation bands.” If you’re interested in the topic, you should check out the full ~45 min conversation, but I really wanted to pull out some of my key takeaways while they’re top of mind.

I strongly believe compensation planning is important at any company size. Whether it’s you and a business partner, you’re a 10-person company, or you’re scaling to your first 100 employees, even small and midsize businesses should take it seriously. It sets the tone for how you attract and retain talent. 

That said, it can seem like a blackhole, especially the first (or second…or third…) time you do it. Heck, I wrote a whole blog just about how complicated headcount planning is, and that’s only one piece of the puzzle. But it doesn’t all have to be done at once, and you definitely don’t have to press pause on all other efforts to dedicate an entire quarter or two to the effort. So, from the webinar, here are my three steps SMBs can take to simplify compensation planning.

Determine Your Goals

You don't have to tackle compensation planning for the entire company at once. Start by focusing on specific job families, departments, or areas where you're hiring or have a significant team.

  • Focus on Goals: Identify your organization’s key challenges and goals. Are you looking to hire aggressively, improve retention, sharpen your competitive edge for top talent?
  • Take a Targeted Approach: Once you’ve identified a goal, find a project that works specifically towards reaching it. Maybe you have a huge product push and really need that team scaled and ready to manage it—dial in on a strategy to evaluate that team’s compensation needs and structure. Putting you in a better position to make adjustments and scale, while also testing out practices that could possibly translate across other teams (eventually). 

Establish Your Pay Strategy

Market data is very important. But if you’re just getting started, it’s way too easy to spiral on it. Rather than fixating on benchmarking data right away, take your learnings from step one and pull that goal (or goals) into your pay strategy.

  • Conduct A Light Audit: Conduct a lightweight audit of your existing employees' pay positions relative to the market. This will help you understand if you're paying competitively or need to adjust.
  • Define Your Strategy: Use data (you can always start with a free resource if you’re doing this for the first time), your audit results, and of course the company-level objectives to determine the pay strategy needed to achieve your target market position and talent acquisition goals.

By the way, your pay strategy will—and should!—evolve over time. It doesn’t have to be precious nor perfect.

Build Your Pay Ranges 

Or compensation bands, payscales, pay bands, etc.. The nuances in what you call them aren’t important early on; what is important is taking the goals from step one, the strategy from step two, and turning them into something [more] tangible for your team.

  • Simplify Ranges: You don't need complex pay ranges. A straightforward approach, such as a range of plus or minus 20-25% from the midpoint target, can suffice.
  • Communicate Clearly: Once you have your pay philosophy and ranges defined, communicate this effectively to your employees. Explain your approach, whether you prioritize cash, equity, or a balanced package.

By taking a targeted and strategic approach to compensation planning, smaller and younger organizations can effectively manage their compensation strategies without unnecessary complexity. Start small and strategically. When you’re ready to scale, we’ve created some really great tools for that at CandorIQ and we’d love to tell you about them!

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