Compensation Cafe

Don’t Tell Me I’m Great If I’m Not!

I have both friends and clients who have been struck by an unfortunate dilemma. I have a couple of friends who have been told one thing for months, and perhaps years, only to find out that the truth they knew wasn’t the “real” truth. I have clients who need to realign pay for people who have been told they were top performers when, in fact, they are less than adequate. In both cases it seems more like senior managers were trying to be nice, rather than sneaky.

Why have confrontation when you can have everyone like you? It’s easier to be nice to everyone. Many managers have made this their approach to leading their staff. Rather than point out flaws, they point out only the positives. Rather than prepare their staff for bumpy water in the future, they keep things on the bright side right up to the moment the boat hits the dangerous rapids. The discussion of a potential demotion, cut in pay or job-ending decision never seems to make it onto the agenda.

Employees want to be led, and generally want the truth. I also think managers generally want to tell the truth, but seldom have the skills to do so delicately. While these managers do a disservice to employees by not laying out a realistic path, those of us in the compensation community do even worse by not providing them with the tools, words and examples that will allow them to discuss both the good and bad.

We can’t expect great employees who have been promoted to be great managers to be able to talk about pay issues with any amount of expertise. We also can’t expect that they will always do this task well, even if they have been trained. We need to make it clear what needs to be said to underperformers and check back to make sure it has been communicated.

This is not about avoiding lawsuits or angry ex-employees. This is about not being jerks in the eyes of those we need to keep working hard. Once the trust on performance has eroded in a single example, you risk the chance of other employees questioning their value to the company. Rebuilding trust is far more difficult than maintaining it. Like a swimming pool, it is far easier to keep it full than it is to fill it up.

So look at what you've asked managers to communicate. Then ask yourself if you have provided them the skillset to do so with a complete level of truth. It is not only our job to make sure that pay is properly designed and set, it is also our responsibility to ensure that the discussions around pay reflect the sometimes harsh reality of underperformance.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

How Closely Are You Watching Retirement Plan Funding?

Chances are I've already lost the attention of some Cafe readers with that blog title. 

But it has become a hot topic with a series of "Wall Street Journal" exposes and a new book titled
Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers.  News media such as "USA Today" and "Forbes" are now taking a serious look at the issues author Ellen Schultz has raised.

The basic premise of the exposes and the book is that many large companies are cannibalizing their corporate retirement pension plans under the falsehood that the plans are too costly and under-funded.  The typical corporate rational for reducing or eliminating corporate pension plans is that pension plan shortfalls are caused by out-of-control factors such as the large number of retirees, declining stock market investment returns and competition from foreign competitors that eschew good benefits for laborers. 

Yet as the author states, far from being a burden, these pension and retiree plans had contributed billions of dollars to company bottom lines over the past decade and a half, and were responsible for a chunk of the earnings that executives had taken credit for.  Nor were these retirement programs  bleeding the companies of cash. In fact, in the General Electric example at the beginning of the author's book, GE hadn't contributed a cent to the workers' pension plans since 1987 but still had enough money to cover all the current and future retirees.

So who in your organization is watching the store on the true financial impact of corporate pension plans?  Has the HR function - which has made a lot of careers out of simply knowing how to interpret, administer and communicate complex plan details - stayed on top of pension plan design alternatives and funding?  Or has that been turned over to a Finance function that views pension plans as merely a cost that needs to be minimized?   

Now I'm not a person that normally chases after wild conspiracy theories about corporate greed.  But I do care that HR professionals have a command of the full impact of compensation and benefits on both an organization's finances and its ability to attract/retain/motivate talent.     

Guest blogger Paul Weatherhead is a Pay Program Manager for the US Postal Service.  His primary pay program is their award winning Pay-For-Performance program, but he also is involved with other pay and benefit policy issues at the USPS.  Paul actively participates in the WorldatWork professional association as an instructor, author, speaker, reviewer, and blogger.  In his spare time he teaches human resource management courses for the University of South Carolina.  He can be reached at cpaulwd@yahoo.com

Are Your Performance Reviews like an Annual Physical?

I don’t know anyone who looks forward to their annual physical. There is very little about the process that exudes positivity. Nearly all of us know that  we could have eaten better, exercised more or paid better attention to our health. Even those in the best of health dread the thought that this might be the year that something “serious” may be found. The potential “big-ticket” items overwhelm the progress that may have occurred at other points in the year. The process can also a bit too personal, requiring you to expose more in a single sitting than you care to discuss.

When we are young we tend to simply avoid these events altogether. We assume that we are fairly healthy. Any minor issues can be worked out before we age. We feel good most of the time and have fairly good reasons for those times we don’t. What can a doctor tell us that we don’t already know, or that we’d even care about?

Performance reviews for young employees can be the same. The immediacy of life and the general feeling, and reality, of rapid ascent create less importance for what others think on a once-a-year basis. You have a job, but you know it isn’t likely to be your career. You plan to deal with any problems that may pop-up on an as-needed basis. Nothing lasts forever.

As we get older we start paying more attention. There are mandatory tests based on who and what you are doing. The low-level risks that were built when you were young become high-level risks or actual issues as the problems build over time. The rapid ascent of an early job gives way to the plateaus, jumps and starts of a real career. Some of the bad habits of your youth have simply become part of who you are. You take your medication and keep on going.

Imagine if you had access to your health profile at your fingertips. Imagine if your recent decisions could be quickly analyzed for potential harm and a correction plan laid-out prior to real issues arising. What if you had a medical professional who could answer questions on the fly and point out the best choice to make before you made it?

Whether you were young or old, the process would be more useful. When you’re young, this type of review would fuel a much faster rise and would allow you to make more intelligent decisions about the foundation for your future career. When you are not so young, this type of process could help avoid career-ending or limiting decisions and ensure that you continue to evolve when paths might otherwise flatten.

In both scenarios, the annual review seems ineffective when compared to more frequent or even ad-hoc reviews. So, why do we expect our annual reviews to be effective in the workplace, when they do not work in our private lives?

We received grades and progress reports on regular basis as children. That seemed to work. Science confirms that recognizing someone for good or poor results when the results are measured is the best way to link rewards with effort and achievement. A performance review should be just that…a review. If it is to have any real power to motivate or modify behavior it must be linked to lessons learned throughout the year, not just to foggy memories of months gone by.

Make sure your 3-4% COLA increase and limited incentive budgets mean something this year by enhancing your process for improving your performance review. Imagine if there were no surprises other than the dollar amount. Imagine if your good employees looked forward to their reviews and your less than good knew what to expect in advance. It would improve the quality of the process while reducing the angst and preparation for something that virtually no one currently enjoys.

May you have a pleasant and high-performing 2012!

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

American Employers Face Form W-2 Challenges Next Month (and Beyond)

Has anyone reviewed the 2012 rules for IRS Form W-2?  The instructions for Box 12 include details about using code DD to identify the Cost of Employer-Sponsored Health Coverage.  While these amounts are not presently taxed, they must be revealed in tax year 2012:  that will have implications.  Naturally, in the current economic climate, people suspect that once the amounts are shown, there will be a temptation to tax those currently untaxed “income” elements.  Even if the dollars are not immediately taxed at the Federal, State, county or municipal levels, the very fact of disclosure will create havoc with payroll communications. 

Unions can be expected to use the figures to organize laborers, claiming that they can negotiate higher wages and benefits.  At non-union enterprises, individual employees will argue that they prefer the cash to the coverage.  It’s my money and I want it right now!  Or they may bicker over the cost of benefits they don’t use or don’t want.  I can hear them now: Why should a single man subsidize maternity benefits?  But refusing to disclose the figures or reporting them improperly is not an option.  Penalties for violating the new W-2 reporting rules can be as high as $1,500,000, although the maximum is limited to merely half a million dollars for small businesses.  Deliberate filing errors may incur unlimited costs.

The rules are complex and quite detailed, including complicated provisions for such items as adoption benefits. 

Those who carefully follow government regulations will realize that penalties up to $3,000 per person will be levied on employers who grant health care benefit packages where the employee cost for minimum individual coverage exceeds 9.5% of the employee’s household income.  The Affordable Care Act says that companies must collect details about “household income” and analyze it in terms of their employee’s share of an individual coverage premium cost, even if the worker actually has family coverage.  Employers would be required to intrude into the privacy of their people, polling workers for the incomes of every household wage earner, in order to compute the 9.5% break point that will vary for each household.  It is unclear how that will be done.  It is tough enough to collect such information in the US Census, which is completely confidential; company surveys could be inaccurate, and the consequences of error are unknown.

The penalties that start in 2014 will greatly complicate matters for firms that share premium costs with their workers. Under the PPACA law, employers with at least 50 employees must offer affordable health coverage or pay penalties.   A plan is not considered affordable if the employee's share of the premium for individual coverage exceeds 9.5% of their household income.  If the majority of an enterprise’s employees are low-wage workers, there will be pressure to shift more overall premium costs to higher income employees so households with little income can stay under the 9.5% penalty trigger point.  As covered elsewhere, this could mean someone paying the full premium must earn a six-figure income before the average health benefit cost will not trigger a penalty, the company must pick up more of the premium than before, or the employer must reduce coverages to stay within the permitted cost window.  These rules may change, because IRS considered the household income comparison feature unworkable and prefers to apply the affordability test to individual W-2 wages.

If employees choose to buy subsidized coverage on their state health insurance exchange, the employer will be penalized:  it will cost $3,000 for each employee who chooses the exchange and gets a premium tax credit.  Penalizing the company because an employee rejects the company’s health plan and opts to accept a public Exchange plan means the enterprise pays for that individual’s health care, no matter what.

In addition, it appears that even if an employer makes good-faith efforts to provide affordable health care benefits, such an employee free choice could expose the firm to massive penalties.  If any employee receives a premium tax credit or cost sharing subsidy in the state health insurance Exchange, the hapless employer will be subject to penalties of $2,000 per employee minus 30 employees each year! 

Much care must be taken to comply with these rules.  A tremendous amount of clear and careful communication will also be necessary to assure that American enterprises can survive and thrive under these requirements.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Sometimes the Road Less Traveled leads to a Band of Flying Monkeys

We all get bored. Most of us fill that boredom by exploring something new. Often this leads to an exciting new restaurant, but sometimes it means a terrible meal. Sometimes this means meeting new friends, other times it means getting stuck at a colleague's holiday party listening to stories about office politics and sick children. In my experience, very few compensation professionals are also extreme sports fanatics. I seldom speak to someone in our industry who has recently snowboarded off a cliff or free-dived with white sharks.

I bring this up because we are responsible for a huge portion of our companies' success. It surprises me how often professionals make a decision to follow a new path without first calculating to possibility of the path ending in a band of flying monkeys, rather than a better solution.

Are you following the road less traveled in the spirit of Robert Frost or Dorothy from The Wizard of Oz?

I ask because I still see a lot of compensation professionals acting against their nature when it comes to new programs. When an old plan is not working as well as planned, many choose to roll out a new program. This is done instead of enhancing the features and communication around an older plan. While the problems may be driven by failures in the design of the old plan, it is just as likely they are caused by poor utilization of available plan features or poor communication of the same.

Given our increasing responsibilities and shrinking staff sizes, rolling out a new plan efficiently is often beyond our capabilities.  We frequently discover that completion is impossible when we are already well down the "new plan" road, when turning back is no longer an option. This results in abandonment or, worse, partial roll-out of the new plan.  It can also mean that your old plan may still, by necessity, be your ongoing solution.

This year, explore a quick trip down the future of your current program path and ask yourself if you can get where you need to go without starting all over. You may find that you have simply been doing things by rote when a burst of new energy is all that is needed to reach your destination.

Remember that although Dorothy finally got where she was going, the journey was both arduous and terrifying.  We seldom have the luxury (or desire) of putting our employers and employees through a truly frightening experience. Dorothy had the distinct advantage of an author who could ensure that her story had a “Hollywood” ending. We generally drive the ending of our stories and are held professionally accountable for their success or failure.

Take a few days before 2011 disappears to document the reasons for the success or failure of your current (or recent) compensation plans. Be brutally honest about whether you and your staff could have done anything to have made them more successful.

Might I recommend doing those things, before you start down another unknown path?

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” , “If I’d Only Known That” and  “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

Prepare for Compensation Meetings Like an NFL Broadcaster

Like many of you, I have football games playing on my TV during most autumn Sunday afternoons. Also, like most of you, I  pay a lot attention to the big plays, but little attention to the broadcast itself. This past Sunday, for perhaps the first time ever, I focused on the incredible preparedness of the professionals producing the television events. It got me to thinking. What if compensation professionals prepared themselves in the same way? Our meetings with Executive Management and Compensation Committees would be short, enjoyable and incredibly effective.  More importantly, our programs would evolve more quickly and represent our companies more completely.

Consider any NFL broadcast. The announcers have spent all week studying the players and game plans of each team. Research assistants have put together statistics with such specificity that they make my wife laugh almost every weekend. “That pass sets the record for most passes to a running back, under 5’7” during the third quarter of a game in the twelfth week of an NFL season.” Cameras are set-up to cover the play from nearly every angle. They know where family members are sitting and where they’re from.

A great example of this attention to detail was a recent game in which Carson Palmer, quarterback for the Oakland Raiders, threw an interception that was run back for a touchdown. Almost immediately, there were replays from three or four different angles. There was nothing surprising here, just expected levels of great work.  Then came the doozey. Within 30-45 seconds of the play the announcers started talking about Mr. Palmer’s tendency to throw interceptions that were returned for TDs. While they spoke, a series of at least eight prior interceptions from the full length of his 8 -year career, played on the screen.

This meant that someone had just prepared for this unique opportunity. Carson Palmer has played more than 128 games in the NFL.  He has thrown 2,560 passes. Of these, eight or nine were intercepted and returned by the other team. Someone on the broadcast team gathered these into a package that was immediately accessible. The director knew the package was there. The researchers knew how to call it up on demand. The announcers were fed some statistical information to support their innate knowledge. And, in less than a minute, everything came together on screen in compelling support of this specific tendency.

Imagine if you were this prepared every time someone asked you about your compensation plans. “Hey, what’s the rule on Change-In-Control for the 2007 Stock Option Plan and does that conflict with the COO’s employment agreement that he received when we was hired at that company we acquired in 2009?” What if you had an immediate (correct) answer every time someone asked, “Why do we have that feature?” or “How much cash and equity should we offer a Senior Software Programmer, in Chicago, IL?”

If we all prepared and stayed organized like NFL broadcast teams, much of the stress of our jobs would be gone. The stress of leaving a meeting with more things to do than when you walked in.  The stress of providing the wrong, or no, answer in an executive meeting. The stress of correcting administrative errors due to assuming we knew a rule, rather then knowing the rule exactly.

Of course, we’ll never get to a point where we simply have a team of specialists to help us get prepared. We do not work in an industry where there is always accurate statistical data, or in a world where our rules are applied exactly the same way every time.  But, we can, and should, consider making this our goal and begin working toward achieving it.  You never know when that one thing that has only happened a couple of times in the past will happen again, but you would likely be compensated and respected more if you had a ready solution when it came up again.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” , “If I’d Only Known That” and  “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

The Trouble with Expats

On Tuesday I joined fellow Café bloggers Ann Bares and Chuck Csizmar for a Focus.com podcast on International Compensation.  You can listen to the recording here but one topic in particular seemed to spark interest and a touch of controversy: Expat compensation!

We've all encountered at least one expat that made us wonder what service they perform that’s so valuable it’s worth a rent-free five bedroom apartment with high molded ceilings, private school for three kids and a monthly ‘hardship’ allowance that’s higher than most of the locals’ salary.  (And also wondered where you sign up… unfortunately, it’s the same place you sign up for golden parachutes.)

In the centralized organizational structure that characterized the early days of globalization, that's what you did - you sent your ‘tame’ leaders overseas to whip the locals in shape and supposedly groom them for the next level of leadership.  And since they were already making a packet and enjoying a fine standard of living you had to sweeten the pot to get them to go, especially if family was involved. 

But times are changing.  On the one hand, we see a greater demand than ever for global leadership skills, as well as a critical leadership shortage in developing countries that necessitate seeding new local offices with experienced personnel and leaders.  That means that expats aren’t going away and we’ll still see generous packages for top roles. 

At the same time, there is heavy scrutiny of conspicuous spending even as companies are realizing how important global experience will be to compete in the global economy.  So we’ll probably see some evolution on the expat front with an eye to acquiring more global experience for less money. 

Here are a few predictions:

1. Top expatriate roles will still exist but be fewer and harder to get outside of companies that have a formal global leadership program.
2. Companies that have a formal global leadership program will vacillate between ‘home’ based pay, which tends to result in more complexity and inequity vis-a-vis the locals, and standardized ‘host’ based pay, which reduces complexity but creates disparity in assignment attractiveness.
3. Companies will get better at clearly separating COL adjustments from local job responsibilities, making it easier to explain variations in expat packages as well as smooth the adjustment when returning home.
4. There will be more reliance on short-term assignments, site visits and web conferencing tools rather than multi-year fully loaded expat assignments.
5. To develop future leaders, companies will start sending mobile high potentials on overseas assignments that look more like relocations with a bit of assistance than expat assignments.
6. As overseas assignments become more common for early leadership development purposes, repatriation programs will increase in importance in order to help employees re-adjust to corporate life and avoid wasting or losing valuable skills acquired during the assignment.
7. Companies will – or should - begin defining ROI criteria for expat assignments, as my Café colleague Chuck Csizmar advises in his excellent and informative post Expats: How to Toss Your Money Away.  (Chuck tends to take a dim view of throwing away money.)

When determining an appropriate expat package, one size doesn’t fit all.  An unmarried junior engineer looking to pick up some global experience has very different needs and expectations from a senior business leader who will be undertaking new responsibility and relocating his or her family.

Having said that, no organization has time to create a compensation package from the ground up every time someone goes on overseas assignment.  An effective expat policy takes home country, host country, skill and job levels into account in order to strike the right balance between consistency and individual appropriateness.

Picture courtesy of justlanded.de.

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.

Are Your Employees Costing You More This Year?

Does it feel like your employees are costing you more this year? It might, given everything that's been going on in the economy. Like many companies, your revenues may be decreasing while your costs are increasing. You may be tempted to blame the increasing costs on labor. But you'd probably be laying the blame on the wrong area - the average cost of employee compensation has increased less than $0.50 per hour during the last year.

Private industry employers are currently spending an average of $28.13 per hour in employee compensation, up 49 cents from $27.64 a year ago. Wages and salaries are about 70% of this, averaging $19.81. Benefits account for the remaining 30%, averaging $8.32. 

The Bureau of Labor Statistics just released the latest Employment Cost Index. The Employment Cost Index measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries.  Data from the BLS indicates that the cost of total compensation for civilian workers increased only 0.3 percent during the last three months, and the rate of increase is slowing down.

The chart below compares the three-month percentage change in the cost of employee compensation for the periods ending September 2010 and September 2011. I've broken the data out into the five major occupational categories. Within each category, I show the percentage change for total compensation, wages and salaries, and benefits.

In all but one occupational grouping, the three-month rate of increase in the cost of total compensation fell or stayed the same relative to last year:

• Management, professional and related occupations: decrease from 0.4 percent to 0.3 percent
• Sales and office occupations: no change
• Natural resources, construction and maintenance occupations: increase from 0.4 percent to 0.6 percent
• Production, transportation and material moving occupations: decrease from 0.7 percent to 0.2 percent
• Service Occupations: decrease from 0.4 percent to 0.1 percent

The increased rate of growth in natural resources, construction and maintenance occupations is due to a higher rate of wage and salary increase:

• Management, professional and related occupations: no change
• Sales and office occupations: increase from 0.3 percent to 0.6 percent
• Natural resources, construction and maintenance occupations: increase from 0.3 percent to 0.6 percent
• Production, transportation and material moving occupations: decrease from 0.5 percent to 0.2 percent
• Service Occupations: decrease from 0.3 percent to 0.1 percent

The rate of growth of benefits in all occupations fell, and in fact the cost of benefits in service occupations actually went down:

• Management, professional and related occupations: no change
• Sales and office occupations: decrease from 0.6 percent to 0.3 percent
• Natural resources, construction and maintenance occupations: decrease from 0.7 percent to 0.5 percent
• Production, transportation and material moving occupations: decrease from 1.1 percent to 0.0 percent
• Service Occupations: decrease from 0.7 percent to -0.1 percent

What all of this means is that even though your costs for total compensation are increasing, the cost is increasing at a decreasing rate. The growth rate is slowing down. So even though you may be feeling pinched between falling revenues and rising costs relative to last year, it's probably not entirely due to payroll costs.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer Podcast. Follow her on Twitter at ProactiveStats.

 

Three Things for Benefits and Compensation to Talk Over

The leaves are turning, the geese are flying south and right now your TPA is your best (or worst) friend. In other words, it's Open Enrollment season all over North America.

I've been working with my client on an Open Enrollment announcement email today. Even though rate increases are comparatively low this year and the company is adding some nifty new benefits, our planning discussions keep wandering back to the cuts the company made three years ago.

I think it's hard for a lot of us in Human Resources to find the compass these days. Many of us are still worried, for one thing. Maybe feeling guilty about the tough pitches we've had to throw to employees in the last few years. Or secretly uneasy that our programs aren't really addressing business needs -- whatever those are in this economy.

One thing is perfectly clear. Finances are much more complicated for all of us. And because of that, there are things that benefits and compensation could begin to talk over and maybe even collaborate on. I'm starting to think that employees would benefit from a closer relationship between the two functions.

Here are three things that come to mind right away that could benefit from closer teamwork. Add to this list if you have more suggestions!

1. Even if your benefit deal used to be better, it sure beats going it alone

Moderating cost increases stopped companies from redesigning healthcare coverage this year -- in combination with the lingering questions about Healthcare Reform. Even though it is easy to see a lot of cost cutting on the horizon when costs start zooming back up, consider the alternative.

As two sole proprietors, my husband and I pay $1,350 a month for spouse + 1 coverage -- a figure you're not likely to find on an Open Enrollment contributions chart. Barry and I need to make sure we have the income to cover these costs. At your place, how much does Compensation take benefit cost increases into account when planning the total compensation or merit budget? The topic comes up, but are the numbers run? Scenarios with typical demographics?

Just like the family financial planning you do at home, a detailed analysis (including typical out of pocket healthcare costs) might tell another story. The company may not change its practices, but it would be helpful to hear the stories that the numbers/scenarios tell.

2. We all know what employees want

Employees appreciate Total Rewards statements. The research tells us we can count on it. It gives employees a clear financial picture by adding the value of their compensation and benefits up for them. If we can bet that statements will earn us high scores on engagement surveys, why don't more of us do them? Or do them on a regular, reliable schedule?

And then make sure that managers know how to answer questions about the statements. Knowledgeable, talkative managers -- another communications priority that employees keep telling us about.

 3. Work can make you physically sick

We all know that job stress can damage our health. However, long hours and lack of sleep (factors that HR can't really influence) are not the primary culprits.

It turns out that the top two aspects of work with the most impact are issues that performance management is designed to help straighten out -- organizational constraints (aspects of the work environment that stop you from getting your work done) and role conflict (when one boss tells you to do one thing and another has a different idea). Role ambiguity is further down the list, but we all know how stressful that one can be, and how much HR can help straighten it out.

How do I know about these findings? Jeremy Dean on PsyBlog reported today on a recent study of the effect of occupational stress on physical symptoms like headaches, backaches, sleep disturbances and GI problems. There are five more ways that work can make you physically sick with these symptoms, if you want to check out the article. It's an eye opener. 

Margaret O'Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors of the International Association of Business Communicators (IABC), Pacific Plains Region. She earned her M.S. and Ed.S. in Instructional Technology at Indiana University. Creative writing is one of her outside passions, along with Masters Swimming.

Do Generational Differences Matter For Total Rewards Strategies? Part 2

Do you think that generational differences don't matter when it comes to total rewards strategies? Think again...

Differences in core values between generations influence our view of ourselves, the work we perform, and how we expect to be compensated for that work. Part 1 of this series focused on how generational differences in these core values impact base salaries and pay increases. In this post, we'll talk about the implications of those differences for incentives and benefits, and how to incorporate these differences in a comprehensive total rewards strategy.

To give you a quick recap, CEO Magazine's article "Meeting the Challenges of Tomorrow's Workplace" summarized the differences in core values as follows:

Because each generation has different core values, the types of incentives that are most effective differ by generation: 

Traditionalists crave appreciation, and they like memorabilia. For this group, plaques and trophies and conventional "employee of the month" programs can be successful. Other groups - particularly the Gen Xers - view these kinds of incentives as cliche and would be turned off. But for the Traditionalists, getting a gold watch upon retirement still means something. "Old school" incentive programs can be quite effective.

Boomers crave recognition, and status symbols are effective. They tend to be concerned with personal rewards, and anything that differentiates them from others - from a corner office to being asked to present the company's strategy at a trade show - is likely to be effective.

For Gen Xers, it's all about performance. Incentives tied to results tend to be most effective. Xers are unique in that they like better technology, and having access to the best office tech is high on their list. Being an Xer, I can personally attest to this! Results-based incentives tied to technology can be very effective - Xers would rather have the best computer than the corner office. When thinking about incentives for Xers, think "tech", rather than "employee of the month" or status symbols, and be sure that the incentives are tied to performance and results.

Gen Y employees crave constant feedback. Because of this, spot bonuses are very effective within this group. And staying true to their collaborative nature, non-financial incentives such as group outings can ben very effective. Taking the sales team on a group zip-line adventure works for Gen Y. It won't work for Traditionalists, and Boomers won't see what's in it for them. Xers are likely to view it as lame, and just want to get back to work.

When it comes to benefits, different groups prefer different benefits structures and kinds of benefits offered:

Not surprisingly, Traditionalists prefer traditional benefits packages. Defined benefit retirement plans, conventional vacation and time off policies, and typical kinds of benefits are most appealing to this group.

Boomers place the most emphasis on benefits, and often make employment decisions based on benefits. They're willing to make some salary concessions to get a better benefits package. Like the Traditionalists, Boomers are more comfortable with conventional vacation, time off and retirement plans.

Gen Xers, on the other hand, want options. One-size-fits-all benefits packages don't work for this group. They want the freedom to choose and the option to be self-reliant when it comes to benefits. This self-reliance is consistent with the "hired gun" perception; because they may move from employer to employer, Xers are more comfortable taking responsibility for their own benefits and developing their own plan that can move with them.

Gen Yers are more interested in creative benefits. Flex time, cafeteria benefits plans, company-provided gym memberships, tuition reimbursement, on-site medical care, and free meals and beverages appeal to this group. The more creative the benefit, the more it will appeal to Gen Yers.

So, what does all of this mean for your total rewards strategy?

All of these differences with respect to base salary, pay increases, incentives and benefits may make you feel like there's no chance of developing a total rewards strategy that works for everyone. The truth is, you can't make 100% of your employees 100% happy 100% of the time. There is no "perfect" strategy. But there are three things you can do to move your total rewards strategy closer to that "perfect" point:

1. Be flexible. Offer your employees choices. Give Gen Y employees constant informal feedback, but make sure that you still have a formal performance evaluation in place that covers everyone. Consider offering, for example, a health benefits plan with options. Employees can choose one of a variety of employer-sponsored plans depending on their needs, the size and makeup of their families, etc., or they can receive an "employer subsidy" if they choose to purchase private insurance on their own. It's easier to be flexible with incentives and benefits than with base salaries and pay increases. Use this to your advantage, and offer incentives and benefits options that are likely to appeal to all of your employees, regardless of generation.
2. Be transparent. Take the time to craft well-written policies and procedures, and ensure that your workforce understands how the total rewards strategy works. It may not be possible to completely reconcile the differences between Boomers who think pay increases should be tied to seniority and Xers who think pay increases should be tied to performance. Some employees may not love the policy, but if they understand it, they can make an informed decision about whether it's something they can live with, or whether they should explore other employment options.
3. Be equitable. Remember that all employees, regardless of generation, are concerned about equity. If there are disparities in base salaries and pay increases, or incentives and benefits are offered to some employees and not to others, you're setting yourself up for trouble. You can't restrict who's eligible to participate in an incentive or benefit program because you think a particular age demographic of your workforce won't be interested. You need to offer it equitably, and let the employees make the choice whether to participate or not. An equitable total rewards strategy can lead to increased employee engagement, reduced turnover, increased productivity, and a lower risk of compliance investigations and discrimination litigation. All of these things lead to a healthier organization and an improved bottom line.

When thinking about your total rewards strategy, keep these generational differences in mind. But also remember that there are some common themes that transcend generation. Everyone wants to be respected in the workplace. Everyone wants to be valued - and rewarded - for the contributions they make.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer Podcast. Follow her on Twitter at ProactiveStats.