Compensation Cafe

Is Co-Creative Analytics the Answer?

There's been a lot of talk about skill shortages at the Cafe lately. Jim Brennan points out that the educational system may be incapable of closing the talent deficit, resulting in a broken link between compensation and education. Ann Bares also discusses the skill shortage, and thinks the answer may lie in cooperation between the recruiting and compensation functions.

Addressing the challenge of the skill shortage in today's economic environment requires a new approach, and I think Ann may be on to something. I'm a big fan of interdisciplinary solutions. The interdisciplinary approach has led to advancements in disease prevention, economic development and global climate change. It has even led to the development of new fields of study like nanotechnology, genomics and bioinformatics. It brings fresh perspectives to old problems, and can lead to astonishing breakthroughs. 

It may be difficult to find a starting point for this inter-departmental cooperation, given that recruiting and compensation are each unfamiliar with the other's vernacular. Data may be the universal translator, and co-creative analytics may be the ideal starting point.

What is co-creative analytics? Here's how the process was described in a recent HBR blog post:

You put together ad-hoc teams that involve not only analysts with relevant domain expertise but also represent skills from other domains, which brings new ways of thinking to old analytical problems. Over a short two or three day period the team will brainstorm around the problem involved and bring together as much data and as many analytical frameworks as they can to both frame up the problem and outline potential solutions or at least pathways to solutions.

As Ann points out, the solution to the skill shortage may lie in a collaborative effort to better understand alternate candidate pools and identify the rewards strategies likely to attract and retain these candidates. It's easy to see how co-creative analytics could facilitate this collaboration.

This same interdisciplinary approach has applications in other areas of the organization. Performance management immediately comes to mind. A co-creative analytics approach could provide better alignment of individual performance goals with the goals of the organization. It's likely that based on different past successes and failures, different departments will approach a given organizational goal in different ways. Sharing those approaches across departmental lines can spark new ways of looking at old problems, pushing the organization forward.

What other kinds of organizational challenges could co-creative analytics address? 

 

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. 

Switzerland Pay - Great for Employees, Less So for Execs

In the past several months, Switzerland has made some interesting compensation headlines. Swiss voters recently passed a referendum on executive compensation that is more far-reaching and restrictive than anything we currently have in the U.S. This new set of rules was supported by a convincing 68% of voters. At nearly the same time, a UBS report from September 2012 shows that Swiss employees in Geneva and Zurich receive the highest net wages in the world. Does this tell us anything?

The highest paid employees in the world just voted for some of the most restrictive executive compensation reform we have seen to date. To be fair, Geneva and Zurich are among the most expensive cities in the world, but UBS reports they also have some of the lowest tax rates. I think it is telling when people who are doing relatively well compared to the rest of the world still have an issue with how much executives are making. I am just not sure what it is really telling us.

Are executives paid too much? Is there a misunderstanding of how and why executive pay came to be at its current levels? Has the media, or have politicians, flamed the fires of executive compensation unrest? Or are executives in some sort of compensation cold war, outspending each other to show their relevance and power? Let’s be honest, all of the above are far too simplistic, but each is believed by groups of employees, shareholders or others.

The new Swiss limitations on executives apply to publicly traded companies. Among the new rules is a requirement that pension funds vote in the interest of their members. They must also report how they voted. There are also annual say on pay votes, annual elections for directors and a ban on severance and golden parachute payments. Companies’ Articles of Association (similar to U.S. Articles of Incorporation) must add new details on compensation structure and rules for how compensation may be used for several groups and purposes. The final kicker is the potential for criminal penalties and fines if these rules are broken.

These new rules may simply be a shot across the bow in the new battle to bring executive compensation levels into publicly acceptable ranges. Several other countries, including the U.S. and a few Western European countries, have incomplete rules on the books or in the works. Executives may find themselves boxed in by the many stakeholder and influencers with different perspectives on this issue.

A decade ago when the UK rolled out its Say on Pay rules, few consultants or companies believed that similar restrictions were likely to occur in the US. They were right for almost ten years. While we will not see aggressive new restrictions on executive pay in the immediate future, the approval and gradual acceptance of these rules across the Atlantic may be writing our future. In the past, rules like this have taken 5-10 year to reach our shores, but we all know that cycles are speeding up. We may well see restrictions like this sooner than expected. Are you ready, and will you support or oppose these efforts? 

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.

Compensation and Education: A Broken Link?

Has the tie between education and compensation been broken?  Or is a new conflict emerging due to the inability of our educational system to close the talent deficit?  Any break in the chain linking teaching institutions and the KSAs that earn pay is troubling.

While we face a shortage of viable candidates for the critical STEM jobs vital for economic recovery, we have an excess supply of people burdened with immense debt incurred pursuing educations which do not produce suitable employment.  Obviously, college curriculum developers and placement officers are not doing a very good job.  Universities produce graduates in disciplines with no job openings.  Part of the blame rests on the flat economy, because no one can help even the most qualified candidate find employment that doesn’t exist.  The jobs available today are increasingly less middle-class and more of the low-wage type, too, and that further reduces the pool of opportunities for those with university degrees.  Arguments that more education MIGHT change that dilemma rest on the doubtful presumption that students will choose the tougher academic fields where strong skills are badly needed but qualified applicants are in short supply.  Don’t bet on it.

Workforce participation by college grads has been steadily declining, despite the fact they seem to have lower unemployment rates even if they can’t find work in their career field .  Part of that paradox exists because they are frequently willing to take any job despite being “overqualified,” probably because of the immense pressure of student loans that cannot be discharged under new bankruptcy rules.

Student debt is the next U.S. financial crisis, because it already exceeds credit card debt.   An advertorial for an auto equity loan scheme offering temporary cash flow to the typical under/unemployed grad illustrates how bad the situation has become.  Determined people who invest in higher education still have a hard time finding steady income from a suitable job in their field.

In a planned society, this misallocation might not happen because it would not be permitted.  In an openly competitive economic system, you would think that “free market forces” would operate to efficiently match supply with demand.  But this has not happened.  Or maybe it is happening, because pressure is increasing to lower barriers against importing foreigners with the skills our home-grown educational system seems incompetent to produce.  Even professional societies (IEEE) propose immigration reform for STEM talent.

Meanwhile, industry seems to be turning away from an academia seemingly unable to close the skill gaps (talent deficit) in the real world. Everyone agrees that higher education does pay off, over time, despite initial employment issues and similar problems when unemployed; but mismatches between abilities and jobs persist.

The alternatives for solutions are shrinking due to a confluence of forces.  There are fewer people sufficiently educated for the diminishing supply of skilled jobs required for modern employment.  “American workers are overeducated and underskilled,” according to one report.  Large numbers of degreed workers remain underemployed.  At the same time, there are more people literally being encouraged to disappear from the job market and become dependent on new forms of “the dole”  funded by taxes on increasingly stressed and underemployed workers.

How can this mess be fixed?  As the unprecedented number of embedded research links demonstrate, these are deep and serious problems.  What are the most promising possible options to solve them?

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 Photo "060713 Tangle" by Dan4th

Skill Shortages: An Opportunity for Recruiting and Compensation to Converge?

Too much focus on job titles is undermining our ability to fill our more challenging job openings, argues Matt Ferguson, CEO of CareerBuilder, in his recent HBR blog post.  By looking only at applicants with specific job titles and overlooking candidates who possess many of the essential skills required and who could take on the responsibilities with a basic investment in on-the-job training, he observes that many employers could be creating their own skill gaps.

In making his point, Ferguson highlights a study conducted recently by Economic Modeling Specialists International.  EMSI completed an analysis of 41 occupations commonly reported as having a skills shortage and then used their own compatibility index (which is based on O*Net competency calculations) to identify and estimate the number of workers who would be willing and able to switch occupations into categories where there skills may be more highly valued than in their current positions.  Where there appears to be an available and adequate pipeline of qualified workers, the EMSI analysis examines wage comparisons as well as other potential "opportunity costs" to understand the degree to which there are incentives for workers to cross occupational lines.

Essentially, EMSI is using this process to highlight situations where organizations could be overlooking "nearly perfect" candidates who possess many of the essential qualifications for a position.  Examples noted include a technology company trying to hire technical writers who might also consider paralegals with exposure to technology subject matter -- or a healthcare organization needing to find medical assistants who might also consider pharmacy technicians as a viable candidate pool.

The EMSI study (of which I have provided only a cursory overview here) raises some interesting questions and possibilities for both recruiting and compensation.  Through its analysis and findings, it prompts employers to consider supporting their recruiting efforts with deeper studies of the available labor markets in order to better understand the possibility and presence of alternate candidate pools -- and to also contemplate the pay and other types of incentives that might be necessary to attract candidates with compatible skills, so that appropriate reward strategies can be explored and put in place.

Seems to me to be an interesting opportunity for recruiting and compensation to put on their respective thinking caps and do a little collaborative problem solving.  You?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a wide range of client organizations.  Ann was recently named President Elect of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and has joined the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares. 

Creative Commons image "Converging Footsteps: My Father and Stepmother" by CarbonNYC

At the Comp Cafe, We're Counting the Days 'til 2021

Last week I mentioned a report called "Global Talent 2021: How the new geography of talent will transform human resource strategies" from Oxford Economics. I found it exciting and timely because the report describes a future that is already emerging around us. 

The changes that have begun are going to involve business and cultural shifts that were unimaginable fifteen years ago. Our businesses will be globally networked with employees shifting their employment from the U.S. to emerging markets and back again, as business needs or job opportunities arise. 

We'll need to track and explain to executives where to invest in talent and where to reduce investment as areas become less critical. These adjustments will be ongoing rather than epic events. And in this shifting employment environment, implementation of adaptable compensation practices will become as important as program design.

Here are a couple of the quotes from the report:

"Employers who are candid with their employees about how they rate relative to peers and what future leadership potential they possess may find their workers more motivated to develop new skills and master new techniques."

"Making employees feel more part of the conversation is critical to business success, and closely correlates to the overall health and prosperity of the company."

"Take a greater evidence-based approach to talent management. Employing workforce analytics to assess and segment talent, and using quantitative tools to indentify risk and integrate HR into business planning can lead to superior results."

Just wondering. Do any of these recommendations sound familiar to you? If you are a regular Compensation Cafe reader, you must have heard these suggestions repeatedly over the last four years.

Compensation Cafe writers are itchy for improvement. We're a group of cheeky, opinionated HR practitioners who spend a lot of time looking to the future. Each one of us is a big fan of evidence-based analysis for every and any HR strategy. We'll even give you ideas on how to pull it off.

"Our research reveals not only that tomorrow's landscape for global talent will be dramatically different than that of today, but that some countries and industries will need to adapt more quickly to accomodate these rapid shifts."

If you love this drama, keep reading the Compensation Cafe!

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.

What Motivates Creative People?

Until now creativity has been viewed as important but not essential for the survival of a company.  Companies instead have focused on efficiency, productivity, and continuous improvement to lead them to success.

But priorities are dramatically changing. In a Global CEO Survey conducted by IBM, CEOs identified "creativity" as the most important factor for the successful company of the future. 

By “creativity” they mean truly innovative skills found in jobs like architects, data scientists, designers, etc. ---- skills believed to have true strategic value.   Any employee can be creative in his/her work, but the result is not likely to be a “show-stopper” for the company as would the work results of this “creative group”.

Creative employees are different—certainly in the workplace.   Most of them just don’t care about the same things as other employees.  Because they are different, managers have had difficulty knowing how to motivate them.  None of the usual practices that work with other employees seem to work with them.

Creative employees are intrinsically motivated.  They set extraordinarily high standards for themselves.  Research has shown that management can’t get them to work harder or perform better by saying “here’s some more money”.  When extrinsic rewards are being dangled in front of them like carrots on a stick, they feel externally controlled — which becomes a negative for motivation. It’s almost like the more you pay them to do what they love, the less they will love it.

Of course companies need to pay them “enough” to satisfy them. If they don’t, compensation becomes a sore point and distraction.  In addition, they might have a spouse who is less interested in creativity than in paying the mortgage and saving for the kids’ college.

But if management really wants outstanding creative performance, the key is intrinsic motivation– the work itself. 

This is consistent with what I have been told by a couple of my creative friends who have started up companies and now are venture capitalists.  It’s not the money that motivates them (even though they usually make tons of it).  It’s the challenge, the “aha” moments, the discoveries that lead to significant breakthroughs that are the “highs” creative people live for. It’s almost addictive, and it’s absolutely the driver behind their success.

Example:  The wife of one of these friends tells the story of one of her husband’s “aha” moments.   He was in the shower when he had an “aha” moment ---- bolted from the shower and ran naked and dripping wet through the house to his office pumping his arms and singing at the top of his voice.  His path took him through the family room where she was entertaining some friends.   He was totally oblivious --- caught up in the high.

So how can management use the work itself to motivate creative employees?

1)Provide them the right work environment ---- free from bureaucratic excesses, administrative work, unrealistic/changing deadlines, company politics and micromanagement.  
2) Don’t make status check calls and keep track of what’s done/left to do. Spend time with them and really listen to what they have done. Try to understand how they approach and solve problems and what has worked/hasn’t worked.
3) Give them an important problem to solve that the company urgently needs solved. Let them know (if true) that no one else has been able to crack it. This can be a real motivator.

Being told what to do and how to do it with no tolerance of failure, little expectation of recognition, and arbitrary deadlines, can kill motivation. But providing a positive atmosphere where failures are examined constructively, where management really listens and success is recognized in unique ways, can result in spectacular results.

It takes work.  But isn’t it worth it?   CEOs seem to think so. 

What has your experience been in trying to motivate “creatives”?  Any successes you can share?

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. 

Can Your Compensation Philosophy Do This?

The topic of compensation philosophy was raised recently in a conversation I had with a group of local executives.

As companies migrate to new products and services, to new customer profiles, to new technologies and competitive sectors, and to new partnerships, unless this happens purely by merger and acquisition, the people and the work must follow along.  Rarely does this happen smoothly and predictably.  More often it happens in fits and starts, where we pounce on opportunities and then scramble to assess the implications after-the-fact.

From a compensation perspective, this doesn't just bring new jobs and different skill sets into the picture.  It can also mean a shift to a whole different competitive labor pool and a challenge to the principles and assumptions on which your pay program is built.

It can mean that one day you're competing with the local manufacturing industry for talent and the next day you're up against Yahoo or Google.  One day things are in steady shape and the next you're bringing in a stream of very different talent that upends internal pay relationships in a way that  ripples through half the organization.  One day you have a relatively homogenous workforce and the next you are facing a glaring delineation between them that built today's business and them that will build tomorrow's.

This is when you discover that your traditional compensation philosophy, that beacon of eternal wisdom that is supposed to guide all compensation decisions, is of little help in steering through the morass.  A declaration that you intend to "establish salary opportunities at the 50th percentile of the relevant labor market" doesn't bring much comfort when you're straddling a moving fault line.

While reflecting on these issues raised by the executive group over the past week, I ran across The Agility Factor, an article published this week in strategy+business (authors include Edward Lawler, among others).  The article highlighted four routines that distinguish "outperforming" companies from their peers by helping them anticipate and respond to events, solve problems and implement change more effectively.  This agility, the article notes, is more than just the ability to change.  It is "a cultivated capability that enables an organization to respond in a timely, effective and sustainable way to changing circumstances."

Quick summary of the four routines of agility described in the article:

A dynamic strategy - including not only an enduring purpose, but also an intent and identity relative to that purpose which is flexible enough to change on short notice.

A perception of environment change - maintaining continuous contact with and drawing information from the environment, which can be evaluated against the company's existing identity, intent and business model.

Response testing competencies - resources are available and can be quickly deployed to experiment with and learn from new ideas.

Change implementation - having the authority and the ability to change habits and practices embedded in line operations, rather than being limited to staff/headquarters groups.

I think this suggests some interesting possibilities for making our compensation philosophies more agile and responsive.  Most compensation philosophy statements that I've encountered (and this includes the ones that I have historically partnered with clients to develop) focus on the organization's objectives, principles and intent relative to how it pays its people.  The result, however, can be a somewhat static document that leaves us helpless in the face of wrenching change. 

Taking a cue from The Agility Factor, what if we made our compensation philosophies more dynamic by:

• Ensuring that our statements of pay purpose and objectives, while clear and robust, will allow us to stay true to some enduring principles while still retaining the flexibility to respond to unanticipated changes in the business environment?

• Defining and articulating our commitment to the routines of ongoing environmental sensing, information gathering, idea generation, experimentation and learning?  This means that our contact with the environment must go beyond annual benchmaking studies.  This sensing must be grounded in a deep understanding of our current and any emerging business models, as well as implications for our workforce and how we reward them. It also means a commitment to regular experimentation and learning.

Your take?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a wide range of client organizations.  Ann was recently named President Elect of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and has joined the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares. 

Creative Commons image "gymnast showing a bad back bridge" by Rick McCharles

Real-Life Experiment in Pay Transparency

Would you trust your co-workers with setting your job responsibilities? Would you let them decide whether to promote or demote you? How about determining your compensation? 

That's exactly what's going to happen on Fox's newest reality TV series, Toxic Office: Does Someone Have To Go?

According to a press release from Fox, the premise is simple: 

Frustrated bosses will hand over the reins of their companies to the employees, offering their respective staffs a chance to make changes in the workplace - even if it means letting co-workers go. 

In one of the previews, employees are gathered in a conference room watching a PowerPoint presentation detailing each employee, right down to salary:

The network says that the show empowers employees to solve their own problems. Reality TV issues aside, could such a setup in real life solve problems? Or would it create more problems? 

We talk a lot about creating transparent pay, but can it ever be a good idea to have complete disclosure, publishing every employee's salary company-wide?  

My concern is that emotion would come into play. Cliques, jealousy, and conflict are a fact of life in the workplace. Decisions might be made in response to a "can you believe he makes that much?" reaction, rather than considering the full picture.

There are numerous factors affecting compensation other than job title and seniority. Differing salary histories in previous employment, negotiations, and salary expectations play a role, as do market conditions, the importance of the position to the company, and individual performance. Could the typical employee get past the initial emotional response and make an objective decision based on a rational assessment of the full picture?

There may be a role for employee input for some types of compensation. For example, IGN Entertainment created a profit-sharing system where employees awarded each other "tokens". The more tokens an employee receives from his co-workers, the larger percentage of the profit she receives (Ann Bares provides the details at Compensation Force). But could this system work for base pay as well as it does for incentive pay?  

We'll have to tune in and see how all of this plays out, but my guess is that going beyond transparency and disclosing salaries to co-workers is likely to create more problems - the kind of table-flipping, name-calling drama that we've come to expect from reality tv - than it solves. 

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. 

When You Can’t Differentiate Based on Compensation, What Do You Do to Stand Out?

Our esteemed Compensation Café editor, Ann Bares, recently conducted a survey on the annual salary merit increase and potential changes afoot (read the results of the survey in Ann’s post on Compensation Force). It seems compensation pros are considering changes, but few are making the leap yet.

But then my highly unscientific poll method of asking colleagues and friends about their experience with or recommendations for the annual compensation increase process (by whatever name you want to call it – merit increase, raise, cost-of-living increase) shows deep dissatisfaction with the status quo. Here’s just one example that’s illustrative of many of the stories I heard.

The husband of a member of my team has been working for the same very large, global organization for the last 30 years. For much of that time, he’s worked with the same group of people who know each other quite well. So when everyone on the team received a 2 percent “merit increase” (as this company does use the classic differentiation scale of 1-5 with higher merit increases supposedly going to those who receive a 5 rating), it wasn’t surprising for people to grouse to each other about not only the low increase but how everyone received exactly the same increase, though performance ratings did vary.

Adding insult to injury, the price for a cup of coffee in the café also went up on the same day, leading to the inevitable result of people complaining their entire merit increase now went straight back to the company to fund the increasing cost of their daily caffeine habit.

Of course, one story does not a trend make; however, multiple sources are showing merit increases no longer align to cost of living increases. It’s clear even companies with the best of intentions for compensation cannot compete for top talent based on pay alone.

A recent survey from CareerBliss proved the point, even in the highly competitive tech industry in Silicon Valley. (Direct content from CareerBliss is available here.) Heidi Golledge, CEO and co-founder of Career Bliss, had this to say about the survey results, in which Intuit employees were found to be the happiest employees in tech:

"CareerBliss also found salary was not a huge factor in determining employee satisfaction. For example, Yahoo, which ranked eighth on our list, has one of the highest average salary listings — $87,000 a year, whereas Intuit’s average salary is $77,000 a year — once again proving money does not necessarily buy happiness at work. When it comes to tech, folks feel happy creating the latest technology and being part of a cool culture with friends at work."

Differentiate on Culture

In today’s workforce, culture is your differentiator. Anyone can copy your compensation plan. Anyone can one-up you on pay to try to draw your best talent away. But your unique culture – how your employees engage with each other, with customers, and with the greater purpose of your organization – can never be copied. Sure, people may self-select out of your culture because it’s not the right fit for them, but that serves to strengthen your culture further.

Where does your organization put retention and recruiting emphasis?  On culture or on pay and benefits? Which do you see as most powerful for differentiation to retain highly sought after employees?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the  world. His articles on fostering and managing a culture of appreciation  through strategic recognition have been published in Businessweek,  Workspan and HR Management. Derek splits his time between Dublin and  Boston. Follow Derek on Twitter at @DerekIrvine.

Three Pay Patterns

Three pay patterns seem to exist in North America today.  

As the economy has struggled, some firms continue with business as usual attitudes, ignoring outside market changes while continuing their traditional practice of steady pay increases.  Others shut down tight, freeze salaries and cut payrolls.  Still others take a middle position, moderating their raises and responding in a temperate and intermediate manner.   They each may report increase rates of 5%, 0% and 2.5%, respectively, in pay increase surveys.  Don’t forget that point, because how those numbers are handled is important.

Divided practices and inconsistent behaviors are real.  Only last year, a Harris poll reported tremendous differences in pay increase practices.  At the same time that a significant block (almost half) is standing still, we also see other employers frantically searching for new methods to retain critical workers.   Variations like that create terrible problems for total rewards professionals who give recommendations and make decisions according to survey results.   When enterprises do not grant pay increases, they frequently do not respond to pay increase surveys or at best supply a “none” answer to the question.  Such answers (if even noted) can skew the results.  Some survey firms report “no increase” populations, while others simply compute the average or median increase rate of those who GAVE increases and ignore the silent non-responders.

In this 21st Century, few salary surveyors still ask the ancient question about the interval (“how long since the last increase?”) involved.  It is relevant, because a 4% increase granted after four years of frozen pay is not really the same as a 2% increase given every year or a 3% increase budget allowed in alternate years.  Besides that, the question of what’s going on at employers whose practices are not reflected in the survey observation sample always remains unanswered and can be extremely problematic.

From a statistical standpoint, a random sample of a significant population sample should yield reliable results; but pay surveys today very seldom meet that standard.  Surveys of major highly profitable employers with secure income streams will not produce the same answers offered by small struggling enterprises operating in deeply troubled areas.  Total reward professionals are confronted with the same challenge that faced the blind men trying to describe an elephant.

Everyone has a different perception.  Each is right, from their perspective.  But that is not the answer your top management wants to hear.  They frequently demand a clarity that simply does not exist.

In the end, total reward professionals will be challenged to temper increase survey findings and predictions of changes with explanations of the underlying meaning of the metrics.  Absolute numbers should rule rather than the relative velocity of change comparisons.  What it takes to attract, engage and retain your scarce-skilled critical performer is far more vital than the percentage rate by which some group moved from its previous position.  Stick to real verifiable realistic absolute numbers displaying present reality rather than vague relative comparisons from past history, in order to enhance your opportunities to both survive and thrive.

 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.

Wikipedia Commons image "Fingerpost at Drem"