Compensation Principles
What does 'total compensation for total contribution' mean at Koch?
Aligning all forms of pay with the value each individual creates for the company, not just their job title or tenure.
What is base pay considered at Koch?
An advance payment for the value an employee is expected to create.
What is the default or reset amount for variable pay each year?
Zero
Should supervisors fixate on the 50th percentile of market data?
No, they should use the full range and focus on what’s directionally helpful.
What is the first step in the annual compensation review?
Assess the employee’s total contribution to results, culture, and long-term value.
How does Koch’s approach to pay differ from traditional market-based pay?
Koch pays people based on their individual contribution, not based on market averages or pay grades.
When an employee is not awarded an increase, what steps does the supervisor need to take?
Communicate the decision to the employee AND enter the 'No Change in Pay' transaction in MyHR.
When should a spot bonus be awarded?
As close as possible to the exceptional contribution being recognized.
Why is market survey data considered data, not knowledge?
Because it doesn’t account for individual performance, responsibilities, or business context.
Who should supervisors discuss their pay recommendations with before finalizing?
Their supervisor and HR.
What is marginal contribution, and why is it important?
It’s the difference in outcomes if a typical performer replaced the employee; it helps assess true individual impact.
Why does Koch avoid using rigid pay grades or step increases?
Because these approaches do not account for individual differences in contribution, performance, or changing business needs, which can limit motivation and value creation.
What is the primary purpose of variable pay at Koch?
To recognize and reward exceptional, significant, measurable value-creating contributions that go above and beyond expected performance.
What should supervisors do when market value for a skillset is changing rapidly?
Stay informed about trends and use judgment rather than relying solely on outdated survey data.
What should supervisors clearly communicate to employees about their compensation?
How their total contribution connects to their total compensation.
What is meant by “we pay people, not positions”?
Compensation is tailored to the individual’s unique contribution, not just the role they fill.
What are non-financial incentives, and why are they important?
Recognition, growth opportunities, and meaningful work; they motivate beyond just financial rewards.
What transaction code should be used in myhr when entering a spot bonus?
Spot Bonus
What is a common misapplication of market data?
Trying to find a perfect match for a role or anchoring pay to a specific percentile.
What is the supervisor’s responsibility when communicating a pay decision?
Own the message and ensure clarity and transparency.
Why must recognition and rewards be earned to be effective incentives?
Because only earned rewards motivate employees to fully develop and apply their talents for long-term value creation.
How does Koch determine the mix of base pay and variable pay for an employee?
The mix is based on the nature of the role, the individual’s contribution, and the impact of their work on long-term results, rather than a fixed formula.
Why is it important to individualize variable pay decisions rather than apply a uniform bonus percentage to all employees?
Because individualized decisions ensure rewards are aligned with each person’s unique contribution, which drives motivation and maximizes value creation.
How can market data be used effectively in compensation decisions?
As one input to understand competitiveness, not as the sole determinant of pay.
Why is it important to reassess compensation at least once a year?
To ensure pay remains aligned with the employee’s current contribution and market realities.