STRATEGIC COMPENSATION KEY TERMS

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1 STRATEGIC COMPENSATION KEY TERMS 5D Design Tool Questionnaire A framework to assist in creating a strategic compensation model. The 5-step process includes developing a compensation strategy, designing a compensation plan, determining compensation measures, defining forms of compensation and delivering the compensation model. Attract To incent an individual to come to a place by offering a favorable condition, opportunity, quality or program Base Pay The basic cash compensation that an employer pays for work performed. This tends to reflect the value of the work and not performance or individual contribution. Behavioral Measures Data that gauge individuals' satisfaction, engagement or perceptions (parent satisfaction survey results, student wellness survey results) Blended Pay Model A compensation model that involves the adjustment of base pay and bonuses Bonus A one-time payment of direct or indirect compensation that is offered in addition to an individual's base pay Building Refers to measures and compensation determined by entire school buildings Calculation Technology A technology solution that computes the amount of awards based on a strategic compensation model Centralized Compensation Model A single, overarching model that applies to all eligible employees of an organization Closed Communication Method Exclusive communication strategy in which outside parties do not have an opportunity to ask questions during the strategic compensation model design process Collaborative Team Group consisting of multiple and diverse internal and external stakeholders Communication Channel The method, strategy, path, tools and resources used to convey a message Compensation Strategy The principles that guide the design, delivery, forms and determination of compensation programs

2 Cost-of-Living Adjustment (COLA) An across-the-board base pay inflation designed to align with increases in the cost of living Data Reliability The extent to which a measuring procedure yields consistent results on repeated trials Decentralized Compensation Model A multi-faceted model that involves differentiated rules or formulas for different groups within an organization Design Committee Group of individuals responsible for creating a compensation model Direct Compensation A monetary incentive or reward District Measures and compensation determined by the entire district or organization Education Level Highest level of education attained; type of degree held (i.e., Bachelor's, Master's, Doctorate, etc.) Eligibility Requirements an individual must meet to participate in a program External Stakeholders Individuals outside an organization who are invested in the organization's success. In a school district, this includes parents, community organizations, taxpayers, businesses and state and local government. Forms of Compensation Direct or indirect compensation Frequency The breakdown of pay over a specific time period (i.e., bi-monthly) Hard-to-Staff Subject-Areas or Schools Subjects-areas or schools for which a district has difficulty attracting or retaining qualified personnel High Needs School or districts that meet state or federal guidelines pertaining to free and reduced lunch, percentage of staff with highly qualified status, minority populations or family income Horizontal Team The grouping of individuals based upon organization position; grouping of people in like areas (i.e., all third grade teachers) Human Capital Development The development of a set of skills an employee acquires on the job (through training and experience) that increase that employee's value in the marketplace Human Motivation Force that drives the level of energy, commitment and creativity employees apply to their work 2

3 Incentive Direct or indirect compensation given to an individual or team before an action has been completed to motivate him/her to complete that action or accomplish a certain goal Incremental Change Change that relies on tradition as a base but incrementally adds new dimensions Indirect Compensation Pay received in the form of services and benefits (i.e., pensions, health insurance, vacations) Individual-Level Compensation Compensation that is distributed to individuals rather than to teams Initiative-Based Compensation Compensation awarded to individual for their participation in certain programs (i.e., pilots of new curricula or technology solutions) Input Measures Measure of activities, efforts, and contributions out forth by an individual (i.e., employee evaluations, attendance) Internal Stakeholders Individuals within an organization who are invested in its success (in a school district, this includes teachers, students, principals, central office staff, etc.) Lagging When an organization consciously decides to have its base pay below a similar position in the external market Leading When an organization consciously decides to have its base pay above a similar position in the external market Levels of Compensation The breakdown of compensation by unit such as individuals, teams, buildings or districts Living The compensation system will be revisited and changes will be made as needed (see Static) Market Comparison Relationship between the pay for an internal job versus a similar job in the external market Measure Number or quantity that records or reflects some value or performance Objective/Goal-Based Compensation based upon the completion of a task or obtainment of a specific goal or outcome Open Communication Inclusive communication strategy in which outside parties have opportunities to ask questions during the compensation model design process 3

4 Opportunities Chances to improve a project, organization or process Opt-In Individual has a choice to whether or not he/she participates in a program Organizational Strategy An organization's plan of action to achieve particular goals Output Measures Data on summative and "end-result" outcomes (i.e., value-added data, graduation rates) Pay for Performance Compensating employees based on measures of effort, knowledge, skills or outcomes Pay Form Method of delivering direct or indirect compensation to an individual (i.e., paper check, direct deposit, etc.) Process Measures Measures of ongoing and in-process activities (i.e., formative assessments, time to complete certain tasks) Reformational Change Change that involves significant departure from the traditional, but keeps some traditional components Retain To ensure an individual stays within an organization by offering a favorable condition, opportunity, quality or program Reward Direct or indirect compensation given to an individual or team after an action has been completed or performed as the result of an effort or attainment of a goal Risk Assessment Identification, measurement, evaluation and estimation of the levels of risk involved in a situation Seniority Years of service Skills/Duties/Abilities The repertoire of skills an employee can perform rather than specific skills the employee may be performing at a particular time (i.e., an individual is bilingual and compensated for that skill) Static Fixed or stationary condition or position; once designed, a static compensation model will never change (see Living) Strategic Compensation The alignment of compensation with desired organizational goals Strategic Compensation Design Life Cycle The suggested steps in which to create and continuously improve a strategic compensation system. Steps include: execute, measure, analyze and improve. 4

5 Strengths Characteristics of a project, organization or process that give an advantage Supplemental Pay Direct or indirect compensation for performing a duty in addition to one's current job Sustainability Longevity; capacity to endure S.W.O.T. A strategic planning method used to evaluate strengths, weaknesses, opportunities or threats involved in a project, organization or process Synergy Measures and compensation determined by combinations of individual, team, building or district levels Task Completion Compensating an individual based solely upon the completion of a task (i.e., professional development workshops) Team Measures and compensation determined by teams such as by grade-level, subject-area or work departments Threats Elements in the environment that could cause problems for a project, process or organization Timing When compensation will be delivered; refers to the time of year (month, season, etc.) and the time in relationship to the date of data collection (i.e., rewarding 2011 success during 2012 school year) Top Down Decisions occur at the top and are enforced upon individuals lower in the organizational structure Total Compensation An individual's complete pay package that includes cash, benefits, and services Transformational Change Lasting change that is embedded into the system and shifts away from the traditional to something new and different Transparency Openness of communication, financial information or processes Vertical Team The grouping of individuals based upon organization position; grouping of people across areas (i.e., math teachers across grade levels, a department team representing various subjects) Weakness Characteristics of a project, organization or process that put it at a disadvantage relative to others 5