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Financial Management

HR Management

Resource Management

Policy Management

Because legal compliance with compensation-related regulations is the responsibility of the compensation department

Because the compensation professional has a fiduciary responsibility to ensure that the financial resources of their organization are spent in a prudent manner

Because it is possible to pay significantly less for talent in different countries and compensation should advise management on when and where to locate various jobs within the company

They shouldn’t. Due to the complexities of global regulations and practices, compensation administration outside of the home country should be outsourced.

Fixed costs must be kept to a minimum, but variable costs can fluctuate since they tend to correlate with revenue.

Variable costs often have a heavier focus than fixed costs, which applies to all areas, including compensation.

Fixed costs and variable costs are equally important and both should be kept to a minimum.

Fixed costs are not a concern because they cannot be changed, so the focus is primarily on variable costs.

A Star

A Question Mark

A Market Leader

A Cash Cow

Pricing your products appropriately

Understanding your business and its competitive strengths and weaknesses

Forecasting profit, growth and investment performance to develop realistic budgets

Evaluating prior year performance for the narrative portion of annual financial reports

It isn't. The performance review should not be related to pay decisions.

It is related to the extent that it affects variable pay awards. Base pay is based solely on tenure, prior experience and job skills.

It helps managers meet salary budgets by allowing them to adjust review results to align with available salary increase funds.

It provides managers a measure that can be used along with salary planning guidelines to determine appropriate rewards or consequences.   

Compensation budgets only because staffing cannot exceed the funds available

A combination of organizational goals and budget realities

The consensus of HR management and line management estimates

The opinions of senior leaders in the organization

Compensation costs eventually stabilize and become a consistent percent of revenue.

Compensation costs and revenue increase at approximately the same rate.

Compensation costs eventually decrease as a percent of revenue, increasing profit growth.

Compensation costs remain the same as a percent of revenue until variable compensation costs exceed fixed compensation costs.

A varying mix depending on employee influence on goals to provide the necessary incentive to maximize profits

100% variable pay to motivate all employees to maximize productivity and sales

90/10 for the majority of employees (base/variable) to share in the company’s success with increased variable pay for management/executives to motivate employees to seek higher positions

High base pay and low variable pay to ensure predictability of total compensation expense

Stock/share options

Stock/share grants

Restricted stock/shares

Performance units