The Compensation Handbook, Sixth Edition: A State-of-the-Art Guide to Compensation Strategy and Design

The most relied-on guide in the industry—now with strategic insight for using compensation strategies and practices to create competitive business advantage

The Compensation Handbook has been a mainstay on the desks of human resources and compensation professionals for more than forty years—and now this revised Sixth Edition continues the tradition with new material and focus on developing a sustainable competitive advantage. The most important revision to date, this transformative edition will enable compensation and human resources practitioners to:

• Provide a road map for creating a fully defined compensation strategy for any organization
• Design and implement an approach for attracting and retaining talent that will remain relevant into the future
• Present programs that allow for the seamless alignment of historic best practices with the latest tools, methods, and diagnostics in compensation

Much of this guide’s longtime success comes from the extraordinary team of highly respected experts from business and academia who share their authoritative knowledge on every aspect of compensation, and this latest edition features more than two dozen new contributors leading the field in their specialties. From using “big data” to solidify compensation decisions to building compensation programs that adapt to rapidly changing business and workforce scenarios to executing successful plays for new talent, retaining essential staffers, and encouraging skill development—The Compensation Handbook, Sixth Edition continues to be a groundbreaking tool that forward-thinking compensation professionals and HR practitioners can use to substantially add value to their companies today and in the future.

Preface xi

PART I: INTRODUCTION
1 The State of the Compensation Practice 3
Lance A. Berger
2 Using a Total Rewards Strategy to Achieve Competitive Advantage 13
Steven E. Gross and Mandy Rook
3 Aligning Total Compensation Programs with Organization Values and Strategy 27
Thomas B. Wilson
4 Winning Compensation Strategies for Organizational Sustainability 35
Dorothy R. Berger
5 Excelling as a Compensation Professional 45
Brian Moore and Sue Holloway
6 Emerging Compensation Issues 53
Joseph J. Martocchio

PART II: BASE SALARY
7 Positioning Salary Structures within the Total Rewards Context 63
Andrew S. Rosen
8 Selecting and Developing a Salary Structure 81
Michael Armstrong
9 Making Merit Pay and Bonuses Matter 89
Myrna Hellerman and James Kochanski
10 The Purpose and Nature of Job Evaluation 97
Michael Armstrong and Paul Thompson
11 Optimizing the Use of Salary Surveys 105
Tim Brown
12 Rationale for and Approaches to Benchmarking 119
Tom McMullen and Iain Fitzpatrick
13 Paying for Skills, Knowledge, and Competencies 135
Gerald E. Ledford, Jr.
14 Using Nonmonetary Awards to Support Behaviors that Drive Business Results 143
Melissa Van Dyke

PART III: VARIABLE COMPENSATION
15 Choosing the Incentive Compensation Programthat Best Promotes Performance 157
Linda E. Amuso
16 Designing and Implementing Effective Variable Pay Programs 169
Erin C. Packwood
17 Aligning Sales Compensation Plan Design with Talent Retention Strategy 179
Jerome A. Colletti and Mary S. Fiss
18 Developing and Applying a Return-on-Investment Methodology to Drive Sales Force Performance 191
Rebecca Sandberg and Carrie Ward
19 Creating a Culture of Collaboration, Innovation,and Performance through Team-Based Incentives 199
Luis R. Gomez-Mejia and Monica Franco-Santos
20 Revolutionizing Workplace Culture through Scanlon Gain Sharing 211
Dow Scott and Paul Davis

PART IV: EXECUTIVE COMPENSATION
21 Formulating and Implementing an Executive Compensation Strategy 225
Ted Buyniski
22 Designing and Executing Long-Term Incentive Plans 235
Ben Burney and Bill Gentry
23 Regulating Executive Compensation 249
Frank P. VanderPloeg
24 Formulating Executive Employment Agreements 265
Andrea S. Rattner
25 Cracking the Secret Code of Long-Term Incentives in Private Companies 281
Myrna Hellerman and Yelena Stiles

PART V: COMPENSATION AND THE BOARD
26 The Compensation Committee and Executive Pay 289
Seymour Burchman and Blair Jones
27 Dynamics of CEO Pay 307
David Swinford and Jane Park
28 Board Compensation 315
Nora McCord
29 Structuring Board and Executive Pay 325
Bruce R. Ellig
30 Compensation Committee of the Board 333
Robert H. Rock
31 Creating an Effective CEO Succession-Planning Process 343
James F. Reda and Molly A. Kyle

PART VI: PERFORMANCE AND COMPENSATION
32 A Framework for Designing a Performance-Management Process 355
Charles H. Fay
33 Choosing a Performance-Appraisal System 363
Martin G. Wolf
34 Linking Compensation to Competitive Business Value 383
Mark Graham Brown
35 Using Financial Rewards to Drive Productivity 391
Christian M. Ellis
36 New Developments and Issues in Pay for Performance 397
Mark D. Cannon
37 Making Calibration an Integral Part of a Performance-Appraisal System 409
Dick Grote
38 Guidelines for Effective Executive Performance Appraisals 423
James F. Reda and Molly A. Kyle

PART VII: TALENT MANAGEMENT AND COMPENSATION
39 Employing Novel Ways to Use Compensation to Win the Talent Wars 441
Deborah Rees
40 Strengthening the Link between Compensation and Return on Investment 451
Mel Stark and Mark Royal
41 Incorporating Work/Life Effectiveness into a Total Rewards Strategy 463
Kathleen M. Lingle
42 A Methodology for Effectively Communicating Compensation Programs 471
John A. Rubino

PART VIII: GLOBAL COMPENSATION
43 Critical Expatriate Compensation Issues and Practices 481
Roger Herod
44 Global Local National Compensation Issues and Practices 493
Jordan Blue, Ed Hannibal, and Ilene Siscovick
45 Employing Novel Compensation Approaches to Compete for Expatriate Talent 503
Yvonne McNulty

PART IX: BIG DATA
46 A Guide to Realizing the Value of Big Data 521
Lance A. Berger
47 Using Workforce Analytics to Make Effective Compensation Decisions 529
Dan Weber
48 Making Better Compensation Decisions in the Age of Big Data 537
David B. Turetsky
49 Using Big Data to Enhance the Value of Compensation Programs 551
Ezra Schneier
50 Turning Data into Compensation Information 561
Martin G. Wolf
51 Exploring New Technologies that EnhanceCompensation Programs 571
Mykkah Herner

Contributors 577
Index 581

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