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#5 Reasons Why Compensation Bench-Marking Is Essential For an Organization The impact of compensation bench-marking extends to gaining a strong corporate identity and provides a competitive edge by building effective employee engagement strategies

By Aparna Ahuja

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In today's hyper-competitive & dynamic environment, an organisation may experience multifaceted challenges in hiring talent at the leadership level. It isn't very easy to find leaders who resonate with an organisation's long-term vision, meld with its culture while contributing extraordinarily in their core tasks. In this scenario, it could be extremely disappointing to lose this valuable talent to another firm, and for the least due to a slight variance in compensation.

Availability of industry compensation data or more specific data relevant to a certain role/position aids an organisation to internally standardize its compensation structure as per the external benchmarks, so as to neutralise any anomaly that could lead to a potential talent drain.

While the direct impact of compensation benchmarking, which is irrefutably linked to retention cannot be denied, it is worth mentioning the indirect impact or the larger effects of the exercise on an organisation.

  • Ensures Preparedness- Retaining critical talent leads to preparedness towards growth overdrives, expansion & diversification. It also ensures accomplishment of strategic goals of an organisation.
  • Increases Productivity and Growth – Compensation Benchmarking can positively influence employee engagement which leads to increased productivity and growth. While job satisfaction and a strong sense of value instilled in employees by stakeholders may drive productivity in their tasks, this softer aspect of keeping employees engaged may not be long-lasting. Inconsistent pay rates for employees in the same job lead to employee dissatisfaction and lower productivity. A compensation benchmarking helps in promoting employee engagement and performance
  • Promotes a Positive Work Culture – Appropriate compensation bench-marking techniques generate a positive attitude amongst employees and also helps in creating a great work culture. Organizations should recognize and take necessary measures to execute the right compensation strategies in the organization thus making it a great place to work.
  • Cost Optimization - An organisation can save significant salary cost by hiring and retaining employees at more appropriate and consistent levels if they analyse current market trends/data provided through a compensation benchmarking intervention, while also saving hundreds of hours of business management's time as a result of a more streamlined salary process. Availability of market data also leads to effective budget planning & allocation
  • Establish Brand Value- The impact of compensation benchmarking extends to gaining a strong corporate identity and provides a competitive edge by building effective employee engagement strategies designed in view of the best practices prevalent in the market. It helps to pre-empt industry trends and accordingly design talent management roadmap powered by specific business insights.

Lastly, by investing in a compensation benchmarking exercise, an organisation can clearly analyse its positioning and reputation in the market and accordingly take proactive measures to make the desired shift.

The result would be that in the process the organisation would successfully be able to create a strong employment brand identity by winning the war for talent, retaining your best employees and securing the best and the brightest to join your organisation.

Aparna Ahuja

Senior Engagement Manager, Athena Executive Search and Consulting


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