The way things change over time affects almost every compensation situation. Consider some of the typical challenges that arise.
“She has already surpassed the quota demanded last year.” Performance output objectives valid in prior periods are irrelevant going forward.
“Why was that promised raise challenged?” Ouch. The salary increase budget that won preliminary approval in January suffered substantial revision in July.
“What do you mean, the CEO bonus plan needs to be modified?” The executive compensation formula acceptable at a small startup operation in its early days before a steady positive income flow has been established may become unconscionable later. Once the business has grown to become an established giant with multi-million dollar profit levels, that primitive simple cut of a modest sum would never pass muster from an outside objective executive compensation committee of the board of directors. Relative relationships not periodically revisited and revised can be hazardous.
“I thought I was supposed to switch my functional assignment and move into the management progression ladder this month.” Career development paths are altered and modified whenever organizational long range staffing plans change.
“Move him up on the succession chart and double check to assure his pay trajectory is consistent with his current high value.” This previously overlooked and historically underpaid guy was hired at a discount, but he has vastly outperformed the entire crop of supposed superstars we hired at premium rates at the same time for the same function. And make sure to slow or reverse their disproportionate base pay lead over him.
"But I've always been rated outstanding..." or "I never have been denied an annual bonus before." Every advantage is presumed to be an infinite entitlement while any negative consequence is abhorrent and indignantly protested as an alien unfair exception. Unlike positive rewards, negative reinforcements fail to register as permanently regularly scheduled outcomes.
“Let’s just use the same approach that was so effective way back when!” The best solution used ten years ago will not automatically remain the best option now.
“Although the competitive market rate for Noses used to match that for Tongues, the latest flavor industry surveys show the sniffers to be a lot more valuable than the tasters. If we bump one group up according to our Compensation Policy, the other bunch will demand classification parity, screaming that peer relationships are sacred and must always be maintained.” Funny, how employees always embrace the principle of relative peer pay equity when it yields a higher figure than their market reference point. When the competitive market rate lags, they demand to be kept “whole” with their prior peers whose jobs remain highly paid. Yet, when outside demand rises rapidly for their jobs, they are quick to abandon the historically treasured peer equity relationships and clamor for the proper higher open-market rate. Well, circumstances do change with time, don’t they?
Every element of human resource management is time-sensitive. The solid practices of yesteryear fade into distant memory when better and more popular techniques emerge. What worked well once before might not be appropriate (or even legal) today.
All aspects of the reward trade fluctuate with time and circumstances. Change is continuous although its velocity generally varies. Reality itself is in a state of constant flux. No stream of water remains the same. The atmosphere is never static (sic). The only constant is change, but it very rarely takes place at a steady predictable pace, tends to follow irregular patterns and is almost never symmetrical in form.
We engage in a constant balancing act, juggling roaring chainsaws, flaming torches and sharp sabres while teetering on a freshly cut log rushing down a flume. We will never get bored, because stuff changes.
E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience. After every kind of corporate HR and consulting role in every industry, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness, Jim testified in many reasonable executive compensation cases. He also serves on the Advisory Board of the Compensation and Benefits Review.
Image "Ominous" by James Loesch courtesy of Creative Commons