Preparing for comp cycle evaluations in your company can be a daunting task for HR professionals — even highly experienced ones. The discussions that occur as part of the process touch on some delicate issues, and it’s not always easy to make decisions about increasing salaries and benefits. On the one hand, you want to reward your employees for their hard work; on the other, you need to stay within the company’s means and avoid situations of imbalance within your staff.
“Today’s market is a worker’s market,” says Niv Alfa, VP of HR at Zebra Medical. “Even average workers expect and demand compensation increases which may not always be realistic. On the other hand, compensation is still one of the most important tools we have to maintain employees and to communicate about excellence and about the values we would like to emphasize in the company culture.”
So how do you go about managing the comp cycle in a way that reduces conflict, increases employee satisfaction, and encourages better performance while staying on target with the company’s overall strategy? We asked some HR experts — all of whom are Compete customers — for their advice on running a successful comp cycle. Here’s what they told us.
1. Set a clear strategy
Every HR expert we asked emphasized the importance of setting a clear strategy for the evaluation process.
Reut Rubinstein, VP of HR at Lusha, says: “As with every project, it’s important to answer questions such as: ‘What is our strategy in this field?’ ‘Is there a sector that’s more important to us than another?’ ‘What are our budget constraints?’”
“To plan the process, you must start with deciding on a benefits strategy: according to the market, above the market, performance-based, seniority-based, etc.,” says Naama Engel, VP of HR at Bookaway.
“It’s very important to create a process that helps managers understand who is worth investing in,” says Niv Alfa from Zebra Medical. She explains that during the first comp cycle in her company, the management put together a roadmap that addressed a number of markers, including:
- General satisfaction with the employee’s performance
- How unique and valuable the employee’s knowledge and skills are to the organization
- The cost of losing the employee
- The employee’s contribution to the company culture and atmosphere
- How the employee compares to the market average
“When we were ready to talk about the actual numbers of salary increase, we already had a common language,” she goes on, “and it was easier to make decisions about outliers and move the process forward within the budget that our CEO had set.”
Inbar Sagi, Head Of Human Resources at EarlySense, agrees. “Once there is a comp strategy in place, it’s much easier to make decisions,” she says. “You need to be the one leading the process, with a clear and transparent process relying on solid market salary data.”
“Decide how you want to use the budget,” advises Taliya Dishon, Chief of Staff at Nexar. “Do you want to have an X% raise company-wide, or use it to compensate your top-performers only? If you choose the latter, make sure to collect managers’ reviews before the comp discussions.”
2. Get organized
Another essential element of a successful comp cycle is organizing your data in a way that makes it easy to follow your strategy.
Moran Taichler, Head of HR at Edgybees, recommends starting with a spreadsheet that provides an overview of all employees by department. The spreadsheet should include:
- Position type
- Start date
- Vacation days
- Stock options
Inbar Sagi of EarlySense also recommends adding a performance evaluation rate, for example: low, medium, good, excellent, and “star.”
“Prepare convenient tools for managing the process: distribution of files to your managers, tracking your progress, and control of outlying situations,” adds Naama Engel from Bookaway. “If you don’t know how to build it well on Excel — the finance officer working with you will know. Plan your schedule to allow for time to integrate the process, analyze it, and ensure that the organization has met its goals.”
3. Get aligned with the management
The third element of a successful comp cycle is making sure that the HR professionals and the management of the company are on the same page.
“One important tip I’ve learned from experience,” says Niv Alfa from Zebra Medical, “is to prepare managers for the conversations they will have with their employees. How do we present the compensation? How do we speak to employees to whom we’ve decided not to offer an increase in this round?”
“The C&B process may be led by the HR team, but it’s really a joint effort between us and the CEO and financial officer in the company,” says Naama Engel from Bookaway. “The process must take place in close cooperation with the management and be led by them. The full involvement of all partners in this process, its goals, and its schedule will make your life easier.”
“The more the management is on board with the messaging and the values behind this process,” she adds, “the easier it will be to decide what to do at difficult junctures, to communicate with employees, and to make fair decisions over the long term and not just during this process.”
“We often forget that though the comp cycle is a process of numbers and budgets and is mostly managed as an administrative project, the manager needs your help with things relating to decision-making, management skills, ethical dilemmas, and so on,” she goes on. “Take advantage of the process to expand the instances where you offer support and partnership to the manager.”
4. Understand the competition
Many of the HR professionals we spoke to emphasized the importance of benchmarks: having clear data on the market trends and making decisions about compensation and benefits based on what’s happening at other companies in your field.
“You need to reassess all positions once every quarter in terms of benchmarks because our market changes very quickly and the salaries change,” says Moran Taichler from Edgybees. “I use Compete to identify the benchmarks. This helps me understand what the 50th, 75th, or 100th percentile is for each position in terms of salary, and I enter that into my spreadsheet. Using this data, you have to decide on a company level whether you’re going according to the 50th or 75th percentile. I recommend the 75th because assuming it’s a good company, people won’t leave for a small increase in salary.”
“Market, market, and again market,” says Naama Engel. “Understand where your employees stand in relation to the strategic placement you have chosen and what is happening in the market today. What the average percentages employees are receiving, what the turnover rate is, and what competition you’re contending with.”
Taliya Dishon from Nexar points out that understanding benchmarks is crucial to understanding how to handle employees at risk. “By using systems like Compete, you can pre-identify employees who are receiving below-market compensation and be proactive in raising their salary,” she says. On the reactive side, if an employee asks for a raise and is disappointed by the company’s decision, “the company can use systems like Compete to show the employee real data on their market value and move the discussion towards a PDP (personal development program) approach — a.k.a., ‘You are not there yet, but let’s think about the steps you can take in your career in the coming year that could help you get where you want to be, both in terms of your professional development and your compensation.’”
5. Keep things simple and quick
Our HR experts also mentioned that it’s important to keep the process brief and as simple as possible. “Avoid a complicated process, lack of clarity, or lack of consistency,” says Reut Rubinstein from Lusha.
“Plan the process to be short and intense,” Naama Engel advises. “There’s no point in a long process.” She explains that in her experience, the longer the process is, the more convoluted it gets.
6. Keep the big picture in mind
Finally, experts emphasize that when you do offer salary increases to workers, it’s important to keep in mind the effect it may have on other workers and on the rest of the company as a whole.
“Sometimes, for a particular position that’s been taking a long time to fill, you may be tempted to raise the salary,” says Moran Taichler. “But this could create an imbalance in the company.”
“For example,” says Naama Engel, “if your goal is to differentiate according to performance — that is, high-performing workers are placed on a higher percentile — make sure this is the situation within the organization as a whole. If not, figure out how to minimize the gaps.”
“It’s a bit risky to link feedback and performance cycles to comp discussions because it creates the immediate expectation among the employees that if they received OK feedback, they will automatically get a salary raise,” warns Taliya Dishon. “It’s better to convey the message that the feedback cycle ‘reward’ is much more related to personal and professional development that will eventually help the employee to grow, boost their career, and obviously improve their comp terms, title, and so on.”
Creating a compass
Ultimately, Niv Alfa points out, your goal is to help the company build a strategy for worker compensation that will help your business and its employees grow and thrive.
“An important, and challenging, part of our job is to help the organization, its management, and the managers make decisions according to data and to minimize impulsive thinking, or the type of thinking that comes from the difficulty in keeping employees or meeting their demands, which is constantly increasing,” she says. “Our responsibility is to create a compass that gives direction to the organization.”