Total Compensation Strategy Essay

Total Compensation Strategy Total Compensation Strategy Managing Diversity Nationally and internationally, companies are facing the task of reassessing the balance between their own identity and the force of integration. Centralism often makes access to new markets and regions difficult. Distinctive local autonomies, on the other hand, endanger the overall organization and identity of the company. Connected with this is the question of whether a unified and global compensation policy should exist, and how much room for maneuver local and regional entities and organizations should be given.

In heterogeneous corporate and company structures, in particular, there are no unified compensation strategies and structures. Systematic guidelines exist at most for the top management; in middle management levels, on the other hand, no corporation- or company-wide strategy is adhered to. For these management levels, a number of conflicting compensation strategies have often developed within the grown legal structures. Human Resource Management 2 Total Compensation Strategy Think Global, Act Local

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The framework of the total compensation strategy: performance, results and market The development of a total compensation strategy creates and influences a collective culture, offers corporation- and company-wide shared rules and directives, advances the implementation of the business strategy and promotes performance and results orientation. A total compensation strategy should take into account the following elements and orientation points: » Fixing a value-based company management » Coupling with the long-term appreciation of the company’s value Market orientation for engaging qualified executives and specialists » Cost consciousness during conception and implementation » Taking local conditions into account Strategy and Value Management Commitment and Flexibility Total Compensation Strategy Motivation and Performance Figure: Framework of a Total Compensation Strategy Human Resource Management 3 Total Compensation Strategy Structure Follows Strategy The extent and structure of the compensation should be based, in terms of results, on the total compensation approach, and should take into account egional or local market conditions and the particular social and tax systems: Compensation elements Fringe benefits Rounding out the attractiveness of the (monetary) compensation package Structure Aligned to local practice and market requirements Entrepreneur Mid/long-term incentives Rewarding the medium-term appreciation of the company’s value Integral element of the long-term total compensation / aligned to relevant comparison group / linking with growth Short-term incentive Fluctuations depending on results and performance of the year (bonus depending on reaching goals)

Once the goal has been fully achieved, aligning to the mid to top range in the relevant market Base salary Oriented to the internal quality rating, the strategic relevance and the value-added contribution of the position Figure: Total compensation approach Harmonized with relevant markets (prevailing market practice) Employee In the results, the developed total compensation strategy fulfills, among other things, the following objectives from a company and managerial viewpoint: Objective Supporting the orientation of the business units Result Positioning in the relevant market

Strengthen performance and results orientation Variable compensation elements Flexibility in adapting to changed business situations Success- and results-dependent elements Enable organizational change Flexibility of the compensation elements Promote motivation and loyalty Price fairness and transparency Engaging and retaining qualified executives and specialists Figure: Development of a total compensation strategy Flexibility and breadth of the salary bands and market conformity of the total compensation Human Resource Management 4 Total Compensation Strategy

Step by Step The Kienbaum approach for the development of a total compensation strategy is ideally based on the following steps: Project steps Core questions and elements » Which compensation structuring elements reflect the demands of the future business development? Analysis of the framework conditions 1 2 3 4 5 » Which specific advantages are offered by corporation-wide standards vs. individual structuring possibilities? » Are specific regulation requirements in existence? » Which framework conditions are needed for structuring using existing regulations?

Specification of principles and guidelines » Defining management and operative levels » Taking into account international consistency » Establishing the compensation structure » Taking into account value-orientation » System for the agreement of objectives and performance evaluation » Defining salary bands » Establishing demands according to global principles » Reflecting on the advantages and disadvantages of different points of view » Defining useful and necessary parities » Solution suggestions for the harmonization of the structures » Developing transfer scenarios

Systematization and harmonization Formulation and adoption of a total compensation strategy » Transfer to global principles » Defining roles and responsibilities » Defining corporation-wide policies and principles » Defining regional/local policies and principles » Developing transfer scenarios » Dealing with asset protection / adjustment measures » Developing communications concepts » Creating brochures and supplementary information » Deploying a global compensation committee » Defining IT support » Roll-out in pilot countries/regions/remaining countries Communication and implementation

Figure: Project steps for developing a total compensation strategy Human Resource Management 5 Why Kienbaum? » We listen to you before taking action Keeping in mind the developments within your sector, your own objectives as well as the prevailing company culture, we develop relevant solutions covering every aspect of compensation. Listening carefully is consequently an important part of our work. » We take your individual situation into account management system for approaches that are suited to your company, that meet your specific requirements and that harmonize your company culture.

Our first task as your partner is to gain an insight into your company. Together with you we develop a tailor-made performance » We develop solutions that meet with approval » We accompany you right to the goal We recognize possible solution paths and develop these together with you. The depth of our consultancy expertise enables us to cut through complex facts. We support you in implementing solution paths that will lead you to your desired goal. We are also happy to support you in the practical implementation. The biggest assets of a company are its employees.

We develop and implement solutions that meet with the approval of both the management and the employees and that motivate them to work towards achieving their company’s goals. Our work is done when we are all convinced by the results. For us, a convincing result comprises flexible systems that are useful for you in the long term and that can easily be adapted to future developments. We support you actively in your communications. Total Compensation System Success- and performance-oriented Compensation Systems (Performance Management, shortand long-term Incentive Systems) Job Evaluation Systems (Grading Systems)

Executive Compensation Compensation Comparisons / Benchmarking Compensation Studies / Salary Calculation Software / Online Salary Survey Figure: Our performance spectrum Kienbaum has 15 offices throughout Germany. Its international activities are supported by local consulting teams in Austria, Brazil, China, Croatia, the Czech Republic, France, Great Britain, Hungary, Luxembourg, the Netherlands, Poland, Russia, Switzerland, Singapore and Thailand. Kienbaum Management Consultants GmbH Beethovenstra? e 12-16 60325 Frankfurt am Main | Germany Fon +49 69 742237 00 Fax +49 69 742237 02 [email protected] com

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