Revisit your salary and review process

With the year-end salary and review process approaching, now is the perfect time to revisit your firms' human-capital strategy. To be most effective, the salary and review process should be part of a comprehensive strategy aimed at developing and retaining talent. Based on the research that we conduct on human capital, as well as my own experience as a human resources consultant and team manager, I offer the following tips: Benchmark your compensation structure. First, understand that the talent in highest demand will command the most competitive cash compensation. In addition, you need to decide what level and skill set is required to support your specific goals, and then set cash compensation to allow you to compete in those areas. The fastest growth in cash compensation is among technical specialists. Ensure that employees have job descriptions, goals and objectives. Job descriptions help employees understand their role and responsibilities, and what each job requires in terms of experience and skill sets. Goals, on the other hand, tell employees what results are expected above and beyond completing their basic job tasks. Without clear goals and objectives, it is challenging to encourage and motivate employees to attain the right results. Firmwide goals and objectives are as important as individual goals because they provide context to help employees understand how their job tasks contribute to the firm's success. For example, how many new clients is the firm targeting annually? What level of profitability is it targeting? What kind of experience does the firm hope to deliver, and what does that look like from the client's point of view? With firm goals clearly stated, employees can better see how their roles and responsibilities drive the firm's success and their own compensation. Tie incentive compensation to measurable outcomes. The goal of incentive compensation is to increase staff motivation as well as behaviors and attitudes that correlate with success. Yet advisory firms have a mixed record in actually tying incentive compensation to anything tangible. Just 50% of firms tie incentive compensation to individual goals, and just 57% tie incentive compensation to firmwide goals, according to the 2011 Compensation & Staffing Study. Even firms that have documented goals often fail to use them — that is, no part of the employees' compensation is contingent upon meeting those goals. Goals are a key part of the compensation mix, especially for incentive pay; they need to be documented and be used to drive performance. Solicit input all year. Two-way open communication is essential to an effective working relationship. According to our study, most reviews are annual (66%), with only a small percent semiannual (19%) or quarterly (10%). But reviews don't necessarily have to be tied to an annual compensation review. Instead, giving employees regular, timely feedback can be an opportunity to encourage development and continuous improvement year-round. Ask employees to assess their performance, and focus on accomplishments and areas for improvement. Equally important is to get input on areas for development and engage in a conversation about career goals, specifically the path for them in your firm. Regularly reviewing the plan with employees will help to correct any issues that arise and ensure that employees stay engaged. The study data clearly show that firms perform better financially when they take a comprehensive, disciplined approach to managing human capital. Now is a good time to ensure that you have the key elements of that approach in place to create an industry-leading compensation strategy and a profitable, growing firm. Kelli Cruz is the director of research and consulting for IN Adviser Solutions. For more information on the 2011 InvestmentNews/Moss Adams Compensation & Staffing Study or assistance with your human-capital strategy, go to inadvisersolutions.com