Compensation Cafe

From Academic Research to Evidence-Based Management: A Step in the Right Direction

I don't know about you but I've been confused about whether academic research and evidence-based management (EBM) are just two terms that mean the same thing ---or if they are totally different.   So I looked into it.

Here's a definition of each one:

Academic Research:  Scientific method of inquiry that starts by making assumptions (an hypothesis) about what the findings are expected to be. The methodology for testing the hypothesis and analyzing the results is usually mathematical. 

EBM:  Evidence-based management involves making decisions about the management of employees or companies through the use of four sources of information:  practitioner expertise and judgment, a critical evaluation of the best available research evidence, evidence from the local context and the perspectives of people who might be affected by the decision. 

Although academic research has existed for years, it has never been much help to HR practitioners.  Reasons?   Academic research is very narrow and covers only a small portion of subject matter that is useful to HR.   In addition, researchers are rewarded and their tenure depends on conducting research that is accepted for publication in top-tier journals not in conducting research that is geared towards application.

EBM is practice-focused and starts with questions, problems, and issues faced by HR practitioners in daily situations. It’s not hypothesis or theory which is the primary focus of academic research.

Consequently there is a gap between what academic researchers want to study and what practitioners want them to study.  Ed Lawler says:

“If I had to choose one change that would make a difference, it would be for business schools to change their research focuses.     . . I would argue that they should do much more research and writing that focuses on practice.  The problem is that I do not see business schools showing any interest in changing their approach to research.”

Enough said about academic research.   Let’s move on and look at a description of what EMB is and is not.  

Analytics is one type of EBM evidence that is proving to be a huge help to HR practitioners.  A survey by Mercer/World at Work provides some good information about HR analytics including external and internal benchmarking, projections, simulations and predictive modeling.  

Today total rewards involves more than just insuring competitive pay and pay-for-performance.  It requires a broader analysis showing the business impact of specific practices.  This includes looking at how rewards effect the ability of the company to hire the right skillsets, to satisfy different employee generations/demographics and to reduce or reallocate costs without disrupting productivity.   And all of this can be done via the use of analytics.

Some good news: the first EBM peer-related journal is available.  It would be worth your while to look at it.  The current issue has several articles on compensation.

Welcome to the new world of EBM and HR analytics!   Where have you been?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

What Payroll Would You Like To Be On --- Argentina? U.S? Taiwan?

I once dealt with a company that had 20 employees in Argentina when inflation was running rampant at ~40%.

Management was thinking of putting all 20 on the U.S. payroll to stabilize their pay.  They agreed it would only be temporary.  When inflation subsided they would be transferred back to their own payroll.

As if to rationalize it, they announced they already had a Managing Director (MD) in Taiwan on the U.S. payroll.  He was paid 100% of his salary and bonus in US$. Argentina                                                                                                                      
I reminded them of a time when inflation in the U.S. was running ~15%-18% and merit budgets were ~10%.  Most companies I knew of didn’t make any special adjustments for it.  They explained to employees that they were paid based on market rates for jobs.  Cost of labor — not cost of living.  There was no thought then of putting everyone on another country’s payroll because of inflation.

Most of the companies I have dealt with believe employees should have to live with all the ups and downs of their own country’s economy, cost of living, etc.   They believe they aren’t responsible for bridging any pay-inflation gap by either increasing pay or transferring employees to other payrolls.  

In a case of hyper-inflation --- example 200% --- a company might decide to pay a temporary premium on top of salary, but inflation would have to be truly extreme.  They would also want to know if competitors were doing the same thing.  The downside of this arrangement would be the difficulty of weaning employees off the premium once inflation was under control.

Taiwan                                                                                                                     
The MD in Taiwan was key and had doubled revenues in the two years he had been in his role.   For this reason management agreed to his request and didn’t push too hard for an explanation.  They were afraid to deny his request for fear of losing him.   
                                                                                           
If he had been working in the U.S. part of the time on an ongoing basis, it would be no problem to put him on a split payroll --- U.S. and Taiwan.  In reality he was not working in the U.S. at all.  

Bottom Line                                                                                                                    
In both cases the company was setting a precedent for similar situations in the future.  But the real problems were the tax and legal issues.

As far as taxes, in both cases the governments of Taiwan and Argentina were/would be cheated out of revenue from payroll taxes.  The company would have difficulty filing paperwork at the end of the year.  In addition there could be U.S. tax issues as well.

As far as legal issues, the company was not contributing to government mandated benefit programs in Taiwan and would not be contributing in Argentina.   That meant the employees would not be covered.  Trying to access them in the future would alert government officials to the fact they were working in but not being paid from their home country.

The company could continue contributing to the mandated benefits – but if the government looked closely enough they would ask why neither the employees nor company were paying taxes.   So continuing to contribute to benefits might be problematic too.

After weighing all the facts, the company decided it just wasn’t worth it.  The likelihood of getting caught was great, and the cost of penalties could be substantial. 

In order to reinforce my warnings I had a tax specialist from their public auditing firm talk with them.  I asked him to use the worst case scenario in discussing the penalty cost.  He did and it scared them silly.
 
It’s easy to cave in to employee requests.  No one wants to be a bad guy.   But think ahead.   Assume there will be ramifications, then check with a subject matter expert. International legal and tax regulations can be very complicated, and are constantly changing.  

Remember.  As the saying goes:  “A little risk management now can save a lot of fan cleaning later”!

I understand some of you may work/may have worked for companies that do pay adjustments for inflation in other countries.   What has worked/not worked?  Please share your experiences with us.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in
Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

Leaning in, Weisure and Work Life Balance

Have you read Shery Sandberg's new book Lean In? If not, you've probably heard about it. It's receiving rave reviews and generating a lot of conversation. Oprah Winfrey referred to the book as "honest and brave... The new manifesto for women in the workplace."

The book - and the author - have created quite a stir. In a PBS interview, Sandberg stated "there's no such thing as work-life balance. There's work, there's life, and there's no balance." The book encourages women to challenge assumptions about themselves and the workplace, and urges us to give up the myth of 'having it all.'  

In her review of the book, Carey Goldberg argues that Sandberg has missed the mark:

Our greatest obstacle is not any girly self-doubt. It is a rigid workplace culture that won't let us ratchet down. It is employers who do not offer flexible alternatives that drive parents out, by offering only a binary choice between full-time-plus or the highway.

Could the problem really be as simple as workplace (in)flexibility? It might be. But flexibility isn't a 'women's issue' - it's a 'worker's issue.' All of us, irrespective of gender, suffer from workweek creep. Our workweeks are expanding because we're performing work-related activities during non-work time. We live lives of weisure, a term coined by sociologist Dalton Conley. 

Conley notes that "activities and social spaces are becoming more work-play ambiguous" and it's becoming increasingly difficult to segregate the work aspects from the non-work aspects of our lives. The source of this ambiguity? Technology. 

It should come as no surprise then that Sandberg, the COO of Facebook, doesn't think that work-life balance exists. In an always-on, always-connected world, the boundary between work and life is significantly blurred, if not altogether erased.

Our workdays have also been reshaped by the kinds of work we're doing. The rise of the "creative class" means we're working differently, manufacturing ideas rather than widgets. It may be the case that a weisure lifestyle is the best fit for this creative class. 

I'm not sure if work-life balance is possible, at least in the conventional sense. But I do think that if it is, flexible workplaces will help us achieve it. It's up to each individual to find their own balance, and workplaces that embrace a variety of options for these balancing acts will be the ones that lead us into the 21st century.

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 quantitative 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 Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr. 

ESPPs are a Dessert Topping and a Floor Wax

Employee Stock Purchase Plans (ESPPs) get a bad rap although they should be lauded in wonderment. The proof is in the number of different areas that claim full, or no, responsibility for these underutilized instruments. ESPPs are much like the old Saturday Night Live “commercial” for Shimmer (“It’s a Dessert Topping AND a Floor Wax”). Unlike Shimmer, the mythical SNL product, ESPPs are actually delicious, effective and available on your compensation store shelves today. If your company does not have an ESPP, or has not optimized the current plan, you should consider reading on.

ESPPs are a compensation tool and a benefit plan. They are a communication tool and a way to build ownership. They work well when managed by payroll, human resources or a dedicated stock administrator. Depending on the intent, design, communication and company stock price, they can also serve a myriad of purposes. How many compensation programs require employees to pay the company? How many benefit programs can directly align employee focus with the goals of shareholders? How many incentive programs allow participants to directly choose their level of engagement? How many equity compensation instruments have been expressly created for broad-based use?

I recently had someone tell me that they couldn’t see the purpose of committing $75 per paycheck to company sponsored health insurance, because there was no guarantee he would use it. While this same person may also not enroll in an ESPP, showing them the specific upside to their investment does not require them to imagine something bad happening to them. In fact, an investment in a generous ESPP and its subsequent returns may actually help cover the annual cost of their insurance. I first heard of this particular communication approach from a benefit professional who also managed their company’s ESPP. I have also heard a wide range of other creative reasons to join an ESPP from professionals managing these programs from other departments.

As a compensation tool, ESPPs are counterintuitive. The argument goes like this. Dear Employee: We pay you. You pay us some back. We use that money to make the company better. Later, we buy stock with your money and some of our money (the discount). You then make money by selling your stock, or by hanging on to it. (Note: You may also lose some or all of your money.) Let’s face it, it’s that last piece that makes these plans truly unique and causes some pause from both the company and employees.

I won’t go into a detailed risk analysis of ESPPs at this point, but when designed correctly the risk is fairly low and the reward is high enough to be compelling. The most recent plan design survey from the National Association of Stock Plan Professionals shows that plans with a 15% discount have an average of 41% participation. There are a wide range of potential features and limits you can craft for these plans. You can build a program than meets several, or only a couple, of key specific needs.

While we are giving 3% merit increases, we are also cutting other forms of equity compensation and competing in an aggressive talent market. We should all consider the potential of ESPPs. They are a dessert topping, a floor wax, a room deodorizer and powerful plant food. There are not many tools like this at our disposal. Does your company have an ESPP?  If not, why not?

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 Know That”, “GEOnomics 2011” and “Equity Alternatives.” 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 at @Performensation and @SayOnPay.

Gold in California

Public service in California can pay pretty well.  Besides the recent scandal in Bell, CA, a similar debacle occurred when the Alameda County Administrator retired with an annual income over $400,000 a year.  The cash alone exceeds the salary of the POTUS who nevertheless would seem to have a superior perquisite package. 

This latest highly visible fiasco raises the heat over public compensation packages.  Arguments about the equity of public versus private pay have raged for decades and will not end soon.  Current economic constraints have focused new spotlights on accusations of excessive public sector compensation.  Taxpayers tend to become irate when they suspect that their servants are out-earning the bosses.  Feelings of injustice are further inflamed when those who elect public officials and pay the taxes that fund government salaries find their hard-earned money used to enrich insiders.

Other commentaries indicate that such outlier cases are the exception rather than the rule.  These tempests may turn out to exist primarily in teapots, especially when these rare outrageous situations are compared to the mundane reality.  The pay at most public enterprises tends to be so badly compressed at the top, for example, that few private industry managers would be willing to take the pay cut required for a government executive position.

What should not be overlooked is that the renewed attention given to issues like this makes the transparency of pay far more important than ever before.  Taxpayer-supported entities like municipalities, counties and fire districts are frequently run by officials who have little knowledge of (or access to) compensation tradecraft knowledge.  Those familiar with the backroom deals cut in those venues realize just how easy it is to manipulate those ignorant of pay practices into decisions that no responsible rewards professional would endorse.   But much of the nonsense occurs in the light of full open disclosure.  I have witnessed public sessions at city, country, state and even national levels where any compensation person would be tempted to scream in outrage at the silly statements accepted as gospel by the officials.  The low level of pay tradecraft knowledge demonstrated in these situations can only be solved by the involvement of professionals who know their business. 

Messes like this could not exist but for the indifference of compensation professionals.  If we abandon our responsibility to monitor and review pertinent elements of public decisions in our neighborhoods, we deserve what happens to our money.

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.

Creative Commons image "grosso_coins" by dgrosso23

A Lack of Company Enthusiasm Doesn't Mean a Lack of Job Passion

I was at a sold-out sporting event recently. The sport, as it turns out, doesn’t matter. Neither does the team. Heck, even the players are unimportant. I learned something great from a woman selling burgers and beer. I was reminded that you don’t need to love your company or its mission to be an incredibly valuable employee. I was also reminded, once again, that our lowest paid staff members are not simply interchangeable parts. Every one of them can make just as big an impact as our highest paid “stars”.

I left my seat during the action to grab a quick bite to eat. All the lines at the closest food stand were about the same length accept one, which was about 50% longer. I jumped into one of the short lines and watched as the longer line moved faster while every person walked away smiling or laughing. I had to change lines.

When I got to the counter a cheerful woman, with smile so genuine it made me smile back, asked what I would like. I ordered my beer and burger and she said something like, “Honey, you’ve gotta get the garlic fries with that.” She then turned around, sang out my order, complimented the person in the next line while she grabbed a drink for the counterperson on her other side.

I asked her if she was tired and she responded that as long as people were in line she didn’t have time for being tired.  As it turned out, they were shutting down in ten minutes, as the game would end in about twenty. As we waited for my order, I asked if they got seats for the end of the game. She laughed and told me that she had never watched even part of a game. She didn’t like the sport, didn’t know the players and always left before finding out whether the team won or lost.

Yet, she loved the organization and valued the job she held for the past fifteen years. She looked forward to work every day and made sure that, “those people who pay so much for tickets got their money’s worth when they ordered their food from her.” She meant it.  I believed it. Then I walked away with a smile and watched my team win the game.

I am sure away from the game you would have little idea who she worked for. It’s unlikely she comes across as a fan or wears any team clothing other than her work uniform. Here’s the amazing thing. I can’t remember what team was visiting, but I do remember that wonderful employee at the food counter. I am certain there are tons of people like her in jobs everywhere. I know I have met many over the years. It’s unlikely that any compensation program I can design or communicate will ever create another version of her. I can only work to make sure that I never screw up and ruin an attitude like that.

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 Know That”, “GEOnomics 2011” and “Equity Alternatives.” 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 at @Performensation and @SayOnPay.

20 Years Later, is FMLA Working?

It's hard to believe that the FMLA (Family and Medical Leave Act) was signed into law 20 years ago. How has the FMLA impacted employers, workers and their families?

The Department of Labor recently conducted a survey addressing that very question. According to the report, the FMLA has had a positive effect on the lives of workers and their families without imposing an undue burden on employers, and has created very little disruption in the workplace.

Here are some key findings from the survey:

• 91% of employers report that complying with the FMLA has had either a positive effect or no noticeable effect on employee absenteeism, turnover and morale
• 85% of employers report that complying with the FMLA is very easy, somewhat easy, or has no noticeable effect
• Nearly 60% of employees meet all criteria for coverage and eligibility under FMLA
• 13% of all employees reported taking leave for a FMLA reason in the past 12 months
• 24% of leave taken for FMLA reasons is intermittent leave
• Fewer than 2% of employees who take intermittent leave are off for a day or less
• Fewer than 2% of covered worksites reported confirmed misuse of FMLA
• Fewer than 3% of covered worksites reported suspicion of FMLA misuse.

Small to medium sized firms reported very little difficulty in administering FMLA. Larger employers, however, reported more problems: 3% said that administration was "very difficult" and 29% said administration was "somewhat difficult."

Half of employers surveyed reported that administration of FMLA is becoming more expensive.

Intermittent leave (two or more episodes of leave for the same reason) has been one of the key FMLA concerns for employers. Employee responses indicate that only about 3% took any intermittent leave. Employers have a somewhat different perspective on intermittent leave. Reports of the negative effects of intermittent leave on profitability and productivity were as high as 25%.

According to Mary Beth Maxwell, Acting Deputy Administrator for the Wage and Hour Division:

The significance of the FMLA is in its recognition that workers aren't just contributing to the success of a business, but away from their jobs they are contributing to the heath and well-being of their families. Our survey results show that, for two decades, granting job-protected leave has been good for employers and good for millions of workers and their loved ones. The FMLA is working.

Based on the results of this survey, "it appears that employee use of leave and employers granting and administration of leave has achieved a level of stability."

FMLA is a complex area riddled with potential pitfalls. But it seems that 20 years later, employers have a pretty good handle on administration. What do you think? Is FMLA working? 

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 quantitative 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 Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

Frustrated? Here's How Compensation Practices Can Change for the Better

Look up the word "classic" on Wikipedia, as I just did, and you'll find the definition, " . . . something that is a perfect example of a particular style, something of lasting worth or with a timeless quality."

I just ran into a classic that can change the way we work and make our compensation design decisions far more effective. I feel the urge to share!

"The Inconvenient Truth About Change Management: Why It Isn't Working and What To Do About It" by Scott Keller and Carolyn Aiken was published by McKinsey&Company in August 2000. It's a must read for most of us as we struggle with incentive, recognition, merit and executive compensation designs that fail to live up to their promise. After all, pay-for-performance is, at its core, a form of change management since we are trying to shift behaviors and results from their current state to our desired future state where our strategy-driven performance targets have been met.

Keller and Aiken's inconvenient truths have "consistently delivered business results far beyond expectations" and they have the research to prove it. Their breakthrough is that while the programs that we design are entirely rational, a basic scientific insight about human nature is that, ". . . people are irrational in many predictable ways."

This is a fundamental truth of which HR is fully aware because it gets in our way every day. We can replace some of our frustration and improve our odds of leading successful change by applying their research-based insights to our purely rational designs.

Keller and Aikens list nine "inconvenient truths" that we can apply about ". . . the irrational (and often unconscious) nature of how humans intepret their environment and choose to act."  Here are four that jump out from the page -- but truly, don't miss the entire article. 

#1 What motivates you doesn't motivate most of your employees. Here's one that should influence compensation program design.  There are at least five sources of meaning that motivate employees. Research about employee preferences shows a consistently even 20% split across these dimensions: Achieving industry leadership, making a better society/community, improving things for the customer, belonging to a team and finally, impacting "me" personally. If you  tap into only one of these motivators -- for example, compensation's typical What's In It for Me (WIIFM) theme -- you will only build support from 20% of the employees.

#3 It takes both pluses and minuses to create real energy. Here's one that can really upgrade performance management efforts. Most of our programs ask people to look for the problems that need to be fixed and identify solutions. But research indicates that a relentless focus on what's wrong leads to fatigue and resistance. Analyzing what works and why also achieves marketedly improved results. Why do we do this so infrequently? Our excuse is that humans " . . . inherently dislike losses more than we like gains." When you drop this excuse, there's potential for huge performance gains.

#6 Money is the most expensive way to motivate people. You hear this a lot on the Compensation Cafe! Keller and Aiken provide some telling research indicating that small, unexpected rewards can have a disproportionately positive impact that can last for months. The reason? People see these rewards as a "social exchange" and feel a range of favorable emotions that don't come into play with compensation-based "market exchanges."

#8 Employees are what they think. This one applies to any dimension of pay-for-performance. In our rational program designs, we address behaviors because they drive performance. However, we ignore what drives behaviors. There is extensive research that shows . . . "Mindsets (the thoughts, feelings and beliefs held by employees) drive behaviors." If we want to truly achieve behavior change, it is misguided to keep insisting it's purely about good data and effective measurement.

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication -- in an upcoming book. Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal with Towers Watson. Margaret is Deputy Director 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, Bloomington. Creative writing is one of her outside passions, along with Masters Swimming.

How I Learned to Shut Up and Listen

I had a manager once that didn't know anything about international HR.  In fact, he had never visited any of the company's locations overseas.

After I was hired we took a trip to some overseas sites.  Before we left the U.S. I told him to keep his talking to a minimum and focus on listening.  He nodded and then proceeded to talk non-stop everywhere we went.   At the end of the trip he commented, "I sure am glad I went on this trip.  I learned so much."   Hmmmmmm . . . . .

I can look back on it now and laugh.  But in retrospect I acted in a similar fashion when I began my stint in International HR.

Both of the following examples happened a long time ago when I acted more like my manager than I would like to admit.  But I gradually changed when I realized that I could learn a lot if I kept my mouth shut and listened.

Example 1:  A manufacturing site in Malaysia wanted to reduce its healthcare costs.  The HR manager developed a scatter gram that showed locations where large numbers of employees lived.  She then identified clinics/hospitals in those geographic areas, visited 4-5 and made a pitch for special, lower fees.  In return she committed that our employees would not go to clinics outside the “network”. Due to the volume of employees, the clinics agreed.  The result?  Lower healthcare costs.

This HR manager had very little knowledge of PPO’s and HMO’s in the U.S.  She just came up with the idea herself.  Made sense.  I was really impressed. The fact that it surprised me spoke volumes.  I had this belief that I (representing Corporate) was there to teach her --- that new ideas just didn’t come from an overseas site --- only from Corporate.  Corporate HR was smarter than local HR.

Example 2:  A manufacturing plant in Bangkok was reconfigured and the old equipment was replaced with new computerized equipment.   The production operators were trained to run them.   Whereas before they all stood in a row and each operator connected Part A to Part B --- each of them was now responsible for keeping  3-5 machines up and running and doing minor maintenance on them.

HR realized that these new skills meant the jobs couldn’t be matched in compensation surveys.   They were neither traditional production operator jobs nor were they full-fledged technician jobs. 

They were somewhere in between.  So the HR manager decided to introduce what, back then, we would have called “skill-based pay”.    Pay for these jobs was pegged at the operator level with additional pay for extra skills. 

Keep in mind this was manufacturing – and manufacturing has pretty basic jobs --- production/assembly operators, technicians, manufacturing and quality engineers. The operator jobs were so standard in Bangkok that it was a true anomaly at the time to introduce an “operator plus” job.  None of the competitor manufacturing sites had them.   Hybrid jobs just didn’t exist then. 

Once again I was surprised at HR’s ingenuity.  And once again I had to face my old engrained beliefs.  A light bulb went off --- just maybe Corporate doesn’t have a monopoly on creative ideas.

Maybe none of you have ever experienced this.   Maybe I'm the only one arrogant enough to think Corporate had all the answers.  I have to tell you it was a very humbling experience. 

The world is full of great ideas ---- and if you keep your mouth shut and your ears open like I do now, believe me you’ll learn something!

P.S.  Hey --- when you do, feel free to pass it on! 

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in
Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

Driving Innovation with Total Rewards

I've always been fascinated by innovation and the thrill of thinking about something in a way that nobody else ever has. Innovation can drive positive changes in quality, efficiency, and competitiveness. It's no secret that quite a bit of corporate time is spent thinking about how to innovate.

But how do you foster innovation? Spend millions of dollars on state-of-the-art research labs? Encourage riding a unicycle up and down the hallways while juggling, a la Claude Shannon at Bell Labs? Change the company uniform to black turtlenecks and jeans?

You don't have to resort to providing wacky toys or jeopardizing the bottom line with monster R&D labs. Believe it or not, your compensation mix, recognition and rewards programs, and development opportunities can go a long way in creating that next great idea. Here are three ways you can drive innovation with your total rewards strategy:

1. Create a safe space for innovation. Employees have to feel comfortable taking calculated risks. The structure of a total rewards program can help create this safe space. The proper balance between salary and incentive compensation creates a safety net. Relying too heavily on incentives can create pressure for achieving short-term returns. Employees may sacrifice work on "the" idea to come up with "an" idea to earn this month's bonus so they can pay their bills. Getting the right mix between salary and incentives removes this concern and frees employees' minds to pursue bigger and better ideas.  
2. Provide fresh perspectives through development and career opportunities. Addressing the same challenges with the same set of tools day after day can drive even the strongest innovators into a rut. Use professional development and career opportunities to encourage employees to explore their full potential and accumulate diverse experiences. Seeing things from a different vantage point (either because of new skills or a career advancement) can provide that spark of inspiration.
3. Recognize and reward innovation throughout the company. Innovation isn't constrained to the mad R&D scientists. Ideas are everywhere, and not all great ideas are for the next iThing or an alternative energy source that will save the planet. Innovation comes in a variety of forms. Each employee - from administrative assistants to zone managers - should be encouraged to innovate from within his or her own function. Everyone should be looking for better ways to do things, and creating an inclusive rewards program extending beyond the R&D labs can encourage this. 

Innovation isn't some mystical mojo that some companies have and others don't. It isn't about cultivating a "creative" culture. It's about providing employees with security to explore ideas, tools to realize their potential, and recognition of their achievements. 

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 quantitative 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 Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.