Compensation: The Word May Not Mean What You Think it Means

What does “compensation” mean? Those of us who work as compensation professionals consider it a positive, professional  word that speaks to people getting paid for services, effort or performance. Like many words, compensation actually means something else entirely.

From the Collins World English Dictionary

1.     the act or process of making amends for something

2.     something given as reparation for loss, injury, etc; indemnity

3.     the automatic movements made by the body to maintain balance

4.     the attempt to conceal or offset one's shortcomings by the exaggerated exhibition of qualities regarded as desirable

5.     biology: abnormal growth and increase in size in one organ in response to the removal or inactivation of another

Take a minute and read those definitions again. None of them are uplifting and positive.  In fact, each and all of them make my job feel a little unseemly.

Our starting point is a significant hurdle. If people have studied for the SAT vocabulary section (if they even still have that), they are likely to have different definition than ours. We assume that because we mean well and work to create fair pay programs, that people will just adopt our definition. Before you believe our own hype, ask yourself if your “compensation” program ever falls into any of the above definitions.

A.   Are you paying people to make amends for something?  Are your employees being asked to do something so difficult or distasteful that you owe them some sort of monetary apology?

B.   Are you providing reparations? Is your work-life balance so out of whack that pay is actually a replacement for lost time with family or passions?

C.   Are your increases and reviews so automatic that they have become just a form of balancing and correction for unexpected movements?

D.   Is your company hiding shortcomings by distracting people with extra money? If you looked from the outside would your pay be seen as “too good to be true”?

E.   Has your pay (especially for executives) increased abnormally in size in response to the lack of something else? Could you be paying your executives more than you should simply because of a lack of data or a weak Board of Directors?

This is a case where our actions must be far louder than words. We should compensate our employees not to apologize, but to thank them. Our employees should understand that we place as much value on them being emotionally, mentally and physically healthy tomorrow as we do about them getting the job done. Our pay programs cannot be defined as automatic adjustments. We must put real thought and effort into making our own performance more like a dance move and less like that head jerk that happens when you start falling asleep while sitting in an airplane seat. We must address our issues with real solutions and understand that money works only if everything else works, not in spite of it. We need to pay based on the strength of our firms, not because of poor information or limited resolve.

Compensation may not mean what you think it means, because your actions may not be reflecting your intent. Start by assessing your own definition of compensation versus the reality of what you are delivering to your staff. Once your words and actions are in sync, it will be far easier for employees see beyond their paycheck and get engaged in their jobs.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues, Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

Comments

[Shawn Miller]

Clever, Dan...nicely done! Question C is one that hit me right between the eyes...!

[Dan Walter]

@Shawn
Thanks for the comment, and I am glad you liked the article.
Question C seems to be an issue for a lot of companies right now. We all need to work together to find a better way of dealing with it.
~Dan

[Earl]

Agree with the question C comment. How about some departments/divisions/or other subdivisuion so automatic that they dole out equal increases across the board to avoid any confrontations?

[Dan Walter]

@Earl
Teaching managers how to deal with difficult situations, like confrontation, is absolutely critical in today's world of promoting subject matter experts to the roles of leaders.

This is a large and growing problem, that is made worse by the current economic climate.