Compensation Management is the lifeblood to most of the enterprises. Every business wants to dominate Compensation Management, which is simply because a good compensation management model is able to inspire employees, boost morale, motivate your talent, and promote enterprise performance improvement. On the other hand, poor compensation management can also cause the productivity and sales performances to a standstill situation.

The following points are the most common scenarios when it comes to a poor compensation management.

Unclear Pay Philosophy

Before you build a skyscraper, you should build a very strong foundation first. This same philosophy applies in compensation management. Before we build the compensation structures, we need to have a clear pay philosophy. Based on Mercer Consulting’s “3-P Model”, there are 3 common pay philosophies used, which are:

• Pay for People
• Pay for Performance
• Pay for Position

For example, if your company’s pay philosophy is “Pay for Position”, and you don’t have every employees’ Job Description updated, clearly, you are already off to the wrong start.

Outdated Compensation Structure

To maintain a strong compensation structure is imperative for any organization. If your compensation structure is outdated, you may end up paying your employee way too much, which will increase your company operation cost.