Compensation is about much more than base salary; a host of incentives and rewards can factor in. Non-monetary rewards can have significant impact as proven in the McKinsey study: Motivating people: Getting beyond money.

Just as important as achieving the best blend is creating performance-driven compensation programs that align employee compensation to actual impact on the company's key business goals. The biggest challenge is how to distribute and differentiate the incentive compensation between performers who range from being high performers to average or low performers.

The Taleo Research™ whitepaper, Performance-Driven Compensation: The Corporate Talent Insurance Policy outlines five steps for creating and managing a differentiated compensation program:

1. Strategy: map the desired company results with the necessary behaviors needed from employees across the company.
2. Technology Support: the entire performance and compensation process should have a strong technology underpinning.
3. Tactics and Programs: make decisions about what tactics and programs will be essential to successfully executing the program.
4. Measurement: measure progress through consistent and frequent discussions between manager and employee about employee performance.
5. Communication: communicate the results of the year's progress against individual and business goals via total reward statements or other tools.

Watch the video to find out more about how to focus the right pay on the right people in your organization.