Got Data?

I recently replied to a question on Focus.com about employee engagement and was intrigued by a response that criticized HR for their heavy handed control over salaries.

The example given for why this is a problem involved a highly skilled IT professional with four children who has reached the top of his salary grade at his current company.  There is apparently no possibility of increasing his salary although he has taken it upon himself to acquire marketable new skills and at least one other company has offered him more money.

No clue how this one’s gonna play out, huh?

I get it.  We all get it.  Salary ranges are there to promote fairness and reduce the administrative overhead created by exceptions.  These are good things.  But here’s this guy with hot technical skills about to walk because he has a family to support and earns less than the market is offering.  Not to mention that replacing him will be expensive in terms of recruiting, training and lost productivity - possibly more expensive than just paying him more in recognition of his market value.

It sounds like I recommend paying him more to keep him but I’m actually going somewhere else with this.  In fact, I’m a big fan of voluntary attrition because it feeds this Ponzi scheme we call ‘career development.’

My point is if the company is going to lose this person, lose him with intent.  In other words, if your company has a hard rule about salary ranges that’s fine as long as you have:

•    Analyzed which people are flight risks as a result.*
•    Calculated the cost of losing these people and having to replace them. 

*Warning signs include people who are already at the top of their grade, have dependents, possess critical skills, are solid or high performers, haven't had a salary increase or new opportunity in several years, have recently exercized stock options, are late submitting their self-evaluation and/or are frequently absent. There are other signs as well but these are the ones you can get at through your data.

Armed with this information you can evaluate whether it’s worth: 1) changing your policy; 2) creating a new salary grade for highly skilled people to ‘graduate’ into once they reach a certain level of expertise; or 3) doing nothing, but on purpose.

If you don’t possess this critical information about your workforce, an inflexible salary strategy is like a wall across an expressway that surprises people each time a car crashes into it.

OK, that analogy may have been too colorful.  My point is that rigid policy combined with lack of information does not a business strategy make.

At least, not a very good one.

Picture courtesy of Wikipedia.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Comments

[Jacque Vilet]

Great post Laura. Cannot fathom in this day and age of "war for talent" that a company would allow a "critical skill" to walk out the day just because of an inflexible policy. But . . . on the other hand maybe that is one reason why the employee doesn't want to stay. If they are inflexible on salary --- what else are they inflexible on?

[E. James (Jim) Brennan]

Maybe the guy added a skill hot elsewhere but cold at his firm: like learning Linux at a firm deeply invested in MS or mastering SAP where it is not used or wanted. Regardless, all things have limits, including promotional ceilings and perceived values in an unchanging job.

Market value somewhere else is frequently greater than what your current employer chooses to establish as a maximum limit for that same work here, especially if others have one and you have five. Without a policy enforced by the pay police, salaries would escalate and compound infinitely; but common sense is always required. People frequently outgrow their employer. Perhaps the company already has a surplus of solid people in this job. Or maybe the firm can more easily hire a new one with all those costs and benefits rather then encourage more exceptions that create infinite entitlement expectations. That's life.

This reminds me of my 6/30/10 "I Deserve a Raise." Very few people ever ask for LESS.

[Laura Schroeder]

Thank you both for your insightful comments.

@Jacque - It does seem amazing, although armed with better data there may good reasons to let someone go.

@Jim - I actually asked for less money once. ;-)

[E. James (Jim) Brennan]

Usually, the request for a pay cut (or at least a bonus deferral) comes from a guy facing a divorce. There is always a WIIFM involved.