Ready to write your organization’s compensation philosophy?
If you have a firm understanding of what a compensation philosophy is and why it’s important, you’ve completed market analysis and benchmarking, and worked your way through the 4 strategic pillars of compensation philosophy, it's time to put your data and strategy together.
Here are some tips for assembling and writing your philosophy and how to share it with your organization.
Brainstorm with a compensation philosophy table
Start with a high-level view of the compensation options you’ve developed by plugging information into a table like the one below. This will help put your data and decisions into context before you start writing.
2 approaches to formatting your compensation philosophy
The length, format, and details included in your philosophy are up to your company – there’s no universal format. But in general, there are two approaches:
Get detailed: Your philosophy can be a thorough document with
specifics about market position, pay targets, pay mix, segmentation, and geo strategy.
Keep it short and to the point: Summarize your key decisions in one or two paragraphs to create a philosophy statement. Here are some examples:
- Equity is your most powerful compensation.
The problems we are trying to solve are complex, but if we solve them, the value will be enormous. Equity allows everyone on the team to share in this value, which is why we emphasize equity over cash.
- Pay for performance is about what you do AND how you get it done.
Our top individual contributors make a huge impact while putting our customers first. Our best people managers lead impactful and healthy teams. Our compensation programs are focused on delivering more rewards to those who are high performers or enable high performance AND great teammates.
- Recognition should be equitable and meaningful.
In a world of apathy and indifference caring is an act of rebellion. We care about the cause, the art, the details, and one another. We strive to provide personally meaningful recognition and support to all contributors.
Sharing your compensation philosophy
Full, detailed compensation philosophies are best shared only with executives, human resources, and compensation decision-makers.
Although it’s important to be transparent about your overall strategy, you don’t want to be too specific when sharing your targets and goals because this can paint you into a corner if your strategy or finances change. If you say you’re paying in the 75th percentile and then change it, people will feel shortchanged.
Your shorter philosophy statement can be shared broadly to communicate what your company values in terms of pay. Way to share it include:
- Posting it to your company’s intranet
- Including it in FAQs or HR materials
- Mentioning key points during conversations with prospective employees
- Referencing it during conversations with current employees about changes in pay related to things like a promotion or move to a new work location
Your compensation philosophy should evolve with your business
Once your compensation philosophy is written, approved by leadership, and shared, your work is done. For now.
Creating a compensation philosophy is not a static, one-time project. It should always reflect the current stage and goals of your company, so strategies that are right for today may not be competitive in the future.
Re-evaluate your philosophy whenever there are changes to your organization, such as shifts to hybrid or remote work, transitions in executive leadership, or significant growth or expansion.
Thanh Nguyen is CEO & Co-founder at OpenComp. A serial entrepreneur and former member of the founding HR team at salesforce.com, Thanh writes about topics including startup compensation, company growth strategies, the future of work, and hybrid work for publications including TechCrunch and Forbes. Connect with him on LinkedIn here.