It is an easy thing to lead an organization when the good times are rolling, but during a recession – when challenges assail you from every direction – not so much.   To succeed, to lead under these circumstances will require not only possessing a particular series of technical and behavioral skill sets but the ability to apply them as well.  Effective cost cutting has become a business priority, as well as the imperative to continuously create more efficiency in company operations.  You need to trim down as well as trim back, but in a managed fashion that will strengthen your organization for the future.

When it comes to Human Resources and the management of your payroll dollars, you need to cut the fat and tone the muscles; you need to go on a diet.

In your personal life the decision to begin a weight loss / trim down regimen typically means that you have recognized a problem with your current life style and have committed to 1) stop certain negative-reinforcing actions (eating the wrong foods) and 2) instill a sense of discipline to follow new positive-oriented behaviors (portion control and exercise) that would lead you to a healthier tomorrow.  In a similar vein companies facing a legacy of wasteful spending and misused employee rewards require the same discipline to curtail ruinous business practices and embrace the need for new thinking.

In order to rectify costly and damaging practices that have built up and ingrained themselves over time HR management will need to change the manner in which they reward employees and exercise more prudent behavior – as if the funds came from their own pocket, versus a bottomless well or the company’s money tree.

So how do you do this?  Where do you start?  I suggest that if you follow the Seven Step Compensation Diet you will develop a more effective and efficient HR organization, one that maximizes employee reward dollars while keeping a close eye on the company’s business objectives.

Today begins a series of Compensation Café posts that will describe each of the seven steps your organization should take to turn your pay practices around.

Step #1: Look Yourself in the Mirror

People begin a diet because they need to.   The damning evidence stares back at them in the morning mirror, forcing an acknowledgment that something must be done.

Management and HR professionals face a similar wake-up call as employee-related problems raise their troublesome heads and demand attention; payroll costs grown out of control, an increasing turnover of key talent, lower productivity or perhaps evidence of worsening employee morale.  Something is damaged or broken within the organization, economic and human factor pain is being felt and the need to address the issues has become critical.

Sad to say though, that it’s usually a crisis springing up out of nowhere – not timely self-appraisal – that forces action to replace historic lethargy.  Advance warning for the unwary is a luxury that cannot be counted upon.

The likely sources of this pressing concern are systemic practices rooted in outdated or ill-monitored policies that have out-lived whatever usefulness they might have once claimed.  So ask yourself:

• Do you have an HR / Compensation policy manual?
• When was it last updated?
• Do employees / Managers read it / use it?

Or perhaps it is simply that senior management is shouting at you?

Whatever the catalyst, at this early identification stage you will have a sense of likely problem areas (i.e., out-of-date procedures, lack of standards, policy gaps, poor documentation, training issues, etc.).  Analyze the likely causes (the actions likely feeding the problem) and consider what practices or policies the organization should modify or stop outright, and what activities or programs you need to start.  Then write them down.  Identify those policies or practices that may be causing harm and need to be reviewed, and then which new initiatives would alleviate the problem and strengthen your organization.  You will need to focus on these weak areas, as such components of your pay program become the baseline for your future efforts.  Do not lose sight of them.

Knowing you need to take action is a big step, but only the first.

Next up – Step #2: Develop a Compensation Strategy