Learn the critical first step in developing an effective total rewards strategy for your organization. Expert guidance for SHRM-SCP certification exam preparation.
Table of Contents
Question
In developing a total rewards strategy for an organization, what should be the first step in the process?
Answer
Develop a compensation philosophy. A compensation philosophy is a short (but broad) statement documenting the organization’s guiding principles and core values about employee compensation. Ideally, development of the compensation philosophy should precede development of the total rewards strategy, because the philosophy essentially serves as a mission statement that informs the total rewards strategy.
Explanation
The first and most critical step in developing a total rewards strategy for an organization is to establish a clear compensation philosophy. A compensation philosophy is a concise yet comprehensive statement that outlines the guiding principles and core values the organization holds regarding employee compensation.
This compensation philosophy essentially serves as the north star or mission statement that will inform and guide the subsequent development of the total rewards strategy. It captures the “why” behind the organization’s approach to compensation.
By first articulating this overarching philosophy, it ensures that the total rewards strategy will be grounded in the organization’s values, principles, and objectives related to compensation. The strategy then brings that philosophy to life with specific programs, policies and practices.
Without a well-defined compensation philosophy in place upfront, the total rewards strategy risks being disjointed or misaligned with the organization’s core beliefs about rewarding employees. The philosophy keeps the strategy anchored and oriented in the right direction.
So in summary, the compensation philosophy is the essential first step that lays the foundation for building a cohesive, effective, and principled total rewards strategy. Develop the philosophy first as the guiding light, then craft the strategy to enact that philosophy while meeting the organization’s unique talent needs and goals.
SHRM Senior Certified Professional (SHRM-SCP) certification exam practice question and answer (Q&A) dump with detail explanation and reference available free, helpful to pass the SHRM-SCP exam and earn SHRM-SCP certification.