Enterprise Compensation Management (ECM) refers to the strategic compensation policies that motivate employees to support business goals while optimizing the organization’s compensation spending and keeping it in alignment with the organization’s budget.
ECM marks the shift in Human Capital Management from a tactical cost center to a strategic organizational asset as the financial impact of lowering employee turnover, aligning budgetary goals, and increasing productivity are recognized by executive management while determining the total valuation of an organization. An effective ECM system must be able to provide guidance to managers so that their recommendations are within budget. Similarly as PMS represents a significant investment for an organization, the system must be able to provide recommendations to the managers that are consistent with employee performance.
ECM broadly consists of the two components- budgeting and compensation. While budgeting pertains to the personnel cost, compensation consists of devising compensations scheme include fixed and variable components.