Is your Compensation Management Process Broken?

May 21, 2022
Diya Mathur
Diya Mathur
Diya Mathur
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You might have heard or even partaken in water cooler discussions. Believe it or not, water cooler discussions invariably lead to discussions or gossip around topics like salaries, perks, and promotions. There is no good way you can get rid of such discussions but is there a way to minimize the impact it has on your folks? Sure there are ways. If your compensation management process is broken, it will surface someway, somewhere or the other, be it around water coolers or employee appraisals.Soon enough, you will see the effect of an ineffective or inefficient compensation plan on your talent retention and hiring. A good number of sales churns, in fact over 55% of them, point to inadequate pay as the motivating factor for moving on.You don't want your top performers to look for greener pastures now and then. There is a lot of investment in hiring, training, and retaining talent, all of which stand the risk of being washed off. There is no doubt that compensation management is a complicated process that needs periodic and ongoing review, given the competitive nature of the present job market. In the sections that follow we take a look at what an ideal compensation management process should be and some of the common signs that point to a broken compensation management process.

What is a compensation management process?

Compensation management is that part of the HR process that analyses the current job market, the job description, the level of experience among other factors to arrive at a fair compensation.Given the complexity and the impact, it has on the overall functioning of any business, especially the sales org, companies appoint a dedicated compensation manager who is given the responsibility of analyzing and deciding on fair compensation for every employee. In other words, this team ensures every employee gets a fair compensation in line with the job market while also considering various financial aspects. Compensation management teams ensure that employees are fairly compensated across the board by specifically looking at factors like,

  • Work experience
  • Educational qualification and pedigree
  • Job Description/ Roles and responsibilities
  • Performance against roles and responsibilities
  • Job market
  • Cost of living
  • Budgetary allocations in line with org-wide goals

So what does compensation management have to do to get things right? We look at some of the important steps that compensation management takes to ensure fair compensation across the board. By utilizing compensation metrics, they can accurately measure the effectiveness of different compensation structures and make data-driven decisions to optimize overall sales team performance and satisfaction.

Formalize Compensation Policy

They say a good beginning to every change is to have it written. Formalizing a compensation plan by documenting the whole thought process behind your long-term compensation strategy, including the benefits of MBO (Management by Objectives), will help to lay a solid foundation for a robust compensation strategy. It helps you formally document all the policies around employee salaries, perks, and benefits and keep all matters related to compensation as transparent as possible.

Spread Awareness on Compensation Policy

With an open and formalized compensation policy, it becomes easier for the compensation management team to spread awareness among new and existing resources. Awareness helps minimize speculation and water cooler gossip around salaries and perks. A well-documented and well-communicated compensation policy also attracts the right talent and goes a long way in retaining them.

Implement a Robust Compensation Strategy

A fair and formalized compensation policy helps sales leaders and managers build robust compensation strategies for the long term. A robust compensation strategy will always have a long-term outlook while allowing short-term fixes to retain top talent, discouraging ad hoc decisions on matters of compensation. Ad Hoc decisions on compensation may lead to discontent within teams. A thoroughly performance-based compensation strategy, giving very little credence to qualitative assessments also helps in hiring and retaining top talent.

Continuous Review and Improvement of Compensation Strategy

With ever-changing job markets and their highly competitive nature, a continuous review and improvement plan for your compensation strategy, considering factors such as 'budget vs forecast vs projection,' becomes imperative. A periodic review of hiring and retention statistics will give you leads into how well your compensation strategy has worked.

Is Your Compensation Management Process Broken?

So, are there any early warning signs of a broken compensation management process? Here are some of the key signs to look out for in a broken compensation management process.

Broken, incomplete, or vague job description

If one does not define jobs or positions accurately and fixes accountability on the roles and responsibilities involved, there is every chance that compensation based on such job descriptions is flawed too. Near accurate analysis of every job is the bedrock of a good compensation management process. Lack of detail in job descriptions leads to ambiguity that may lead to unfair compensation practices down the line.

The opacity of decisions related to compensation

An appropriate approval system should be in place to approve or disapprove revised compensation plans for every resource. If you do not see a robust approval system in place, you most probably have a broken compensation management process.

Ineffective performance appraisals

If you see every other employee getting good performance appraisals, you most probably have a broken compensation management process. In a true pay-for-performance system, normalization of performance appraisals is undertaken. Only a certain percentage of your employee workforce should receive a handsome pay raise. Toothless performance appraisals will lead to a loose correlation between an individual or team goals and overall org-wide goals.

Confusions regarding incentive payouts

Sales is a complicated and long-drawn process, especially for enterprises with a large footprint. Selling to clients who sit in different parts of the globe will require a concerted team effort. If you start seeing consistent concerns being raised about the amount of incentive doled out for closing a certain deal, especially the kind where multiple hands are involved, you instantly know that your OTE (On-Target Earnings) compensation management process is broken somewhere and needs immediate attention.


A technology-based solution that is an intuitive, insightful, and intelligent performance management system is the need of the hour for a robust compensation management process. Kennect offers a two-pronged solution to all your compensation woes through its incentive and performance management solutions. Incentive Compensation Management and Sales Performance Management by Kennect work together seamlessly to offer you a complete, transparent, and real-time compensation and benefits solution. Give us a try, ask for a demo today.


Diya Mathur

Diya is a Product Marketing Associate and content writer specializing in Incentive Compensation Automation. Diya has honed her ability to bridge the gap between intricate software functionalities and accessible, reader-friendly content. Her articles are a testament to her dedication to breaking down intricate SaaS solutions into digestible insights that cater to both tech-savvy professionals and those new to the software landscape.


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