Compensation Cafe

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.

Numbers That Lie

Hard numbers can turn out to be really soft and squishy upon closer examination.  Perhaps that is why predictive foresight is rarely fully accurate, even when based on the Best Available Data.  (Note the nifty acronym, proving that even an optimal decision is still doomed to be a BAD decision.)

Reliance on data¹ does increase the certainty people feel when making their mistakes.  Numbers are therefore fondly embraced by most compensation people, because numeric data seem to confirm the accuracy of measurements.  But those very numbers can cause us to stumble because they promise a degree of precision that can be quite misleading, if not downright false. 

Last year, the initial Apple effect greatly skewed exec comp survey results (see The Apple Effect note at the bottom here).  Some frowned at the $376,000,000 in stock options granted to the new Apple CEO Tim Cook (which temporarily ballooned in value to over $600 million shortly thereafter) but little attention was given to his subsequent 99% pay cut this year… perhaps because it’s all RELATIVE.  Funny, how a relative increase gets headline attention but a relative decrease is ignored.  Surveys that did not make allowances for massive swings in isolated observations like that would leave their followers spinning in confusion.

Maybe it all depends on whether you want to find what is normal (the median), discover the most popular (the mode) or simply compute the average.  Those arcane terms are really important in compensation work, because each has a different precise meaning. 

When Bill Gates enters a Starbucks, the average customer in the shop becomes a millionaire.   Averages are directly impacted by outliers, while medians are the middle figure no matter how high the high or how low the low observation.  Conventional society tends to favor AVERAGES even though they are more problematic in statistical terms.  There are all sorts of fancy tricks statisticians use to manipulate the figures they process into “hard numbers.”  They include winsorizing, trimming, hot decking (where a missing value is replaced by a similar but different observation) and others .  Excuse me, but some of those gimmicks strike me as flat-out falsehoods; yet they are enshrined in statistical lore and thus may be applied without your knowing.

Likewise, anyone who finesses you with a claim that pay falls in a bell-shaped curve is yanking your chain (or pulling your thumb) in a big way. Wages are never symmetrical nor do salaries have a normal distribution.  That means some of the standard statistical techniques just don’t fit the world of total rewards where the observations are living, breathing human beings.  Whenever the science of number-crunching is invoked, the art of judgment must be added to assure its proper application.

These are just a few of the common compensation conundrums of lying numbers.  What are your favorites?

¹Mark Twain - There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact. 

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 "Bell Curve" by hardeep singh

Job Descriptions are Extinct

"It's what you do with what you have, not what you have that counts."  

Ah yes --- the ever-loved, ever-hated job description.  

A traditional job description (JD) describes the years of experience, preferred industry, education and skills required for the job.   It also lists 5-8 major duties and responsibilities that are usually vague, general and passive (i.e. Responsible for order entry).  Regardless of its effectiveness, the JD has been the only formalized information about a job a company has had .

JDs are chronically out-of-date.  Even if up-to-date people rarely use them.  Managers don’t use them. Recruiters absolutely hate them as they provide nothing about what the candidate has to be able to do.   A candidate can have all of the education and skills required but not be able to do the job. Ever heard the expression, “He’s had 1 year’s experience 10 times”?   Other than Compensation, no one seems to use them.  

There has been a push for a new type of job description ---Performance Profiles (PP) to replace the traditional JD.  Companies like Microsoft and Intel are now using PPs.  Lou Adler – well-known thought leader in talent acquisition and author is now on a “tear” about how useless traditional JDs are.

Here’s an example of the difference in recruiting based on what a candidate must have (the traditional JD) versus what a candidate must be able to do  (a PP).

A recruiter asks the COO what he is looking for in a VP, Marketing.   Here’s the traditional JD answer based on must have:

“I need a BSEE from a top university. In fact, the person should have an MSEE, too. In addition, the person should have at least 5-10 years in the industry plus an MBA from a top school like Stanford or Harvard.”

The recruiter asks him to describe what the VP, Marketing must be able to do.   Here’s the PP answer:

“The person in this role needs to put together a dynamic three-year product road map addressing all product opportunities we have in significant detail. As part of this the person must understand our industry trends, especially what Competitor ABC is doing, and put us in a position to stop playing catch-up.”

Adler has some good points about PPs but he focuses only on recruiting.  As a solution, I propose a multi-sectioned online document that would satisfy the different needs of Compensation, Recruiting, managers, employees and candidates.  It would have 4 sections: 

1) Job Responsibilities:  These are the ones in traditional JDs that Compensation  would use for survey participation.  They’re not likely to change often.

2) Job Requirements: What candidates must be able to do in the job if hired.  Instead of seeing “Responsible for product marketing” they see the actual requirement “Develop a product marketing plan for the new high-speed controller.” Recruiting would use them. 

3) Goals:  For current employees, these would be their annual goals for the year.    If hired during the year, candidates would have their goals prorated.

4 ) Performance/Success Measures: Clear description of what “success” looks like for each requirement/goal. 

Job requirements, goals and success measures would change every year as part of overall company goal setting.  Job responsibilities would change as necessary.

This document could be used for survey participation, recruiting, goal setting and performance reviews.  Four for the price of one!

OK you say --- but are PPs legal?   Law firm Littler Mendelsohn says “yes”. 

“An employer that follows the recommendations in The Essential Guide  (Lou Adler's book) will have in place a rational, fair, consistent, and well documented hiring process. It is likely to make better hiring decisions, to enjoy the benefits of a more diverse workforce, and to be more welcoming to veterans and the disabled. Such an employer is less likely to be sued and more likely, if sued, to have a good outcome. Jurors will typically be able to understand Performance-based Hiring, respect the fairness of the process, and therefore be more likely to find for the employer in a case involving hiring discrimination or otherwise involving a dispute over job qualifications.”

The Littler article is chock full of legal information regarding PPs, and I encourage you to read it.  (Go to:  http://louadlergroup.com/contact-us/#.   You have to complete the form and then check “Send me a copy of white paper by David Goldstein.)

Let’s face it folks.   It’s time we had something that’s useful for everyone.  PPs could be it.

What do you think?

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. 

Is Disclosure Good or Bad for Executive Compensation?

Today's Compensation Cafe post is a bit different. It is part blog post and part infographic. In the US, disclosure of executive compensation has been required, in some form, since 1934. Survey data regarding executive compensation has only rocketed to the forefront over the last 30 years. During this period executive compensation has increased at a rate faster than corporate performance, faster than the growth in company size and faster than the stock market.  This gives rise to the question: Is disclosure good for executive compensation?

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 Peer Group Voir Dire

So, I was recently doing my civic responsibility by serving on jury duty. As it happens, when I am just sitting around, my thoughts turn to compensation issues (just like yours!). A strange and crazy thought came to me. Imagine if your peer group for compensation was selected in the same manner as a “jury of your peers” in a criminal court case. Besides it being almost glacially inefficient, how would this historically proven method (even the ancient Greeks used it) for choosing one’s peers impact the world of compensation?

Let’s first review the current compensation peer selection process. A company sets its goals. Next, it decides on its peers, sometimes with the assistance of an outside professional, other times using only internal expertise. Key components usually include the industry and size of the company. There is sometimes a bias toward companies with similar compensation philosophies and/or pay levels. In all cases, companies use a combination of quantitative and qualitative factors to create a group that meets their specific needs.

Then shareholders, or their advisors, choose a peer group based on their goals. These peers are chosen more “scientifically” and often do not take into account company culture, idiosyncrasies, history or future business plans. The peers chosen by the company and those chosen by investors are often quite different. Imagine if criminal trials worked this way.

Look at it from the defendant’s perspective. The defendant would have a professional, in this case a lawyer, simply pick twelve people who have similar interests and backgrounds. Perhaps all of them would have a criminal history. Maybe all of them had been falsely accused in the past. Maybe interviews showed the group unanimously did not support the law that was allegedly broken. Justice would be easy. The charges would prove groundless and the case would disappear. People who disagreed would scream and yell from the sidelines and demand to have a voice.

How would this look if the prosecution controlled the process? The prosecutor would gather a group of citizens who had previously indicated that they not only supported the law, but also blindly trusted the people enforcing the law. The prosecution would just need to explain why the person was on trial and the verdict would likely go their way. Of course, both extremes are equally unjust.

In the world of compensation, especially executive compensation, we have both scenarios happening at the same time. Because both sides choose peer groups based on their own perspective, they both feel they are right. Because each side is 100% right, the other side is required to be 100% wrong.

Now imagine a world where peer groups were chosen through a debate between companies and investors, with a trusted overseeing figure making final decisions (the “Comp Judge”). Each side would put up its list of peers. The company and the investors would then evaluate these at the same time. Each side would be given the opportunity to remove some, but not all, of the peers suggested by the other. The Comp Judge would be able to replace rejected peers with new peers until an uncomfortable balance was achieved. Neither side would be perfectly happy. Neither side could say the peers were completely wrong. Final compensation levels and strategy for a given company would be linked to peer group market data that was specifically chosen for the current season and neither side could immediately dispute the decisions made.

Each side could appeal in future years (let’s two or three) and attempt to modify the peer group. This would only be allowed as long as a Comp Judge could be persuaded that there was a real issue with the last peer group decision.

Of course, this is all fantasy because companies would never give up their autonomy and some shareholders will always think that some companies are trying to game the system. But, you have to wonder if compensation creep (the inexorable rise of pay) and the related wailing and tearing of clothes would calm down a bit and let us put more focus into strategy, communication and business results.

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.

How I Learned to Shut Up and Listen

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Grade School Lesson

An elementary school was started in a small town in a distant faraway land.  The people there were very organized in their planning.  Classes would always begin at exactly the same time; recess was set for exactly the same time; and school would let out at exactly the same time.  The school board strongly believed in careful control and was determined to keep things neat and orderly.

Structure began with the initial first grade class.  After sorting the children and lining up all the first graders by height, it looked like everything was perfect.  The shortest child was in front and the tallest child was at the end.  All were in order.  When the first grade marched out for lunch, the line was led by Andy, Beth, Carlos, Doris, Eddie, Felicia and Gus.  Each in sequence was taller than the one before, so every child could see over the head of the one in front of them.  They made a nice neat orderly class when they lined up.

But it changed next year.  In second grade, Beth had grown faster than Andy or Carlos and was now taller than both of them who stood flanking her.  Doris had not grown at all, so she could not see over the taller three who used to be shorter when they lined up in front of her.  The same kind of thing happened with the rest of the class.  For example, Eddie grew a lot more than Felicia and Gus did, so he towered over them, too.  The nice neat line they made last year no longer worked. 

This upset the school board President.  These children were in the same class.  They were put in proper order when they were initially together in first grade.  Now, they were still together as they began second grade a year later, but they were in disorder:  their new heights messed up the nice neat orderly line created last year.  All the children in the same grade were supposed to grow at the exact same pace so as to stay constant in identical relationship to each other, weren’t they?  That was the angry question raised at the next school board meeting.

Well, no, replied an old teacher.  Kids grow at different rates.  The height order sequence that worked once before won’t remain identical for all time, particularly not after they have grown for a while.  Patterns found in the past will not always persist infinitely into the future.  Things change, and those changes are not usually neat, orderly, consistent, symmetrical or predictable.

This was unwelcome advice.  It was ignored, of course.  Even unto today, some children there stretch high, walking on tiptoes, to appear taller while others slouch and cringe to look smaller.  I think the place was called Dravrah, or maybe it was Lana.  Whichever it was, you can generally recognize their graduates, because they share a certain look, exhibit a particular attitude and tend to cluster in specific occupational categories where they can assure themselves that everything is under control.

What are we doing when we design compensation systems this way?

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 "Young Actors Light Up Stage" by familymwr

What's Your Delta?

An incremental change in a metric is called “a delta” in math and physics.

“How much will your pay increase next year?” is a query about your delta.  "What kind of pay increase do you anticipate giving to your employees?" is asked a lot; but perhaps it is the wrong question.

Surveying your delta is basically another way of asking, “What is your incremental rate of change from where you stand right now?”  Even harder to answer is, “What is THE delta?”  Some people consider it vitally important to carry a precise percentage number to their top management that says this is the normal rate of change planned by everyone else.  But it may be completely useless information of the type that demeans the compensation profession in the eyes of the executive team.

Let’s examine the sense of the question in a different light.  What would be the relevance of a rate of change that affects physical movement instead of pay movement?

Pose the question:  “What is the average individual change in speed?”  The movement delta of the average person is probably a few miles per hour.  Some people are motionless (especially when asleep); some are walking; some are driving in motor vehicles; and some are jetting around the world at five hundred miles an hour.  So the average, the median, or the weighted average person’s rate of movement change might be a few miles an hour.  But why, you demand, would anyone want to know such a meaningless metric?

Indeed.  That is a very good question.  Even better, why would anyone care what an unknown hypothetical normative rate of change amounts to, in the absence of any clear information about their base starting position.  After all, it DOES make a difference to any implications about the measurement of changes in your rate of movement if your personal delta takes place while you are riding in a speeding train versus tripping down a stairway or jumping from an airplane. 

Perhaps the better question would focus on the shortfall between where you want to be and where you are right now.  Rather than compare various rates of change from different base positions, instead look at how far you have to go to reach your goal.  In other words, stop asking “how quickly are you accelerating?” and start asking “how close is your destination?”  The compensation market index or overall compa-ratio may be more important than the rate of change.  Communicating a call to action or issuing a status report would seem more usefully productive than simply depositing a vague factoid on the floor. 

Telling executives where you stand as an organization places you squarely at the center of the team working on solutions to shortfalls or designing preventive/contingent programs to maintain the desired position.  Defining a closure relationship seems superior to describing relative movement.

What do you think?

 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.

The Best of the Compensation Café 2012 – A Holiday Gift from Us to You

Each year the crew at the Comp Café writes about 200 articles on all things compensation. Many of them are actually pretty darned good. In this spirit, each Café writer has selected a favorite post of 2012. Some were read widely and shared throughout the industry, others are hidden gems you may have missed when they were first posted. Here’s your chance to have a little thought-provoking, cheeky, holiday reading while you wait for reindeer hooves upon your roof. These are some of the best from the best compensation writing team in the business (or one of the best) (maybe around the median?) (nah, we’ll go with the “BEST”). Enjoy and get inspired for a 2013.

Ann Bares: Rewards & Gamification: New Frontier or Next Big Fad?

Used to be that the notion of playing games at work meant sneaking in a hand of Solitaire during a slow moment.  Now gaming is drawing attention as a way to connect people to reward programs and focus them on goal achievement.  Is this the new frontier of engagement or just the next fad?

Jim Brennan: The Compensation Cookbook

Bowing to the unceasing demands of compensation people for a one-stop source of all the secrets of the trade, E. James (Jim) Brennan dedicated his April 1 article to breaking news about the forthcoming Compensation Cookbook from the renowned author H.R. Screwtape.  The Compensation Cookbook is expected to be the last word on 21^st Century state of the art in the field of total rewards.  Readers are encouraged to place their advance orders as soon as possible.

Chuck Csizmar: Balancing Comp 101 with the Workplace

The contribution you can make to your organization is in blending technical knowledge (the how-to) with seasoning and experience to understand what will work for your organization, considering culture and management bias.  Technical knowledge will give you the same answer every time, but knowing how to use that knowledge like a craftsman’s tool to aid in achieving business objectives – that's the key to success as a Compensation professional.

Derek Irvine: You Can Never Give Too Much Recognition

One question I’m often asked is, “Can’t you recognize too much or too often? Doesn’t that water down the effect and impact of recognition?” My answer is nearly always to ask another question, “Have you ever received too much recognition?” The answer is invariably, “No.” Find out why in this post (including why the new Wreck-It Ralph animated movie is on my must-see list).

Margaret O’Hanlon: Your Comp Program Speaks for Itself. Are You Comfortable with That?

It’s tough to be candid with yourself about pay-for-performance practices. This article starts with vignettes from a few companies that don’t realize that they are stumbling. When managers don’t identify high performers accurately (because they prefer to reward their favorites), they don’t realize they’re throwing cold water on productivity and creativity. Most companies can’t afford to stumble these days. Q1 is a great time to both make resolutions and actually start work on them. Here are issues that you can, and should, address in your own backyard to sharpen the focus on results at the same time that you manage the numbers.

Laura Schroeder: Moneyball

Companies tend to overvalue top talent and undervalue everyone else. Assembling a team based on the ‘best’ people you can get for your money isn’t a winning strategy unless money is no object, and even then it’s questionable. This post discusses how the right B team can kick the A team’s butt and how that fact can impact hiring, rewards and performance.

Stephanie Thomas: The Compensation Function is Evolving

This was the Cafe's first infographic – proof that we are evolving right along with the profession. Creating visually stimulating translations of data can be challenging, but the results speak for themselves. It’s great to see that most comp pros (at least those included in the survey) are on the right track. - they recognize the importance of communication and consistency, and are moving toward refinement and specificity. I think this can only improve the compensation function.

Jacque Vilet: Out With Metrics ---- In With Analytics!  

I feel strongly that when compensation decisions are made, Compensation professionals need to use analytics that look toward the future rather than metrics that focus on the past.  The use of analytics will allow Compensation to more closely align a total rewards strategy with the company’s business strategy --- and that’s Compensation’s most important responsibility.

Dan Walter: Is it Time to Change the Equity Compensation Paradigm?

I love equity compensation, but am not currently enamored with how it is being used. This is the starting point for a discussion on how to best evolve equity compensation. The instruments, vesting schedules and stated goals for most of these plans have changed very little over the past 20 years. While people are naturally resistant to change, we are also supremely adaptable. What can we do to restore the purpose and luster to these programs?

Note: to see more from any of the Compensation Cafe writers simply copy and paste their name into the search field on the left. We bet you will find some additional articles that will make your “best” list for 2012.

All the best,

The Compensation Café

(And a special "thank you" from the Editor to Dan, who took time out of a busy year-end schedule to coordinate and compile this gift to our readers.)

Dressing for Success - Really?

It hasn't been that many years ago that the term "business casual" was coined.  To many business leaders at the time though, the phrase meant no more than wearing a red tie, and perhaps only once a week. 

Well, that was then.  Today, attitudes and customs are quite different, and typically much less conservative.  For example, it's not uncommon in some circles for male employees to forgo the use of socks within an office environment.  I know this because recently I visited such an office and saw for myself.

But is this clothing revolution a global phenomenon, where everyone is doing it, or are there minefields of differing customs out there, waiting to trip up the unwary business traveler?

According to a recent global survey (Ispos / Reuters), clothes still do make the man - or woman.  Depending on where an employee lives, putting a best foot forward - at least at work - is still key to upward mobility and career success.

Or sometimes not 

As you might expect though, customs of acceptance have evolved - though not in a uniform fashion.  Researchers have found that attitudes about the use of proper attire in the workplace differ from country to country, which leads to some interesting and diverse attitudes about perceived workplace "slackers" and "achievers."

Have you ever arrived at a meeting dressed for the Boardroom, only to discover everyone else wearing collared shirts and slacks?  Awkward, isn't it?  A scenario you would wish to avoid.

Europeans have been found to have the most casual attitude when it comes to work clothes.  Only 27 percent of Europeans reported that they wore traditional business clothes to work (jackets and ties for men, dress suits for women).  People in Hungary might be the most casually dressed workers in the world.  Only 12 percent of Hungarians reported that they wore "business clothes" to work, while 46 percent said they thought clean and pressed shorts were appropriate office attire.  On the other hand, workers in India might be the best dressed, with nearly 60 percent of survey respondents reporting that they wore business clothes to work.

Many workers worldwide no longer equate dressing well for work with what they consider success.  Approximately 40 percent reported that they wore casual business clothes to work.  However the same percentage of respondents said that people who wore such casual attire in the office would probably not be hired or promoted into senior management positions.  Additionally, 66 percent of respondents believed that senior managers should always appear better dressed than their employees.

For many then, conservative dress is never out of style.  In some circles (usually non high tech) casual dress may even give the "perception" of a lack of professionalism. 

Workers in India held the harshest views for people who wear casual clothes to work.  Nearly 60 percent of Indians described casual business dressers as "slackers", and 64 percent said that such casual dressers would never reach senior management positions.

For a contrary viewpoint, where I live in Central Florida business casual is considered  the proper attire by many organizations, across the organizational hierarchy.  In fact, wearing a tie in some offices would cause co-workers to stop and take notice.

When it comes to bosses wearing casual clothes in the office, Swedes appear to have the most lenient attitudes.  Only 27 percent of Swedish respondents reported that they believe that wearing casual clothes on a regular basis would hinder workers from attaining high-level jobs.

Common exception: Bankers and Lawyers

Generally speaking though, the higher up you are in the company's structure, the greater the reluctance to "dress down."  One Business Unit Head acquaintance in Europe suffered through so many shocked looks when he once wore jeans to work, that he never repeated the experience.

So what's the takeaway from the survey data for the business traveler?  When in doubt, ask ahead.  Don't assume.  Getting the lay of the land in advance is always smart thinking.  As a rule of thumb though, remember that you can always dress down by taking off the tie or power jacket, but the opposite won't work nearly as well.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Creative Commons image courtesy of bark