Compensation Cafe

Is Viral Pay Contagious?

With a name like ‘viral pay,’ it’s bound to get attention.  But is it just a catchy name or is there more to it?

I was skeptical at first because having your bonus decided by your colleagues sounds a bit like ‘being judged by a jury of your peers,’ which as we all know is not always fun or fair.  But reading this article at Fast Company provided an opportunity to re-think my assumptions. 

Whatever your rewards policy du jour, human frailty threads through every aspect of management, team work and incentives.  If you leave rewards up to managers you run the risk of centralized human frailty in the form of favoritism, whereas if you open it up to the community you risk decentralized human frailty in the form of a popularity contest. 

Think about it: Who typically gets voted off the island, the least qualified person or the least likeable person?  I don’t want to generalize here but the last person standing tends to be a charismatic buffoon rather than a highly competent person with an offputting personality.

What it essentially comes down to is this: People vote for people they like to the extent that it doesn’t create a threat or disadvantage to themselves. 

Now let’s examine the possible impact of human frailty on viral pay.  On the positive side, allowing everyone to decide about rewards decreases the impact of manager bias and may increase the likelihood ‘silent heroes’ receiving recognition.  It also encourages teamwork and cooperation because personal rewards depend on garnering widespread good will. 

On the downside, while relationship building is very important, we don’t want it to take a back seat to actual work getting done.  There’s also a risk of employees trying to ‘game’ the system, for example by trading rewards.  Finally, people do have a perverse streak and may be reluctant to reward people they think are already too popular or successful. 

Getting back to the article, I liked IGN Entertainment’s approach to viral pay because it includes several checks and balances to rise above personal bias and encourage fair play:

• Rewards are anonymous, so there's no currying favor.
• Everyone has the same amount to allocate so it's harder to game.
• Some rewards are held back for manager discretion, so collective opinion is balanced by personal judgment.

Whether you buy into all this or not, viral pay is just one more step in the direction of a more collective approach to work and leadership.  As I recently wrote in Who Moved My Manager?, the modern workforce is 'global, virtual, fluid, contingent, self-managing, and project-oriented,' which impacts how people work together as well as how they are managed. 

In other words, whether it sticks or not, viral pay is part of a larger trend rather than an isolated fad.  For more information and great insights, I recommend listening to Ann Bares and Stephanie Thomas' recent podast on viral pay.

Interestingly, no one seems to be suggesting that employees vote on executive bonuses. . .

Picture courtesy of kool-stuffs.blogspot.com.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

The Compensation Philosophy Conversation

In my experience, there is nothing quite like getting leaders around a table (literally, if you can manage it, and figuratively, if you cannot) to debate what they intend the organization to accomplish with its compensation dollars - and then committing their agreement to paper - to bring clarity to reward design and administration.  This is the exercise we like to call setting compensation philosophy.

Beyond the trick of actually pulling the right people together for the conversation (What? Spend an hour of our monthly meeting time to talk about priorities for what is likely our single largest expense item?), there is the question of what content a compensation philosophy discussion should cover.  Below are some examples of the types of questions I have found most helpful.  I would invite readers to chime in with their own thoughts and opinions.

Business Anchors and Objectives

For me, these are the most important, highest payoff questions because they help define top organizational priorities and illuminate the opportunities for alignment between reward spend and business success.  Of course, teasing them out is not always as straightforward as it should be.  As noted in a recent Harvard Business Review Daily Stat, many executives (49% of those surveyed by Booz and Company) say their companyies don't even have a defined list of strategic priorities.  Push hard here; you could be doing your executive team a big favor.

• What are the organization's most important business and operating objectives right now?  How might those change going into the future?
• What do you see as the biggest challenges the organization will face in achieving these?
• What major threats and opportunities might lie on the horizon for the organization?
• Given the above, what should our top objectives for compensation - rewards - be?

Reward Elements and Their Purpose

I also find it helpful to parse out the different pieces of the overall reward package and to define their purpose and role in the overall "portfolio".  This helps us identify any gaps or "double dipping" that might exist among current offerings.  Don't overlook items outside cash rewards that might be important differentiators for your organization.

• What different elements or programs are part of your overall reward program?
• What is the purpose of each?  What role do they - should they - play in accomplishing your objectives?

Competitiveness

I believe it is important to define what competitiveness means for your organization.

• Who do you see as the organization's key labor competitors - from where do you recruit people and against whom should pay practices be set?
• At what level should salaries, cash compensation and total rewards be set relative to this competition?  At median/average levels? Somewhat higher or lower?

Job Valuation

I think it is important to be clear about the primary method used to establish job value, whether that be external market pay practices or some internal (e.g., factor-based) evaluation approach.

• Which of the following should play the primary role in determining relative job value within the organization -- external market practices or internal job relationships?

Pay for Performance

I often find that pay for performance objectives and intent is articulated in the first two question areas (Business Anchors and Objectives,Reward Elements and Their Purpose).  Nevertheless, this is usually important enough to warrant its own distinct focus.  It may be helpful to ask these questions both at the level of each reward element (i.e., salary, annual incentive, etc.) and for the overall package.

• To what extent should compensation reflect performance?  Dramatically? To a slight degree?  Not at all?
• What level of performance should be considered?  Individual? Work team/group/department? Business unit?  Organization wide?

These should at least help you get the conversation started.

What would you add to - or change in - the above list of compensation philosophy questions?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Creative Commons Image: "ThinkingRIFD" by @boetter

Is it Time to Change the Equity Compensation Paradigm?

Even with the explosion in performance-based equity, most equity compensation plans look very much like they did almost twenty years ago. Stock options, restricted stock unit and employee stock purchase plans would be familiar to a time-traveler from 1995. The biggest differences are in the size of the payouts and that many participants receive equity as an addition to base and bonus pay, instead of as a replacement for some of it. The similarities now and then are almost too numerous to list.

For the sake of a theme let’s talk about private companies.

Recently, many investors, executives and employees at privately owned companies have started thoughtfully questioning the reasons behind plan design and features, process and communication. These questions are less focused on traditional public company issues of skyrocketing CEO pay and governance issue and more aimed at how to create programs that fit the needs and patterns of the current economy as they relate to smaller companies.

Let’s start with vesting. Why does almost every plan offer 3 years vesting on full-value awards (restricted stock RSUs, Phantom Stock) and 4-5 years for appreciation-only awards (stock options, SARs, etc.)? There are two basic answers to this question.

1)     Legacy. When stock options plans were first solidified in the 1990s it was common for an exit event to occur in 4-5 years. Everyone followed the leader and an innovative idea became a dictum.
Restricted regained popularity after the Dotcom bust. The first few of these newer plans to make the headlines had three year vesting (AT&T, Microsoft). Once again an idea that had been focused on the needs of a moment became a kind of commandment.

2)     Practicality. Most companies find it hard to see more than three years into the future. Most compensation professionals see three years as being the minimum for “long-term” incentives. Conveniently these mesh well.

You’ll notice that I didn’t mention any scientific evidence behind typical vesting schedules. In most almost two decades working on these plans, I have not seen any convincing research that explained how nearly every company would benefit from nearly identical vesting norms.

More important than the initial questions about vesting tradition is the unspoken question: Why won’t longer or shorter vesting periods work? Vesting should exist to help the company meet specific goals and objectives. Awards with shorter, and much longer, timeframes do work for some companies. Why wouldn’t an eight-year schedule work if it matched the expected period for fruition of the company’s goals?  Why not two years for employees with shorter-term goals? The issues with vesting schedules are that most advisors are stuck in a rut, and most executives have been led to understand that equity is bound by legacy design considerations.

What about the type of instrument? Stock options have been the “go to” resource since the late 1980s. Unfortunately, they can be a bit like heroin. The initial grants are small and have an amazing impact. In order to repeat that feeling grants must get bigger and more expensive. Participants become more dependent on them and companies lose sight of some of the critical reasons they started using them in the first place. Once addicted, it becomes difficult to wean people off of stock options.

We have also heard a lot about the growth in restricted stock shares and units, but these vehicles are seldom used beyond founders in most start-ups. After the first few people, they tend get put on the back burner until the stock is publicly traded and the price is subject to the whims of the public market (consider them a form of methadone). Stock Purchase plans are difficult to do in private companies, but there are still valid reasons to consider them. We seldom hear much about the other forms of equity compensation, or the alternatives to traditional equity.

Even if we stick with the traditional big three, why haven’t these programs evolved with the changes in the markets, types of investors, company lifecycles and more? In 1990, when most of the current program designs were locked-down phones were still attached to a wall and there was no such thing as email. We live in a smart-phone world while using tools from a time when the Internet or calling someone from your car was still a concept bordering on science fiction. We can do better and I hope to spur a discussion here at the Compensation Café on what we can change to move these plans forward.

 What do you think needs to be fixed about equity compensation?

This article is the start of a discussion I hope will expand through this year and beyond. Look for future articles on this topic as we explore the possibilities of evolving compensation to meet the needs of the 21^st century.

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 “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 at @Performensation and @SayOnPay

These Companies Actually Want Something to Happen [Implementation Pt. 3]

Companies that are more effective at implementation -- of business strategy, pay for performance, change, communication -- deliver higher Total Shareholder Return. This is Part 3 of a series on research that can help your company get better at implementation.

 

The World's Most Admired Companies act like they actually want something to happen. They take performance measures seriously.  Yep, that means they closely manage their objective setting process.

1. Most Admired Companies have a well-defined approach to performance  management.

As Hay Group's research indicates, 93% of the Most Admired Companies have a clearly defined global approach to performance management, compared to 74% of their peer group. That means almost all know the outcomes they want to achieve through performance management and  track whether they have achieved them.

Odds are, they define what a high quality objective looks like and can give functional examples. Senior management plays a visible role. Objectives are submitted on time. Measures are checked to ensure they will impact business results. Everyone talks the same language about performance management.

2. Their performance management approach involves linking performance planning with their strategy.

3. This may be the most powerful finding -- the Most Admired Companies use performance management to help employees understand HOW to balance short-term and long-term priorities.

Ah, the power of alignment. Most Admired Companies expect their business priorities to drive performance measures. Compared to their peers, they pay more attention to measures beyond the short-term delivery of growth and profitability. Operational excellence reiterates their long-term focus. Performance measures address the customer needs, so all employees can direct their efforts towards the customer. And they include measures that encourage focus on "Human Capital" issues like management skills, career development, performance management, and so on, so their leaders and managers know they are serious about it.

How do they help their managers prepare performance measures and conduct performance management? In my next post, we'll look at what Towers Watson's research tells us. Their topic is, "How Top Companies Create Clarity, Confidence and Community to Build Sustainable Performance."

Margaret O'Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors 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. Creative writing is one of her outside passions, along with Masters Swimming -- she swam two miles yesterday!

Retention v. Engagement: Stay or Play?

Imagine you're in a management meeting where the main topic is how to attract and retain the best people.  Someone expresses frustration with not being able to reward top performers with cash and the conversation segues into topics like engagement and non-monetary rewards. 

That’s a great conversation for managers to have but it’s important not to confuse retention policies with engagement policies.  Although there’s overlap between how you approach engagement and retention - after all, engagement is the best way to retain people as long as you don’t grossly underpay - the target audience is a bit different. 

Let’s start with engagement: Ideally you want to engage everyone in your company.  If you can’t engage everyone, focus on the people who have the most impact on customer experience and the highest performance variation, as I wrote about in a recent post Maximizing Your Rewards ROI.  That’s not the same as focusing on top performers, which is the more common approach.

Engagement creates that wonderful team dynamic that leads to outrageous customer experience and improved performance, with low turnover as an added bonus.  Typically, you engage people with something other than money, such as appreciation or increased responsibility, but money may also play a motivational role.

Consider a typical sales clerk at a jeans store.  A neutrally engaged clerk shows up for work, responds to inquiries with a baseline of helpfulness and rings people up.  An engaged clerk makes people feel welcome and proactively offers sincere - and truthful - advice on the most flattering jeans styles.  This is a perfect example of high impact to customer experience combined with high performance variation, which is exactly where you want to focus your engagement efforts.  It's also a good place to channel scarce rewards, since the clerk will be more passionate about moving jeans out of the store for a percentage of the sale.

In other words, your strategy toward the sales clerk should be focused on engagement, which will positively impact retention as well.

Now let’s look at airline pilots, who have a built-in incentive to perform well, independent of things like salary, appreciation and career opportunities.  You don’t want to lose your best pilots to a competitor, but you also don’t get much value out of trying to ‘engage’ your pilots.  A pilot’s job is to deliver people to wherever it says on the ticket.  To this end, they’ve had thousands of hours of training and flight time, so we don't expect wild variation in performance whether they feel engaged at work or not.  If they don't meet a baseline level of performance they won't be pilots any more, plain and simple.

In the case of pilots, your primary goal is to retain rather than engage.  It's not that you don't want engaged pilots but the business driver is subtly different.

Here's your checklist for retention policies:

• Performance is consistent
• Direct impact on customer experience is low
• A high degree of training and/or experience is required to do the job

For engagement policies, the opposite is true:

• Performance varies from person to person
• Direct impact on customer experience is high

In other words, an engaging culture confers all sorts of benefits but if you target workforce segments with tailored rewards think carefully about your audience and what your goal is - are you rewarding people to motivate them or to retain them?  It makes a difference.

In conclusion, here’s a little poem I wrote to explain the difference between retention and engagement:

Stay or Play?
Retention gets people to stay.
Engagement turns work into play.

(Don't worry, I won’t quit my day job.)

Picture courtesy of funny-potato.com.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Stubborn Is As Stubborn Does

I share my house with a brood of cats and it’s been that way for as long as I can remember.  I love them, but recognize that they are stubborn, stubborn, stubborn creatures, and at times it seems like they’re the ones who run the place.

Have you ever tried to change a cat’s food, or their litter box, or their water dish?  They don’t react well to the new and different, and when they don’t react well their loud and disdainful behavior can really disrupt your day. 

These felines are also creatures of habit, preferring a daily pattern of repeated behavior that in their view creates a safe and reassuring environment – where they feel the most comfortable.  Break that pattern and you get the look, or worse.  I can attest to the fact that dealing with the stubborn and habitual can be a real trial.

In the business world there are many companies run by a leadership who possess similar inflexible behavior, an aversion to breaks in pattern.  Those who like things just the way they are.  Whoever coined the phrase “if it ain’t broke, don’t fix it” was probably a charter member in that "blinders on, head in the sand" leadership cadre who likes things just the way they are.

While it’s a truism that yesterday's strategy and operating principles are rarely a recipe for future success, how often do you see managers hang on to what used to work - until the signs of failure become so visible and so painful that it can no longer be accepted?

Comfort

These folks with their heads in the sand are not necessarily bad managers, or even poor business leaders.  What they are is comfortable, and when we’re comfortable we feel safe, relaxed in our surroundings, familiar with what needs to get done and a bit over confident about our control of our business environment.

When we feel comfortable and confident we prefer to repeat those same actions that brought us to our present state of mental ease.  In other words, we don’t like to rock the boat, we don’t like “change for the sake of change,” and we’re skeptical of new and unproven techniques.  We get stubborn and dig in our heels.

It’s worked before, it brought us success.  Let’s leave it alone.

However, when someone or some event breaks that comfort level (new competition, weakened economy, technological advances, etc.), the first thing we experience is anger that our warm cocoon could be shattered by new business realities.  Soon enough though, that anger will convert to a sense of fear, whether we admit it or not.  More likely we’ll act out in an aggressive fashion that disguises the panic we feel.

Fear

People can be fearful of change, especially leaders.  Because they don't know the new rules, because there are risks when implementing new strategies, and those who stick their head above the crowd can get it chopped off.  We’ve all seen that happen.

When you must get yourself up and out of your comfort zone it’s a natural reaction to feel defensive and unsure about what you should do next.  Leadership may not have the competencies or the experience to adapt to new business challenges.  It’s not difficult to lead when things are going well.  But when the going gets rough, when the pressure is on to change course, to implement new strategies, not so much.

I’m not sure about what to do; everything has changed.

Pushed out from their safe environment management can find itself unsure, defensive and unsettled about the correct way forward.  And until matters settle down again they can be difficult for practitioners to work with.

You can help them 

You may consider managers stuck in the past as living dinosaurs, but have a care because these beasts have teeth.  They don’t like this uncomfortable new world, and they tend to shoot the messengers.  To offer assistance to a leadership challenged by the unfamiliar, practitioners need to step up and provide steady, confident and reliable advice.

• Acknowledge the past: Yes, previous strategies have worked well and brought the company success and financial strength, reputation and a strong foundation for the future.  A pat on the shoulders for management.

• Focus on the why: Whenever advocating change, focus your message, your research, your examples and your entire business case on why your recommendations lead to solutions.  Keep your eye on the goal, not that you’re changing patterns of behavior.

• Dangle the carrot: Always point toward the business and personal success that would be the result of your recommendations.  Besides showing the achievement of business success, emphasize that the deciding leadership will gain credit for managing the organization through these difficult times.  Stroking the ego doesn’t hurt here.

The next time someone comes to you with an idea to build a better mousetrap, listen to them.  Keep your eyes, your mind and your options open.  Instead of being afraid of change embrace the opportunities presented.  It can make for a better tomorrow, and you’ll shake the tag of “stubborn.”

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 Jo Bowling

Implementation: Are you the 71%?

71% of the "World's Most Admired Companies" report that they are very effective at the implementation of their business strategy.  Only 47% of the less exalted companies can claim the same accomplishment.

What does that mean to compensation and rewards? It probably means that more than half of the companies outside of the Fortune 500 often do not meet their business goals. It certainly means that they don't execute very well. Whether there is a correlation with their revenue - and their ability to fund salaries, bonuses and benefits - is another topic.

But really? Pay for performance? How can we seriously say we are pulling it off if we can't even get the company pointed in the right direction?

Look at the commitment that the Most Admired Companies have made to communicating the strategy and more importantly to our work, making sure that managers and employees understand their role in it.

from "Rewards-Program Effectiveness: What Makes the World's Most Admired Companies Great",World at Work Journal, First Quarter, 2009

Yes, research has indicated that employees are more engaged when they know how their work is connected to the business strategy. But let's look at something even more fundamental.

Can we truthfully claim our compensation programs are pay for performance when we spend more time on the numbers than we do on helping employees achieve the right business results?

I'm not saying it's easy. But I do think it's our job. So more on implementation, including communications, in my future posts.

And in the meantime, take these findings to heart. For many companies, this is only the first month of strategy implementation. What will you do throughout the year to continue to educate managers and employees about their role?

The information will help them take their objectives far more seriously -- oops, what I meant to say is that managers and employees will be more engaged!

Margaret O'Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors 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. Creative writing is one of her outside passions, along with Masters Swimming.

Don’t Tell Me I’m Great If I’m Not!

I have both friends and clients who have been struck by an unfortunate dilemma. I have a couple of friends who have been told one thing for months, and perhaps years, only to find out that the truth they knew wasn’t the “real” truth. I have clients who need to realign pay for people who have been told they were top performers when, in fact, they are less than adequate. In both cases it seems more like senior managers were trying to be nice, rather than sneaky.

Why have confrontation when you can have everyone like you? It’s easier to be nice to everyone. Many managers have made this their approach to leading their staff. Rather than point out flaws, they point out only the positives. Rather than prepare their staff for bumpy water in the future, they keep things on the bright side right up to the moment the boat hits the dangerous rapids. The discussion of a potential demotion, cut in pay or job-ending decision never seems to make it onto the agenda.

Employees want to be led, and generally want the truth. I also think managers generally want to tell the truth, but seldom have the skills to do so delicately. While these managers do a disservice to employees by not laying out a realistic path, those of us in the compensation community do even worse by not providing them with the tools, words and examples that will allow them to discuss both the good and bad.

We can’t expect great employees who have been promoted to be great managers to be able to talk about pay issues with any amount of expertise. We also can’t expect that they will always do this task well, even if they have been trained. We need to make it clear what needs to be said to underperformers and check back to make sure it has been communicated.

This is not about avoiding lawsuits or angry ex-employees. This is about not being jerks in the eyes of those we need to keep working hard. Once the trust on performance has eroded in a single example, you risk the chance of other employees questioning their value to the company. Rebuilding trust is far more difficult than maintaining it. Like a swimming pool, it is far easier to keep it full than it is to fill it up.

So look at what you've asked managers to communicate. Then ask yourself if you have provided them the skillset to do so with a complete level of truth. It is not only our job to make sure that pay is properly designed and set, it is also our responsibility to ensure that the discussions around pay reflect the sometimes harsh reality of underperformance.

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 “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

Implementation: Action that Must Follow Ideas If You Actually Want Something to Happen

Each year we step back to adjust to an updated business strategy that addresses new challenges. We plan alignment of objectives, behaviors and performance with that strategy. And then we try for effective implementation of the strategy so we can achieve the planned-for results . . . results that fund financial success and compensation.

This is the virtuous cycle in which you invest your hard work and the company's money.

As we all know, HR plays a critical role as facilitator of alignment and educator of effective implementation. Many of you are in the midst of the objective setting process right now, where you are responsible for training and facilitating the cascade of objectives within your organization.

Objectives that employees should be developing to link with corporate performance. Otherwise, their work will have only a glancingly positive impact on financial and operational results -- or could misguidedly create obstacles that have negative impact on those results.

There is no doubt that your employees' ability to adapt to each new strategy impacts the success of your company. Look at this result from the World's Most Admired Company research conducted by the Hay Group in partnership with Fortune Magazine. It makes it clear that "Most Admired Companies" do a far better job of implementing their strategies (and achieve significantly higher Total Shareholder Returns).  

And their HR organizations do a better job of implementation, too. Implementation of new programs and existing programs like compensation that can truly play a role in the business strategy when employees see strong linkages and understand how they can impact success. 

Over my next few blog postings, I'm going to cover what effective implementation means, how it can help you and what you can think about doing differently. I thought it would be a great time of year for this discussion since you'll be turning new ideas into plans over the next few months.

Turning great intentions into business results is really where the rubber meets the road. Great ideas become actual business opportunities only when people understand clearly and then are willing and able to do the tough work of changing to a new focus and new practices.

I'll be talking about communications and I'll be talking about change management, too. After all, compensation is a form of change management. Every paycheck sends the message that we expect employees to assess a changing environment and profit from changing opportunities.

Margaret O'Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors 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. Creative writing is one of her outside passions, along with Masters Swimming.

Executive Compensation and the Great Wizard of Oz

Executive compensation holds as much mystery and magic as the Great Wizard of the Emerald City.  Of course, if the curtain were to be pulled back, the real magic would be found in how a lack of information, combined with fear and imagination, have colored the pay of all executives with the same brush. Remember that when Dorothy and Toto met the wizard he was just as unhappy and scared as they were.

I find it amusing and frustrating that there is so much misinformation about executive compensation. Let’s state the givens: Yes, there are many CEOs who make more money than most people can comprehend. Yes, executive compensation is a complex arena with many assumptions and estimates being made at any given point. Yes, companies spend a lot of time and effort on disclosure. So why am I frustrated?

Everyone discussing executive compensation has some type of an agenda. Companies don’t want to upset their shareholders or fight with the media. Journalists want a story that stands out among the noise of the day. Shareholder advisory firms want to show their knowledge and ability to shift practices. Consultants want to defend their past practices or point out their superiority when compared to pay at non-clients. Survey data providers want information that can be easily understand and digested. Politicians want to look good to their constituents without upsetting their contributors.

Each perspective leads to a different approach to the positives and negatives of executive compensation. Companies tend to paint things grey and play it safe. The media tends to hyperbolize and point out the outliers. ISS and Glass Lewis point out new issues to remain relevant and gain new clients. Consultants point out their successes and explain their failures as “beyond their control,” or “not their fault.” Survey data is defended as holistic even when it is often made up of a tiny fraction of representative companies. Politicians focus on the obvious problems and talk about them like they represent the majority of pay practices (but, they seldom act in the same way.)

All of this posturing has turned the topic of executive compensation into a kind of omnipresent wizard with terrifying powers and a capricious temper. It’s spoken about in hushed terms or artificially confident booming voices. The curtain is never really pulled back, since everyone already “knows” what’s behind it.

Imagine if the wizard had simply invited Dorothy behind the curtain the moment she arrived. Consider what his life would have been like had he rejected the mysticism of his new role from the day he arrived in Oz. Of course, he wouldn’t have had the power over people that mutual fear and misunderstanding granted him. Perhaps he wouldn’t have also had a lonely misunderstood existence that made him miserable.

When preparing this year’s proxy disclosure, say on pay voting and overall communications regarding executive compensation, consider pulling back the curtain on your pay. If you give people the truth only the crazy will find a way to dispute it. If you give people the whole picture you will lose the power of mystery but, in return, gain the power of understanding.

(Dear Readers: Yes, I know that I have used the Wizard of Oz twice in recent posts. No, I don’t know why, since I have not seen the movie in several years. Who knew it was created to inspire compensation articles?)

 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 “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