Compensation Cafe

Help the Recruiter Help You

For those of you out there currently "in transition," or perhaps looking to make a change from your present employer, at some point in the search process you're going to have to deal with the "gatekeeper," the employer's internal recruiter.  Did I hear a groan?  It can't be helped, because it's highly unlikely that you'll reach the employment offer stage without dealing with this person.  Perhaps a few tips 'n tricks can help you gain an advantage, one that could make all the difference.

Note to self: you can make this relationship work for you.

The Recruiter's own performance is being measured

Your success is their success.  Picture a spreadsheet with 10, 15 or even 20 job titles - all open jobs the responsibility of your recruiter.  Every job filled, no matter how, is a sign of good performance (call it a white mark); every job remaining open past a projected fulfillment date is a black mark.  Recruiters are constantly challenged to produce candidates; the quicker the better.

That's what they are measured by; finding qualified candidates for open jobs. While conducting their searches the recruiter can help you with your own efforts, but only if you can help them in return.  Do you have what they need?  During each interview recruiters consider whether their target can gain them another white mark, and they can't afford to waste time.  So you need to start your convincing from the first contact.

Their job is to separate the wheat from the chaff.  Which are you?

Recruiters don't hire people.  They introduce qualified candidates to the hiring manager, who in turn makes the ultimate decision.  Thus another performance measure is how many qualified candidates are brought forward (call it the "second phase"). 

If you don't pass muster (meet their qualifications criteria) they'll drop your resume like a hot potato and move on.  That's how recruiters gain a reputation of being cold, unresponsive and lacking compassion for your situation.  Remember the spreadsheet?  Recruiters often lack time for the social niceties of returning phone calls and emails from those not considered qualified.  If you can't help them you're pushed off the radar screen.

Engage the Recruiter; anything less is a strike against you

You don't have to be friends, but a positive and polite demeanor is always helpful.  Displaying a superior attitude, especially one laced with tones of arrogance and condescension (you're an executive candidate, right?) will do more than lose you style points; it could cost you much more.  Candidates labeled "high maintenance" or having a poor attitude tend to get lost in the resume pile.

A smooth interview process serves the interests of everyone.  This is where the candidate remains personable and professional, while demonstrating a strong interest in making a contribution to the company.  When you emphasize your conviction that this opportunity is more than just a job for you, the recruiter will see you as a potential white mark.

Help Them to Help You

The specifics of an employment offer are not developed by the recruiter; they are the messengers who deliver the offer.  However, as soon as you seek improvements (the push back) they become your spokesperson to Management and to HR.  Such negotiations are handled by the recruiter acting as a go-between.  They will plead your case (provide the "why?" arguments) to the hiring manager and perhaps HR, so give them the ammunition (specific justifications) they need to help press your case.

At this point the recruiter will want you to succeed, as they have skin in the game now too.  So help yourself by providing specific examples as to how you can help the company.  This will strengthen your case for when the recruiter needs to explain what you want and why you want it.

-----------------------

Bottom line?  The recruiter can be your friend, if you can help them.  If you can avoid making their job more difficult (remember those 20 open jobs?), if you can work with them, and stay positive, polite and professional the recruiter can be your best advocate when it comes to getting a job offer and negotiating the best terms.

They can get you the job . . . or not.

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.  With over 30 years Rewards experience 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. 

Image: Creative Commons photo by mayreejayne

Why HR is Undervalued

Now, more than ever, Human Resource and Compensation professionals have good reason to feel undervalued. 

HR keeps the organization alive by the care and feeding of their most vital assets, their employees.  Compensation maintains the proper competitive position, preventing most employees from being pirated while picking off their share of talent from rival entities.  Total Rewards professionals assure that your human talents are truly resources rather than dead weight, expense items or liabilities.  We deal with costs and expenses that remain largely outside our control and we display loyalty to our employer by remaining faithful to management interests when wearing the management hat (versus the employee-advocate hat we wear at other times). 

As if the pressure of dealing with our own unique underlying schizophrenia (from switching wearing both black and white hats) were not enough, now we are being assaulted by a continual stream of new regulations and rules.  Federal proposals like the FLSA exemption recordkeeping change, the Paycheck Transparency Act, the Heath Care Reform Act and the Employee Misclassification Act and more all promise to add more stress. 

All this occurs while senior executive management considers whether HR, Compensation and related Talent Management and Total Rewards functions should be outsourced. 

That suggests that we are not doing a good job of justifying our value.

Although I hate to admit it, I am not optimistic about HR getting a seat at the big table with the senior adults.  We frequently appear to them to be off in the corner playpen, engrossed with non-essentials.

All too many in our field don’t even speak the same language as senior management.  For example, a recent extremely distressing discussion string in a global HR network featured a long list of posts claiming that HR is a profit center rather than a cost center. 

Even after clear warnings, no one bothered to even research the meaning of the words cost center or profit center in accounting terms.  Obviously, few of the HR posters understood management accounting, basic economic principles or executive-suite language terminology.  If you have ever served as a corporate CEO or even spent much time dealing with board compensation committees, you would understand my horror at the adamantly wrong-headedness of the participants. 

Rather than turn it into a mutually productive positive affirmation of the tremendous value of the HR function in transforming humans into resources, the majority of the posts failed to demonstrate any understanding of basic management economic terms.  Refusing to research the precise meaning of the concepts they so carelessly misused made an already bad situation even worse.  If you thought the image of HR had been denigrated before, wait until you see what the key decision-makers of global enterprises will think of us if they read such prattle!  We are properly judged by our actions.

If HR people cannot understand the language of management, how can they advise them?  If self-proclaimed compensation experts cannot demonstrate the simplest research capabilities to remedy their shortfalls in comprehension, how can they hope to offer enterprises useful services? 

There is a good reason that experienced enterprise managers and sophisticated executives look down on HR.  All too often, we have acted in ways that deserved their dismissive opinions.

Even as I write this, Keystone Award Winning PhDs Jay Schuster and Pat Zingheim are preparing to publish a study on the failure of HR departments to play any notably useful role in either preventing or correcting the economic disasters of the last few years.

We can only rehabilitate our image by improving the practical utility of our outputs.  Unless everyone in the Total Rewards profession steps up to operate at a higher level, the growing minority of members who don’t know what they are doing will destroy our credibility forever. 

How else can we improve this lamentable situation?

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that  (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Building Your Compensation House? Don't Forget the Recognition "Flair"

Earlier this month I had the opportunity to participate with several Compensation Cafe bloggers on a BlogTalk Radio show hosted by Paul Hebert of i2i on "Compensation and Rewards: What's the Difference?" The conversation flowed across several topics, but one of the most interesting was Total Rewards - how compensation and recognition/incentives intersect.

The way I look at it (as I said on the show) is the compensation side of the house is like the architects and builders who put the walls and floors of a building into place.These are essential. You need people to show up at work, and they won't without proper compensation. But once you've got that foundation in place, to make it a great workplace, you need interior designers - you need some color and flair. This is where the competitive differentiator of the future lies, with those who understand a fair compensation structure combined with the flair that makes work more than a place to "pick up my paycheck and leave."

Think about this. If you're investing the money to "add flair" in your home, would you focus only on the entry hallway, or stop at just the kitchen? Of course not! You'd want the entire house to look coordinated and well decorated throughout. The same is true with Total Rewards programs - don't limit participation in Total Rewards components to just the top performers or high potential employees. Involve everyone.

In fact, research supports this. In May, the McGill Institute released research that found "profit at the bottom of the ladder." The key findings of this report - treat the people at the bottom right and you'll dramatically improve productivity, increase returns and reduce financial costs - is strong validation of the need to eliminate elitist recognition and rewards programs that target only the top 10% and expand the opportunity to recognize and be recognized to all employees at all levels.

This recent research supports findings from a Forum for People Performance Management and Measurement report from nearly a year ago on "Putting People First." This research highlighted an alternative to employee engagement - employee enrichment - that revolves around helping employees have better lives.

"People are fundamentally concerned about the physical, psychological and social aspects of their lives in ways that span both the workplace and their private lives. The greatest value organizations can provide employees is to move beyond the basics of regular compensation and benefits to encompass personal growth.

"The idea of promoting personal growth among employees shifts the focus of leadership away from strictly marketplace outcomes and moves it towards the enrichment of people's lives. Marketplace and financial performance are not abandoned, they are just re-conceptualized as outcomes of the actions of people in the workplace. Personal growth can take a variety of forms including education support, training programs, physical and mental wellness efforts, rewards and incentive programs."

View this nascent post-recession economy as a period for implementing new approaches to increase business productivity and motivation within your workforce. Compensation is returning to normal, but that is only restoring a solid foundation and sturdy walls for employees. Engagement techniques are producing measurable results, but employees are still stressed by the fallout from actions taken during the recession. Help managers who are at a loss on how to improve employee engagement and productivity in these continuing difficult times. Add "flair" with enrichment efforts and simple appreciation to show workers, at all levels, how much you value them and their efforts.

As Globoforce’s CMO & Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin, Montreal and Boston. Follow Derek on Twitter at @globoforce.

77 Cents and Gender Discrimination: The Wrong Conclusion

Can you believe it's the 21st century, and we're still talking about pay equity and the gender wage gap?!?

Last week, President Obama urged Congress to pass the Paycheck Fairness Act. During an interview discussing the Act, White House senior adviser Valerie Jarrett said "women deserve equal pay," and cited a statistic: women earn 77 cents for every dollar men earn. 

This "77 cents" statistic is certainly making the rounds- earlier this year, Acting EEOC Chairman Stuart Ishimaru stated, "The wage gap is alive and well in America, with the typical full time year round female worker making $0.77 for every dollar earned by her male counterpart."

What's the first thing you think of when you hear that statistic? If you're like most people, you think of gender discrimination. Women earn 77 cents for every dollar earned by men because of discrimination. 

I'm here to tell you that's not true. The "77 cents" statistic can't be due to gender discrimination. Here's why.

In 2007, Francine Blau and Lawrence Kahn published an article that looked at earnings of men and women, and found a difference of 23 cents per hour; this article is the original source of the "77 cents" statistic. But they didn't stop there - they tried to understand what was causing the difference. Here's what they found:

 *Blau and Kahn also included education; they estimate that education actually closes the wage gap by 6.7% (not included in my chart since it's a negative number).

Blau and Kahn found that 59% of the gender differential could be explained by non-discriminatory things: experience, chosen occupation, chosen industry, etc. So the "77 cents" statistic can't be due to discrimination:

• Estimated wage gap based on "77 cents" statistic = $0.23 per hour
• Amount explained by nondiscriminatory factors    = $0.14 per hour
• Amount NOT explained                                           = $0.09 per hour

According to Blau and Kahn, the most that could be attributed to discrimination is $0.09 per hour. And this assumes that their model accounts for ALL legitimate nondiscriminatory factors.

Are there legitimate nondiscriminatory factors that were omitted from their model? Probably - no model is perfect. Some people have argued that men are better negotiators than women, and because of this men tend to get higher starting salaries. Are differences in negotiating skills discriminatory? Perhaps, based on the way that we raise our daughters (that's a sociological issue). But the employer can't be held responsible for differences in negotiating skills, can he?

Something else to consider: overtime hours, shift premiums, etc., may cause a difference in earnings between men and women, even though their base rates of pay are the same. If a woman chooses to work fewer overtime hours than her male counterpart, resulting in lower earnings, is that discrimination?

If we were able to build the perfect model and study every single legitimate nondiscriminatory factor, the unexplained portion of the gender wage gap would likely be less than $0.09. And even then, it doesn't automatically follow that the remaining unexplained portion of the gap is directly attributable to the employer engaging in gender discrimination.

So now you know. The next time you hear the "77 cents" statistic, stop and think about what it REALLY means...

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. For more than a decade, she's been working with businesses and government agencies providing expert EEO analysis. Stephanie has published several articles on examining compensation systems with respect to equity. She is the host of The Proactive Employer, and is the Director of the Equal Employment Advisory and Litigation Support Division of MCG.

Total Rewards Gurus - Where Are You?

Lately cash has a bit of a bad rep when it comes to total rewards.   Oh, sure, we all still like it and want more of it but doubt has been cast on its role in motivating employees. 

For example, a recent survey published at WorldatWork found that non-monetary incentives have more impact on employee engagement than financial rewards. 

Findings like these combined with tight fiscal budgets have lead companies to keep a tight lid on salary increases while shifting to more variable incentives such as bonuses and lump sums, in order to reduce total salary entitlements and increase strategic alignment. 

Of course, variable pay is still cash and used improperly, cash incentives can lead people to do very silly things that aren’t in the company’s long-term best interests. 

Therefore we also see a growing trend toward a total rewards approach that includes non-cash incentives such as recognition, flexible work options, career development and creative rewards like gift certificates, extra vacation and free stuff. 

What's interesting here is that non-cash rewards programs are often designed by incentive and/or talent management consultants rather than compensation specialists, even though research shows that a combined rewards strategy using financial and non-financial levers has the highest impact on engagement.

So here’s my question: If the purpose of compensation is to motivate, and non-cash compensation rewards have a high motivational value, why aren’t compensation specialists leading the charge on non-cash rewards?

Recently Compensation Café writers teamed up over at Incentive Intelligence to discuss this (Paul Hebert’s insightful write up here) and basically, it comes down to a few things:

1. Comfort zone – Compensation and incentives specialists typically have different comfort zones.  For example, most of the compensation specialists I know love numbers and spreadsheets, while incentives specialists tend to be more interested in human behaviors that can’t be captured in spreadsheets.
2. Expertise – Compensation professionals can get certified in commonly accepted compensation practices, whereas the education available for other kinds of incentives is less plug-and-play.
3. Span of control – Even compensation specialists with a holistic view of rewards may not be in a position to influence organizational development, management quality, work life balance or company culture.
4. First things first - Some companies aren't ready to make the move to total rewards because they're focused on getting base pay and benefits right.
5. Most of the evidence is still anecdotal – Base pay and (to a  lesser extent) variable pay best practices are reasonably well-documented but when it comes to non-monetary incentives, the findings are less straightforward. 

Despite these reasons for division of labor today, I think companies will continue to pursue a more holistic approach to employee motivation and rewards. And then?

I don’t have a crystal ball but if the trend toward total rewards continues, it stands to reason that companies are going to start expecting broader expertise. 

Think about it: If you had a choice between paying two experts with different specializations in the same field or paying one specialist with expertise in both, which would you choose? 

Of course, maybe spreadsheets are too boring for the incentives folks and non-cash incentives are too airy fairy for the compensation folks and they’ll never meet in the middle.  But for those who view rewards holistically, what better time than now to expand your skillset?

Thinks of compensation as peanut butter and incentives as chocolate, two great skills that go great together: It’s just a matter of time until someone starts selling peanut butter cups. 

Why not you?

Picture courtesy of Wikipedia Commons. 

*This post is not an advertisement for Reese's and no chocolate incentives were received for mentioning yummy peanut butter cups in this post.

Laura Schroeder is a Compensation Strategist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and is currently pursuing a certificate in Strategic Human Resources Practices at 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 and spending time with friends and family. You can follow her on Twitter @WorkGal.

Salary Ranges Must Die ... and be Reborn

It's time to fundamentally rethink the tools we use to manage base pay.  Salary ranges, in their current format, are totally out of sync with today's talent management reality.

For illustrative purposes (and for those who don't buy this post's premise), just take a peek at the early salary increase budget and salary range adjustment figures released recently by Hay Group.  Planned 2011 salary increases budgets are hovering around 2.9% while companies are planning to next adjust their salary range structures by about 2.3%.  Granted, we are still in a bit of flux as the economy recovers, but if - for example - these numbers were to reflect a pattern going forward, they would suggest that the average employee will only be making about 0.6% headway in their salary range on an annual basis.  With a typical 50% wide salary range (minimum set at about 80% of the midpoint), this suggests that it will take a competently performing employee hired at minimum today 30 years to reach their range midpoint, which represents the competitive market rate for their job.

How's that going to work for us?

Salary ranges in their current form must die ... and be reborn.  Our charge as reward professionals is to figure out what they will look like in their next life.  Will they be merely narrower (as today's slower salary growth would seem to demand) or will they take on a totally new configuration?  I think it's likely that we will move away from the one-size-fits-all salary range approach of yesterday and move toward salary management tools - or overall cash compensation management tools - that are more customized to an employer's specific talent management reality and intended brand.

There is a lot of interesting experimentation going on out there already.  One client of mine, a financial service firm, replaced its salary ranges with total cash ranges several years ago.  The firm is organized into individual client service units and each unit has the ability to: 1) Determine the pay mix, the relative proportion of base and variable pay, within the total cash range and 2) Develop its own variable pay approach, as fits its management and marketing style.  With this platform, this employer is able to maintain a degree of control, of external competitiveness and of internal equity, while allowing for flexibility and customization within the client service units.

I am intrigued by the notion of total rewards ranges, where we define ranges of total reward dollars and allow flexibility (within range determined boundaries) in configuring the different elements.  Perhaps the ranges are set based on a total cash target and parameters, with flexibility around pay mix and design, and a menu of additional reward element possibilities.  Maybe the overall range has different stages or modules based on different levels of development and contribution - and the total reward options are linked to these as well.  A number of employers are moving - or have already moved - to this format.  For me, an image like this comes to mind...

 

Just my doodling and thinking out loud.  What about you ... what's YOUR vision of the future of pay ranges?  What steps has your organization ALREADY taken to better align your pay tools with today's reality?  Let's get started!

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 and enjoys reading in her spare time.  Follow her on Twitter at @annbares.

Is Your Compensation Program the Prettiest House on the Street?

I live in San Francisco and as I walk the streets it is impossible to ignore the magnificent homes all over the city.  There are an incredible variety of styles and many streets are lined with grand Victorian or Edwardian homes.  These homes are generally two or three stories high and include many interesting details.  Some are painted in a monotone and most are painted in two or three colors (the base and the trim), but occasionally I will pass a home that stops me in my tracks.  These magnificent homes have intricate color schemes with many of the intricate details painted in bright colors of gold leaf.  Small features are called out with flourish and the homes seem to stand up taller and more confidently than those that surround them. These prized possessions show the passion the owners have for their what is likely there investment.  Interestingly, the houses that surround these amazing homes are also more ornately decorated than houses on other blocks.

This got me to thinking about compensation programs (lately nearly everything gets me thinking about them!). 

Most of us care enough to paint the base and trim of our compensation programs.  We pick a good base program and complimentary program or two and dutifully apply these in what we believe are strategic ways.  In the end we have very nice programs that fit in well on our street, but seldom stop someone in their tracks.  Although our goals are to attract, motivate and retain great staff members, we generally design our programs simply to be satisfactory.  Then, there are those unique companies that really go all out.  They take the time to not only paint the base and trim, but they make sure the little, unique details are readily visible and understood.  They passionately communicate the whole package and the individual pieces in a way that shows their love for their programs.  These programs stop people in their tracks and often become the subjects of presentation articles and industry evolution.

I often wonder what it is that drives these passionate companies.  Is it simply a pride and confidence in who they are?  Is it a desire to prove they are better than those around them?  Whatever it is, I wish I could inspire every company to embrace their plans in this manner.  These “best houses on the street” provide all of us with an example of what truly can be done.

Imagine if every company had the passion to decorate their compensation plan to its fullest potential.  Imagine if every plan got the ongoing care and attention of the best plans.  Of course this would take a bit more time and effort, but the results appear to speak for themselves.  If you did this, what would your own plan look like?  The plans of those companies around you would surely have to follow.  I think of this exciting potential every day and it inspires me to push at the edge of the envelope.  Perhaps we all just need to take this slow summer time of the year and finish painting our houses.  I wish you all the ability to have the prettiest house on the street by end of 2010.

Dan Walter is based in San Francisco, CA and is the President and CEO of Performensation, a firm focused on improving its clients performance and equity compensation programs. He has worked with small start-ups through the Fortune 100 for more than 15 years. In addition to being a frequent speaker in the US and abroad, Dan is on the board of the National Center for Employee Ownership, helps run ShareComp, a virtual conference for the share plan industry and heads Equity Compensation Experts one of the largest free networking groups for equity compensation professionals. Dan loves to share ideas and information. Follow him on LinkedIn or Twitter at @performensation.

How Employees Pay for Executive Comp Excesses

There's a bit of a kerfuffle in the Internet biz news about a recent paper called, "When Executives Rake in the Millions: Meanness in Organizations." It was presented to this year's International Association of Conflict Management Conference by Sreedhari Desai of Harvard University, Arthur Brief of the University of Utah and Jennifer George of Rice University.

Their goal is to supplement the discussion about the relationship between today's executive pay levels and organizational performance. They turn instead to research on the impact of executive pay levels on executives' treatment of their employees. The findings are sizzling.

Here are a few:

• ". . . increasing compensation not only increases CEO's perception of how powerful they are but also affects the perceptions of the workers they manage."
• " . . . higher income inequality between executives and ordinary workers results in executives perceiving themselves as being all powerful and this perception of power leads them to maltreat rank and file workers."

What do they mean by the "maltreat" reference in this quote and "meanness in organizations" that is used in the title of the paper? Well, a more objective description is that they " . . . investigated the relationship between the total compensation of an organization's CEO and the organization's relationship with its employees . . . " as measured by relations with unions, health and safety violations, reductions in force, retirement funding and employee relations initiatives.

Some of the "remedies" the authors propose are naive and ivory tower-ish, which has led to a couple of rants on the Web. No matter, it's the research findings that are instructive for us. We can figure out our own solutions, given the situation we find ourselves in.

The insights offered in this paper on the impact of power (exacerbated by Fortune 500 CEOs' average compensation having increased by 300 percent over the last decade) are well considered and immensely instructive. Especially since we know that the tough times will be with us for awhile and tough decisions will still challenge our leaders.

As the squeeze continues and the pressure is unrelenting, how much is our highly paid top managers' tendency to " . . . objectify lower level employees and view them as mere instruments . . . " influencing broad compensation issues like merit pay budgets and incentive design? It may be time to scrutinize our assumption that tough times demand tough decisions and examine whether there may  be a more balanced perspective that we haven't considered.

Want to think outside the box? Give this study a look, I think.

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, along with Masters Swimming.

How to Save a Buck and Spend Two

Your company is seeking to employ a Financial Accounting Manager, and the leading candidate is currently "in transition."  Human Resources has pegged the market value of the job at $75,000 (midpoint), but it's known that the preferred candidate (Bob) will accept $65,000.  A seasoned and experienced professional, Bob was previously paid $ 76,000 by his last employer, but was caught up in a restructuring staff reduction.  He's been out of work for almost a year and is getting desperate.  Relocation is not an option, and he's worried about feeding his family and paying the mortgage.

When the decision point arrives, other less qualified candidates are already making $70,000 and asking for $75,000.  Some hiring managers would look at this situation as a no-brainer.  "Let's hire our "A" candidate and save $10,000 to $15,000" would be the smug decision.

That wasn't hard, was it?  An exceptional candidate has been gained at a low ball price.  The manager deserves a pat on the back for saving the company money, right?  But, wait a minute.  Perhaps it should be a boot in the butt instead.  You make the call.

A savvy professional like Bob will have a sense of the competitive market, so he'll be aware of having taken a significant pay cut to land this job.  So how excited will be be with the offer?  Today, he'll be delighted and will celebrate getting a job and finally having money coming in again.  Tomorrow, not so much.

How long before resentment grows that he was taken advantage of - gotten on the cheap?  What will happen to his enthusiasm, engagement, morale?  What will he come to think of the company, never mind the hiring manager?

What is the likely future for Bob?

It is always safe to presume that how an employee is treated will become known; otherwise you'll be stuffing skeletons into a closet - and you know how that trick never ends well.  So when Bob confirms the low ball treatment, what reaction can you expect?

• Angered by a sense of being taken advantage of he could continue with his job search - looking for a better opportunity - while still working for you

• His job performance will suffer, dropping from 110% to automatic pilot somewhere south of Satisfactory.  He'll be going through the motions - not exactly the dynamo you thought you had hired.

• Bob's attitude will turn negative and he'll become another disengaged employee - critical of the company and management, doing no more than he must in order to get by

• And yes, he'll ultimately quit, but on his terms and timing.  His anger will have kept simmering and he'll likely feel little concern as to how his departure affects the organization.

What you have now is a bad hire, in retrospect;  that situation is unnecessary and easily avoidable if you treat candidates fairly.  Look at it from the candidate's perspective; when your back is to the wall and you feel your "rescuer" is taking advantage, that feeling causes a pit-of-the-stomach resentment that lingers and festers.  And it costs.

Let's tally up the cost

The manager claimed a cost savings by the hiring decision.  But when you factor in the longer term ramifications of that decision, how do the initial savings hold up?

• The hiring decision saved $10,000 to $15,000 per annum by consciously underpaying the candidate

• What is the discounted value of a disengaged employee who doesn't perform as expected or desired?

• What is the value of time lost when Bob quits and the job is vacant while a replacement is sought?

• What is the value of hiring a potentially more expensive replacement (plus agency fees) and perhaps relocation?

• What is the value of productive time lost while a new employee gets up to speed?

• Finally, what is the subjective value of a discontented employee in your midst, possibly poisoning other employee attitudes?

So the next time a hiring manager proudly announces how to save a bunch of money on a candidate who's in transition, take a moment to think it through.  You may want to consider a boot in the butt instead.

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.  With over 30 years Rewards experience 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. 

Image: Creative Commons photo by greggoconnel

Can't Buy Me (Workplace) Love

As I start to write, I'm humming the Beatles tune of a similar title in my head. Their lyrics were  poetic and prophetic, even when it comes to matters of the heart at work, because money can't buy workplace love. 

That's not to say that many a manager and employer haven't tried to use money to counter other deficiencies in treating/managing/leading/recognizing/rewarding their workforces, but it rarely works as intended. In today's world of commonplace mass layoffs, "doing more with less" and "working smarter, not harder" a few extra bucks isn't going to buy a Whole Lotta Love (I'm starting to hear another classic coming on..., but I digress).

Don't get me wrong; people work for money, and so market competitiveness, especially for base pay, is critical to the ubiquitous "attract, motivate and retain" objective we often hear mentioned. (Base pay is mostly for the "attract" part, and to a slightly lesser degree the "retain" element; not so much for the "motivate" part, but that's a post for another day). Because cash compensation is so important, it's critical to make sure the cash elements of your reward programs are competitive with the relevant external labor markets in which you compete for talent.

But if you think you can buy workplace love, engagement, loyalty, or commitment, you're mostly dead wrong. Some people can be bought psychologically, but not that many (excluding politicians, of course!).

Substantial research confirms the disconnect between money and commitment or engagement at work. For instance, a recent study conducted by WorldatWork (membership may be required to view study results), in collaboration with the  Hay Group and others, confirms that indeed, non-pay elements of the total work experience are the key drivers of employee commitment and engagement.

The study, a survey of hundreds of compensation/rewards professionals, reports that organizations realized better outcomes in their efforts to "engage" employees if non-HR employees were also involved in the development of reward and engagement efforts.  Regarding key reward elements, "non-financial rewards, as opposed to financial rewards, are viewed as having more impact on employee engagement," says Tom McMullen of the Hay Group. He goes onto say that "quality of work, career development, organizational climate, and work-life balance have a greater perceived impact on employee engagement than financial rewards."  

The perceived quality of managers and top leaders are also more important than financial rewards on impacting engagement.  "Quality of leadership has a profound impact on employee engagement and motivation" says Paul Rowson of WorldatWork, who also says that "organizations must think it terms of total rewards and not just financial rewards if they are to enhance employee involvement, commitment, job satisfaction - and performance."

Assuming your compensation levels are already competitive, the next time a weak manager seeks approval to use increased pay to enhance retention or morale, maybe we should be thinking about fixing the manager, rather than throwing money down the drain of worker discontent (with their management and/or leadership).

You may have heard the phrase that employees join companies, but they leave their managers - this is so true (just think about the last really bad manager you worked for).  Of course, some will leave for more money or opportunity elsewhere, for sure, but when people are poorly treated and/or managed, virtually all of them want to leave!

Once your workforce is paid fully competitively, additional reward dollars would be better spent on programs and actions that enhance culture, employee commitment and engagement, and ones that strengthen your management and leadership. 

Don't try to buy employee love and loyalty; earn it instead.  It's cheaper, and more effective.

Doug Sayed is principal and founder of Applied HR Strategies, Inc., a Seattle-based compensation consultancy, and developer of the StrategicPay Series, a series of hands on, "do it yourself" guides for developing your own strategic compensation programs.