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ATD Blog

Linking Compensation with Learning and Development

Monday, October 20, 2014
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Most programs fail to achieve their desired results when operating in a vacuum. Indeed, programs are inextricably linked—like a dancing team. When each program dances separately, performance falls flat. To achieve a perfect score, all programs need to dance in perfect step. Talent development programs are no different. To have a stellar compensation program, companies must also invest in comprehensive learning and development (L&D) programs. 

A compensation program can’t be as successful if people managers don’t have the tools and resources to develop, measure, and reward employee performance. Conversely, employees want to know what they need to do and how to get there to be promoted. In other words, they want to know what training or skill development is required. 

Employees want to know how they will be paid for that progression. More importantly, employees view their total rewards as including compensation, as well as learning and development. It’s all part of their value proposition: what employees deliver and what they will receive in return for those efforts. 

Companies invest heavily in ensuring these programs are appropriately linked because the results far outweigh the efforts. Experience shows that complementary programs achieve higher ROI, such as low turnover, an engaged workforce, and increased productivity. Bottom line: a high-performing workforce increases the probability that the organization will achieve business objectives and financial success. 

To create—and nurture—a high-performing workforce, both compensation and learning and development programs must be aligned. And to ensure the programs complement and support each other, companies need to employ the three key steps. 

Step 1: Develop guiding principles 

It’s hard to know what target a company is trying to hit if the target hasn’t been defined. How can processes, outcomes, and results be measured if there is nothing to measure them against? How can the dance be successful if the programs don’t know what music is playing? 

Developing guiding principles helps ensure the programs are all designed with the same end goals in mind. Leaders should start by outlining the company’s short- and long-term business objectives. Project teams can then articulate guiding principles that align the talent management strategies with these business strategies. 

For example, if a company is transitioning from an IPO to a growing public company, it needs a workforce that focuses on profits, understands its shareholders’ needs, and is able to launch products or services effectively. A guiding principle for the HR programs might include ensuring the current workforce comprises the necessary talent to achieve these performance expectations. The guiding principles would then be used to review, design, and enhance the compensation and L&D programs to propel the newly-public company forward. 

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Step 2: Identify the linkages 

An effective compensation program is typically designed to attract, motivate, and retain employees. An effective learning and development program provides employees with the skills and resources to be successful at their jobs. 

Compensation programs retain employees by rewarding them for achieving pre-determined performance objectives. But a compensation program can’t ensure employees have the right tools and resources to achieve those objectives. Instead, organizations must rely on learning and development programs. This is why compensation and L&D programs must dance the same tango—and work in sync. 

To dance a perfect tango in the IPO example, management might find that it does not have enough employees with public company (not start-up) experience. As a result, the company needs to evolve and grow its workforce. But how?   

Compensation programs should be re-designed to work in tandem with L&D to attract, retain, and motivate employees with experience growing profitable companies. Some of the talent will be hired externally and the rest of the talent will be developed internally. This will require different incentive programs and other monetary and non-monetary rewards. Meanwhile, L&D programs will need to train employees to be operationally efficient, focus on customers, and ensure profitable product management. 

Bottom line: Linkage is critical because individuals typically join a company for the money. They typically stay for the career opportunities and personal growth. 

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Step 3: Engage in ongoing management training 

Both the compensation and L&D programs are only as good as the managers that implement them. If managers don’t understand how the programs complement and support each other, either one or both programs won’t be used as intended. As a result, the guiding principles and business objectives won’t be achieved. 

Managers should receive ongoing training on how implement both the compensation and L&D programs. Who is eligible for training? What training are they eligible for? How will managers measure the effectiveness of the training programs—whether employees actually learned and implemented their new skills? How should managers recognize and reward employee contributions and performance? 

Manager training also is important to ensure internal equity and an engaged workforce. Employees can become highly disengaged if they perceive favoritism. Complaints increase if employees think certain people receive training or rewards based on WHO they know, rather than WHAT they know. By training managers to effectively implement the compensation and L&D programs, employees will feel that they are treated fairly—as a group—and stay engaged. 

Final word 

High performing companies (those with successful year-over-year financial results) ensure all of their talent development programs dance well together. A set of overarching guiding principles, programs that support each other, and managers trained to implement these programs significantly increase the probability of achieving program results. Most importantly, the company has an engaged, highly productive workforce that achieves desired business results.

 

About the Author

Stacey Hawley is the founder of Credo (www.thecredocompany.com), a compensation and talent management firm and author of Rise to the Top: How Women Leverage Their Professional Persona to Earn More. For 17 years, she has been helping both companies and individuals—directly and indirectly—achieve their career goals.  

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