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Compensation is a major factor in retaining, motivating and attracting employees. Prior to
determining base pay and other compensation programs, a compensation strategy, based on
your business plan and cycle provides the consistency in HR programs that retains,
attracts and motivates employees. Once this is addressed, the compensation programs can be
designed and delivered, linking back to the compensation philosophy.
K. Gordon & Associates can develop a total compensation strategy for your organization
and assist in the delivery, documentation and communication of the compensation strategy
and/or the compensation programs.
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Job evaluation establishes a job's internal relative worth to an organization by measuring
a position's duties against pre-determined factors. This enables organizations to compare
jobs fairly and consistently within an organization. There are several basic approaches to
job evaluation; however, the outcome is usually very similar: different levels for
different jobs.
K. Gordon & Associates can assist you with your current job evaluation program, or
work with you to develop a job evaluation program. We provide a system that has a
"turn key" approach that you can use on your own on an ongoing basis and we
provide necessary training internally to the employees that are responsible for
maintaining the job evaluation program. Alternatively, we evaluate the jobs for you and
provide the company with a finished product.
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A job description is the foundation for determining pay for the position. Job descriptions
have several uses but are useful when benchmarking positions in the market place or when
determining job worth of a position within the organization using a job evaluation system.
A job description can be a simple tool that is easy to read.
K. Gordon & Associates can provide you with a simple tool for ensuring the important
concepts of a job are captured and documented in a job description that is easy to use but
contains relevant information.
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Pay structures are tools designed to be internally fair, externally competitive and cost
effective - all in support the organization's compensation strategy. Pay structures group
jobs of equal value together. The goals of a successful base pay program will be
consistent with your compensation strategy, perceived as fair within the organization,
used to attract and retain employees, and easy to administer.
K. Gordon & Associates can achieve an affordable and workable base pay structure. We
establish salary guidelines, which can be used on an ongoing basis and can be linked, if
desired to employee performance and/or behaviors. We assist with adjusting annual salaries
and salary ranges. We can provide you with a process to perform this annually. Typically,
spreadsheet software or salary administration software is used. The salary schedules can
be updated by adjusting the middle value or midpoint of the highest grade in each
schedule.
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A major goal of a competitive compensation program is to provide compensation that is
consistent with the organization's external labor market. This would be to maintain
external equity by paying employees salaries and benefits at pre-established levels in
relationship to salaries paid to similar employees in competitor organizations.
Organizations use wage and salary surveys to provide them with the primary data for use in
pricing jobs. Therefore, it is necessary to identify reasonable surveys, which will
provide data to accurately price the jobs, and ensure that jobs being priced are a valid
comparison to the survey position.
K. Gordon & Associates can conduct market studies, which will provide competitive data
for identified benchmark positions. To establish the competitive market levels, we use
data from a variety of resources including information on positions among comparable
organizations, information available to the organization, published surveys and K. Gordon
& Associates' network of contacts and confidential data sources. We conduct a detailed
analysis of the compensation currently paid to your employees. This compares the market
information we obtain, and identifies the relationship of your jobs to compensation levels
paid by competitors. This ensures the compensation program is competitive both internally
and externally and is a positive retention and motivational tool.
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Organizations use incentives to:
- Attract and retain key employees
- Increase productivity and profitability
- Encourage and motivate involvement within the organization
In order to achieve these goals, Incentive Programs focus attention on desired company
results, tie pay to performance, provide "at-risk" compensation and provide a
competitive total cash compensation package. Incentive Programs may consist of short- and
long-term incentives.
K. Gordon & Associates can evaluate existing incentive plans and modify or design new
incentive programs tied to measurable financial and operational goals. This encourages
effective planning, spotlights necessary actions and increases profitable business through
focused performance.
K. Gordon & Associates can also assist you with Team Based Incentive Programs. Team
based programs operate in a team structure and provide rewards to teams based on positive
results.
They are usually classified as:
- Group Incentives - All employees in company share in rewards based on performance gains
tied to corporate profitability.
- Group Sharing - All employees in company (with some exceptions) share rewards based on
production gains and/or cost savings. These are not necessarily tied to corporate results or
profitability.
- Gain Sharing - All employees within a homogeneous group (i.e., department or division)
share based on achieving target performance.
K. Gordon & Associates can conduct feasibility studies and design Team based
programs to work in conjunction with existing salary plans. This ensures that the team
rewards are financed by improved productivity and integrated with overall profits. This
also motivates employees to operate more effectively in a team-based environment.
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The way organizations pay top management plays an important role in motivating the
critical performance needed to run the company effectively. There are a number of
components that can be used, in addition to base salary, that make up the total
compensation package for an executive. Incentives that are comprised of cash and stock
will focus the executive's attention on the achievement of goals. Effective total
compensation packages provide the retention tool necessary to keep key individuals on
board, while providing those executives with compensation that has long-term growth
potential with favorable tax benefits.
K. Gordon & Associates can design executive compensation plans that target the
retention of key executives and provide substantial incentives based on the achievement of
specific goals and financial objectives.
Executive Employment Contracts
In some situations, an executive employment contract may be required when hiring an
incoming executive, which is a contract that provides an incoming key employee with a
written guarantee of receiving certain compensation, perquisites, benefits and rewards,
regardless of the results produced on the job beyond a stipulated period. The employee
also may agree not to:
- Compete with the present employer for the duration of employment and for a certain time
period thereafter, and/or
- Disclose or discuss secret formulas, etc. that are of value to the employer (which is
actually required by law)
The advantage of having a contract is that the executive may refrain from talking to
potential "competing" organizations and in essence cannot work for any other
"competing" employer during term of contract. There is however a disadvantage
that the executive is guaranteed employment even if performance deteriorates.
K. Gordon & Associates can review current contract provisions and prepare written
agreements in conjunction with your legal counsel to clarify the terms, conditions and
responsibilities of both parties. This provides security for your key executives, giving
them a "Golden Parachute" and protecting them in the event of a company
disposition. These contracts keep key executives motivated on company results, rather than
their own "personal" situations and maintain consistency within a management
team.
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Many organizations feel that they way the present themselves to their marketplace is often
achieved by their sales force. These are the individuals who take an active approach in
getting the message out about the company's products and services. The way the sales team
markets the company, and in turn, how successful the organization is, is directly related
to the sales compensation program. A sound sales compensation package enables the
organization to focus sales activities towards desired results, and reward these outcomes
with compensation tied directly to the level of achievement.
K. Gordon & Associates can evaluate, design and implement simple and effective sales
incentive plans using, periodic or annual incentives, commissions and/or perquisites. This
enhances the ability to attract, retain and motivate sales personnel, and management. This
also enables the organization to provide compensation consistent with its business
strategy, mission, and goals.
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Long Term Incentive plans are used to provide incentives to employees based on longer term
(more than 1 year) results. Usually long term incentive awards are earned by achievement
of specific goals over an extended period of time (3 - 10 years). The performance periods
may run sequentially or they may overlap based on the desired results. These awards can be
paid in cash or stock, depending on the design of the programs.
K. Gordon & Associates can determine your long-range performance objectives and
develop programs that reward with cash, stock options or phantom stock. These plans retain
promising employees and executives that are necessary for future organizational growth.
This also minimizes or defers tax ramifications and commonality of interest between the
shareholders and employees.
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A Total Compensation Review involves reviewing the compensation plans in place in an
organization with a view towards effectiveness and cost-efficiency. The review should
include the following:
Analysis of current Compensation Program in relation to the stated Compensation Philosophy
and Strategic Business Plan
Comparison of compensation practices
Recommendations covering modification of the current Compensation Program, if necessary
K. Gordon & Associates can assist you with a total compensation review to ensure that
the current programs meet the desired objectives as stated in the compensation strategy
and are cost effective. If needed, we recommend value added modifications to the current
program.
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