Compensation Philosophy – Essentia Health


An organization’s compensation philosophy is the collection of principles that guide, as well as drive, its formulation of decisions regarding staff compensation. In the compensation philosophy, the organization justifies the decisions. Each organization has a unique compensation philosophy. Even then, every organization is keen on hiring, as well as retaining, excellent talent. It communicates that keenness in own compensation philosophy (Davis & Edge, 2004). This paper appraises the compensation philosophy of Essentia Health, a not-for-profit, integrated system of healthcare. The system has operations in Idaho, Wisconsin, Minnesota, and North Dakota. It has thousands of employees, including credentialed practitioners and physicians and tens of clinics and hospitals.

Essentia Health’s Compensation Philosophy

Essentia Health’s compensation philosophy is percentile-based. The wages it offers to its employees are considered in the light of the corresponding market rates. Essentia Health’s benchmark for compensating its CEO is the 65 percentile compared to the CEOs of corresponding healthcare systems. The corresponding figure for Essentia Health’s other executives is the 60th percentile (Springer, 2016).

Evaluation of the Essentia Health’s Compensation Philosophy

Essentia Health’s compensation philosophy means shows that the healthcare system is sensitive to the dynamics of the wider market in which it operates. Its executive pat mirrors the growing complexity, as well as size, of healthcare systems (Springer, 2016). Notably, the compensation philosophy is in agreement with the prevailing law, which obligates not-for-profit organisations, including not-for-profit businesses, not to pay staff members with pay incentives (Davis & Edge, 2004; Tibergien & Pomering, 2013). Pay incentives include stock options. Stock options are frequently awarded to for-profit organization’s executives as submitted by Springer (2016).

The compensation philosophy, which has the capacity of assisting Essentia Health in hiring, as well as retaining, excellent talent, can be enhanced in various ways. First, it can be improved by having it cover all cadres of the organization’s employees to help in their recruitment as well retention (Davis & Edge, 2004; WorldatWork, 2007). Secondly, it can be applied against other helpful compensation philosophies such as the specific number-based compensation philosophy (Davis & Edge, 2004; Tibergien & Pomering, 2013).

Environmental Factors Influencing Essentia Health’s Compensation Philosophy

Various internal, as well as external, factors influence Essentia Health’s compensation philosophy. The factors include the law. As noted earlier, the law disallows not-for-profit organisations from paying staff members with pay incentives (Springer, 2016). The system’s strategic focus and mission, which is attract the best extant talent, influences the philosophy as well. The system feels that its executives should be paid at least at the 60th percentile in order to attract leading talent to its executive ranks. As well, the system is keen on remaining very competitive, leading the market regarding the talent it attracts (Davis & Edge, 2004; Tibergien & Pomering, 2013; WorldatWork, 2007). It is keen on projecting itself as a high-paying organization, or employer.

The company has the capacity for sustaining its current executive pay since it has the requisite financial wherewithal. It has no challenges paying its executives, including the CEO, for their proficiency even when they have not served it for long. It retains talented executives easily by bringing them up to market. As an employee becomes more and more proficient in his job, it is essential to have them move to the succeeding career level. That will ensure that the employee’s pat does not stagnate, which may dishearten him or her and persuade him or her leave for another employer (Davis & Edge, 2004; Tibergien & Pomering, 2013; WorldatWork, 2007). Essentia Health’s culture has also motivated it to adopt its extant compensation philosophy. The culture is defined by the attraction, motivation, as well as retention, of leading talent through competitive compensation.

Key Factors That Should Contribute to the Essentia Health’s Development

There are various factors that can add to the Essentia Health’s development. First, the enhancement of the scope and effectiveness of its compensation philosophy can bolster its development by ensuring that it is served by highly talented and highly productive executives. As noted earlier, the compensation plan can be improved by having it cover all cadres of the organization’s employees and using it in conjunction with the specific number-based compensation philosophy (Davis & Edge, 2004). The two philosophies will assist the system establish itself as a competitive employer and a market leader.

Second, the establishment of an effective communication strategy regarding the system’s compensation plan can bolster its development. Ideally, an organization’s staff members should be well-informed of its compensation philosophy. Third, the system should ensure that its compensation philosophies are designed in a way that allows for their use in tracking the development of skills, especially the skills that occasion proficiency in given jobs. Employees move closer and closer to the market value as their proficiency levels improve.


 Compensation philosophies are used by organizations to help them attract, motivate, as well as retain, talented staff members. By and large, the philosophies occasion equitable compensation for the performance of given services. As noted earlier, Essentia Health’s compensation philosophy is percentile-based.

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