Are We Stuck in Market Mimicry?

Can we benchmark our way to reward success?

Short answer:  I don't think so.  But as a profession, we may be somewhat stuck in a rut of trying to do just that.  This was one of a number of threads I picked up in attending WorldatWork's Total Rewards conference this week, as several presenters - from different topical angles and with varying levels of urgency - urged us to reconsider our sometimes-single-minded focus on the external market.

Highlights from a few of these below.

In their session "Using Statistical Research to Change Compensation Strategy", the Google compensation team, led by Frank Wagner, showed us the power of listening to the organization and using rigorous data on employee sentiments and preferences to help drive reward direction and solutions.

Sibson's Jim Kochanski and Myrna Hellerman, in their presentation "Pay for Performance: The Big Bang Theory", described the black hole of "sameness" that organizations can get caught in when their focus is discovering and implementing the same offerings that everyone else is.  The "Big Bang" happens when organizations start moving apart and realize that it's OK - even quite smart - to be different.  The main consideration, then, shifts from what the other guy is doing to what the business needs to be successful.

Patricia Zingheim and Jay Schuster of Schuster-Zingheim, in their session "Compensation and HR During Crisis: Which Solutions Add Value?", shared lessons learned about what works in challenging times from a study of banks hit by the subprime crisis.  One of their conclusions: Avoid an overreliance on survey data and copying the practices of other organizations.  Surveys may show what is competitive - what is prevalent - but they seldom report on how practices work and add value to the business proposition.

These and other discussions during the conference beg the questions:

Have we, as a profession, become too mired in discovering and copying what others are doing, at the expense of really learning the business of our businesses and figuring out what will drive their success?  Have we bought the lazy premise that simply mimicking the market is a sound reward strategy? 

And, given history's tendency to swing back and forth over time, are we witnessing the beginning of a shift away from market-driven reward practices, toward more organization-centric approaches?  If so, what implications would this have for the various total reward elements?

Just food for thought on a spring Friday.  What's your take?

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

Image: Creative Commons Photo "Le Mime" by jan lewandowski

Comments

[E. James (Jim) Brennan]

While the seasoned professionals know that surveys just show what others did rather than whether it was good or bad for them, often their bosses don't care. What Big Giant Competitor down the block is doing can be an important reference point for insecure managers who frequently press their people for surveys to justify their lemming instinct to snuggle into the end of the line. Some seek to minimize risk by accepting a followership position for CYA. The smart execs, of course, only use surveys to inform their contextual understanding, to determine whether their particular best practice lags or leads that of their peer groups and by how much.

Surveys may tell you where NOT to go. They can be a road map to dodge the tree all the others hit or they may guide you into a dead end.

[Charles H. Green]

Good article, thanks.

You're on valid and well-trod ground here; Michael Porter's 1996 HBR article (November-December) called What is a Strategy nailed this issue particularly well.

Porter suggests that the very essence of a strategy is differentiation, and that operational effectiveness--of which benchmarking is just a tool--is itself a necessary but not sufficient condition for strategic success. As you also point out, emulating lemmings just reduces everyone to an eventually-least common denominator. It doesn't serve any constituency well to simply copy.

Jim Brennan is certainly right that many managers seek CYA justification in benchmarking; perhaps your article and Porter's can help point out the deficiencies in benchmarking-only approaches.

[Ann Bares]

Jim:

Nice bit of perspective - that surveys provide context or a reference point against to make an informed choice - they do not provide The Answer.

Charlie:

Thanks for the Michael Porter reference and the reminder that strategy is ultimately about differentiation. Important mesage - and one that we obviously need to have reinforced!