Compensation Cafe

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

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.

Does Lack of Pay Lead to Lack of Discipline?

Is pay required for professionalism? Despite the widely publicized excesses of the Wall Street crowd and the constant Hollywood demonization of capitalism, things seem to fly out of control faster when a Non-Profit is involved.  From the Papacy to Penn State and Boy Scouts of America, the shenanigans that occur in religions, schools, charities and other tax-exempt entities seem to show that NPs exhibit many Dark Side behaviors that would never be permitted at enterprises organized for crass amoral commercial purposes. 

Those who have served non-profit boards of directors know quite well what I’m talking about.  People who on their regular jobs would never think of doing something unprofessional will not hesitate to wield their power rashly from an unpaid management post.  A short list of sample misbehaviors includes: 
    •    Demanding special treatment for relatives or friends,
    •    Second-guessing vastly experienced subordinates,
    •    Playing with the careers of regular employees.

Those abuses seem less typical in corporations and businesses than they are in organizations run by volunteers.  Of course, my view could be jaundiced by the unique features of those I’ve closely encountered, but conversations with others even more experienced in the ways of non-profits have consistently confirmed these observations.   Maybe the lack of compensation gives rise to irresistible temptations to take your pleasure in other ways.  Perhaps workers need scorecards to keep track of the right and wrong of their actions.  Could it be that a salary tied to a clear quid pro quo like a job description or employment contract is necessary to supply a governor on the engine of motivation that might otherwise spin out of control? 

Is there something inherently healthy in the for-profit mode of operation?  Does a toxic seed grow when you don’t get paid for your efforts?  Researchers have identified behavioral differences in Social versus Commercial environments.  Standards and expectations are not the same in a social setting where people act without pay as a commercial motive.  Why is it that the lack of perceived “compensation” seems to inspire irrational behavior?  Well, maybe not irrational but at least irregular, when viewed thru the prism of conventional professional standards.  After all, “compensation” is literally that… something that satisfies you, received in exchange for your service. 

How, then, do you assure balance in the value proposition when work is done without pay?   I fear that, in the absence of formal rewards, volunteers create their own informal compensation programs to supply whatever consequences they find most satisfying to their personal motivations.  After all, everyone knows that anything of value not controlled by the organization will be controlled by its inmates workers, regardless of their volunteer or paid status.  That compensation may be in the form of money, the intrinsic satisfaction of creative or socially beneficial activities, the personal pride that results from public recognition before your peers, or the pleasure taken from the exercise of authority over others; but every contributor exerts themselves for some reason. 

The rewards taken by the unpaid people who rule over tax-exempt non-profits tend to be less visible than what shows up in a payroll record.  And that is not always a good thing.

What do you think?

Creative Commons image "Coins in High Saturation" by MoneyBlogNewz

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.

It's the Little Things

I was all set to post a completely different article this morning until I got off the phone with the manager of the hotel where I am currently staying. I am staying at a beautiful resort. It is on the ocean and, in fact, my room has a view of the Pacific. The food has been wonderful. The staff has been friendly and helpful. But, I am very tired, a bit annoyed and overall my experience did not meet the promise of the vision created by the instantly visible “big” picture offered by the location.

Let’s trade in the hotel for company. We can switch the room for a department. The food is like my pay. And the staff is like HR and Compensation. So what could possibly be wrong? I am at a great company, in a fantastic department, my pay is wonderful and HR and Comp have been friendly and helpful. How could I be less than happy? Let’s talk about the little things.

When I went to brush my teeth last night the sink didn’t drain. It took almost 5 minutes for it to empty. When I went to sleep the room was a bit warm. I set a cooler temperature on the cool remote and went to bed. A few hours later, in the middle of the night I awoke to an even warmer room. I reluctantly called for assistance after being unable to determine the problem. The person who came to my room was also unable to correct the problem. I chose to stay in the room rather than go through the difficult process of changing to a distant new room.

A couple of hours and catnaps later I had to start working. I went to order breakfast and realized the room had no menu for the multiple onsite restaurants. I opened the Guest Service binder and the very nice metal insignia fell off and onto the glass desktop. I picked up the desk phone to call the front desk and it didn’t work. When I spoke to the front desk (from the functional bedside phone) I explained my issues and they expressed their apologies. They also offered a discount.

Things happen, but understanding that fact does not completely remove their impact.

Imagine the remote as your participant website. The air conditioning is the commute or parking access for your location. The maintenance person is the HR business partner who does not have the tool to answer the urgent question. The metal insignia, the termination provision in your LTI and the desk phone is the customer service line at one of your third party providers. And what about the sink? Heck, let’s just say your sink was clogged this morning. (Even I can run out of metaphors!)

By this point, you may have forgotten how great the company and its people are. You might not remember that pay was great. This is the challenge of the little things. Even though not a single one, or the combined total, of the minor issues I have experienced in the past 24 hours would stop me from staying at this fantastic venue again, they have colored my experience enough that I will without truly experiencing what this place had to offer. When you think about your compensation plans make sure you take care of the little things. When they become problems in a swarm you can lose nearly all of the amazing impact your company and effort should have brought.

Lastly, when the little things fail, don’t spend time reminding people of the good things.  Just fix the little things and move forward knowing that the big stuff will usually speak for itself in the long run.

P.S. Did I mention how good the complimentary coffee and fresh-baked croissant are?

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

Newton’s Three Laws of Compensation Motion

Earlier this week, fellow Comp Café-er Stephanie Thomas, wrote an article titled The ‘God Particle’ of Total Rewards. In it, she discusses the Higgs boson particle that seemingly holds the key to why things have mass and the secret ingredient in compensation programs - people - and how they hold things together. This got me thinking about how some of the most basic laws of physics control some of the most profound aspects of life. Given the fact that my last physics class was almost 30 years ago, I thought I’d take us back to basics. Sir Isaac Newton was a pretty smart guy. He developed three laws of motion that have historically worked well for most humans. With a little (OK, a lot) of poetic license I reframed these three laws below.

I. Every compensation program in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.

Basically, this says that once something is moving it will continue moving in the same manner unless, of course, something acts to stop or change that movement. Consider your average compensation program implementation.  Even the best implementation and roll-out has a few flaws, but it would be great if whatever movement we created at kickoff would remain constant for a while. However, nearly everything that happens at a company and to each individual directly impacts the movement of your program. Changes in goals scrape off a little of your speed. Strife with a boss pushes back against your well-designed program. Little and typically unnoticed distractions slowly drain away even more speed.

Handling this Law requires always being behind your plan pushing, or in front of your plan clearing a path. The push comes from understanding your program goals and being able to translate that into the goals of each key stakeholder and influencer. Clearing the path is mainly about communication.

Law I states: things will not change unless you make them change. In other words, don’t expect change to happen just because you want it to.

II. The relationship between an object's mass m, its acceleration a, and the applied force F is F = ma. Acceleration and force are vectors (as indicated by their symbols being displayed in slant bold font); in this law the direction of the force vector is the same as the direction of the acceleration vector.

This Law explains how velocities change when forces are applied. The greater the mass, the greater the force needed to create acceleration. Also, a greater mass requires more force to slow it down. This is the argument for both rigorous testing before any plan change and small pilot programs when the final number of people involved will be large. It is fairly easy to redirect, speed up or slow down a small group. Large groups, on the other hand, take enormous amounts of effort to get moving, to change direction or to slow down or stop. It is easier to stop a toddler on a trike than a fully loaded locomotive.

Often people wonder why compensation programs at very large companies tend to remain fairly constant regardless of popular trends. This law explains this.  While it is possible to make fairly quick movements with even the largest plans, the force (staff size and budget) required to execute and control the movement is seldom within the range of what compensation departments are allocated. The only hope for achieving quick movements here is to show how the quick movement of the compensation program can lead to an equally quick movement in company success.

Law II states: making changes becomes harder the bigger the group or issue gets.  In other words, don’t wait to make changes and when you do make changes make sure they work small before you try them big.

III. For every action there is an equal and opposite reaction.

This law is the tricky one for compensation professionals. Basically, it translates into: “Every time you do something great, expect to deal with something bad. I often hear this referred to as the “Law of Unintended Consequences.” In truth, if the action taken was deliberate, the opposite reaction should also have been fully expected.

The place I see this happen most often is in pay for performance programs. The performance award goal says to maximize revenue, but there is no mention of controlling costs or risks. The sales commission programs says you get paid a bonus on what you close in Q3, but does not specify that the deals need to stay closed through a given date in the future. The raise is given to keep an important person who would have been happy with half as much had they just not been “forced” to go interview somewhere else.

Law III states: that there should be no unintended consequences if you plan and design with forethought. In other words, every time you work to motivate an action or feeling, determine exactly how that motivation may also result in exactly what you don’t want.

While the ‘God particle” may still up be for debate, these basic laws are proven. Use them to your advantage or spend most of your time dealing with their consequences.

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 “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

Nonprofit Restrictions Might Affect You

Why should HR/comp professionals care that almost 400,000 nonprofits disappeared last year in America?  Above and beyond those who are directly employed by a nonprofit, there are lots of reasons for the rest of us, including self-interest. 

Corporate giving programs are frequently part of the total rewards system.  Employees may ask for donations to charities or request time off for volunteer activities at worthy causes.  Top business executives regularly serve on nonprofit boards and often involve their HR and compensation staff to provide in-kind pro bono services.  Finally, regulators can levy personal fines of $10,000 against organization managers (which includes advisors) for every compensation mistake. So some knowledge about the nonprofit sector is a must.

Government housecleaning caused the approximately 20% reduction in the number of tax-exempt entities currently recognized by the IRS. The organizations that lost their tax-exempt status had not filed with the Service for 3 years; most were very small and no longer active.

Tax-exempt enterprises hold their privileged status only by providing a public benefit and meeting certain specific federal and state rules like timely filing.  One of the most fundamental (and surprising) requirements is transparency, as the annual required IRS financial reporting is a public document.  To maintain their tax exemption status, they must follow IRS regulations and restrict their activities to permitted behaviors that meet the public benefit purposes that justify not paying taxes on their assets or income.  That means that if they abuse the rules or skip submitting the necessary forms to the IRS long enough, they can lose their tax-exempt status.  In 2011, the IRS implemented legislation that forced the loss of tax exemption for nonprofits that did not file as required.  With fewer to audit, state and federal regulators may become more aggressive.  The remaining group of nonprofits approved for tax-exempt status will be subject to tighter IRS review in the future.

Total reward professionals or their executives who take part in management decsions at charities and foundations will be well advised to: 

• avoid prohibited political and unrelated business activity; 
• file the correct form properly;
• use e-filing because it will catch math errors and the software won’t permit failures to complete the form properly;
• watch out for excess benefit transactions that enrich insiders and can trigger an Intermediate Sanctions (IRC 4958) charge by enforcers. 

Special rules permitting lesser penalties than revocation of tax-exempt status against parties who receive or permit unreasonable compensation were enacted in 2001. Directors and HR/compensation professionals who qualify as organization managers under IRC 4958  (even if merely providing outside advisory services) are exposed to personal financial liability under the Intermediate Sanctions regulation for activities that are permitted at for-profit enterprises.  For example, allowing the Chairman's worthless nephew to hold a highly paid sincecure at a tax-exempt organization can cost you a personal $10,000 fine. 

Truly, things are different at nonprofits.  Forewarned is forearmed!

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.

Image courtesy of discoverybusinessservices.com

Out of Control?

Have we lost the ability to self-regulate?  It appears that the current culture built on expectations of instant gratification will lead to a new tragedy of the commons.  Compensation commitments may exceed capacity.

Michael Lewis (Beware of Greeks Bearing Bonds, Moneyball, Liar’s Poker) has done it again…. His newest article, California and Bust, captures the current economic crisis and identifies the next one forthcoming, now predicted to be at the U.S. municipal level.  His statements about what I call “the ratchet effect” at the bottom of page 4 are key.  At the top of page 6, he offers diagnoses and introduces prescriptions.  Pretty light on solutions, but both entertaining and very interesting.

When the engine that has reliably powered and enabled ever-increasing public sector reward expansions sputters and falters, decisions that were easy no-brainers in flush times may come back to haunt those who made them.  Long-term commitments (like progressionary promotions, labor contracts, automatic step-increases or municipal pay programs enshrined in city ordinances) made with the assumption of uninterrupted positive income gains in the future cannot be met when the new reality suffers from far less prosperity than anticipated.  Despite TV advertising slogans, political sound-bite phrases and recurrent movie themes to the contrary, bold dreams, confident hopes and optimistic projections are not self-fulfilling prophesies.  The Pollyannas who cut the employee-friendly deals of yesterday are frequently not around today to suffer the consequences of their short-sighted assumptions.

As a behavioral economist with much experience dealing with labor relations, payroll budgeting and organizational design at that municipal level, I can’t disagree with anything Michael Lewis said.  Bargaining groups will continue to push for higher compensation.  No union negotiator ever lost an election campaign to be on the bargaining committee because they were too tough on management.   But elected public servants are vulnerable to the kind of strong lobbying unions can bring to elections; they are likely to cave in rather than offer strong resistance to wage demands from powerful special interest groups.   Generous actions taken in the past to placate workers (organized or not) can become millstones around the necks of states, provinces, counties or cities confronted with declining tax revenues that are now proving insufficient to cover the expenses they have committed to incur.  Our Western system of adversarial process (head-butting) by which each side ignores what is best in the single-minded pursuit of partisan advantage, counting on the other side to respond accordingly (equally strident from the opposite narrow perspective) until they hash out a mutually agreeable synthesis compromise somewhere between the two extremes, doesn’t fare well when one side is able to effectively dominate the negotiation and dictate terms.  Unbalanced power permits reckless results.  The effect can be hidden for a while, when money keeps pouring in, but when the flow of cash slows or stops, it can have the same effect on a municipality as sudden drops in blood flow have on human hearts.

Rewards professionals should realize that the next decade may feature service level insolvency among states, counties and municipalities.  Imagine the problems when a city trims personnel and reduces activity.  Streets go without repairs.  Police patrols are cut back.  Fire houses are shut down.  Emergency services are less available.  Not to be an alarmist, but this is real, folks.  These things are not likely to happen.  They are guaranteed to occur unless unforeseen events intervene in ways no one can envision at present.  The law of unintended consequences will continue to punish those who ignore it and act upon unwarranted assumptions.

You know what they say about “assume!”

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: Comedy & Tragedy Part 2 by richardgardner69

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

Compensation: The Word May Not Mean What You Think it Means

What does “compensation” mean? Those of us who work as compensation professionals consider it a positive, professional  word that speaks to people getting paid for services, effort or performance. Like many words, compensation actually means something else entirely.

From the Collins World English Dictionary

1.     the act or process of making amends for something

2.     something given as reparation for loss, injury, etc; indemnity

3.     the automatic movements made by the body to maintain balance

4.     the attempt to conceal or offset one's shortcomings by the exaggerated exhibition of qualities regarded as desirable

5.     biology: abnormal growth and increase in size in one organ in response to the removal or inactivation of another

Take a minute and read those definitions again. None of them are uplifting and positive.  In fact, each and all of them make my job feel a little unseemly.

Our starting point is a significant hurdle. If people have studied for the SAT vocabulary section (if they even still have that), they are likely to have different definition than ours. We assume that because we mean well and work to create fair pay programs, that people will just adopt our definition. Before you believe our own hype, ask yourself if your “compensation” program ever falls into any of the above definitions.

A.   Are you paying people to make amends for something?  Are your employees being asked to do something so difficult or distasteful that you owe them some sort of monetary apology?

B.   Are you providing reparations? Is your work-life balance so out of whack that pay is actually a replacement for lost time with family or passions?

C.   Are your increases and reviews so automatic that they have become just a form of balancing and correction for unexpected movements?

D.   Is your company hiding shortcomings by distracting people with extra money? If you looked from the outside would your pay be seen as “too good to be true”?

E.   Has your pay (especially for executives) increased abnormally in size in response to the lack of something else? Could you be paying your executives more than you should simply because of a lack of data or a weak Board of Directors?

This is a case where our actions must be far louder than words. We should compensate our employees not to apologize, but to thank them. Our employees should understand that we place as much value on them being emotionally, mentally and physically healthy tomorrow as we do about them getting the job done. Our pay programs cannot be defined as automatic adjustments. We must put real thought and effort into making our own performance more like a dance move and less like that head jerk that happens when you start falling asleep while sitting in an airplane seat. We must address our issues with real solutions and understand that money works only if everything else works, not in spite of it. We need to pay based on the strength of our firms, not because of poor information or limited resolve.

Compensation may not mean what you think it means, because your actions may not be reflecting your intent. Start by assessing your own definition of compensation versus the reality of what you are delivering to your staff. Once your words and actions are in sync, it will be far easier for employees see beyond their paycheck and get engaged in their jobs.

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 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

Either Put Me in Charge or Let Me Be a Lackey. I'm Fine with Either, But I Can't Do Both.

A friend recently updated their status with the title to this article. Ironically, I saw it just as I got off a call with a client who  was explaining that somehow she was expected to serve as both the strategic visionary and tactical processor for her company’s multi-national LTIP programs. The simple request in my friends status update seemed reasonable, well thought-out and familiar. As we traverse the crags of an uneven recovery, companies have found it difficult to create compensation plans that perform as expected. As budgets continue to be bound by uncertainty, companies have been unwilling, or unable, to hire tactical help. This leaves compensation departments in a quandary. When should we strategize and when should we make things happen?

For those of you who are feeling like your personality and activities are being split down the middle, I'd like to suggest a small exercise. Take 4 hours and block it off your calendar. (I know you don’t have 4 free hours, but trust me this may really help.) Let’s just pretend you blocked off 10:00am-2:00pm tomorrow.

• 10:00-10:30: Spend the first 30 minutes making a list of every strategic idea you would address if you were in charge of everything, but not responsible for doing any of the tasks. Rank based on compliance, urgency, cost and benefit.  Call this your “Strategy List”.
• 10:30-11:00: Focus the next 30 minutes making a list of every process you would improve if you didn’t have to worry about planning, administration or reporting tasks. Rank based on compliance, urgency, cost and benefit. Call this your “Tactics List”.
• 11:00-11:30: The next 30 minutes make list of all the tasks you would do if you were never interrupted by other things. Think about the minutiae and get granular. Rank based on compliance, urgency, cost and benefit. Call this your “Tasks List”.
• 11:30-12:00: Go through the Strategy, Tactics and Tasks lists and mark each item that ONLY someone with your skill set or better (not you) can get done. Then mark those that can be done by someone with a lesser skill set.
• 12:00-12:30:  Look at the remaining items. These are the things that you believe ONLY YOU can accomplish. Is this list realistic? Can anything be moved to one of the other lists? When this list is down to two or three items, you are set for a promotion.
• 12:30-2:00: Go have a nice lunch with a friend.  Celebrate that you just figured out how to put yourself in charge or be a lackey.

A very smart manager once told me “irreplaceable is unpromotable.” She made it clear that as long as I was the only one who could do certain things, I would remain the only one doing those things. Turns out, it’s basic logic. If you want to stop doing things on your list, you must first figure out a way for others to do them (or to make the items go away altogether.)

Look at your lists again. Which things do you really want to be doing? Of everything that’s left, can you train, hire, outsource, bring in consulting or temporary staff to get them done? If yes, put together a business case for exactly that. If no, keep working on your lists until the answer is yes. I have seen people change things in a week or two and I have seen cases where the changes were so large or numerous that it would take 6-12 months to get them done. I have never seen company where the changes were impossible.

The key is this: If you want to be in charge, the first step is figuring out how to be in charge. Regardless of whether you want to be a lackey or in charge, the first step is to define what those terms mean. The next step is to clearly communicate to those who can help make the change. This may be your boss, colleagues, or the staff working for you. The key is to show what’s in it for them (WIIFM). If they see the personal benefit, they may be inclined to help.  If you communicate things as a plea for help, you may get short-term traction, but nothing will really change.

So, put yourself in charge or make yourself the lackey, but only you can ensure that you’re not both.

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 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