Essay on Compensation: Management and Retention Strategy

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EXCHANGING VIEWS SERIES, # 4, JUNE 2006

COMPENSATION AS A RETENTION STRATEGY

MARIAN COOK

FOREWORD FROM EXCHANGE PRESIDENT
ShoreCap Exchange (“Exchange” or “SCE”), a non-profit sponsored by ShoreBank
Corporation, was established to help build stronger local banks and microfinance institutions
(MFIs) that serve the poor in developing rural and urban economies, primarily in Africa and
Asia and to a lesser extent, in non-EU Eastern European countries.
To achieve its goals, Exchange uses a blend of capacity building approaches to strengthen local banks and MFIs including:1
Embedded technical assistance (TA) approaches (e.g. institutional needs assessment and
TA planning, playing a role on bank boards, conducting evaluations);
Direct one-on-one consulting services;
Banker to Banker Peer Exchange Forums; and
Exchange’s Knowledge Exchange activities among peer bankers are premised on its belief that entrepreneurs learn best from other entrepreneurs and that providing opportunities from bankers at all levels, to learn from their peers is a valuable, cost-effective and an underutilized form of business services delivery.
This paper is based on one of Exchange’s peer forums – the HR Forum. This Forum meets four times a year by phone to discuss and brainstorm on subjects of peer interest. The calls are staffed by HR experts who contribute to the discussion. HR Forum calls have focused on issues identified by participants as key areas of interest. The first series of HR calls were related to leadership development and retention strategies. The current series of calls centers around the strategic role played by HR in development financial organizations. HR Managers from financial institutions located in South and Southeast Asia, Southern, Western and
Eastern Africa are part of the calls, and we would like to thank them for the valuable insights they contribute about their organizations. This paper is based on an interest these participants expressed in learning more about the subject.
We would love to hear from you on any thoughts, comments or suggestions about this paper and our various endeavors (see email at bottom of page).
All the best,
Lynn Pikholz
President, ShoreCap Exchange lpikholz@sasbk.com 1

Exchange currently focuses its one-on-one technical assistance exclusively on ShoreCap International’s investees.
Exchange’s knowledge exchange activities and banker-to-banker peer forums are inclusive of peer MFIs and banks that have not have received an equity investment from ShoreCap International.

Compensation as a Retention Strategy

TABLE OF CONTENTS
4

EXECUTIVE SUMMARY
UNDERSTANDING THE BIG PICTURE: COMPENSATION AS A PART OF
RETENTION STRATEGY
REVIEW OF OVERALL RETENTION STRATEGY
DESIGNING A COMPENSATION STRATEGY AND MODEL FROM THE TOP
DOWN
IMPLEMENTING A COMPENSATION MODEL
POST PROJECT COMMUNICATIONS
KEYS TO A SUCCESSFUL IMPLEMENTATION
CONCLUSION

6
14
17
18
18

APPENDIX A: Sample Project Work Plan and Time Line
APPENDIX B: Sample Compensation Review Committee Description
APPENDIX C: Sample Communications Plan

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22
23

3

4
5

Compensation as a Retention Strategy

EXECUTIVE SUMMARY
In today’s globalized economy, the importance of opportunities for growth, advancement, and work-life balance in the office vary from employee to employee. If one or all of those needs are not met, employees may seek employment elsewhere. The role of Human resources professionals in hiring and retaining the right employees is becoming more and more important to an organization’s overall strategy. A previous Exchanging Views Paper:
“Strategies for Staff Retention”2 examined how staff retention strategies help organizations meet their goals. This paper further elaborates on the role of compensation in the overall retention strategy.
The paper lays out steps for designing and implementing a new salary structure and provides useful tools for developing a project plan and time line and a communications plan. In the end, Human Resources and senior
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