Compensation Cafe

Executive P4P: What Came First, the Chicken or the Egg?

It’s an age-old negotiation. Pay me more and I will perform.  Perform better and I will pay you. So, what comes first, the payment or the performance?

Hay Group’s Annual CEO Compensation Survey was released last week. The results show the highest weighting ever (31%) for long-term performance plans. Was this a result of executive pay programs that have been re-geared with performance metrics since the advent of Say on Pay?  Was this the result of CEOs performing better as more attention has been paid to their actions and behaviors? Or, was caused by something else?

Some have suggested that this is proof that if you perform better you get paid more. Others argue that this is evidence that executive compensation has been gamed to ensure amazing pay when things are great and pretty darned good pay as long as things are better than terrible. Hay Group’s recent article mentions that superior performance resulted in a cash-pay premium of only 9 percentage points over poor performance, even though the difference in net income was more than 70%.

Obviously the overleveraged hockey stock graph that is claimed by many to show cranked up pay of top executives doesn’t apply to cash compensation. The incredible (although inedible) stock market has driven equity compensation to impressive highs. (Those who express any surprise at this must either admit they do not understand the impact of steep drops in the market (2008 anyone?) or stop talking about executive compensation for ever more.)

Let’s face it, even less than stellar performers are lifted when the market rises.  And, with the leveraging action of stock options mixed with rising stock prices, it is hard to create separation between the high and low performers of the corporate world.

Another spoiler alert for the upcoming future are performance unit programs using TSR as a metric. TSR is impacted when the market gets hot. As top performing companies begin to plateau, investors push the prices of mid-range performers more than some underlying fundamentals may support in the long run. From 2010 to 2011, net income for the group measured increased by 13.1% and TSR went up by a median of 3.1%. From 2011 to 2012, net income increased by a far less impressive 2.1%, while TSR went up by equity spiking 14.4%.

These results give rise to the ongoing question: Whose fault is it that executive pay continues to climb, seemingly in every market turn?

The argument regarding executive compensation continues. When pay is up, one side picks a set of metrics to explain why it should have gone up more. The other side picks a set of metrics that shows why it never should have been so high in the first place.

Does better pay drive better performance? Of course! Not always, not perfectly, but…of course.

Does better performance result in better pay? Yep. Sometimes more, sometimes less than desired, but it certainly does.

Which comes first, the performance or the pay? In today’s world of executive compensation pay must be great to get performance, but performance must be great to justify pay in the long run. I guess this is just a long way of asking: What do you think?

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.

Pay for Supervisors

The well-established principle that supervisors should praise in public but criticize in private can derail a compensation system.  An article caught my eye recently on how slackers pull down the group because the crew rarely sees the corrective discipline privately applied.  It illustrates that what keeps people productive is effective communication of the appropriate feedback that drives behavior.  That made sense, but the recommended solution sucked.

Two thoughts came to mind:  (1) just as compensation is communication, isn’t communication also compensation? and (2) why are supervisors paid if not to keep the entire staff productive?  This article will focus on the second question, because the first deserves a complete post of its own.

If a boss follows the accepted rules and keeps corrective interventions private and confidential, that apparent silence bespeaks indifference to the workgroup who do not see any improvement steps, remedial actions, reprimands, punishments or open displays of negative consequences to the slacker.  One consultant prescribes intervention by the peer workers with the offender.  Rather than getting pissed off and demotivated yourself, he suggests, you should take ownership of the issue (because you are most affected by it and therefore more responsible than the boss!) and handle it yourself.  If the boss doesn’t act, some claim the peer co-workers should step up and chivvy the culprit.

Whose responsibility is it, to maintain a productive workforce?  Nowadays, it is true, bosses may supervise remotely, having little proximate physical contact with the team and therefore frequently unaware of slackers who goof off.  Even if out of sight, however, bosses are paid and supposedly trained to handle exactly these issues.  It is their monkey. 

Should co-workers be expected to cover for the supervisor, taking up the slack created by ineffective management to “supervise from below”?  I think not.  While social pressure from peers can be wonderfully effective, most workgroups are not elite teams of highly self-actualized experts who require little guidance.  An immediate supervisor is usually PAID to manage the performance of subordinates.  The boss may be called lead person, crew chief, foreman or forewoman, supervisor, manager, director, VP… or any title under the sun, but this role of people-monitor is the sole reason they receive a supervisory title and get higher income.  Leaders don’t neglect the well-being of their followers, because that is a repudiation of their pay grade. 

Remember that supervisors frequently have a more difficult task than mere managers.  Many people get the fancy title of manager (higher rank, pay, status, etc.) while remaining a sole individual performer, handling a project personally or administering a functional area.  Supervisors oversee people.  Managers may have no subordinates reporting directly to them, but all supervisors are responsible for the output of workers who report directly to them.  Handling people is actually a far more complex challenge than dealing with materials, administering plans, generating ideas and doing things that do not require exercising authority over people.  Instead of doing things yourself, the supervisor is supposed to delegate tasks and leverage the application of talent through others.  That is often much harder than handling issues personally as an individual contributor.

Since supervisors are already rewarded for filling that role of monitor and guide, they should be charged with the duty of fulfilling that responsibility.  It seems wrong, improper and unfair to expect underlings to enforce discipline and to maintain the productive work environment when a supervisor is neglecting their duty.  Any boss incapable or unwilling to perform that authoritative human interaction role should be demoted to a coordinator position where they can deal with data and things and not face supervisory challenges. 

Or am I wrong, again?

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 cafepress.com

The Stuff of Legends!

I've been getting to know a few new clients recently. They've been introducing me to their culture and I've been helping them learn a bit from their demographics.  In writing a report for one client yesterday, I was repeating back to them a factoid they gave me. It went something like, "70% to 80% of new employees make it through the first year and tend to stay." I stopped typing.

It is exciting, but is it true? Do they have the data for it?

Every company has legends. Stories that they use to define the company as a hero. You have them in your company. You have them in HR. The thing is that, like all legends, things have been polished up a bit to build in drama. Or they may have been true once but over time the story has become more reassuring than accurate.

Or one day a few people wished upon a star.

Some legends are powerfully tied to the company's sense of self and should be negotiated carefully. Odds are Marissa Mayer thought she was tackling a legend when she limited telecommuting at Yahoo! She still thinks it was the right thing for the business.

Let legends automatically guide our decisions and over time our decisions will become dusty. This can be bad for the business, our employees and, frankly, our careers.

If people at your place of business toss around legends, especially if they involve a belief that things are just so, it's a good idea to check them out. ("We target the 75%ile" is a good one, if your market index is hovering around .6. Another is, "We pay for performance" when most employees are surprised by their performance ratings or the size of their incentives.)

Anybody out there have favorite legends to share?

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.

Stop Spreading the Peanut Butter and Start Feeding the Eagles

"The difficulty lies not so much in developing new ideas as escaping from the old ones." ------ John Maynard Keynes

I wrote an article here six months ago on the need to differentiate among employee groups --- how companies should manage their workforce like a portfolio of investments.  And how some employees, like investments, pay a much higher return than others.

This subject still bugs me.  I don’t think I hit it hard enough.  So I will try again using some head-whacking 2x4’s. Here’s a quote from Laurie Ruettimann --- the high priestess of “whacking”:

“Here’s what I’d love to know: At what point in time did it become common place for every freaking single person in business to believe that they had to treat all employees in their organization equally in every situation? Here’s the truth. That’s what was made up by lawyers and adopted by HR people as an easy rule of thumb to play it safe against the itty bitty possibility that you’d get your butt sued. Over the years it’s gone from a concept used to protect against gross discrimination of gender and race to a concept used to create policies for everything from bereavement leave to bathroom usage. It’s out of control.”

Laurie makes Richard Beatty --- HR thought leader ---look positively “genteel”. Here’s what he says:

"HR wants to treat most employees the same way, and they spend considerable time trying to defend or fix poor performers, taking on the St. Bernard role.  Low turnover isn't necessarily a good thing.  Think about where you might want to disinvest.”

HR is also behind what Beatty calls the "silly" idea that a company should try to be the "employer of choice."

“If you are the employer of choice, who's going to be applying for your jobs? Everybody and their dog's brother. You want people who are excited, enthused, and understand how to contribute to what you do, as opposed to those who simply want to find a good place to hide out."

WOW!  Is your head ringing from the 2x4s yet?

Much of the above boils down to HR’s penchant for risk avoidance and the need/ease of treating everyone equally.  HR needs to move away from risk avoidance to risk leverage. Just as top management finds it critical to balance the risk and reward of their strategic decisions, HR also needs to incorporate risk into their thinking. This new mindset will help them not only understand the full range of HR risks, but determine which risks are worth taking.

Mr. Jesuthasan of Towers Watson, in the Oxford Economics Global Talent 2021 survey, says:

“Being risk-averse is no longer a viable approach.  Risk awareness is not just about identifying the risks you don’t want to take, but also the risks you do want to take.”

It’s all about risk management.  Will doing X increase the likelihood of getting Y?   Is doing A too big a risk to take in order to get B?  Every day it’s about weighing relative risks against relative opportunities.  

Do we spread the peanut butter --- risk averse?  Or do we feed the eagles --- risk leverage?  There must be some HR programs that are "adequate" and that's OK.  There must be some HR programs which are "good enough" and that's really good enough. (I may hear about this one.)

HR needs to focus on equity instead of equality; on engaging the right employees, not necessarily all employees; on hiring choice employees, not becoming an employer of choice; and finally, on special rewards for certain groups of employees, not all employees. There’s not enough time, energy or money to do everything for everybody.

If top management sees HR as part of the team, someone who is working to grow the business and help them take smart risks, they’re going to be far likelier to run things by HR – and far likelier to listen when HR tells them “no”.  

Do you have an "equality" mentality — spreading the peanut butter?  Or do you have an “equity” mentality--- feeding the eagles?   

Head whacking is over.  I feel better now.

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. 

The One Equity Compensation Trend to Rule Them All

Performance equity has taken a long journey. Initially, its use was inhibited by accounting rules that made it far more advantageous to grant equity with time-based vesting. Those rules went away at the start of an incredibly volatile decade for the stock market. The path to this trend has been an adventure requiring a fellowship of disparate groups and events. Stock options lost their luster after the end of Equity Compensation’s Golden Decade™. Dodd-Frank joined the fray after the financial mess of 2008-2009. Even time-based restricted units slowed in growth as companies worked to rebound. Finally, the incredible recovery of the stock market over the past several years has all led to a major shift in how companies, investors, the media and politicians view equity compensation.

As I went through 2013 Equity Trends Report from Equilar, I found several interesting morsels of information. The report discusses some of the trends in stock options, restricted stock and performance-based equity. At more than 30 pages, I would be able to little more than summarize it here. But, there was one section where I called and requested more data.

The report shows most data in time-ranges from 2007 through 2012, the one exception was the chart on performance shares granted to the S&P 1500. This chart shows only 2010 through 2012. As you may know, Say on Pay became a reality in the US in 2010. Assuming that Say on Pay had a direct impact on plan design, I asked for the data empirically showing the change in performance equity use from 2008 through 2012.

While the data speaks for itself regarding the impact of Dodd-Frank and Say on Pay, I believe the story is far from over. Performance-based equity is entering the troublesome “tween” stage. Most of the companies with these plans believe they are almost ready to be left alone for a while, but many investors are just starting to see newly developing issues. At the recent WorldatWork conference, there were sessions trumpeting the success of Total Shareholder Return (TSR) as a metric for equity compensation. At the same time, there were sessions that explained that TSR was clearly flawed and did not reward performance consistently. I predict we will continue to see rapid evolution in the use of internal financial and operational metrics. We will even see growth in metrics more qualitatively measured, like customer service scores.

Like so many in the throws of adolescences, the full potential and fate of long-term performance awards is not yet known. What data does show is that this is the one equity compensation trend that currently rules them all.

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.

Memo to Dan Pink and Friends: Incentives Do Not Undermine Employee Motivation

Editor's Note: I am proud to feature today's guest post from Dr. Gerry Ledford, who shares some key findings and points from his presentation at this week's WorldatWork Total Rewards and his recent WorldatWork Journal article.  As a big fan of Gerry's work, I am particularly pleased to be able to share his thoughts and wisdom with the Cafe audience.  Take it away, Gerry!

The rewards field is filled with mythology about what research has to say, and practice is guided by the mythology. Consultants, famous executives, the business press, and ultimately academics who don’t know their stuff monotonously repeat the popular wisdom until it becomes generally accepted as truth.  All too often the body of research flatly contradicts the popular wisdom. 

 Two of my favorite myths are Herzberg’s claim that money is hygiene factor rather than a motivator (not supported by his own data, by the way) and the undying faith in the idea that a happy worker is a productive worker (the underpinning of much of the work-life and best place to work movements).  We will leave a discussion of these myths for another day. Here I focus on a destructive myth, namely that extrinsic rewards such as monetary incentives undermine intrinsic motivation to such a degree that they make incentives ineffective. 

You might imagine that effects of extrinsic rewards on intrinsic motivation is an obscure academic topic of little interest to practitioners.  If so, you would be wrong.  In fact, this position was championed the authors of perhaps the two best selling books on rewards in history, Alfie Kohn (1993) and Daniel Pink (2009).  For example, Kohn claimed in his 1993 book that, The bottom line is that any approach that offers a reward for better performance is destined to be ineffective.” Furthermore, “Possibly the most compelling reason that incentive systems fail is . . . (that) extrinsic motivators not only are less effective than intrinsic motivation but actually reduce intrinsic motivation . . . Furthermore, the more closely we tie compensation (or other rewards) to performance, the more damage we do” (emphasis in original).  Both books were heavily referenced, but neither author was particularly qualified to review the hundreds of research studies on this topic.  Kohn was a high school teacher and Pink was a political speechwriter turned author. 

The research says something quite different than Kohn, Pink, and their friends suggest.    

• Monetary incentives generally lead to increased performance.  There have been six major reviews of the literature on incentives in the past 20 years, and there were several others during the 1980s.  As I demonstrated in my presentation at the WorldatWork meeting this week, all these reviews reached the same conclusion: monetary rewards increase performance. Even academic proponents of the Kohn and Pink position such as Edward Deci concede this.  So much for the claim that any negative effect on intrinsic motivation is so serious that it causes incentive failure. 
• Extrinsic rewards actually can increase intrinsic motivation depending on how they are implemented.  All relevant academic theorists agree on this point.  Good implementation means communicating the importance of the task and how the incentive works; setting specific, meaningful goals; providing supervisor feedback and support; hiring employees who want incentives; and building an incentive-oriented organizational culture.  The idea that incentives are actually a source of intrinsic (not just extrinsic) motivation is not a surprise to anyone who has seen a salesperson, production worker, or CEO engrossed in calculations of their next performance bonus payout and developing tactics to maximize the payout. 
• Rewards have no negative effect on intrinsic motivation for boring, routine work because the tasks have little intrinsic motivation to reduce.  This is important because much of the work of our society would not be done if we did not offer extrinsic rewards for task performance.  In fact, incentives (but not salary alone) can increase intrinsic motivation in routine work.
• The negative effect of incentives on intrinsic motivation can be manufactured in the laboratory, where most of the studies in this literature were originally conducted, but the effect disappears in real-world conditions.  A review of 43 field studies found that incentives actually tend to increase intrinsic motivation.

Compensation professionals who are familiar with our topic may have wondered whether their work on incentives is an exercise in futility, and doomed to fail because incentives undermine intrinsic motivation. Fortunately, compensation professionals can rest easy.  Extrinsic rewards increase performance because they increase total motivation (extrinsic plus intrinsic).  Any negative effects of rewards on intrinsic motivation can be easily avoided by the sound implementation of incentive plans.

ENDNOTE: Readers interested in more information on this topic are encouraged to see the article by Ledford, Gerhart, and Fung in the current issue of the WorldatWork Journal (Q2 2013) entitled, “Negative Effects of Extrinsic Rewards on Intrinsic Motivation:  More Smoke than Fire.” (Access the article on the USC site here.) The article offers an overview of the extensive literature on this topic. 

Gerry Ledford is Senior Research Scientist at the Center for Effective Organizations, Marshall School of Business, University of Southern California.  Much of his professional work focuses on employee reward systems.  He returned to the Center for Effective Organizations in 2012; he was a key contributor there from 1982-1998.  From 1998 to 2003, he held leadership positions at Sibson Consulting. Since 2004, he has been President of Ledford Consulting Network LLC.  He received a Ph.D. and M.A. in Psychology from the University of Michigan.  Gerry has authored over 100 articles and ten books and he frequently speaks at professional events.

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.

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.