Week 22, 2022—Issue #206
Compensation Strategy: Line Managers, Comp Committees, and Team-Set Salaries
Each week: three ideas for how to build better organizations. This week: three ways to structure compensation. Originally published in the WorkMatters newsletter on June 3, 2022.
Compensation strategy is a lot of things to a lot of different people. But to me, it all comes down to the question of who makes salary decisions and how. Let’s dig in:
1. Line Managers
A line manager is a person with direct managerial responsibility for another individual. In most organizations, it’s the line manager that makes salary decisions. This can work well in high-trust environments, but it requires that learning and development be handled by a third-party mentor or coach who is able to provide unbiased advice and feedback.
2. Comp Committees
A compensation committee is a group of people that make salary decisions on behalf of one or more teams. Committees come in many different forms, but they’re often comprised of volunteers that make decisions in response to proposals submitted by individuals and/or their managers who are now free to mentor and coach now that they don’t set salaries.
3. Team-Set Salaries
Team-Set Salaries is a compensation system that relies on neither managers nor committees. It uses software — specifically, Percival.live — to enable team members to collectively “split the pie” and make transparent decisions as to how to divide finite resources. It’s a reasonable alternative for organizations that aren’t amenable to Self-Set Salaries.
In reading about compensation strategy online, I found lots of materials on how to set salaries, and I learned that the decision boils down to three options: you either pay above-market, at-market, or below-market rates.
Sigh.
How an organization compensates its people is one of the most important decisions it will ever make. I think it reasonable therefore to expect its compensation strategy to address the key question:
“Who makes salary decisions in our organization? Is it the individual, the manager, or someone else?” It might be an easy question to answer or it might not. Either way, Who should supersede How.
That’s all for this week.
Until next time: Make it matter.
Did you know? WorkMatters is a weekly newsletter that explores new and better ways of working. New issues drop Fridays at 10 AM ICT and subscription is free. Back-issues are published to Medium after three months.
