Compensation Cafe

Friday Special at the Cafe

Every Friday, we make it our business to find an especially interesting compensation/reward oriented blog post from the past week from somewhere outside the Cafe, and highlight it here.  For this week's Friday Special we're highlighting a post by Wally Bock on his Three Star Leadership Blog titled 8 Characteristics of Highly Effective Workplaces.

From responses collected over 20 years, Wally has created a list of the characteristics which make a work place a good work place.  He's also validly concluded that it is an individual's supervisor who drives the majority of these items.  Here's his list:

• Productivity
• Community
• Interesting and meaningful work
• Clear and reasonable expectations
• Frequent and usable feedback
• Consistency
• Fairness
• Maximum control possible over work life

It's always important to remember as rewards professionals that people feel good about their work when they are valued by their organization and their supervisor.  Our rewards programs must work hand-in-hand with supervisor training and allow for the intrinsic value we all experience when we're successful at our work.

Click over and read his blog for more details about the 8 characteristics, and for his many other wonderful and insightful posts.

Editor's Note:  Special thanks to Darcy Dees for taking on the Friday Special responsibilities this week.  Way to go, Darcy!

What Happens When Your Social Media Brand Leaves?

I recently attended a social networking meeting, it was mostly non-HR types, but an issue I’ve been mulling over came up.

Who owns the social networking connections?  

Let’s pretend that I’m known on Twitter as @avshockey (I’m not, but we’ll continue the fantasy by pretending I have something to do with the Colorado Avalanche and I’m employed by Kroenke Sports Enterprises who own the Avs).

Do the followers of @avshockey belong to me or to Kroenke Sports as my employer or to make it even more sticky, the NHL?

Does it matter, or should it matter?

Continuing my fairy tale from above, we’ll say I have more than 4,000 followers on Twitter, several thousand on my LinkedIn profile and my Facebook fan page, etc.  I’m conscientious about my image and that of the Avs/Kroenke/NHL, I’m representing good sportsmanship and am an advocate of the sport, my team, my employer, etc. I communicate regularly, and my audience is engaged with me. And, because in order to be successful in social media, I reveal an appropriate amount of personal information in conversations — like the fact that one of my kids plays youth hockey, for example. In short,  I am the brand that is Avalanche Hockey.  

Because of my social media (socmed) persona, I’m helping to drive the business (more than the $588/month additional individual incremental revenue mentioned in the IBM/MIT study, via the HR Capitalist).   

Pondering the conversation our own Ann Bares started over on Compensation Force I’m not compensated for my socmed persona and  I’m not evaluated on my socmed persona.  Should I be?  

Now we have this situation to consider.... I @avshockey have just been hired by (yet in fairy tale land...) the Denver Broncos.  What is the impact if @avshockey is no longer employed by Kroenke/Avs?  Does it matter if @avshockey retires, quits or gets terminated?  Do they/can they hire someone else?  Am I willing give my Twitter name to someone else, or do I even have to?  Can I ask Kroenke to pay me for it?  If I do, how much is it worth?  How much are my followers worth?  Can I encourage my followers to come over to the Denver Broncos, or must I do that, if my work in socmed was part of the reason I was hired? Do they follow me because I’ve got a great socmed personality regardless of being @avshockey or because to them I’m the brand that is the Avs? What if @avshockey is taken over by another employee who doesn’t do a good job engaging the audience?

Since this is all brand new, there are no good answers or best practices yet, but here are a couple of points to consider:

If an employee wants to engage in socmed on behalf of the company, have them do so with a name that represents the company and the employee. For example, perhaps I should have been @avshockey_Terri. That allows a change to happen (@avshockey_Val, for example) without trying to “fool” your community.  Even if you decide not to set a policy, watch and understand what your employees are doing in this important and very public arena, and involve the right departments. If a PR person tries to handle customer service issues on Facebook without the customer service department, good intentions may backfire.  If an employee leaves, come to an agreement on how any social media representation will be handled. You don’t want a disgruntled former employee with thousands of Facebook fans airing dirty laundry. That can often be avoided by simply discussing and agreeing.

More for us and our legal counterparts to consider.  Get ready.  

 

Terri Albee, CCP, is managing partner of HR Ops Team LLC, which provides scalable and affordable human resources services, ensuring human resources structures are in legal compliance, streamlined for funding or exit events, or just optimized for day-to-day operations.  Terri has planned and managed HR operations in a variety of industry verticals from start-up organizations to the Fortune 500, domestically and globally.  Her experience encompasses design, implementation, compliance and management of compensation, benefit and equity plans at all levels.

Thinking Small While Striving Big: Performance Rewards for an Uphill Climb

In a recent manifesto on The Small Revolution at Change This, authors Linda Kaplan Thaler and Robin Koval put forward the idea that the way to make a difference and move forward in a time of overwhelming obstacles and changes is to think small.

As Kaplan Thaler and Koval put it:

These new times call for a new outlook, and therefore, we must change our perspective
from the grandiose and difficult to the humble and doable. By rediscovering the magic within our smallest actions and celebrating the tiny victories that each of us accomplish daily, we can overcome the big obstacles and effect real change.

I think there is truth to this.  Many of us have been in situations where we are simply overcome by the sheer size of a problem or task, but where we find a way to move forward by breaking the thing down into doable bits.  The sense of making progress , even in a small way, can bring us positive energy in the face of a daunting challenge.

Many of our organizations are facing an uphill climb to economic stability.  Given this reality and the need to create forward momentum, it behooves us to look at our performance management and reward processes to see whether there may be a place to think small - to measure, recognize and reward the interim victories that will move us along in our quest toward future success.

Of course, the watchword here - and always - will be balance.  Balancing the small and more immediate victories with the need to keep our eye on the larger goal.  Reinforcing the important little step without throwing our longer term direction into jeopardy.  Celebrating the humble accomplishments without forgetting the bigger shifts and changes which must ultimately be made.

Image: Creative Commons Photo "He's Too Tiny to Measure Up" by Patty O'Hearn Kickham

Who Completes Your Surveys?

As reward professionals, we rely heavily on survey data.  It is important to know what our competitors are offering in order to provide a competitive reward package.  If we’re hiring for a new position in our organization, we need to understand what the market offers to those positions.  (Please note that I am not tackling the issues raised in any of the proposed legislation such as the Paycheck Fairness Act which might make it more difficult to rely on market data in this post.  Check out this post at Compensation Force for more on that topic.)

So we’ve established that this data is important to our rewards programs and must be accurate, but who in your organization completes the surveys?  Does the lowest ranking person get the onerous job of completing the survey and figuring out how the benchmarked positions may have changed over the year?  Or does your senior-level, most seasoned person complete the surveys?

Completing the surveys can be a wonderful learning experience for new staff.  It can help to impart a better understanding of your programs.  But what if the survey isn’t completed accurately due to a lack of experience?  What does that do to all of the end users of the data who depend on data accuracy to make valid program decisions? 

We’ve come up with a workable solution to this issue.  Our Compensation and Benefits Administrator completes as much of the survey as possible, all the while learning more about how our programs work which helps tremendously with job knowledge.  Then we sit down together to go over the data, again allowing for more learning to take place while also insuring accurate reporting.  What solutions have others established?  Let us know in the comments.

Darcy Dees works as the Compensation Manager for Rock Bottom Restaurants, Inc., headquartered in Louisville, CO.  She has been working in Compensation for over 5 years now and recently attained her Certified Compensation Professional (CCP) designation.  She spends what little free time she has hiking and reading.

Image:  Creative Commons Photo "Math" by Silenceofnight

Judge Sotomayor's Nomination & Total Rewards

There were tears in my eyes when I heard President Obama introduce Sonia Sotomayor yesterday morning as nominee to the Supreme Court. Not only did she grow up in my hometown (the Bronx) at the same time that I did, her parents were immigrants and she went to Catholic school (like me). Sadly, we have something else in common. She lost her Dad when she was nine. I lost mine when I was ten. So you can imagine how touched I was to hear about her success, even though I know nothing about her record or career. 

But her remarks and President Obama’s also got me thinking about a few things that I have felt strongly about ever since I started in this profession. I like to think they have something to do with where I come from and some of the things I have learned, but I bet they matter to a lot of other people in our business, too.

Human Resources can have a real, long term influence on people’s lives
Judge Sotomayor went to Princeton in 1972. The Ivy League schools had just opened up to women in 1970, I believe, so she was one of the first to benefit from that amazing opportunity. And, of course, she graduated from Yale Law School, another great achievement.

I know many women who immediately benefited from this shift in academic attitudes and ultimately, regulations. I know even more women who have benefited over the years from Title Nine’s guidelines on school sports, which enabled them to become athletes through the guidance of coaches.

I mention this because so often in compensation and benefits, we grumble about the complications that new regulations bring. But look what came of these complicated bureaucratic shifts during the 1970’s. Today, women from all walks of life contribute to our progress in business, government and sports. Let’s try to remember the weight and broad impact of these regulatory changes when you are working through the details of the Lily Ledbetter Fair Pay Act, and the Mental Health Parity Act, and, and, and, in the coming months.

Can you remember how it used to be?  Some of you can't.  That's because we have truly changed people's lives.

There is no equivalent for personal and professional growth
Judge Sotomayor also mentioned this morning that she felt her biggest mistake had been that she didn’t clerk after law school. She feels clerking enables you to, “. . . see more about the practice of law than you see in ten years of practice.” Instead, when she finished law school, she said she just wanted to go out, “. . . and change the world.”

Didn’t she just put in a plug for employee development? That aspect of Total Rewards that we keep tripping over because we don’t really pay very close attention to it, even when employees get in their own way trying to "save the world?" I mean, really, doesn’t everyone just want to get promoted and earn more money? It’s just not that simple, as we all know.  Research keeps showing us that recognition and professional growth opportunities are mighty powerful influencers.

As I have mentioned in earlier posts, this economy is a perfect context for employee development.  Tough times provide an unparalleled training and development opportunity for innovation, problem solving and cost management. And you don’t have to spend time designing training simulations. You just ask employees to show up for work, and be sure they have good access to a strong supervisor or coach, and reasonable resources.

Work/Life balance isn’t only a Total Rewards plan
In spite of a long, distinguished career during which Judge Sotomayor met and worked with many of our political and judicial leaders, whom did this new nominee thank for helping her attain this achievement? Her mother, brother and stepfather. It’s not a novel occurrence, but it is one to note. Recognition by our family members often matters the most, especially when people are working under this much stress.

I was talking about Total Rewards at lunch on Friday with a colleague who is a member of a global communication practice for one of the big firms. We kicked around the exciting communication innovations offered by Web 2.0 and Social Media. Then we worried about the state of the economy and what would come from the upcoming debates on executive compensation and national health care. 

At one point, she said the shift she was hoping for was toward “healthy” Total Rewards. I thought it was a fascinating word choice, with allusions to far more than Wellness programs and performance-based incentives.

It’s become clear that our goals and motivations can and should be more than financial. Success stories like Judge Sotomayor’s illustrate, in a particularly compelling way, how rich we can all become. (Especially today, before all the dust from the nomination process gets kicked up and blown around!)

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 communication to the dialogue at the Café; before founding re:Think Consulting, she was a Principal in Total Rewards Communications with Towers Perrin.  Margaret earned her M.S. and Ed.S. in Instructional Technology at Indiana University.  Creative writing is one of her outside passions.

Trends in Long-Term Incentives

Reviewing the recently released Fredrick W. Cook Co. report "The 2008 top 250 - Long-Term Incentive Grant Practices for Executives" re-reminded me about how fast trends are moving in the executive compensation arena.

Less than a decade ago executives were being showered with plain-vanilla stock options on a regular basis, and many executives had never even heard of terms such as restricted stock, "full-value" awards, or performance shares.  Today, those plain-vanilla options are on the decline, while restricted stock and performance shares are a regular part of the long-term incentive lexicon, especially in public companies.

The report, which focused on very large public corporations, shows a dramatic shift in long-term incentive practices in recent years, first away from stock options, then to restricted stock (or RS units - RSUs), and today more towards performance shares (essentially performance-restricted stock, instead of time-restricted stock). While some readers may wonder if trends in large public corporations are relevant to their organizations, at least in the executive compensation arena, most of the trends and innovations tend to start in larger corporations (who have the internal staff and external consultants to research and develop new or revised approaches to long-term incentives).

While stock options remain the most common form of long-term incentive (LTI) granted to executives, the percentage of execs receiving them has dropped from 90% to 79% between 2005 and 2008.  Over the same period, restricted stock, which gained ground earlier in the decade, has actually dropped slightly in usage (from 66% to 60%), largely at the expense of increased use of performance shares. 

Performance shares, which are earned (are granted and/or vested) based on the achievement of predetermined goals over a specified period of time, have gained significant traction over the past few years. In 2005, 40% of large-company executives received them, while in 2008 that percentage had increased to 60%. 

The report also states that this increasing trend toward performance shares will continue, with an increasing percentage of firms considering or planning their use in the future. According to the report, they are the only major type of LTIs that are increasing in prevalence of usage right now.

The movement towards performance shares is likely to please at least some of the executive pay critics who have claimed (often correctly) that many executive compensation plans and practices were not "pay for performance" oriented enough. 

Doug Sayed, SPHR, CCP, is principal at Applied HR Strategies, Inc., a compensation consultancy based in the Seattle area.  Doug is a Certified Compensation Professional (CCP) with over 20 years of HR and compensation experience. He is the lead author of the upcoming "do it yourself" compensation resource toolkits, the StrategicPay Series, the first edition of which will be published in the second quarter of 2009.

Friday Special at the Cafe

Every Friday, we make it our business to find an especially interesting compensation/reward oriented blog post from the past week from somewhere outside the Cafe, and highlight it here.  This week we point you to a timely and helpful post by Jon Hyman, who authors the Ohio Employer's Law Blog. 

In his post Alternative Compensation Plans Pose Wage and Hour Risks, Jon cautions employers who develop and implement "creative" compensation plans that may ultimately jeopardize the exempt status of the covered employees and render the organization liable for unpaid overtime.  He quotes Baden-Winterwood v. Life Time Fitness, Inc., a case decided earlier this week, to illustrate how a company can get caught by this issue. 

From Jon's post:

Life Time Fitness paid its employees a pre-determined, semi-monthly base salary, in addition to monthly bonus payments based on year-to-date performance as set forth in a written bonus plan. For the years 2004 and 2005, the bonus plan permitted Life Time Fitness to make deductions from employees’ salary to recover prior bonus overpayments. In 2006, it amended the plan to provide that while it could still make semi-monthly salary deductions for overpayments, “[o]n an annual basis, in no case will the Guarantee Pay be lowered.”

The Sixth Circuit found that the 2004 and 2005 plans violated the FLSA, which does not permit salary deductions “for the reduction of guaranteed pay under a purposeful, incentive-driven bonus compensation plan.” Because the deductions were illegal, the employer could not claim the benefit of the FLSA’s exemptions for its employees during those years.

Because I have seen more than one client of mine consider dipping its toe into this territory, I think this case and Jon's advice around it are important for all of us in the HR and reward professions to take note of.

I have also found Jon's blog to an invaluable source of employment law intelligence and advice - click over and check it out today, and be sure to put it on your regular reading list.

Have a great weekend!

Should We Provide Additional Pay For Added Duties?

There have been a number of posts lately about how we should reward employees for taking on additional work duties.  Our editor, Ann Bares has weighed in on this subject both here at the Café (post 1 and post 2); and also over at her Compensation Force blog with this post.  Another great blogger, Allison Green over at Ask a Manager responded to a reader question about this topic in a post that was featured at U.S. News and World Report.

I found some of the reader comments to Allison’s post to be very interesting.  It’s obvious that some people firmly believe that more duties should equal more base pay.  In every job I’ve ever had starting all the way back in high school, I’ve always been asked to take on more work than what I was originally hired for.  I think that perhaps one time I was given more money along with the additional duties, but mostly it was at the same base pay rate.  However, taking on the additional duties has always led to additional growth and eventual promotions, which did entail more money.

If we’re asking someone to take on more work, it’s because we like the work they’re doing and believe that this person has more potential.  Maybe we’re evaluating their abilities in different areas to determine how far they can go with our company.  During this time of high unemployment when reductions have occurred nearly everywhere, we’ve only kept those people who are valued contributors to our work team.  So the addition of responsibilities is a vote of confidence and an opportunity for that individual.

Additional responsibilities that do not entail a significant increase in judgment or accountability should not automatically equate to more base pay.  That’s simply life in our current business environment.  Although I believed that even before the economy tanked and we were all asked to do more with less.  Additional responsibilities that are at a higher level than the work being performed now (a.k.a. “a promotion”) should be accompanied by more base pay. 

A better response to added duties is to say “thank you, we believe in your work and appreciate having someone who’s capable of doing more on our team.”  If we really feel the need to financially compensate our employees for doing more work at the same level, Ann’s proposal of a one-time bonus is the best monetary solution since it isn’t a permanent commitment.

Darcy Dees works as the Compensation Manager for Rock Bottom Restaurants, Inc., headquartered in Louisville, CO.  She has been working in Compensation for over 5 years now and recently attained her Certified Compensation Professional (CCP) designation.  She spends what little free time she has hiking and reading.

The Price Paid for Working Nonprofit ... is Wrong

Kicking off a pay audit for the information technology arm of a nonprofit early in my consulting career, my charge was laid out for me as follows by the Vice President heading up the unit:  "We know that we (the IT staff) pay a price for working here.  We simply want to make sure that our sacrifice is in line with that of the rest of the organization - that we aren't "more behind" than the other employee groups."

I recall being caught off guard by his candid appraisal of the situation.  And my work with nonprofits in the intervening years has served to strengthen my belief in the absolute wrong-headedness of this.

Dan Pallotta, who authors the Harvard Business blog Free the NonProfits, wrote a post this week discussing this phenomenon and its repercussions.  From Dan's post:

We say to students who choose charity, You must watch your classmates who chose the for-profit sector pass you by on the economic highway — buy homes in better neighborhoods, send their kids to better schools, drive safer cars, take better care of their aging parents, indeed serve on the boards of and direct the very charities that employ you — but you, because you have chosen to help the indigent, you must sacrifice — you can have none of this power, none of this security.

Dan further delineates just what that sacrifice might entail, for the best and brightest ...

A few years ago Business Week did a survey of Harvard MBAs ten years out of business school, at an average age of 38. Their median annual compensation was $380,000. The average compensation for the CEO of a hunger charity in America at the same time was $84,000. We're not going to get many people with a $380,000 annual earning potential to make a $296,000 annual sacrifice to run a hunger charity. It's cheaper for them to donate $100,000 a year to the hunger charity, get a $50,000 tax savings, still be ahead by $246,000 a year, and have a lifetime of huge earning potential still awaiting them. They can realize their economic dreams and get the psychic benefit of making a difference, but the hungry lose their full-time talents forever. Do we really think it is of comfort to the mother whose child just died of starvation to know that at least no one was making any money in the failed effort to save her son?

And draws our attention to the crux of the problem ...

Yes, we can change the world. Yes, we must. But to do it we must right the injustice that allows a baseball player to be paid $5 million a year and have it celebrated in Forbes, but cries "foul!" when the guy running the charity trying to cure cancer makes $400,000. 

As I've noted in earlier vents on this subject, I see little sound reason for and ultimately little to be gained by setting the expectation that pay at nonprofits should be at below-market levels for comparable opportunities.  Not just because it is wrong and because it forces a terrible choice on talented people who might be able to make a real difference in solving important problems, but also because paying people less than they are worth can create a host of hidden and unintended consequences that ultimately hurt the organization and lower the return on our charitable investments.  These can range from a reluctance to set and hold people to tough performance standards (because it seems unfair to do when we are underpaying them so) to poor staffing decisions (such as hiring the cheapest talent available rather than the right talent for the need).

Naturally, as I've said before, administrative costs should be carefully managed.  But to scrimp where we should be investing - in tools, in technology and (most importantly) in talent - is to miss the opportunity to drive real results for the constituents our nonprofit institutions serve. 

And that is neither good business sense nor a smart use of our charitable dollars.

Ann Bares is the Editor of 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, enjoys reading in her spare time and is currently trying to decide whether to follow her daughter to China this summer.  Follow her on Twitter at @annbares.

It's a Matter of Heart

Fate played a part in selecting the topic for this post.  When it touches us, it is usually difficult for someone.  I write this as a dear friend is passing.  

There are no federal employment or labor laws nor are there state mandates regarding bereavement, each company sets its own policy.  I’ve worked in a variety of industries and for companies in all stages of life.  Each had it’s own policy/guideline on bereavement leave.  Some more generous than others.  

My recommendation: provide as generous a policy/guideline as possible, as everyone handles these things differently.  A typical scenario when someone passes:

• A day at the funeral home.  
• A day for planning the memorial/funeral and grieving.  
• A day for the funeral/memorial service and related gathering(s).  
• Travel time if the loss is out of state.  

Things you can do for the staff/affected staff member:

• Be compassionate.  People, after hearing of a tragedy, cannot return to productive work immediately.  They’ll make mistakes because they’re distracted by the event or information.  Tell them it’s OK to focus their energy on what’s happening.  If you do this sincerely, most people will return more quickly to productive work when their need for information and interests are satisfied.  
• Call a meeting, with permission from the affected staff member, explain the situation.
• Allow people to help.  People want to do something to help solve the problem or ease the situation.  They want to bring food for the affected family, send flowers, send memories, give donations to the charity of choice.  Give them an outlet.
• Be available.  Have the management and HR available to the affected staff.  Be visible, walk around, offer an ear.
• If your company has an EAP or other counseling through a health plan, make it known that it’s available.  Explore the possibilities of on-site counseling if needed.
• Train your staff about grief, how to handle it.  Teach them about the stages of grief, how to deal with their own grief and that of co-workers, how to explain to children about a tragedy... All of this supports the grieving co-worker, the workplace morale and builds staff self confidence in a positive way while lessening the long term impacts of tragedy.  

If your company has a bereavement policy/guideline and/or a giving policy/guideline, make sure the staff are aware of the policy(ies)/guideline(s), post them on your Intranet if you have one.  

Don’t allow the bottom line to be the ultimate driver of your bereavement policy/guideline.  It’s a matter of heart.  

Terri Albee is a seasoned independent consultant whose practice has a primary focus on total compensation.  She has worked in a variety of industry verticals from start-up/entrepreneurial organizations to the Fortune 500, with both domestic and global responsibility.  Her experience encompasses design and implementation of total reward plans at all levels, from the Board of Directors on down.  She earned her B.S. in Business Economics from Regis University.