When implementing compensation management software, there are many different configuration decisions that need to be made. In a pay-for-performance situation many organizations set specific guidelines for each number in the rating scale. With this method, if an employee’s overall score is a one out of five, they probably won’t be eligible for merit or bonus increases. On the other hand if an employee’s score is a four out of five, they should be eligible for a higher percentage than someone who gets a three out of five.
During project implementation many of our customers go back and forth on how and where to use guidelines in the salary and bonus administration process. Most organizations have at least one or two business units or groups that will need very strict guidelines and rules. From our perspective, we recommend that the minority of the organization doesn’t drive how a company-wide system should be implemented. If you have a difficult group that needs hard rules, then setup specific configurations and guidelines for that group only, don’t make the entire organization suffer!
Typically organizations will look at their most difficult group and try to setup the system to make sure that group’s issues can be met. For example, a company with 5,000 employees will want to spend countless weeks trying to configure for every what-if scenario for a group with less than 20 employees, or for a small number of executives with completely different short and long term incentive plans. We recommend you start with the easiest group first and decide what types of hard or soft rules need be to be in place for that group.
From our perspective it is necessary to configure each individual group separately. Most of the time each country, division, location, or business unit is going to have separate plans and guidelines. Don’t make the mistake of over-configuring for your easy groups, it will hurt user adoption.