How well do you understand your compensation system? Probably better than you understand the inner workings of the cosmos, right?
I propose that it's easier to wrap your mind around how the universe was born. Why? Because the universe plays by a well-defined set of rules.
I've been fascinated by the discovery of the Higgs boson (aka the "God Particle") that CERN announced earlier this month. The empirical detection of this particle could shed light on how the universe came into being. In layperson terms, the Higgs boson would explain why things lump together, why things have mass. Without something like the Higgs boson to hold everything together, nothing in the universe could exist.
What holds the various elements of your compensation system together? That's not so easy to answer...
Each of the pieces of your total rewards program plays a role. Base pay and incentive compensation are like neutrons and protons - they're the nucleus, at the center of everything. Benefits and perquisites are the electrons, spinning around the nucleus, giving your total rewards program its unique characteristics.
Your compensation communications are like photons - visible carriers of the electromagnetic force and your total rewards program. Performance management systems can be thought of in terms of exotic particles; there are many different kinds playing varied roles.
All of these elements have rules. Base pay is subject to minimum wage requirements, your internal grade/step system, external benchmarks, etc. Incentive compensation is governed by performance objectives. You have handbooks, fact sheets and Summary Plan Descriptions for your benefits and perquisites programs.
You have internal guidelines for compensation communications. You also have (or should have) well-defined and objective criteria for evaluating performance, formal policies for performance improvement plans, and so forth.
But what holds all of these elements together? What gives each of these pieces mass, and causes them to cease being individual elements and coalesce into "The Total Rewards Strategy"?
It's not the compensation equivalent of the Higgs boson, with defined properties and interactions. It's people. Beautifully ugly, messy, unpredictable people, each one as unique as the next, each one variable from minute to minute.
There are no definitive rules governing a person and his interactions. What motivates me today may not motivate you at all, and it may not motivate me tomorrow. Incentive plans that work well now may be obsolete when market dynamics change (as a result of changing behavior of people). Different styles of communication and evaluation become necessary when the characteristics of your workforce change (think about the "millennials" conversations...). Everything is constantly changing, and if everything is constantly changing, there can be no well-defined properties and interactions.
This is why there is no such thing as "THE" total rewards strategy, only "a" total rewards strategy. What coalesces in one organziation with one group of people at a particular point in time flies apart into oblivion in another organization with another group of people at a different point in time.
We may never truly understand how the various elements of a total rewards strategy bind together and, almost magically, transform into a Total Rewards Strategy. It's different for every program at every point in time. I don't think it's possible, from a total rewards perspective, that such a thing like a "God Particle" exists...
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 quantitative 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 Inc. and is the host of The Proactive Employer. Follow her on Twitter at proactivemployr.
Photograph: Fabrice Coffrini/AFP/Getty Images
Comments