Compensation Cafe

Why Can't They Talk about Health Care the Way We Do?

There seems to be a little bit of quiet time in the Health Care Debate hullaballoo right now.  The President, the Congress and the Media are trying to get a break in before Labor Day, just like the rest of us.  Before the din picks up again, I’d like to say something out loud to all of us in HR.

When it comes to getting the message out about health care – coverage, costs, relationships with providers, healthy practices, you name it – each one of us has done a better job in our career than any of the parties involved in the national debate right now. 

Here are a couple of examples of what I mean:

• We recognize that healthcare benefits are an emotional issue.  When we plan communications about benefit changes, we take employees’ worries into account.  Our plan addresses their concerns early, candidly and in detail.

• We know that employees who are afraid can’t listen.  In fact, they are likely to misunderstand what we’re trying to say.

• We make sure that we answer the persistent question, “what’s in it for me?”  And if the answer is a fairly cheerless one, we know that we’ve got to give employees a really good reason why. 

• We realize that employees need to agree with the reason why.  Maybe not at first, but soon.  It’s our job to make a good case for it.

• We know healthcare coverage is confusing.  We change the elaborate legalese and complicated details into clear, basic descriptions and examples that people can rely on when they panic because they have become ill.

• We build a sound case for benefit changes -- one that can validly be linked to the greater good of the organization to which we all belong. 

Why don’t they?

If we rely on this body of knowledge to create effective healthcare communications, why aren’t the politicians and Media tapping into it? Why has the national debate over the last few weeks resembled the Tower of Babel?

I could go on, but I’m telling you what you already know.  We’d be out of a job if our communications led to the recent “Town Hall debates” about Health Care.

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.

Friday Special at the Cafe

Every Friday, we make it our business to find a terrific reward oriented blog post from the past week from somewhere outside the Cafe, and highlight it here.  This week I'm pleased to call your attention to a terrific post on the topic of performance from Cafe friend Kris Dunn at the HR Capitalist titled Role Player versus Star: Embedded Observations from the Field.

What's great about this post: not only does Kris put his finger precisely on the pulse of what is behind our collective inability to make performance management work better, but he uses it to engage employees at his organization in a great discussion of what differentiates role players from stars.

A few nuggets Kris gleaned from the conversation with his team members:

--The term "Role Player" isn't a negative to most people.  When asked to define a role player, most team members spoke in positive terms.

--Stars were thought by this group to be driven by passion and to be naturally curious, which leads to them gaining knowledge about other areas that complement their current role in the organization.  That additional knowledge and expertise can either make them a star, or cement their status as one.

--There's some natural suspicion among general team members on the motivation of stars.  Are they just naturally driven, or are they attention hounds who want all the glory.  I thought this line of thinking was pretty interesting and got me to thinking - even if Stars are driven by ego, should it matter?  Doesn't the organization still benefit?  In any event, I can see the ego-driven point that was made. 

--Team members generally think that someone can't become a star without putting in more hours than other people.

-THE CRAZY STAT:  Over half the group in attendance thought that 60% or more of the team members at our company thought they (self-identification) were stars.  But, when asked to provide a % of team members who were ACTUALLY Stars (the raters looking at the team member base), over half the group in attendance thought 25% or less of the team members in our company could legitimately be identified as stars.

As Kris puts it, that was the point where his head exploded. 

While I can relate to that - I still think it was an awesome move as an HR VP.  Until we get to the bottom of the Role Player versus Star distinction and make some real headway, we're going to remain stuck on the tarmack in terms of making performance management work in our organizations.  Click through to read the rest of the post and also check out the slide presentation Kris used for the session.

Have a great weekend!

Can We Measure What We've Lost?

Senator Edward “Ted” Kennedy passed August 25, at the age of 77. 

 

Since early on in his public career Kennedy had an impact on Human Resources (or back in the day... Personnel).  He helped pass the Civil Rights Act of 1964, reformed immigration quotas to include more Eastern countries and secured federal support for neighborhood clinics within his first term.  

 

Despite his family’s vast wealth, Senator Kennedy continuously fought for those in need.  As he remembered his friend and colleague, Senator Christopher Dodd spoke of Kennedy’s empathy, where the touch of a hand on a shoulder, a pat on the back, words of gratitude or steely determination for a piece of legislation for those in need made a difference.  

In 1969 — 40 years ago! —  Kennedy gave his first speech calling for national health insurance for all Americans.  An amendment creating a minimum tax (now known as the Alternative Minimum Tax which limits the amount of taxation placed on middle-income Americans) was created that same year.  In 1974 he introduced a national health insurance bill.  

 

Over his career, he either wrote or was instrumental in the passage of  many pieces of legislation affecting HR practitioners, including the Occupational Health and Safety Act, Older American Community Service Employment Act (1970), the Consolidated Omnibus Budget Reconciliation Act (1986), Americans with Disabilities Act (1990), Family Medical Leave Act (1993), State Children’s Health Insurance Program (1997), Federal Minimum Wage increases (the latest in 2007), and numerous others.  Kennedy didn’t pass these landmark laws and programs alone, his success stemmed from his ability to reach out to his colleagues on both sides of the aisle time and time again over the years.  

 

Many of us in HR may have cussed him a time or two after learning of the administration required by some of these programs as they were implemented.  I know that sometimes I even questioned the very need for the legislation.  In the end, it may have hit you — like it did me — that despite the extra work on me, the end goal truly was to assist those that needed a hand. 

 

Sadly, Senator Kennedy didn’t get to see the legislation he referred to as "the cause of my life" get passed in the form of universal, decent health care for Americans, but he never gave up his dream.  Even though in the last months his input dwindled and he felt the need to pass the sword to Senator Dodd, the work continues on legislation to provide a universal healthcare plan and is getting closer and closer to fruition. Perhaps Senator Kennedy’s words from the 1980 Democratic National Convention are applicable again: “The work goes on, the cause endures, the hope still lives and the dream shall never die.”

 

To the very end, for Senator Kennedy, it was all about the people and what he (or we) could do for them. He was willing to put the full force of the federal government behind what he felt needed to be done.

Other than Lyndon Johnson, perhaps no other elected official has had a greater impact on the social structure of employment, compensation and benefits. It will be interesting to see how we’re able to measure the loss.

 

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.

On Max-Outs, Grade Creepdom & Careers

Salary grade creep, in my experience, is rarely a "universal" problem in most organizations.  More often, there is a particular manager - or group of managers - who seem to have made it their life mission to exert a continued push against the pay grade structure.

The question is: why?

I got an interesting peek into the motivation behind this recently when an executive admitted to me that, as a matter of course, she always brings jobs forward for re-evaluation as soon as the incumbent gets close to the maximum.  While most managers may not be quite as candid about their strategy, I have a feeling that, in reality, this is the case more often than people admit.

The truth is that our pay structures, to a large extent, influence how careers progress within our organizations.  With a traditional salary range structure, the circumstance of being "maxed out" presumably presents the employee with two options:

Door Number 1.  If the employee, often one who has been in the position a long time, prefers to remain within the comforting confines of their current job and not develop new skills and competencies, salary growth from this point will be limited to the extent by which the range itself moves in response to competitive pressures (although there is often a lump sum increase policy in place).  Keep in mind that an employee at maximum in a classic 50% wide salary range is earning a salary 20% higher than the range midpoint, which typically represents the "going rate" for the work. 

Door Number 2.  If the employee is willing and interested, this is an opportunity for a discussion about how they might augment their skills and capabilities, further their education, and pursue a new career path - so that they can increase the value they bring to the organization and create a commensurate salary growth opportunity for themselves.

Often, per my opening point, a third door magically appears.

Door Number 3.  The employee's current position is re-evaluated and moved to a higher salary grade level with a higher salary range, thereby creating more room for salary increases.

Here's where the sticking point lies.  Door Number 3 is a legitimate third option to the extent that the manager and employee have truly made changes to the purpose and accountabilities of the role in a way that increases its value - to the organization as well as in relation to market practices.  Too often, however, Door Number 3 is just a method of circumventing the rules and limitations of the system.

Which, for those having a Door Number 3 problem, begs the question: are the system's rules and limitations the right ones? 

Or the bigger questions:

What should a career in this organization look like?  How should it progress?

Does the pay structure support this kind of career?  Are the right rules and limitations in place?

What should the options be for an employee who reached their salary maximum?  Is it primarily Doors 1 and 2?  If so, have we trained our managers and given them the tools and assistance needed to have these conversations with employees?

If the options include Door 3, do we have guidelines and support available to ensure that this option becomes a value-adder for everyone concerned, and not just a workaround to get the employee more money and the manager off the hook?

What's your take?

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 enjoying having her daughter home from China.  Follow her on Twitter at @annbares.

How 401(k) Phobia Stalks Your Employees

The truth? Everyone should be saving more toward retirement. There are lots of good reasons for it. But I know that I’m not doing such a great job of it right now, how about you?

Here are the facts from the leading Op-ed in August 24’s New York Times:

“Fidelity Investments, which manages 11.2 million 401(k) accounts, reported recently that from mid-2008 through the first quarter of 2009, more employees reduced their contributions than increased them.  That trend reversed in the second quarter, but overall, employees are still contributing less than they did last year.”

It’s just too scary. What it goes into the 401(k) stays in the 401(k) . . . at least that’s the plan. Most of us feel that tying up money right now is just too big a risk.  What with bills that are barely getting paid, raises that will be negligible, jobs that are still tenuous and good, solid evidence that the market can wreak havoc on our balance any old time it feels like it.

 

More and more companies are planning to reinstate their company match, as Ann Bares, Editor of the Compensation Cafe pointed out in an earlier post describing “A Ray of Hope?”  And, this week, Becky Regan introduced us to the DB(k) retirement vehicle which will be available for small businesses in 2010 and includes an automatic employee contribution.  These are great advances along a road that has always proven to be quite bumpy.  Will they be enough to get employees to save more? Probably not, if past experience predicts future behavior.

 

We’ll have to work hard to build trust, I think, before we can expect employees to change their savings behaviors. Realistically, employees are the ones taking big risks these days, with retirement savings as with many, many other aspects of the employment relationship.  Determining day-to-day, who or what can be trusted about money, especially.  In many cases, they’ve got good reason for being cautious.  In the words of The New York Times, “ . . . as the recent crisis has so amply demonstrated, having each and every American bear all of the risk is not the path to a secure retirement.” 

 

Can you expect to have any influence now, when 2010 compensation realities are beginning to sink in for employees?  These issues are tough, complex and, yes, confusing.  But retirement is an aspect of your Total Rewards along with compensation. There’s lots of research about savings habits out there.  Odds are it could be used to develop an approach that would help employees look at plausible alternatives. 
 
As always, start at the beginning. Acknowledge today’s stark realities. Tell the truth about how hard it is to save right now.  Instead of using off-the-rack materials provided by your 401(k) administrators, try to break the mold and provide information at a practical level that’s distinctly different from the past. Have you talked with your employees about dollar cost averaging, for instance? Illustrated how an additional $50.00 or $100.00 contribution per paycheck can add up? Reminded employees about pretax college savings options (so they are clear about their choices)? Looked into investment clubs?

 

Secure retirement? It’s hard to believe that it will ever be, but we’ll never inch any closer to it unless we keep the savings trickling in.

 

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.

Food for Thought: Pay for Performance Obsolete?

Frank Roche over at KnowHR has posted a very interesting video which he claims could “bring you up short if you think pay for performance is the way to go.”  The video is 18 ½ minutes long, so you’ll need a little bit of time to watch* it.  In it, Career Analyst Dan Pink discusses social science findings about rewards and performance and how these can be applied to business.

He starts “making his case” by highlighting studies about how people performed different types of tasks both with and without a reward.  What the researchers found was that rewards narrow our focus, concentrate the mind, and restrict our possibility.  So in tasks with a simple set of rules and a clear destination, those individuals receiving a reward outperformed those who were not told they would receive a reward.  However, when a task required creative thinking, offering a reward extended the time it took to solve the problem.  In one of the studies the researchers concluded “once the task called for even rudimentary cognitive skill, higher rewards led to poorer performance.”

He makes the case that extrinsic rewards should not be applied to tasks that require creativity.  He recommends having intrinsic rewards in place for these types of tasks.  Here are the three that he suggests:

• Autonomy –directing our own lives
• Mastery –getting better at something that matters
• Purpose –doing what we do in the service of something larger than ourselves

He goes on to provide examples of companies and programs that do a good job using autonomy and are seeing results.  He mentions the “20 Percent Time” in use at Google where engineers spend 20% of their time doing whatever they want to do, as well as the ROWE program originally implemented at Best Buy in Minnesota.  His case study of intrinsic rewards in action is the fact that Wikipedia is much more successful than Encarta.

So Dan Pink definitely provided some food for thought.  Much of what he said makes sense and feels right based on my own personal experience.  But he said something else almost as an aside that is likely central to making intrinsic rewards work.  He said “pay people adequately and fairly, get the issue of money off the table, then give them lots of autonomy.” 

But getting the money issue “off the table” isn’t always so easy, especially in today’s economy.  Many companies rely on their incentive programs to be self-funded to hold down costs.  A great number of companies have recently been through layoffs, furloughs, and wage freezes and/or decreases.  A salary that is adequate in the market place may not be “adequate” to an individual.  I imagine that it’s hard to successfully implement intrinsic rewards if people are concerned about their base pay. 

The other thing that must in place before this type of program could take off is the right management culture.  It’s one thing to say we give our employees autonomy, it’s another thing to ensure that all managers trust their employees enough to allow autonomy. 

So I’m not ready to throw all of our cash incentive programs out the window yet, because I think it takes time to get to a place where intrinsic rewards can reach their full potential.  I also think cash incentives still have a place, and maybe the key is to apply those when you want employee’s heads down and their focus to be on a specific, clear goal (that they know how to reach).  I’ll continue to ponder this one and would love to hear our readers' thoughts in the comments.

* Here’s a link to the TED blog which has a written summary of the video if you don’t have time to watch.

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 Next Generation 401k Plan Is On the Horizon For 2010

Beginning in 2010, businesses with fewer than 500 employees will be able to offer their employees a new retirement plan, called the DB(k).  The Kiplinger Business Resource Center offers a synopsis of the new plan, and forecasts that  it will quickly pick up steam as the economy recovers and the competition for good workers increases.

The DB(k) is an attractive new option for an employer sponsored retirement plan that provides an opportunity to provide a strong retirement plan with fewer hassles and less financial drain than a traditional pension plan, according to Joan Pryde, Kiplinger's Senior Tax Editor. The DB(k) combines a 401(k) savings plan with a small guaranteed income stream to offer a blended plan that offers the best components of a traditional pension and 401(k) plan.

The key elements of the plan include:

• A defined benefit equal to 1% of the final average pay for each year of the employee's service, up to 20 years.
• The minimum pension benefit is payable to employees who work 3 or more years for their employer.
• An automatic enrollment feature for the 401(K) portion, with 4% employee contributions automatically deducted unless the employee specifically opts out.
• An employer match of at least 50% of the employee 401(k) contributions, with a maximum required match of 2% of pay.

What's particularly exciting is that the DB(k) plan is EXEMPT from "top-heavy" or discrimination testing rules!  The administrative paperwork involved will be less than if a company offered a separate pension and 401(k) plan, says Martella Turner-Joseph, a pension actuary with Kiplinger.  Only one plan document and Form 5500 will be required.

Congress authorized the DB(k) as a component of the 2006 Pension Protection Act, with its original intention to fix a flaw in the current retirement system that focuses on 401(k) plans.  Only 50% of companies now offer pensions (as of 2006, according to a PBS Frontline special, "Can You Afford to Retire?)"  

The premise for creating this website and television special was that we boomers are headed for a shock as we hit retirement age.  We'll live longer but be shorter on income than our parents were due to the economic decline, vanishing pensions and reduced 401(k) account balances.

They conclude in the hour-long special that traditional retirement is a thing of the past that boomers won't enjoy in the same way that our parents' generation did.  Instead, we will be working well into retirement age due to financial needs and increased longevity. 

There's no doubt that we boomers will have a huge impact to health care, investment markets, societal impacts, etc. simply due to the huge size of our member population.  Only time will tell how boomers will weather their "golden years" and maintain their middle class standard of living. But the DB(k) offers promise to following generations to enable them to better plan for their own retirement.

Becky Regan is the founder and President of Regan HR, Inc.,a human resources consulting firm specializing in compensation consulting for California employers and purveyor of online HR products. A former Corporate Human Resources Director (10,000+ employees) with more than 25 years of HR work experience in many industries, her team works with private, public and non-profit clients.  Becky is passionate about designing HR programs and compensation plans that build organizations.

Flickr photo courtesy of Creative April

Show Your Creativity as a Rewards Professional

We all know compensation budgets are tight, with salary increase budgets at the lowest levels in "recorded" history (since consulting firms and WorldatWork started tracking this data closely in the past 30 or so years). 

Granted, a 2% merit budget doesn't give you a lot to work with, but with bit of resolve and creativity, you CAN make an impact to retain, and drive performance with your best and most productive staff. Of course, this means you must be willing to shake things up a bit, make some hard decisions and really "pay for performance," instead of relying on the old milquetoast version of "merit pay" program that nearly all organizations use (or claim to use).

Here are a few ideas to get your creative juices flowing:

• For roughly 1% of payroll, you can give an average 5% pay increase to your top 20% performing employees.
• For 0% to a few percent of payroll, you can spice up your variable pay program (bonus or incentive program) with a budget that will only be spent as individuals, teams and/or the entire organization (depending on your plan design) increases its financial and other strategic goal performance. In other words, we only payout these funds if the performance supports it. Use it to drive performance towards targeted goals meaningful to your strategic business plans.
• Save cash dollars, but provide potentially valuable rewards to key performers (or larger chunks of your workforce) by offering non-cash (or low cash) rewards such as more flexible work schedules, greater telecommuting time or options, and new or increased recognition efforts.
• Increase use of long-term incentive rewards for top performers, such as new or enhanced restricted stock or stock option grants (especially while stock prices are depressed) to increase future rewards and retention. 
• Offer special training and learning opportunities to your best performers, to enhance their engagement (and skills), while tying these special programs to retention.
• Enhance your recognition program efforts, in addition to one or more of the above suggestions.

Are these the only possibilities?  Not at all - these are just a few ideas to whet your creative juices. In today's environment, we have to be more creative to enhance retention, drive greater performance, increase organizational loyalty ("they really took care of me during the recession") and make sure that our best performers don't feel neglected.

Some of you may be asking "if we spend more on our top performers, does that mean we'll have less for others?" Candidly, yes.  Most organizations have limited resources, and who in these tough times do we most want to reward? For some organizations focused on egalitarian treatment and doling out nearly the same "pay for performance" packages for everyone, some of these ideas probably don't make sense.  But then again, if that's your approach I sort of wonder how well you're doing in the "motivate and retain" arena. These are tough times, and they call for making tough (but organizationally-smart) decisions.

Don't forget, your top performers are the people that drive your organization forward, and the people that your competitors would most like to hire. Take care of them, and most of them will take care of you, now and in the future, when they will have opportunities elsewhere. 

Doug Sayed is principal at Applied HR Strategies, a Seattle area compensation consultancy, and author of the StrategicPay Series Base Pay Toolkit, a guide for helping non-compensation experts to develop their own strategic compensation programs.  Doug is a Certified Compensation Professional (CCP) with over 20 years of HR and compensation experience, and a Master's degree in HR management from the Ohio State University.

Plans to Reverse Salary Freezes and Reductions Accelerate: A Ray of Hope?

I'm just one consultant working with organizations in one area of the country, but activity and conversations I've been involved in over the past couple of weeks suggest that things may be starting to break loose.

New research released by Watson Wyatt would seem to confirm this, revealing that the number of companies planning to reverse salary cuts, eliminate salary freezes and reverse 401(k) plan reductions in the near term is on the rise.

Part of an ongoing series intended to track reward and other HR practices through the economic downturn, the Watson Wyatt research shows a significant uptick from its June to its just-released August study in the percent of companies planning these positive steps over the next 6 months.  Details excerpted and presented in the table below.

A ray of hope?  Here's hoping it is!

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 enjoying her daughter's return from China.  Follow her on Twitter at @annbares.

Friday Special at the Cafe

Every Friday, we make it our business to find a terrific reward oriented blog post from the past week from somewhere outside the Cafe, and highlight it here.  This week we point you to a great post about recognition practices on the Globoforce blog, authored by Derek Irvine.

Derek discusses the nature of employee productivity gains realized during this economic downturn and decries the poorly conceived recognition attempts of some organizations in "Productivity Increases and I get ... a Lapel Pin?!"

It’s easy to see what those numbers mean. Employers are getting a lot more work per hour out of many fewer employees and are paying those remaining employees less for it.

What thanks are employees getting for this hard work – beyond keeping their job I mean? One article that hit my screen this week suggests lapel pins – yes, lapel pins! – are the way to go. Let’s pause for a moment and consider how many working professionals actually wear clothing with lapels on a regular basis. Bankers and lawyers, yes. Some doctors, but not all. Executives and senior leaders, perhaps, in some more “corporate” environments. But generally speaking, the vast majority of rank and file employees do not wear lapels to the office on anything like a regular basis. And I don’t know about you, but I’m not sticking a company-logo pin into the lapel of my best suit at the next wedding or funeral I attend.

Derek asks some great questions about any company's reliance on "company logo tchotchkes" as a key piece of their recognition strategy.  Click through to read more. 

The Globoforce blog is a great source for staying abreast of employee recognition trends and research - add it to your reading list today!

Have a great weekend!