Whether you love him or hate him, Nick Saban, head football coach at the University of Alabama just might now be the highest paid coach in college football. Two National Championships in three years has earned him that honor. In reading about his recent contract negotiation, I found it more interesting what he said about his assistant coaches’ pay (all but one got a raise) than his own:
“It’s imperative that we keep continuity and we have an opportunity to be competitive salary-wise with other schools who are trying to hire our coaches,” he said. “It doesn’t really matter what my opinion is or what anyone else’s opinion is. The market is what it is, and if we’re not willing to pay that to the best people that we have, they’re not going to be here.”
I couldn't have said it better, Nick. Not only does this speak to his capabilities as a leader in realizing that in order to be the best, you have to surround yourself with the best, he also realizes that market forces are at work in governing compensation. Whether you leading a college football team or a company, you’ve got to know the market in order to be able to make wise decisions.
Because of this, I advocate for annually examining your compensation structure and policy if you want to keep your best people. Here steps to do this:
1. If you don’t have a strategic compensation policy, set one. Determine if your business needs to lead, meet, or lag the market in pay based on a variety of factors including the skill level you need, availability of the skills you need, competition in your market for labor, and obviously a host of your company’s financial indicators.
2. Get wage data from all the markets in which you compete for labor. This may entail data from a local survey, but it may include looking at national surveys based on how far you have to go to find the talent you need to be competitive.
3. Using wage survey data, determine where you currently fall in terms of your compensation structure.
4. Update your wage structure to reflect your strategic pay policy. Here’s a tool for understanding how to do this: Updating Wage Data to Reflect Your Pay Policy
Compensation reflects the total financial returns and tangible benefits received for employment, so make sure you’re considering and examining more than just base pay.
In addition, there are those non-tangible rewards that also motivate behavior and cannot be neglected. After all, leading the market in pay does account some of Alabama’s ability to keep good coaches, but I would think getting to coach under and learn from the best coach in college football does account for some value that can’t be measured.
What benefits or compensation, whether tangible or not, distinguish your company?