Rewarding participants for improving processes, performance, productivity
and profits is as much a science as smart companies commit to make it.
Starting a new enterprise, bringing up a new product or expanding capacity
can be optimized by making the right decisions in the beginning and
throughout the processes.
Paying people for their hard work and rewarding them for exceptional
performance is as much a business process as the three examples just given.
So too, making smart decisions about how to pay people optimizes
performance, productivity and profits.
Compensation planning involves three major sectors:
- Base compensation - a "draw" as expenses of the company for applying
core sets of competencies.
- It is important that base compensation is competitive with the market
- e.g., for similar positions in similar organizations in local, regional
or national markets.
- Annual incentive compensation - a "reward" for meeting and exceeding
targeted business goals and objectives and improving mastery in core
- It is critical that annual incentive compensation motivates rewards
and retains exceptional talent and that it recognizes exceptional
improvement in average talent.
- Long-term incentive compensation - a "reward" for meeting long-term
objectives (normally over a three year period) that clearly add tangible
and intangible value to the market value of the company.
- It is essential that long-term incentive payments are for demonstrated
and validated additions to the book or market value of the company.
Since compensation is a significant expense for all companies, it is
critical that all compensation paid have minimal accounting and tax
- Not classifying compensation correctly, not paying payroll taxes
correctly and on time, and not adhering to federal and state unemployment
and payroll tax laws is inordinately penalized under current laws and
- So too, paying incentive compensation inefficiently for tax and
accounting purposes inordinately affects cash management.
Smart organizations engage experts early on in executing business
processes in order to optimize their decisions.
The HARLON GROUP uses expertise gained over time in several successful
engagements to help you optimize your decisions.