Category Archives: human resourses
Last week in a post titled “You need to dance with the person who brought you,” I wrote about the difference between traits, characteristics, skills and experiences and specifically what combination of these go into making effective non-profit board leaders. Today, I I’m looking at the same thing, but I want to turn this lens on the non-profit executive director position.
To recap . . .
The differences between traits, characteristics, skills and experiences (in my opinion) are:
- A trait is something someone inherits or is born with
- A characteristic (e.g. quality) is something that describes someone
- A skill is something that someone has learned
- An experience is something someone has experienced
With regards to traits and innate abilities, I started writing about this topic a few year ago in a post titled “Non-profit executive directors take the heat every day.” I shared with readers the following talents that Joe Lehr once shared in with non-profit professionals in an article he wrote. The following is a list of those talents:
- Belief — passion, fire, and strength of conviction all stemming from organizational mission, vision and purpose.
- Vision — an ability to see the organization’s future and getting others to see and believe in it, too.
- Focus & clarity — sorting through a lot of information, knowing what is most important, and getting others to see clearly see it.
- Maximizer — a burning desire for greatness and an ability to act as a catalyst for all other stakeholders to reach for greatness (via accountability, transparency, urgency, etc).
- Empathy — self-awareness, emotional intelligence, along with the intuition and ability to sense what others are feeling and thinking and use that to effectively communicate with others.
I generally agree with Joe and won’t spend more time and space discussing traits, and . . .
If you are a believer in the science of personality testing, there is much written on what inherent personality traits a great non-profit executive director should possess.
From a Myers-Briggs perspective, Paul Sohn speculated in his post titled “The Best Jobs For All 16 Myers-Briggs Personality Types In One Infographic” that ENFJ’s and ENTJ’s might be well-positioned for success.
In a study published by Dewey & Kaye titled “Nonprofit Leadership Development: A model for identifying and growing leaders within the nonprofit sector,” they found many non-profit leaders are rated highly as “High D’s.” This personality aspect is described as:
“Direct and Decisive. D’s are strong-willed, strong-minded people who like accepting challenges, taking action, and getting immediate results. People with a high D component like to take charge and are typically found in positions or power and authority.”
While the jury is out and the science isn’t precise (in my humble opinion), the fact is that boards can really stumble when hiring an executive director if they don’t try to wrap their collective heads around what a successful candidate innately needs to bring to the table.
As it relates to characteristics, I’ve seen successful executive directors features/qualities:
- well-networked with a large circle of influence
- organized and focused
- an understanding of the complexities associated with organizational development
- hard working and strong work ethic
- unfazed by long work hours
- servant leader at heart and joyful warrior
- high integrity
- role model who is a mentor to others
- self-starter who works well in fuzzy supervisory environments
- connection and personal story that connects them to the organization’s mission
Skills are learned as a result of life experiences, and the good execs seem to have honed the following skill sets:
- resource development/fundraising
- board development and supportive of board governance
- great communicator
- collaboration and partnership development
- financial management
- human resources
- volunteer management and engagement
From an experience perspective, non-profit executive directors who thrive seem to have:
- worked at various levels of a non-profit (e.g. front line operations, fundraising and management)
- had success at all levels of resource development and not just one aspect (e.g. individual giving, corporate philanthropy, grant writing, government funding, etc)
- successfully provided guidance and leadership to teams of people
- excelled in environments where they had limited real authority and succeeded because of their ability to influence outcomes
Regardless of whether you agree or disagree with these categories and lists, the reality is that non-profit boards have a handful of roles/responsibilities they cannot shirk. One of those responsibilities is hiring and managing the organization’s executive director. Failure to take this seriously is a recipe for disaster.
How does your organization integrate the aforementioned traits, characteristics, skills and experiences into its executive director search process? What specific tools have you used that you found helpful? Are their any specific traits, characteristics, skills and experiences that I missed that you would add to the list?
Please use the comment box below to share your thoughts and experiences. We can all learn from each other.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
I’ve been thinking a lot lately about the non-profit CEO hiring and on-boarding process because a former client of mine is starting to go down this path. So, I decided to get creative and use Lewis Carroll’s Alice’s Adventures in Wonderland and Through the Looking-Glass to talk about what many new non-profit CEO’s go through during and immediately after they’re hired.
For those of you who are wondering, I did pull from my personal experiences; however, I did embellish a little for entertainment purposes.
You might also be wondering what I ate or drank to come up with such a crazy idea? Well, I did play the role of the Dormouse in my high school’s production of Alice in Wonderland. And this awesome story has stuck with me ever since. 😉
Once upon a time, there was a young girl by the name of Alice.
Alice worked for a non-profit organization as a front line staff person. Her organization’s mission was inspirational. She worked with volunteers every day to operationalize that mission in a variety of ways. She helped train volunteers. She engaged donors to financially support the organization’s work. She planned a variety of events both programmatic and fundraising in nature. She sometimes even got to roll up her sleeves and get involved with program implementation.
Alice was successful, and the path in front of her was full of hope and opportunity.
One day while skipping down this path, Alice was approached by a White Rabbit. This nervous rabbit recognized Alice’s raw talents and suggested “she has what it takes” to provide leadership to another organization. In short order, Alice had reviewed a vacancy notice, done what she thought was appropriate due diligence, applied for the non-profit CEO position, and gone through a series of interviews with the rabbit and his search committee.
Upon signing an offer sheet, Alice found herself tumbling down a rabbit hole. At the bottom of this hole, Alice was disoriented but determined. As she turned to the White Rabbit for advice and her next steps, she saw him running away and heard him saying over his shoulder, “Hello, Goodbye. I’m late, I’m late, I’m late.”
As Alice tried calling after the rabbit, she was interrupted by a smiling Cheshire Cat. Startled and disoriented, she asked the cat what she should do first.
- What are the organization’s priorities?
- Is there a 90 day plan waiting for her?
- Can she please see the organization’s strategic plan?
Instead of helping, the cat simply smiled and remarked that she must be stark, raving mad. “Everyone here is mad. I’m mad. You’re mad. It’s only by chance n’ careful planning if you’re not!” In a blink of an eye, the cat fades away and wishes her luck on her new adventure.
In her first few days, with little to no direction, Alice was hungry for a challenge. She knew that her new organization needs her. After all, the rabbit and his search committee shared with her some of the organization’s challenges throughout the search process. They also assured her every step of the way that she was perfect for the job. This must be the truth because in the end, they did choose her over a number of other applicants.
Without any hesitation, Alice decided to dig in. She ate a project, and promptly grew ten times bigger. She drank another challenge and shrank smaller than she ever thought possible. As she looked around for evidence that this was indeed strange and bizarre, no one seemed to validate her feelings. There was no feedback, and there was definitely no help.
One of the first characters Alice encounters, after the White Rabbit ran away, was a hookah smoking caterpillar. As it turned out, the caterpillar worked at the organization. Needless to say, this encounter didn’t go well. My friend Lewis Carroll does a better job recalling the conversation:
‘Who are you?’ asked the Caterpillar.
This was not an encouraging opening for a conversation. Alice replied, rather shyly, ‘I — I hardly know, sir, just at present — at least I know who I WAS when I got up this morning, but I think I must have been changed several times since then.’
‘What do you mean by that?’ said the Caterpillar sternly. ‘Explain yourself!’
‘I can’t explain myself, I’m afraid, sir’ said Alice, ‘because I’m not myself, you see.’
‘I don’t see,’ said the Caterpillar.
‘I’m afraid I can’t put it more clearly,’ Alice replied very politely, ‘for I can’t understand it myself to begin with; and being so many different sizes in a day is very confusing.’
‘It isn’t,’ said the Caterpillar.
Shaken by this meeting, Alice decided to leave the office to explore the new community of which she was now an important member. Perhaps, other stakeholders — board members, volunteers, community leaders, collaborative partners, and donors — could help her get oriented and pointed in the right direction.
Without much effort, Alice came across a Tea Party with a wide range of characters. There was a Mad Hatter, March Hare and Dormouse. These three donors couldn’t seem to get along, nor did they seem to agree on why people supported the organization. When Alice weighed into the conversation by saying she had a good guess as to why the average donor supported the organization, the following weird discussion ensued:
The March Hare: You mean you think you know the answer?
The March Hare: Well, then, you should say what you mean.
Alice: Well, I do. At-at least, at least I mean what I say, that-that is the same thing.
Mad Hatter: It’s not the same thing at all. You might as well say “I eat what I see” is the same thing as “I see what I eat!”
The March Hare: You might as well say “I like what I get” is the same as “I get what I like!”
The Dormouse: [talking in his sleep, then suddenly awake] Aah! You-you, or you might as well say “I breathe when I sleep” is the same thing as “I sleep when I breathe.” [he quickly noded off again]
Mad Hatter: Well, it is the same thing with you.
Frustrated with the idea that her organization’s case for support was perceived differently by so many different donors, Alice decided to leave the tea party. Taking notice, the Mad Hatter yelled after her a few final words of advice, “[This] is a place. Like no place on Earth. A land full of wonder, mystery, and danger! Some say to survive it: You need to be as mad as a hatter.”
Alice pulls out a piece of paper she had taken a few notes on and started checking off stakeholders’ names. Perhaps, visiting with other non-profit CEOs in the community would help put her feet on the ground.
At a gathering of her peers, Alice was approached by two identical looking individuals. She attempted to strike up a conversation about resource development, asking about which families are part of the community’s core philanthropic circle. She prattled on about the importance of individual giving and even tried to impress them with her knowledge about private sector fundraising trends. Instead of finding comrades-in-arms, Tweedledee and Tweedledum bark back at her and said, “Contrariwise, if it was so, it might be; and if it were so, it would be; but as it isn’t, it ain’t. That’s logic.”
Having lost her words, Alice paused but quickly recoiled when the gathering of her peers started staring at her and eerily began reciting the following poem:
‘Twas brillig, and the slithy toves
Did gyre and gimble in the wabe;
All mimsy were the borogoves,
And the mome raths outgrave.
“Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jujub bird, and shun
The frumious Bandersnatch!”
He took his vorpal sword in hand:
Long time the manxome foe he sought —
So rested he by the Tumtum gree,
And stood awhile in thought
And as in uffish thought he stood,
The Jabberwock, with eyes of flame,
Came whiffling through the tulgey wood,
And burbled as it came!
One, two! One, two! and through and through
The vorpal blade went snicker-snack!
He left it dead, and with its head
He went galumphing back.
“And hast thou slain the Jabberwock?
Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!”
He chortled in his joy.
‘Twas brillig, and the slithy toves
Did gyre and gimble in the wabe;
All mimsy were the borogoves,
And the mome raths outgrave.
Of course, it didn’t make sense, but in this place of nonsense, it made all the sense in the world. Her peers were trying to warn her about her organization’s board of directors. In fact, it wasn’t just Alice’s board they were chanting about. They were talking about all of their boards.
Without hesitation, Alice left the gathering of her peers and started running off in the direction of her board president — The Queen of Hearts — and the rest of the board, which was made up of a deck of cards.
In her first encounter with The Queen of Hearts, Alice had lots of questions to ask.
- Is there a plan (or at least a direction set by the board) that she could put her hands on?
- If not, then does the queen have any thoughts on where Alice should roll up her sleeves and start?
- Should she immediately turn her attention to building organizational capacity around resource develop and fundraising? Programming and operations? Board development and board governance?
Without hesitation or any thought, the queen snapped off a response. She explained that the organization was in perfect shape. There was no need to do any of that work, and doing so would simply be a diversion in her opinion. The queen proclaimed that Alice needs to only set her sights on running a multi-million capital campaign.
After giving this a few moments of consideration, Alice decided she must not have been clear in explaining some of what she had witnessed after her tumble down the rabbit hole. So, she started all over again only to be abruptly interrupted by the queen. She said, “I warn you, child… if I lose my temper, you lose your head! Understand?”
This is the start of Alice’s non-profit CEO tenure. While the adventure continued for many years and she had many successes (and learning opportunities), this is a good place to pause the story and ask . . .
- What was your experience with your organization’s CEO search process?
- What was different with your orientation?
- Was there as on-boarding plan in place? What did it look like?
- Did you receive a 90-day plan?
- Were there organizational scan worksheets to help guide you through your first three months?
Please use the comment box below to share your answers or any other experiences/thoughts you might have. We can all learn from each other.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
A few years ago, I wrote a post titled “Why are non-profits adverse to executive coaching?” after a conference where I couldn’t give away executive coaching services. With a few more years under my belt, things haven’t gotten any easier. In fact, I still find it challenging to sell executive coaching services to non-profit leaders. However, I’ve changed my mind since writing that last blog post about the reasons why this is the case.
After a heart-to-heart with a few non-profit friends, I’ve come to believe executive coaching is seen by some (and perhaps many) as a service for professionals who are failing. One person even compared it to counseling.
When put into this context, people who see coaching as a remedy for failure also see asking their board or their supervisor to pay for coaching as an admission of weakness or being unable to do their job.
The ironic thing here is that some of the for-profit sector’s greatest leaders have worked with executive coaches. It wasn’t because they were failing, but it was because they needed to maximize their performance.
Executive coaching is not like coaching in athletics. They don’t call the plays in from the sidelines. In fact, they don’t even tell you what to do. A good executive coach will ask powerful questions, facilitate discussions, help you with goal setting and be an accountability agent in your professional life.
Executive coaches are not therapists, but hiring one can have the impact of bringing greater work-life balance and fulfillment to your professional life.
The reality is that executive coaches are hired for any number of reasons. Here are just a few:
- Help with succession planning
- Developing young leaders
- Improving performance / Maximizing performance
- Serving as a thought-partner during important projects (e.g. strategic planning)
- On-boarding new CEOs and key leaders (both staff and volunteer)
- Surviving and thriving during executive search and transition
I could go on and on with this list, but the bottom line is that there are any number of projects and situation where non-profit organizations can benefit from executive coaching services.
Has your organization every hired an executive coach for staff or board volunteer? If not, then what is stopping you? Please share your thoughts and experiences in the comment box. We can all learn from each other.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
Like so many other people, I am a sucker for year-end predictions. I suspect it has something to do with being uncomfortable with an uncertain future. So, for each of the last few years, I’ve blogged about non-profit predictions and trends during the final few days of the year. Needless to say, I can’t resist doing it again as 2015 comes to a close. Drum roll please? I predict non-profit organization in 2016 will . . .
Grapple with HR issues
In mid-2015, the Department of Labor announced its proposal to dramatically increase the minimum salary levels for individuals classified as exempt executive, administrative or professional employees. This announcement kicked off a public comment period and prognostications that new rules will go into effect in 2016.
My prediction of “confusion” is based on the following facts and observations:
- I’ve heard some experts pontificate on the impact this rule change will have on the non-profit sector (e.g. layoffs, reorganization and consolidation of positions, outsourcing, etc)
- I’ve heard other experts insist the law doesn’t apply to the non-profit sector (e.g. the key criterion for this FLSA provision is “business or sales revenue” which is a standard most non-profits don’t meet)
- I’ve seen one national non-profit organization swing into action with webinars on how to position local affiliates for these anticipated changes
- I’ve sat in meetings with clients who are talking about how they anticipate this rule change will impact their 2016 budget and staff structure
- I’ve worked with a client in New York State who dealt with this when Governor Andrew Cuomo enacted a similar rule change last year and seen the challenges they’ve endured
- I’ve reviewed some of the non-profit submissions during the public comment period and walked away with that feeling of anxiety in my belly (. . . and needless to say, people are stressed out this)
- The Department of Labor seems to be signalling a delay in implementing changes (most experts anticipated implementation in early or mid 2016 and now it looks like it will happen in late 2016)
Do you want more proof of confusion? Check out the headlines on the following online articles and posts (and each post is worth a click if you have time):
- Nonprofit Quarterly: “The Debate over Reforming Overtime Regulations“
- Economic Policy Institute: “Why Nonprofits Shouldn’t Fret Over the New Proposed Overtime Rules“
- Wage & Hour Insights blog: “New Exemption Rules May Be Delayed To Late 2016“
Of course, anything is possible:
- Non-profits may get an exemption or they may not
- The proposed minimum salary of $50,440 may go up and it may go down
- DOL may change its “job duties tests” for executive, administrative and professional employees
Until the Department of Labor makes its final determination and announcement, I think it is safe to say there will be continued speculation. Moreover, I think once the changes are announced, those non-profit organizations who didn’t put contingency plans in place will find themselves in a chaotic place.
If after reading this far, you are experiencing a “bubbling, acidic feeling in your gut,” then I have a few suggestions for you:
- Don’t put your head in the sand and wait for DOL to issue changes to FLSA . . . start your planning now
- Identify all of your salaried exempt employees and make preliminary determinations on which ones you can/should increase to $50,000-ish and which employees you might have to change to a non-exempt status
- Revisit your organizational budget, invest some time into “scenario planning,” and develop a few different budget options your board can consider once the changes are announced
- Engage your HR Committee volunteers in these discussions and enlist their help in your planning efforts (if this committee doesn’t exist in your organization, then create a temporary ad hoc task force comprised of supporters with an HR background)
- Engage your Finance Committee volunteers in these discussions and enlist their help in your planning efforts (if this committee doesn’t exist in your organization, then create a temporary ad hoc task force comprised of supporters with a finance background)
- Start talking about it in your boardroom (this might be a great opportunity to ask board members to read an article or two and come prepared to participate in a generative discussion during a board meeting)
Today’s post reminds me of an old United States Marine Corps expression:
“Proper Planning and Preparation Prevents Piss Poor Performance“
With this in mind, what are your thoughts, experiences and suggestions? Please use the comment box below to share. We can all learn from each other.
If you want to read some of my previous year-end predictions, here are a few links that will get you there:
- 2012 Trends and Predictions: Executive Transition
- 2012 Non-Profit Trends and Predictions: Rise of the Machines
- 2012 Non-Profit Trends and Predictions: Contraction Continues
- 2012 Non-Profit Trends and Predictions: Volunteerism
- The Final 2012 Non-Profit Prediction (I think this is my favorite prediction of all times)
- 2014 predictions for the non-profit sector
- Setting a New Years Resolution or two? Have you identified your obstacles yet?
- Fundraising New Year’s Resolution — Sustainable Giving Strategies
- Fundraising New Years Resolution — Upgrade Strategy
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
Hi, DonorDreams Readers! Hope this week is treating you well! It’s Marissa here, with a great post written by Heather Eddy, President and CEO of KEES: Kristner Eddy Executive Services and Alford Executive Search. While we’ve talked a lot about retaining key employee in the past few posts, today Heather talks about how to plan for when people move on to another opportunity. Succession Planning along with employee retention makes for a strong nonprofit. Thanks again, Heather! Enjoy!
Although this blog has covered retaining employees for the past two posts, sometimes it is time for people to move on, even a revered and beloved leader. How an organization and it’s leadership undertakes this transition says a lot to other employees. It can make a big difference in general employee satisfaction and what might trigger a good employee to leave. A Board may not realize it, but having thoughtful and articulate plans in place about the organizations future (Strategic Plans, Succession Plans, Compensation Plans, Capital plans, etc.) speaks volumes to the general employee base.
Succession Planning is a term used in private and nonprofit sectors (less so with governmental entities) to describe the process that an organization (typically a Board of Directors) undertakes to plan for its next leader. Interestingly, with the term being common in leadership lingo, a limited number of organizations actually have a written Succession Plan. How do we know this? It is a question that we survey groups about frequently. The responses often come back as: maybe, no, I don’t know, yes-we’ve had a few meetings about it, yes-it’s in my head, and my favorite….yes – we talked about it once and someone has the notes somewhere. An idea, wish, intention or concept or does not truly constitute a solid Succession Plan. I find that less than 15% of the nonprofits we interact with have a written Succession Plan that is that is widely understood by organizational leadership (Board and Executives), and could be accessed and implemented with ease. Note – often times the “emergency “plan (what to do when the ED gets hit by a bus or wins the lottery) is confused with the Succession Plan. The two can be related, but are entirely different.
A relevant and ideal Succession Plan should have an overview of the following, with specifics to be filled in at the time certain triggers occur. A Succession Plan should be reviewed every 2 – 3 years if the sitting leader will be there for a while, and every 1 – 2 years as s/he gets closer to natural retirement.
- An overall philosophy of leadership and the role of the Executive leader
- A clear statement of the Board’s role in finding, hiring, evaluating, growing, and changing leadership.
- An ideal timetable for a natural transition process to occur (having a 90-day buffer helps)
- A job description of the current Executive leader and all of the immediate, direct reports.
- An organizational chart, identifying the key functional areas of leadership, and which direct report or other key staff person “back-fills” the top Executive in these functions. Note: this could add another dimension to the plan if all/most of the top leadership is roughly in the same 5-year window of possible retirement and/or the same team has been in place for 15+ years.
- Current thinking (point in time) about the organizations greatest needs in the coming 3 – 5 years. This can be derived from Strategic Planning.
If your organization does not have a written Succession Plan in place, I urge you to have a conversation at the next Board meeting. Try to gain a commitment to invest time in addressing the points above. The Board may not be ready for a full Succession Planning process, but at least document the above six points and make sure the whole Board is on the same page. If the commitment is there to do more….ask the Governance Committee, Executive Committee, or ad hoc Committee to take this on as a special project (60-90 days with 2 – 3 meetings and follow up in between).
We urge you/your organization to not only focus on Succession Planning, but what we call Leadership Transition Planning. This type of planning focuses on how an organization transitions, whether to a new executive leader, an entirely new leadership structure, or growing leaders within the top levels of leadership as the organization grows.
With the enormous workforce transition we will undergo, in all sectors, not just nonprofit, hiring managers (Board’s included) are struggling to find desired talent brings skills to meet current needs, and potential grow with the organization. In some nonprofit sub-sectors, it is anticipated that as many as 20% of the leaders currently at the helm will retire in the coming five years. It is also estimated in those same sub-sectors that, perhaps, at best, 4 – 8% of “ready” next leaders are in place. This upcoming gap is a direct result of nonprofits doing a great job of hiring good talent and getting every bit of expertise they can, but failing to invest in that good talent, to make it great talent. There is an enormous need for organizations to grow and develop talent, at mid and upper levels of management, to meet this potential gap. Does your organization have a leadership development program? If so, please tell us about it in the comments.
Leadership Transition planning helps you define what you have, what you want, what you need/think you need and what is a realistic expectation for the leader(s) at the next phase to meet organizational needs. It then guides you to put that transition in to a timetable, articulate the resources needed (often budget related), and define how you will communicate with internal and external audiences. Based on the type of leadership transition coming up, the timetable and audience focus could be completely different. And, based on the organizational capacity, the ability to invest resources in developing and transitioning leaders varies greatly. Leadership Transition Planning is a process that should be collaborative between the top Executives and the Board. Both leadership groups have a vested interest in the organizations future success, and should work together to ensure the right leader(s) are in place to achieve that success.
While your organization many not face an imminent retirement or departure of its top leader, both Succession and Leadership Transition Planning are essential for the continuity and sustainability of your organization.
Strategic Compensation: An Effective Tool in Recruiting, Promoting and Retaining Highly Qualified Employees
Happy Tuesday! Marissa here! We are continuing our discussion about retaining employees today with a post by Evette Simon, VP of Alford Executive Search. Thanks, to Evette for sharing her expertise with us. Enjoy!
HR system design and a consultative executive-level approach have quickly replaced the traditional philosophy that HR simply serves as an administrative function in support of achieving organizational goals.
The non-profit sector, more than any other industry, has had to quickly make the shift from the philosophy that HR is something that they we HAVE to do, to viewing HR as a strategic partner in organizational development and sustainability.
In an environment where organizations of all types and sizes have begun to recognize that our human resources are among our most valuable and costly assets, attracting and retaining highly skilled employees has become a high-level strategic priority, in order to gain or maintain a competitive advantage.
More than ever before HR practices are being intentionally designed with business outcomes in mind. However, the notion of building strategic compensation systems and policies remain a daunting endeavor for many non-profit organizations due to the lack of trained HR professionals on staff and/or the limited strategic compensation expertise available. As a result, most organizations simply take the best-case default approach of aligning position titles with market surveys and compensating within the reported ranges. And, in many cases, market surveys aren’t used and employment offers are made based on what the compensation of the incumbent in the position at the time of separation or what they were hired at any number of years earlier or even some arbitrarily contrived number in between the two.
Because compensation, whether we like it or not, is usually visible within our organizations, having a written compensation policy that is clearly and consistently communicated throughout the organization is critical toward ensuring that employees understand how compensation decisions are made.
An effective compensation policy will successfully communicate the following:
Internal consistency which highlights and clearly places each job in the organization into an ordered job structure that recognizes the differences in job functions. Placing at a higher level in the structure jobs that require higher degrees of skill and expertise, include more responsibility and more complex tasks, than those jobs requiring less skill, less responsibility and less-complex tasks. Compensation professionals use systematic job analysis and job evaluation to establish pay differentials for each position in the organization.
Market competitiveness refers to the pay practice used most often in compensation policies geared toward attracting and retaining highly qualified employees. In order to determine how the organization’s compensation structure lines up against market competitors, the internal job structure is compared to the competitive external market using compensation surveys. As a result of this analysis, organizations are able to strategically determine whether they wish to lead the market (Market Lead), lag behind the market (Market Lag), or match the market (Market Match).
Many internal and external factors should ultimately play into deciding which market position an organization chooses. An organization might actually choose to lag behind the market for some job categories, lead the market for some and meet the market for others, depending on the internal value placed on specific job categories and the external market conditions for those pools of talent. However, the best practice is to have one market position across the organization. This more equitable philosophy lends itself to internal consistency and is easily justifiable.
Recognizing and rewarding individual contributions should be a key component of an effective compensation policy. Similar to the process for establishing internal consistency using job analysis and evaluation to distinguish the differences between two job functions, attention should be given to the fact that no two employees perform the same job equally, nor do they usually possess the same credentials or expertise. Therefore, when completed, effective pay structures should include defined ways and rationale for recognizing and rewarding employee contributions in order to promote the retention of valued employees.
Other structural components of compensation policies include pay grades and pay ranges. As another outgrowth of the job analysis and evaluation processes, pay grades are used to group job functions determined to have similar compensable factors and, pay ranges outline the minimum, maximum and midpoint pay rates for each pay grade. This allows HR professionals and managers to more consistently apply the organization’s pay policy.
Strategic compensation practices, like every other component of human resource management, must also take into account all of the legal and compliance related factors associated with employee recruitment, compensation and separation. Therefore compensation professionals must also consider all of these factors as part of the high-level strategic process.
Once legally compliant compensation policy and structures are in place, managers and other HR functions will be able to use them as effective tools in recruiting, performance appraisal systems, professional development, labor relations and even terminations.
How does your organization retain highly qualified employees? Let us know in the comments!