Compensation Cafe

You Guys Owe Me - Don't You?

Over the past several years most organizations across the country have cut back on employee reward programs, what with frozen salaries, minimal pay rises, shrunken incentives and even the scaling back or elimination of 401(k) matching funds.  With unemployment having reached 10% at one point and today still above 8% employee compensation has stagnated.

However, with the economy now starting to show signs of life (fingers crossed) some elements of the workforce are beginning to ask when their employers would be reinstating those monies lost through recessionary restrictions and cutbacks.  The viewpoint is that if a salary was frozen or if increases were restricted over the past few years, when better times arrive the company owes payback for that loss of income.  Estimates vary, or course, but such an action would mean several additional percentage points of increase this year alone to catch up – perhaps more, depending on how fanciful the complainant is.

But that ain’t gonna happen.

When the 2011 fiscal year closed for most several months back, companies added up their figures, reported results, shut the books and then moved on into 2012.  They will likely do the same for this year as well.  So case closed.  There is no going back to address what could've been but wasn't.

Unfair?  Are you one of those who think that you’re owed those so-called “lost” dollars?  Then consider the dilemma as a business problem for the company.  Management will not want to be saddled with additional fixed and reoccurring costs just as operations are struggling to regain strength.  While they will likely strive with renewed energy to reward performance in a competitive fashion, as long as it’s affordable given their financial posture, they will not revise their reward programs to pay for entitlement vs. performance, or on the basis of whether or not they’re doing well in a particular time period.

Ain’t gonna happen.  That ship has sailed.

Companies cannot easily "make up" for revenue lost during those down times, nor can lost accounts be quickly replaced, never mind the price increases that had to be put off.  So it hasn't been just the employees who had a lot to swallow.  Each fiscal year tends to stand for itself, with little cumulative value past year-end.  The same can be said about rewards, with little acceptance for the concept of being "owed."

Picture if you will the scene in the Boardroom when the "make up" question is raised – if it ever is. How much would it cost, this suggestion of returning to employees those increases that were lost during the dark times?  Management would consider that the tight fiscal measures put in place for Human Resources, as well as other functional areas, were necessary to get the company through a rough patch.  Now that better times are slowly returning it does make business sense to begin reducing those restrictions going forward or otherwise trying to return to normal operations.

The use of bonuses and merit increases will return to a greater extent in 2012, as will company matches for 401(k) contributions, but they will not be made retroactive. Companies will need to look forward, not backward.

To add incremental, unbudgeted funds to reinstate missed salary increases from a prior year is not going to happen, as management has its hands full bringing itself back to a healthy financial posture.  Supplemental “make-up” compensation, especially in the form of fixed costs, would not be viewed as a financially sound strategy.

So stop asking and move on.  Your organization already has.

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.  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.

Creative Commons image courtesy of quaziefoto

Set It On Fire!

Want to set your employees' performance on fire, spark employee engagement, and ignite a true pay-for-performance culture?

Start with your performance management system.

Many people - managers and employees alike - view performance appraisals as an annual chore that has to be done. According to Paul Falcone, we feel this way because we've moved away from the Golden Cycle of Performance Management:

• Goal setting and planning;
• Ongoing feedback and coaching;
• Appraisal and reward.

Falcone says "the first two steps rarely get addressed, leaving the culmination in the third step more theory than reality. Hence the mandatory paper chase at annual review time rather than a system built on implementation, planned feedback and ongoing communication."

Here are some suggestions to help get you on track.

When it comes to goal setting and planning, the number one priority should be alignment of individual goals and enterprise goals: 

• Clearly communicate the enterprise-level goals across the entire company
• Create a mechanism that allows employees to clearly understand how their efforts contribute to the success of the enterprise
• Build employee goals that mirror those of the enterprise:
  • Financial - goals for growth, profitability and risk from the perspective of the shareholder
  • Customer-based - goals focused on creating value and differentiation from the perspective of the customer
  • Internal business processes - goals focused on internal processes and operations
  • Learning and growth - goals that help create a climate that supports innovation and growth
• Tie individual and enterprise metrics together to link employee performance with real-world job requirements

When employees can clearly see the direction in which you want the company to go, they're more likely to work toward - and achieve - their goals.

Ongoing feedback about progress toward those goals is also critical. Employee performance is something you should be thinking about every day, not just during the days leading up to the annual review:

• Lay the groundwork for performance review conversations all year long by touching base frequently with employees
• Regularly ask questions to find out how employees are progressing toward goals:
  • Do you have the tools and equipment you need to do the job?
  • What is going well?
  • What isn't going well, and what can we do to improve it?
  • Is there anyone who has been particularly helpful to you that should be recognized?
• Listen carefully to employees' answers to these questions, and follow up on what you learn

If you build ongoing communication and feedback in to your system, you can monitor progress toward goals, and make adjustments and recommendations as necessary. 

If you can master goal setting and planning, and provide ongoing feedback to your employees, you can get back on track with the Golden Cycle of Performance Management, re-kindle employee engagement, and re-ignite performance in your organization.

 

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer (Paul Falcone and Winston Tan will appear on the 5/31/12 episode of The Proactive Employer, discussing how to unleash the power of performance in your organization!) Follow her on Twitter at proactivemployr. 

Motivation 101 (or, Pass the Motivation, please)

No one can motivate anyone else.  People already come with their own motivations. As an employer, you must deal with the actual people who do your work rather than artificial stereotypes stamped from an identical mold formed by the creative imagination of some speechwriter.  All you can do is offer reinforcements and consequences that hopefully align with the actual motivations of your employees.

Herzberg's refinements of Maslow's hierarchy of needs is a starting point, but individual motivations run the gamut. The starving poor need basic necessities and money; the prosperous rich have the luxury of pursuing other goals like affiliation, recognition or self-actualization. What works best with a particular group depends on what they need and want.  One cannot generalize that cash is always superior to other rewards nor that individual recognition will always create more productive output results than group awards.  In the immortal words of the ancients, it depends.  Motivation is a diagnostic process rather than a universal lever that can be quickly identified and easily pressed for instant results. You don’t inject motivation into your people like a serum; they already have their own, thank you.

The most effective managers are those who know the actual key motivations of each of their subordinates and therefore customize their contacts, output consequences and reinforcements to the actual motivations that drive each individual. Those who believe "everyone is just like me" are gambling on a broad oversimplification. They will find occasional success with their clones but will experience failure with the majority of people who have different circumstances, different priorities and different motivations.  Research has proven that the most effective supervisors are those with the best understanding of the motivations of their individual subordinates, not those whose direct reports have the exact same motivations as the supervisor. 

A boss motivated by status can’t safely expect a crew of workers desperate for money to want the same rewards he wants; their decisions are driven by different desires.  A supervisor who wants to Do Good For Mankind better not project her motivations onto her starving subordinates who are struggling to make ends meet; their enthusiasm is currently best excited by cash.  In academia, where the subjects studied are comfortable in regard to their hygiene factors, the forces that motivate behaviors are quite different than those operating among twenty-somethings with growing families to feed.  There is a wide disparity of motivations encountered in a typical work group, and the effective supervisor needs more than one tool in his or her kit.

Bottom line: your employees will determine which consequences are more effective with them. Personal responses depend on the preferences of actual individual persons and cannot be reduced to a binary choice between A or B, cash or non-cash, personal or group, individual or team, intrinsic or extrinsic, etc.  Life is more complicated than that.  Actually, the ideal situation is to offer some of all:  the most effective total remuneration systems encompass both cash and non-cash elements in a tremendous variety of forms. 

Universal prescriptions tend to be specifically ineffective.  There is always more than one way to skin a cat.

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.

Creative Commons Image "Should. Could. Would. Did." by SweetOnVeg

You and Your Big Mouth Pay Program

You have a not-so-silent partner in your compensation communication efforts.

It is your pay program itself.

That's because compensation itself is a powerful communication tool.  So is the process you follow and the steps you take to develop, manage and update compensation programs.  In fact, everything you do in compensation is communication.  That's the message behind the road show that Dan Walter, Margaret O'Hanlon and I took to Orlando earlier this week to share that point of view with a bunch of our WorldatWork colleagues.  Piggybacking onto Margaret's recap, I want to send out my own special thanks to everyone who joined us for Monday's conference session.

And because everything we do in compensation is communication, it is important that we do all of it -- from upfront brainstorming and direction setting to ongoing assessment and adaptation -- with intention, considering the messages we are sending at each step of the way.  My experience would suggest that the early steps we take and the work we do to review/renew our programs on the back end are particularly powerful opportunities that we often overlook.

Communication starts even before plan design does, with the way we describe and approach the problem we're trying to solve.  That's why it's important to do our homework, dig underneath the surface and get to the roots of the issue -- whether it be performance, retention or something else.  Our failure to do this, our decision to tweak pay when the problem may be only partly (or not at all) about rewards can speak volumes.  When we throw money at what isn't a compensation problem, we can send unintentional and even damaging messages to employees about their capabilities, their motivation, and the organization's trust in and regard for them.

We also let opportunities slip through our hands when we renew and update pay programs -- or fail to do so.  If we've learned nothing else in the past several years, it's that the world our organizations operate in can change enormously in the space of twelve months.  We can't afford to leave our programs on autopilot, sending messages and promoting efforts that may now be out of sync with what business priorities demand.  A pay program that simply rolls forward into the new year, unchanged or even unconsidered, will speak pretty loudly, too.  It says "same old, same old."  Is that what you intend?

Make no mistake about it.  Your compensation programs speak for themselves.  Are you going to let them speak for you?

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, reads incessantly and is an aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Image courtesy of avclub.com

Wow! Comp Communication Myths Exploded at WorldatWork 2012 Conference

Your compensation programs speak for themselves? So, what are they saying?

Really?

Ann Bares, Dan Walter and I believe that everything we do in compensation is communications and we gave a great group of colleagues an earful on the subject this week at the WorldatWork Conference. If you were there, thanks so much for joining us. We had a great time with you!

If you weren't, I thought I'd share some of the spicier bits. We had (of course) a lot to say.

Designing compensation programs is like dealing with the Kardashians. Everyone in your family (I mean, your stakeholders) has an opinion about comp. Everyone has an agenda. Oy, the emotions involved. Quit trying to duck it. Deal with it.

Who exactly is everyone? The list of stakeholders goes on and on, and they don't see eye to eye readily. Legal, Execs, Division Heads, Department Heads, Managers, HR Business Partners, and more. See what we mean? Comp numbers are not the only point of your story if you have to get all of these people on the same page.

When's the best time to incorporate communication into your compensation planning? Now. You can say you are frustrated or you can do something about it from the first step of your compensation program design process.

That's right, if you are identifying problems with your current program in order to design a new one, it's time to get out of your office and watch those Kardashians (er, I mean stakeholders) closely. You'll achieve a deeper understanding of what is going on that requires the comp program redesign.

Recognize that you are more likely to get the program design right if you start thinking about communications from the very first step. (Imagine, no regrets at implementation because it finally dawned on you that you should have designed something differently.)

Deliver a change management strategy that addresses business results -- not just an executive report on salary practices -- when you develop your preliminary comp program design.

Think about it. The comp program design itself is communication. That means, every plan design decision is really a communication decision.

I want to show these points clearly and boldly so I am purposefully light on details. Stay tuned, there's a lot more where they came from.

Margaret O'Hanlon is founder and principal of re:Think Consulting. Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Communications Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors of the International Association of Business Communicators (IABC), Pacific Plains Region. She 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.

The World Beyond Expats

Forget about expats!   Ok, now that I've got your attention, let me tell you why I say this.

Background

Expats have been used forever as top managers of manufacturing plants overseas for U.S. multinationals.  Although one of the stated objectives was for expat managers to find/groom local managers to replace them, this didn't usually happen.  More often than not there was a steady rotation of expat managers in and out of these factories.

Manufacturing in most industries used to be the only reason U.S. companies had for operating overseas.  Now given globalization, the game has changed.   Now, companies have sales, marketing, customer service and design engineering operations overseas.   And running these operations with expats is much more difficult than having them manage a factory.

New Requirements

The emerging markets are the focus of U.S. companies now as a large revenue source.  Because of this, business models have changed to accommodate differences in these markets.

In high-growth markets such as China, India and parts of Latin America, U.S. companies are now looking at locals to fill most jobs. It is important to note that while China and India are the “hot” markets now for U.S. companies’ revenues, the wave of “hot” emerging markets will gradually shift to include other regions such as Africa, South America and the Middle East.

So why are companies hiring locals to run operations in these countries instead of sending expats?    In a global economy, companies must have a deep understanding of how to market and sell in each market/country.  They also need local engineers to find ways of customizing products to meet different market tastes.  They must deliver localized products at the right price and right branding strategies to customer markets in each country.  Customers in these markets need "face-to-face" contact.  And to do that, companies need local nationals with “street savvy”.

The challenge of finding local talent in each country varies.  In hot markets like India and China there are many engineers.  The difficulty is not hiring but retaining them.   However, the “sticking point” is that there are not enough locals that have the necessary top management skills to run an operation.   “Finding the appropriate top level talent to take advantage of the growth prospects of emerging markets is one of the biggest challenges we face”, said Louis Camilleri, chairman and CEO of Philip Morris International.

Two search firms that help multinationals fill Asia-based executive roles —Spencer Stuart and Korn/Ferry International --- say these candidates with top management skills are difficult to find and retain, and they can command salaries of $750,000 to $1 million—on par with, and sometimes more than, their U.S.expat counterparts.   The top choice is for a local national with years of local experience but that has been educated at a U.S. or European university.  Second choice is for a Western expat that has lived and worked in the region for a long time --- maybe 15 years.

Although the supply of local top management talent is scarce now, the future looks brighter.  Globalization has shaken up the thinking of U.S. executives.   They realize their employees worldwide need to develop a more global mindset.   Companies must think beyond the next few years and make investments in people by giving them international experience.   Some of these employees will be the future C level executives of tomorrow.

Providing long-term expat assignments is not the only or most efficient way to develop global employees.  New alternatives to the traditional expat assignment are being tested.  Both U.S. and overseas employees are included.  Some of these new alternatives include:

• U.S. in-bound assignments for employees overseas
• Assignments (6-9 months) from country to country
• Commuter assignments between countries that are close together
• 2-3 month project assignments --- country to country
• Virtual global teams

These suggestions are merely starting points --- the tip of the iceberg.  Developing globally, work-ready employees worldwide will enable companies to create talent pools that can move from region to region and provide critical management skills for competing in new markets.

There is new meaning to the term “global mobility” today ---- and it no longer necessarily includes expats.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in International Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque has also been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.  She lives in Dallas and has 3 four-legged children and one Chinese daughter (it’s a long story).  She’s had a life-long love of animals and the ocean.   So why is she living in Dallas?

Image courtesy:  referenceforbusiness.com

 

It's About More Than Numbers

I’ve never been particularly good at math, and yet have made for myself a successful career in Compensation.  Now, why is that?  One would think that we’re all numbers people, focused on statistics, surveys and regression formulae.  People just expect compensation practitioners to be a whiz at figures.  On the other hand, such so-called math experts often fail to rise to the top of the profession.   That's a quandary to ponder over.

Why do some compensation people succeed (climb the specialist ladder) and others don’t?  Likely there are several reasons, but I think persona has a lot to do with it.

Changing view of compensation

Effectiveness in Compensation isn’t (or shouldn’t be) all about the numbers, but about the people affected by the numbers.  A successful practitioner should understand their company’s business and the pulse of the employees, who are not just the figures on a spreadsheet.   If you consider the human factor as little more than boxes on an organization chart, then your ability to solve problems will be limited by your ignorance of the employee relations impact that naturally follows your recommendations.

Do you remember seeing an HR fellow with a pocket protector and a bunch of pens in the shirt pocket, walking the hallway while laden down with survey reports?  That was the traditional view of “the comp guy.”  This was the master technician who lived with the charts, graphs and regression formulae, but who failed to understand the people impact of their work.  Everything was about the numbers.

Best practices are different these days.  Compensation staff are no longer confined to a cubicle or an out-of-the-way office, but increasingly are stepping out among the employees, developing their knowledge of how the business operates, all the while increasing their ability to partner with internal business clients.

Sensitized practitioners know that compensating employees should be about the rewards as well as the process, about how rewarding employees can influence behavior, for good or ill.  Therefore the success of the solutions provider is in being able to creatively assist managers achieve their objectives, while at the same time adhering to consistent policies / procedures.  It is not about quoting policy with a shrug of the shoulders.  It's about being engaged in the process.

What’s the color of your hat?

Something else to think about; what role does the Compensation function play in your organization?

• Policeman vs. Gatekeeper:  The role is not to say yes or no, but to encourage an open process of ideas and practices that operate within established policies and procedures.  Nobody likes the fellow who can offer little more in the way of help than quoting from the company policy manual.

• Numbers vs. People:  Are your thought processes people-oriented, or is the understanding that employees are affected by these policies and procedures lost on you?  A business-only focus that ignores the human factor in driving success is inevitably tripped up by lower morale and disengaged employees.

• Policy vs. Flexibility:  Are you one to quote policy as a supposed answer to every manager’s question, or are you open to creative possibilities?  When you tell a manager that the decision remains with them, that you’re only offering advice, you'll be able to actually see their body dynamics relax.   At that point you can reach them, because their defensive barriers will be down and their minds open.

• Analysis paralysis vs. solutions-provider:  Being able to make timely decisions vs. being caught up with a constancy of analysis that never seems to move to a decision point.  Do you have a reputation as a decision-maker or an analyzer?

When you consider the compensation people you deal with in your organization, are they the good guys or the bad guys - the white hats or the black?  Which are you?

You don't have to be a numbers whiz to be successful.  You just have to know what the numbers mean, and how to use that knowledge to help your clients.

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.  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.

Creative Commons image courtesy of Irargerich

Like The Auto Industry, Compensation Must Create More Hybrids

I read a recent article that discussed the annual Rotman Design Challenge. The competition pits teams from Design and MBA programs to determine the value of design methods in business problem solving. This got me to thinking about the eternal compensation debate of program design, versus business strategy (vs. communication.) The argument is whether design is more or less important than understanding the “business data” and whether both of these are trumped by communication.

The Rotman challenge has been won the past two years by teams from design schools. In fact, the top three placements for the most recent challenge were from designers. Now, it is a challenge on the impact of design methodology, but it was initially created for MBAs to show their skills. This would seem to indicate that understanding design processes creates better results than understanding business processes.

Here’s the catch. The judges said they were disappointed that although designers won the contest, they presented poor business cases for how their designs would create revenue. Most designers provide only vague ideas of how their product could or should be brought to market or how it would turn a profit. The business teams were clearer about the profit potential, even thought their ideas were not winners.

So once again, we are shown that we must collaborate better. Apply these lessons to your company.

Design usually comes from your internal compensation team or an external consultant. But, even the best design is incomplete without the business acumen to make sure it can be, and is, applied in the best possible manner. Compensation designed poured onto the heads of business leaders is about as effective as doing the same thing with a pail of dishwater.

Often a CFO, or new CEO, provides the compensation team with a framework for a program that appears to make perfect business sense. Unfortunately, these plan ideas rarely have the nuance and detail required to work holistically for a diverse company. Designers are often stifled, because the idea comes from such a senior executive. It is hard to create the correct idea from scratch when you must first convince someone senior that they are wrong.

Lastly, but often most critically, communication appears to be the missing component of both types of teams. If the designers could have more clearly communicated how their ideas could be turned into real business, then their dominance would have been supreme. If the MBAs had better communicated how great their ideas were, rather than focusing on the “numbers”, their value may have been clearer to the judges. Both sides tended to communicate from their own expertise and focus, rather than that of their audience. No one wins when communication loses.

Compensation is a clear contender for creating hybrid professionals. Compensation pros come from HR, finance, actuarial sciences and psychology. Just to name a few. To fully realize the true potential of the compensation evolution, we must utilize the skills and processes of the creative designer and the methodical business expert. This must be intertwined with the combined communication expertise of an educator and politician.

Since it is unlikely that any of us will ever possess all of these skills, we must work even harder at creating collaborative multi-disciplinary teams. The speed of the business world and the complexity of our tasks require all of us to utilize new perspectives or risk failure. Until we can create the perfect hybrid individual we need to work harder at creating better hybrid teams.

How can you be defined as a hybrid?

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 a co-author of “The Decision Makers Guide to Equity Compensation” and “Equity Alternatives.” 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 at @Performensation and @SayOnPay

What's That Job Worth?

The universe has been sending me a number of questions and inquiries about job evaluation lately, prompting some fresh thoughts about the topic.

Knowingly or not, nearly all organizations are already doing job evaluation.  Job evaluation exists, formally or not, at any employer that pays its employees a wage or salary - unless it happens to pay every single employee the same.  Got two or more employees with different pay rates?  Then you have (or somebody has) evaluated their jobs.  Maybe not purposefully, maybe not well, but it's happened.

Job evaluation is the process by which the relative value of different jobs is established.  The end result of job evaluation is typically a job worth hierarchy - your jobs in a value ordered stack - which then informs pay policy.

When people use the phrase job evaluation, though, they are often referring specifically to formal job content based evaluation approaches like point factor plans.  As you've surmised by now, I find it helpful to think about job evaluation in a broader sense.  From this broader point of view, I believe that formal job evaluation approaches fall into two major categories:

Market, or external-based, job evaluation.  With this kind of approach, the relative worth and pay opportunities of different jobs are based on their market value or "going rate" in the marketplace.  Job content or internal job relationships may also be taken into account, but are typically secondary considerations.

Job content, or internal-based, job evaluation.  With this type of approach, the relative worth and pay opportunities of different jobs are based on an assessment of their content (i.e., responsibilities, requirements) and their relationship to other jobs within the organization.  With more simplistic approaches in this category, the job is looked at in its entirety, as a whole.  With some of the more complex approaches in this category, jobs are broken down into and assessed by their different elements or "factors" (i.e. decision making, problem solving, relationships).  Market influences are also be taken into account, in developing salary ranges, but typically play a secondary role.

Recent research conducted by WorldatWork (Survey Brief: Job Evaluation & Market Pay Practices, 2009) confirms that market based job evaluation continues to dominate in practice, relative to internal content methods like point factor, job component and paired comparison.  See chart below.

Despite the prevalence of market based approaches, there are still reasons why job content based approaches is chosen by many organizations and this - I believe - is why they continue to endure.  A few points on the relative strengths of the two alternative methods are outlined below.

Market, or external-based, job evaluation - key strengths and considerations:

--The biggest strength of the market approach is the direct connection to outside market pay levels and the flexibility that the method allows for responding to market fluctuations and shifts.

--The market approach is relatively straightforward and easy to understand. 

Job content, or internal-based, job evaluation - key strengths and considerations:

--The job content approach provides a viable alternative for organizations who find that valid external market data and comparisons are not readily available for their industry and/or many of their jobs.

--Global organizations are using the job content to help them establish a global job value hierarchy that can cross different countries and currencies.

--The job content approach can create information about jobs and their components that some organizations find helpful to mine for initiatives like talent planning and work design.

--The job content approach can be more complex, making communication a little more challenging.

I find that HR professionals with one type of approach often eye the other wistfully, thinking it offers more objectivity, is more quantifiable, and is less subject to judgment and manipulation than what they have in place.  Ironically, this phenomenon seems to cross in both directions.  Unfortunately, no job evaluation approach gets you out of the hard work of applying judgment and making difficult but important decisions.  Just a matter of ferreting out the approach that best fits your needs and circumstances.

And then there's the rumored end of the job and the dawn of people based pay. 

Maybe another day.

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.

Creative Commons image "American Dollars in a Cup" by images_of_money (with my application of the question mark)

Your Total Rewards Investment Is a Waste, Unless...

Do you have a Total Rewards strategy?

Do you communicate your Total Rewards strategy to all employees in a way that gives them a true sense of your organization's total investment in them?

If you answered "no" to the second question, then by default the real answer to the first question is also "no."

No matter how well defined or constructed your Total Rewards program is, if your employees don't know about it in terms that matter to them, then your Total Rewards strategy doesn't really exist.

In research introduced earlier this week, the Chartered Institute of Personnel and Development (CIPD) revealed:

"The CIPD/Benefex Reward Management Survey 2012 found that more than a third of companies plan to increase their spend on employee benefits this year, but few (17.8 per cent) provide 'total reward statements' and 8 in 10 offer no financial education to help employees understand the value of their pensions and other financial benefits. What’s more, the survey revealed that the majority of organisations have not adopted a transparent approach to communicating information about pay scales, the provision of benefits and allowances, grading systems, job evaluation, performance-related pay schemes and how pay decisions are made for different individuals or groups of employees."

Let's be honest. Rewards or benefits packages can be as half as much or more than an employee's base salary. Why, then, do we so often leave employees in the dark about the full extent of their entitlements? 

Too often, the term "reward" is linked to an employee's performance against corporate goals. In reality, "rewards" encompass so much more, including everything from healthcare benefits to retirement plan contributions, to recognition and incentives received.

But if the total value of these rewards isn't communicated effectively to employees, then its intended benefit will not be felt. Moreover, if reward is to be both truly meaningful to the recipient and provide valuable insight to the HR department on the key performers across the organisation, it absolutely must be closely linked to recognition.  This is a sentiment echoed in a recent Gartner report (Gartner 2012 Strategic Road Map for Employee Performance Management - March 2012, membership required) recommending  organisations test a social recognition policy alongside their existing pay-for-performance programs to improve the success of its reward program.

Charles Cotton, rewards adviser at the CIPD, commented on this research:

“If rewards are used to motivate employees, or to encourage higher performance, then being reticent about reward communication does not make sense. Employers shouldn’t take it for granted that potential candidates and existing staff appreciate or understand the value of the pension scheme or perks such as subsidised meals, life assurance and critical illness insurance. Many employees will not look beyond their base salary and how far they can make it stretch from month to month. As we embark upon the biggest shake up to pensions since the state pension was created, employers will have a duty to communicate with employees about these changes and how they could benefit from saving for their retirement. What’s more, if employers apply that duty of care to their entire reward strategy, by improving employee understanding and awareness around the value of the entire breadth of benefits they offer, employers are likely to reap the benefits in terms of recruitment, retention, engagement and productivity.” (emphasis mine)

To ensure the success of a total reward strategy – incorporating strategic employee recognition – communication is vital, particularly in light of changes to employee entitlements through mounting economic difficulties.  Once the strategy is communicated appropriately and fully understood, it will be embraced by employees and the program will grow – ultimately delivering improved performance across the board and a more satisfied and engaged workforce.

How well is your Total Rewards investment understood by your employees?

As Globoforce’s 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 and Boston. Follow Derek on Twitter at @DerekIrvine.