Compensation Cafe

Declining to Differentiate: Does it Drive Out Your Top Performers?

Does declining to differentiate rewards cause your high performers to head for the doors and your low performers to settle in?  Recent research suggests that it could be a strong possibility.

In their paper The Effect of Relative Compensation Dispersion of Firms on the Mobility and Entrepreneurship of Extreme Performers*, authors Seth Carnahan, Rajshree Agarwal and Benjamin Campbell explored the hypothesis that compensation dispersion influences the probability of an employee's choice to exit the firm.  Their results showed that low compensation dispersion (less differentiation) increases the probability that high performers will exit and high compensation dispersion (more differentiation) increases the probability that low performers will exit.

So if we accept this finding, failing to actively differentiate rewards by performance can put you at risk of losing your top talent.  And of course, rewards aside, nothing erodes your organizational reputation and brand like being known as the place that high performers leave.

Is retaining high performers a concern?  In a recent survey from Sibson of about 100 HR representatives, 99% report that their organizations are concerned about retaining their star talent, but only 76% believe their organization has been successful at doing so.  In their article A War for Stars is Underway, Sibson's Myrna Hellerman and Jim Kochanski follow this data with the assertions that the losers in the war for stars are those that "allow high performers to stagnate" and "under-use pay for performance - they cling to across-the-board actions with little or low differentiation."  Those winning the war "have disciplined performance-management and career-development processes to ensure that stars are appropriately rewarded and deployed."

Conclusion?  More evidence, if we needed it, that we ignore high performance - and high performers - at our own peril.

Does this mean that nurturing and keeping stars is all about cash?  Of course not.  Retaining your top performers demands a broad, multi-faceted effort that address their overall work experience.  But while it may not be all about cash, don't underestimate the importance of cash as the foundational element of that overall package.  Money talks, and the way you compensate these employees relative to their peers speaks pretty loudly.

Does this mean that we funnel all reward and recognition initiatives to the highest 10%-20% of performers?  Of course not.  We all know that organizational life is not that simple.  In most organizations, the work of our "meets expectations" performers is key to creating the conditions in which the stars succeed - and it must be recognized and rewarded as such. 

What it does mean is careful attention to the balancing act through which we aggressively differentiate and reward the stars without losing sight of how we recognize and support all employees, creating the climate and culture that encourages everybody to be their best.

Hey if it was easy, everybody would be doing it, right?

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 - and join her along with her Cafe colleagues Dan Walter and Margaret O'Hanlon at HR.com's Compensation Best Practices and Trends Conference on September 10, where they will be sharing their top-rated presentation Everything We Do in Compensation is Communication. How to Do Everything Better!

Creative Commons Image "It was dark and I was tired" by KellBailey

*Hat tip to workspan magazine's August issue, where this paper was highlighted.

Going Global with Stock Plans

Compensation professionals need to think long and hard before rolling out stock option plans globally.

We have all heard countless times that "one size doesn't fit all".   This applies not just to cash compensation, but stock plans as well.   Many companies have rolled out "global" plans that are essentially identical for every participant, no matter where they are in the world.

The outcome of overlaying a U.S. plan globally is stock awards with radically high values in some parts of the world and awards in other parts of the world with so few shares they have no impact at all.

Keep in mind I am only focusing on stock option grant size.    There are many more issues involved such as legal, tax and accounting.  And there are even some countries where foreign nationals are not allowed to “hold” stock in a foreign company.  But this article is focusing just on award size.

So as stated above, for many years multinationals gave little thought to differentiating stock grant sizes.  They merely extended their corporate grant guidelines to participants in all countries, usually tied to job title or hierarchy levels.  After a while, corporate began to realize that something was "out of whack" when they saw that participants’ stock option values were ending up as 70 - 80% of their pay package.    

Some companies shrugged their shoulders and continued their plan as is.  For them, a limited number of plan participants distributed across multiple countries made tracking local market grant sizes not worth the time and effort.

But for companies that had a large number of eligible overseas participants, different guidelines would have to be used.  But what?   Ten to fifteen years ago, there was little local market information. 

Now, however, Western multinationals have operations in more countries around the world and more local national employees as well.  As a result, market data on stock is easier to obtain. 

Instead of having different guidelines for every country --- companies are beginning to “clump” countries together that have similar percentages of pay in stock.    There may be 2-4 different sets of guidelines applied based on that method.

In another variation, companies may decide to award stock to participants overseas as a percentage of the U.S. award size.  Europe award sizes might be 80% of U.S. award size; Asia, 50-60%; South America 40%, etc.

As stated earlier, grant size is just one complication in going worldwide with stock, and it is miniscule compared to legal, tax and accounting issues.   I will leave those issues for Dan Walter, the resident stock expert, to address.

Going global with stock plans is not for the faint-hearted.   Yet, even though compensation professionals may still not have all the answers --- information is much better than it used to be, and there are several methods to use in designing plans that didn’t exist before.

Does anyone have a comment on how to determine grant size worldwide?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global 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:  www.gossiponthis.com

Language Inflation

Pay inflation is a popular subject, but you hear a lot less about language inflation.  This is important to compensation professionals because words carry and communicate value.  Misuse of words or misunderstanding of phrases can wreak havoc in our trade.  Job descriptions can be inflated.  CVs can be exaggerated.  Job evaluations can be manipulated.  And it is happening.

Even though pay continues to rise (albeit slowly) despite minimal cost increases and high unemployment, the lethargic American economic growth rate has been vastly outstripped for a long time by hortatory verbal inflation.  It dilutes the meaning of the terms bandied about in virtually every form of advertising, “news” reporting and workplace usage.  For example, “outstanding” is subject to statistical limitation at employers who embrace forced performance distributions; and the word “innovation” has become so overused as to become practically meaningless.

Excessive inappropriate uses of exaggerated adjectives like fantastic, stunning, unbelievable, astounding, amazing and such are causing my eardrums to develop calluses.  “Man bites dog,” might be uncommon, but it is not unprecedented; nor is “excellent” the adjective best suited to describe performance that barely meets minimum standards for retention.  When trivia is elevated to sublime levels, perhaps we have lost touch with the meaning of words.

Decimate (the Roman Army disciplinary measure for units who fled before the enemy) now implies absolute devastation.  Granted, if you were the person randomly selected as one of the ten percent to be killed pour encourager les autres, you certainly were destroyed; but the other ninety percent of your cohort or legion survived, strongly reinforced to mend their past cowardly ways or suffer further negative consequences for undesirable behavior.  While it is true that the old military rule of thumb was that any group that had suffered the loss of one-tenth of its members was no longer considered battle-ready, the slide of meaning from 10% to "close to 100%" is rather dramatic.  If my income growth varied that much, I’d sure notice.  

Maybe that example merely parallels the way we take something that was intended to be a small modicum minimal stipend like Social Security, a Depression-era program to keep the penniless from absolute starvation, originally designed to supplement your normal retirement income, and turn it into the sole retirement fund in today’s thinking.  Although I really wasn’t around when it was first created, I understood that Social Security was sold to employers as a substitute for the Christmas bonus; it was allegedly promised to have approximately the same cost to the employer as the traditional year-end bonus while assuring that the worker would not blow the money, because the government would hold it for them until they retired.

Exaggerated comparative adjectives devaluate meanings until terms first created to indicate extreme emphasis become transformed into ho-hum everyday language.  Just as economic inflation devalues money so the same amount purchases less, language inflation demeans the communication process, numbs your attention-catchers and desensitizes your alarm receptors.  Mundane events are so exaggerated that one begins to automatically depreciate any claim of an extraordinary nature.  It also offends your critical facilities, if you are able to retain them against the relentless unceasing assaults on your sensibilities.

Pitch phrase and Cynical translation

Get the respect/job/settlement (or whatever) you deserve… =  Pay us to stroke your ego

You are entitled to _____. = You don’t have to earn this, because it is your right to have it... but it will cost you to retain us to get it for you

We will battle/struggle/fight for you = We will bully, threaten and blackmail others for a price

But wait… there’s MORE! = If you believe THAT, maybe we can also trick you into THIS

It’s free = Someone else will be charged for it

There are probably new diluted words and morphed phrases that will be encountered in the near future.  Whenever the election season arrives, the level of rhetorical abuse seems to always rise to new heights.  The bad examples flaunted in the media can't help but affect the way people communicate in the workplace.

What is your favorite (if such a term is appropriate) inflated word or saying?  Please suggest any new ones that have crept into the compensation tradecraft vocabulary.

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.

Image courtesy of shop.cafepress.com

Q4 Turn On: Tips on Total Rewards Statements

There are a lot of decisions to make in Q4 2012. This is the first in a series of factoids that you can use to brighten up your planning meetings. Turn on effective decision making and demonstrate, once and for all, how brilliant you are!

+ Employees often underestimate the value of their total rewards package by as much as 70%, according to Towers Watson. 

+ Statements can turn your company's cash burn into ROI. Look at these financial losses. Right now, most employees don't understand how their bonus program works (64%) or understand the value of their health care benefits (57%). Bonuses are designed to incent productivity and results, for pete's sake.

+ Companies that have a history of using total rewards statements often release them every two or three years instead of yearly. No major changes to total rewards? Sending them every year can seem repetitive which will diminish their value to employees.

+ Total rewards statements are powerful. They can show new and existing employees the actual value of being on your team -- in numbers that are easy to remember. They paint a still life of the deal employees have with you, even though a few of the details like career opportunities may be missing.

+ More on their power. Total rewards statements can make disgruntled employees furious. Especially if it's the first time you've sent out statements. If you introduce them out of the blue, with no stated commitment to continue the practice, employees will mistrust your motives. So come clean about your intentions. If employees could interpret your first total rewards statement as a self-serving effort to show how "generous" you are to employees, don't do it no matter how hard the execs push. (With execs like that, your employees will be at least partly right!)

+ Rethink sending a total rewards statement if you are planning to make a cutback soon. You'll be guilty of sending misleading, mixed messages. How? Have you noticed that a total rewards statement is just like that picture of your ninth birthday party. It's a static snapshot capturing a slice of time. Only with total rewards statements there are no visual clues -- like your awful nine-year old haircut in your birthday photo -- that warn us to expect change.   

+ Since total rewards statements are all about coming clean with employees, don't pull back on communications after their distribution. The statement demonstrates that you can be candid and outspoken. Odds are that has helped upgrade your relationship with employees. Even if you're tempted, don't poop out on employees now, no matter how much money or time you have used up to create the statements. Keep the communications coming.

+ Monitor the production and distribution of your statements. There is nothing more disastrous than one employee getting another employee's statement. Or your company sending out the wrong HRIS information. Both of these things happen often enough. Be vigilant. 

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She joined Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- "Everything You Do (in Compensation) Is Communication" -- at the WorldatWork 2012 Conference. 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 Deputy Director 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, Bloomington. Creative writing is one of her outside passions, along with Masters Swimming.

The Survey Says . . . .

Now is the time of year that Compensation practitioners begin to receive their copies of just-published 2012 survey sources.  For many, this will be the "starting gun" event for the annual compensation review of their reward programs - to answer the question, how competitive are we?  How much are we going to need to spend next year? 

Granted, the Finance folks have likely already locked in their plans for what the budgeted payroll spend will be for next year, but on or about Labor Day HR and Compensation will gear themselves up anyway in preparation to answer the question that the bean counters have already locked in an answer and ran with it.  By November the Compensation people will have their own answer.

As we begin this market pricing process of matching titles and descriptions to the survey data it's worthwhile to mentally step back a  moment and reflect that, whatever the surveys report as the "going rate," it's not like Moses coming down from the Mount with the tablets.  There's not going to be a crack of thunder and a peal of lightening to accompany the revelations gleaned from the survey source.  There will be no "Aha!" moment of, "so that's what we need to pay."

And anyway, it's not like you have to do what they tell you.

Feel the pulse

How often have you heard a manager say, "I can hire for less than you show the market rate."  Clients tell me that all the time.  I tell clients that all the time.  Of course you can.

Surveys aren't meant to tell you what to pay, but only what others are paying.  And that figure only represents what participating companies are reporting - which of course is not exactly what everyone is doing.

But how many managers understand or acknowledge that qualifier?  How many read the small print behind the figures?  And how many have their blinders on and simply see the figure on a spreadsheet or report and run off with the number?  Think of Chicken Little being hit on the head, only instead of a portend of doom our little Compensation rascal is scrabbling about, telling anyone who would listen that they have the answer.

So have a care; don't think to use surveys as the "answer man," or having the "smoking gun" for your compensation issues.   Survey data shouldn't replace either common sense or your professional judgment.  Senior management is expecting you to understand and evaluate what you gain from your information sources.  Only then, with a balanced perspective, should you recommend a particular course of action.

Anyone (almost) can read a survey.  It's what you do next, how you interpret the data to form conclusions that lead to recommendations; that is what proves your worth as a Compensation practitioner.

Diminishing value

The question mark left from reading compensation surveys is an especially sensitive issue for those working on the international stage.  There the well-known limitations and even scarcity of robust data sources means that reported compensation figures are best used to provide only anecdotal information, with plenty of "yeah, buts" to qualify what's being reported.

However, management doesn't like to hear that.  They want to pin their hat to the answer, just like they prefer to do in the U.S.  It gives them a  comfort, something to point at; something to blame if criticized.  Only overseas there is even less ability to provide common usage trends and true "market" rates.  There just aren't enough companies participating, not enough identified segments (industry, revenue, region, etc.) to have validated figures that you can point at, can try to match.  Every reported figure should therefore have a list of qualifiers behind it.  If only someone would be paying attention.

So use caution before explaining away your recommendations by saying, "but, the survey says . . . "

It's what you say that's important.

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 Ivan Walsh

How to Be Both Transparent and Secretive at the Same Time

Don't think it's possible?  I'm here to tell you that it's easier than it seems.  In fact, I am struck by the number of companies that manage to pull it off.

How can  you be both transparent and secretive at the same time?  Let me share a few examples.

You can distribute well-crafted, multi-colored and detailed total compensation statements that include such helpful information as an employee's pay grade, salary range and current compa-ratio.  This at the same time that you are maintaining a completely opaque, black box of a job evaluation approach that combines peeking at market data with some type of jerry-rigged point factor system, the administration of which cannot be easily explained or defended because it is half voodoo.  So, while employees can know their salary ranges, neither HR or their manager can tell them the rationale by which they were placed in their current pay grade in the first place.

You can hold regular employee shop talks, where you share information on the company's business outlook, even provide high level financial and operating data, encouraging employees to partner with leaders in making the company successful.  This while holding all employee bonus plan decisions close to the vest, claiming that awards are based on performance, but never committing to any specific set of metrics or formula, preferring instead to make a discretionary last-minute call at year-end, so that employees are never sure what to expect until the check - if there is a check - is distributed.

You can even be so boldly open as to publish every employee salary, all of them for anyone to see, while also granting sporadic, significant salary adjustments to individuals based on a process and criteria that are never talked about and so appear to be completely arbitrary and capricious.

Even in the most open and transparent environments, there are things (particularly in the realm of compensation) that should be kept private.  On the other hand, we need to be mindful of our apparent tendency to compartmentalize transparency.  Employees can connect the dots, even if we can't - and we run the risk that our practices of secrecy in one area will undermine our efforts to be transparent in all others.  The net effect may be that employees become hesitant to trust any of the information we share.

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 courtesy of flipkey.com

Turning the Tables

I recently wrote a post about designing a 3-year comp plan.  Remember that one?  I’d run out of colleagues to write about and had to resort to writing about actual business situations.

I got a couple of comments to the effect that as part of this process you also need to understand your financial plan and I couldn’t agree more.  Having said that, a detailed compensation plan is a tool for HR to influence the CFO, to ensure the financial operating plan incorporates competitive compensation over multiple years.   It can help shape the financial plan. 

It can have a seat at the table, so to speak.

So now I have your attention because we all know the CFO doesn’t care about whiny requests for more money to attract and retain talent and it sounds like I’m suggesting a way around this.  And I sort of am.

The thing is, the CFO cares a lot about company performance so to the extent HR can demonstrate the link between people and business performance you have their attention.  Check out this recent post at WSJ entitled CFO Wish List, which describes how talent culture emerged as  a top priority at The Wall Street Journal's second annual CFO Network meeting in June. 

There’s also a great quote by Joseph Zubretsky, CFO of Aetna Inc.: "Innovation is where our financial capital meets intellectual capital.”  And guess what attending CFOs said they need to do to drive innovation?  For one thing, they need to make sure the right incentive programs are in place. 

Do you hear opportunity knocking?

Unfortunately, CFOs have other priorities too, less exciting things - to the rest of us - like tax overhaul, so it’s not like you have their undivided attention.  Assume you have about 5 minutes to make your case before their eyes glaze over and they start going off about cash flow.  Preparing for this 5 minutes should take about 6 weeks (or 3 weeks if you can finagle an hour) and involves the kind of analysis I wrote about in 3-year comp plan.

There’s a caveat.  If the business isn’t doing well there’s just no more money to be had so don’t bother asking for more.  But let’s assume the business is doing well and your CFO is just cheap and skeptical (as good CFOs tend to be).  HR's job is to help the CFO understand what it costs to attract and retain the right talent.  And because the CFO’s primary concern is to constrain expenses, making the case for additional spend on talent requires very detailed and reliable data. 

So think of the compensation plan as a tool to inform the financial plan and drive business performance by ensuring the right incentive structures are in place to attract and retain the best people.

There are other reasons for this kind of detailed analysis as well.  For example, by analyzing compensation, performance, turnover trends, job information, benefits costs, etc., you may also be able to:

• Demonstrate to the Board that scarce rewards such as equity are targeted to critical talent (this helps them minimize the cost of equity to shareholders).
• Make better decisions about where to produce specific SKUs more profitably.
• Identify inaccuracies in worker classifications that should be corrected - you may even be able to negotiate more favorable insurance premiums. 
• Save on recruiting fees each year with more rigorous analysis of internal talent and management of compensation programs.
• Anticipate bonuses that haven't been paid yet or estimate the cost of severance pay for lines of business that are under consideration to be decommissioned.

That’ll get the CFO’s attention! 

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from 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 (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Picture courtesy of Traversus.

Re-Thinking Compensation At Professional Services Firms

Knowledge is power, but is Ignorance bliss?

I started thinking about this question after reading an article by Mark Herrmann about compensation of partners at professional services firms. 

There is a lot of discussion about the advantages and disadvantages of various kinds of pay structures ranging from equal percentages to eat-what-you-kill systems. But Mark points out that one structure is noticeably missing from the conversation: black-box models of compensation.

Under a black-box compensation structure, the managing partner (or small committee) sets compensation for each partner in the firm. No specific formula is used. Partners are forbidden to discuss compensation with each other. Each partner is told what he will earn in the coming year, either as an absolute dollar amount or a projected draw amount, assuming the firm hits 100% of its cost and revenue targets. That's it. Nothing more, nothing less.

The black-box structure is fundamentally different from other pay structures that allocate profits based on percentages:

1. Equal partnerships: all partners share in profits equally or equally within defined groups of partners (e.g., senior partners and junior partners). This structure emphasizes overall performance of the firm, encourages collaboration and collegiality and provides greater level of income security for individual partners. However, there is a lack of incentives. This structure can create resentment among partners and may result in increased turnover.

2. Lock-step system: each partner is awarded an increasing share of profits based solely on seniority. This system fosters overall firm stability, encourages collaboration and collegiality and provides a greater sense of security for individual partners. This system also suffers from a lack of incentives, and can create resentment amongst partners.

3. Modified Hale and Dorr system: incentive structure where profit percentages are allocated by category: "Finder" (originator of client) "Minder" (responsible for client) and "Grinder" (responsible for doing the work). This system rewards individual contributions. Partners' earnings directly tied to performance, which may result in less resentment amongst partners. The downside is that there are no rewards built in for non-billable work which can lead to reduced willingness to engage in firm management, training, mentoring, recruiting and practice group development.

4. Simple unit formula: compensation is based on points awarded for seniority, production, client generation, and non-billable activities; points are then converted into percentages. This system is simple, and compensation is determined objectively. It may create less resentment amongst partners and can lead to increased willingness to engage in non-billable activities. However, it can lead to client and project hoarding. The seniority component can create resentment by younger partners toward older partners and may result in exodus of younger partners.

5. 50/50 objective/subjective: half of compensation is based on objective criteria (hours billed, revenue generated, client generation statistics) and half of compensation is based on subjective criteria (client handling ability, potential for client development, etc.). This system ties pay to performance while rewarding firm management, mentoring, attempts at client generation not immediately realized. However, there is a lack of transparency and the system may be viewed as open to manipulation.

6. Team building: majority of compensation is tied to overall firm performance, large portion tied to department or team performance, very small portion tied to individual performance. This system emphasizes overall performance of the firm and encourages collaboration and collegiality. It also provides a greater level of income security for individual partners. Like some other systems, there is a lack of incentives. This system can create resentment amongst partners and may result in increased turnover.

7. Eat what you kill: rewards each partner solely on individual efforts, recognizes personal production only. This system provides strong incentives for performance, training and retaining profitable employees. However, there are no rewards built in for non-billable work, which can lead to reduced willingness to engage in firm management, training, mentoring, recruiting and practice group development. It also provides less income security for individual performance and can lead to a lack of collaboration and collegiality.

While it has many of the same advantages and disadvantages of other structures, the black-box structure is different at its core. All of the above systems have some means of comparison - whether everyone is compared against one another and automatically found to be equal, as in the equal partnership, or whether everyone is compared against all others based solely on individual performance. In the black-box system, there is no explicit basis for comparison. And because there is no explicit basis for comparison, there is no objective ground for any complaint. 

Is a black-box model worthy of being included in the discussion? Or is it missing from the conversation because it's so outlandish in this day and age of transparency? Is it even worth discussing?

I don't have the answer. I'm just asking the question in hopes of moving the conversation forward...

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. 

Paying People to STOP Working So Hard

Last year I wrote a Compensation Café article titled: “How Much Money to Do a Job You Don’t Want?”  To summarize, no amount of compensation is enough if you truly hate your job. Today’s article is a different take on a similar concept. On July 10, 2012 Bart Lorang, the CEO of FullContact, announced via his company blog that the company was going to pay employees to take their PAID vacation.  That’s right, the company is going to give it’s employee $7,500 to get off the grid.

Of course, there are a few rules.

1. You have to go on vacation, or you don’t get the money.
2. You must disconnect.
3. You can’t work while on vacation.

There are guiding principles

1. Guiding Principle #1: It’s Really Important to Disconnect.
2. Guiding Principle #2: We’ll Be A Better Company if Employees Disconnect.
3. Guiding Principle #3: Everyone at FullContact Deserves a Nice Vacation.

The blog entry was irreverent and many “corporate” communications people would never have let it be published (it includes a few swear words and a picture of some employees’ bare behinds). But, it was in the CEO’s authentic voice and style. He made it clear it was an experiment, and said that the $7,500 figure was based on a nice vacation to Mexico for a family of four. The following is a great quote from the post: “Perhaps it is a sense of ownership or desire to feel needed, but in many company cultures (especially startups), there is often a misguided hero syndrome that encourages an “I’m the only one who can do this” mentality.”

Not a ton of science. Not a ton of (intentional) pomp and circumstance. But, it resulted in more than a TON of impact.

The posting went viral on multiple media sites and later blog entries claim that the company had more than 3,000 applications in the next three weeks! Lorang even posted the process they use to hire people during this flurry. So 3 rules, 3 guiding principles and 3,000 applicants, seems like a successful program already.

Consider alternative uses for $7,500.

1. A 7.5% bonus for someone who makes $100,000
2. About 850 stock options for a company trading at $25 a share
3. A $625/month raise for an exempt employee

All of the above suggestions are not insignificant. In fact, any of the above may work at your company as well as paid time off worked for FullContact. But, can you actually make them happen? Can you make them happen quickly? Will your employees have the immediate and visceral impact shown by those at FullContact? As FullContact clearly states, this is an experiment. It may not work as hoped. It may only happen once. What I find refreshing is that they took action and made it applicable to all employees regardless of pay level.

What does this tell us?

1. It turns out that people love vacations and a companies who care about them
2. Communication is sometimes as simple as communicating (Lorang does so frequently on all sorts of topics)
3. I need to take more vacations.

I am sure it tells us far more, but I wanted to stick to the theme of threes and get on to taking the next three hours off. If there something your company could do for a similar amount that would have the same impact? Please share!

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”,  “If I’d Only Know That”, “GEOnomics 2011” 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

You Can Never Give Too Much Recognition

One question I’m often asked is, “Can’t you recognize too much or too often? Doesn’t that water down the effect and impact of recognition?”

My answer is nearly always to ask another question, “Have you ever received too much recognition?” The answer is invariably, “No.”

David Witt in the Blanchard LeaderChat blog explains this quite well:

“Ken Blanchard has a favorite question he likes to ask audiences whenever he is teaching about the power of recognition. He asks, ‘How many of you receive too much praise at work?’ It’s a bit of a trick question because Ken knows after asking hundreds of audiences, that very few people ever raise their hands. In fact, most people go on to say that the only time they ever get feedback from their manager is when they do something wrong. For these people, the best they can hope for is, ‘no news is good news.’

“Why are managers and supervisors so stingy with their recognition? Especially when we all know how important it is to be appreciated. As William James, one of the pioneers of modern psychology said, ‘The deepest craving of human nature is the need to be appreciated.’”

Leaving employees to “no news is good news?” I can think of nothing worse as a feedback mechanism in the workplace.

Indeed, I had to laugh when I saw this post and the included video preview of an upcoming movie called “Wreck-It Ralph.” Apparently, Wreck-It Ralph is the “bad guy” in a popular video game who comes to the decision to leave his game (translation: his job) to find fulfillment in another game (job) because, as he says: “It starts to be hard to love your job when no one else seems to like you for doing it.”

As Ralph hops through other games, people trying to play his game realize how much they miss Ralph in his role. The game just isn't the same. Think about the “unsung heroes” in your own organization – the employees grinding out the work day-in and day-out in the low profile roles. They and their daily contributions are absolutely and fundamentally necessary for making it possible for your “stars” to shine.

Those top performers most organizations tend to focus on? How far would they get without the regular contributors? And that’s why we strongly recommend recognizing 70-80% of employees annually. Yes, your top performers will still receive a larger proportion of recognition as they should, but your “middle 70%” will also receive the recognition they need to know that their efforts are necessary, valuable and very important as well.

Who are the “Wreck-It Ralphs” in your organization?

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.