Compensation Cafe

Happy Holidays & an Evidence-Based New Year!

While the year isn't quite over yet (many of us still have holiday shopping to do and there is the potential end-of-world scenario on the 21st to consider), 2012 has been heralded in business buzz as the Year of Big Data.  Research suggests, however, that many of us compensation pros (and our HR partners) either didn't get the memo or left it buried in our in-boxes.  Same seems to be true for the related field of evidence-based management and the notion of seeking and using evidence to make better-informed decisions.

In his article Evidence-Based Rewards Management in WorldatWork's Journal (Q3 2012), Robert Greene talks about the importance of moving our profession to a more evidence-based approach.  He also highlights a number of the obstacles we face in getting there.  I highlight and discuss a few of these below.

One obstacle:  Understanding data analysis

To create and use evidence in our work, we must have a basic understanding of quantitative data analysis.  The problem, as Greene notes, is that many universities do not require this as part of their coursework, even at the graduate level.  Even worse, as someone who serves as a regular instructor in professional certification coursework, Greene observes that not only do many practitioners lack quantitative skills, few of us feel any need to acquire them.  This conclusion is bolstered by the results of an informal study we featured here about what HR professionals want to do in their jobs, conducted by fellow blogger Sharlyn Lauby.  Compensation and benefits (the most quantitative fields of HR) clearly come out as the least favorite.  Sharlyn's take on the study results was that HR pros don't mind spending time on the essence of rewards (but may prefer to avoid the deep dive).  Doesn't sound like a crowd eager to embrace analytics, does it?

Now I'm no expert in quantitative analysis and my skills are rusty from years of minimal use, but my second favorite class in graduate school was a course called Multiple Linear Regression.  I'm not kidding; hear me out.  I took it because, at the time, I was enmeshed in selling and implementing a regression-based job evaluation tool (Multicomp anyone?).  I was floored by how much I enjoyed it.  You dump data into a regression model and out come -- if you know how to look for them -- stories and insights.  It's like CSI, only you're investigating people and pay.  All that I'm saying is give multiple regression a chance.

Another obstacle: Accessing and understanding research

Greene notes another underutilized opportunity -- accessing the evidence available to us through the thousands of research studies that have been done in the field of organizational behavior.  He asserts that there is a problematic gap between research and practices in compensation and discusses some of the reasons for this.  Many of us don't read the journals where the most rigorous research findings are published. (When was the last time you picked up a copy of Academy of Management Journal?  Same here.)  Further, academics have reward structures that drive them to conduct and publish research that is focused on theory and heavy on quantitative analysis -- attributes that make the research less accessible and helpful to those of use trying to make pay work in the real world.  So instead, compensation and HR pros tend to draw their "evidence" from popular books and articles that often fail in their claim to be truly "research based."

This is a problem.  I make a regular effort to read research in our field, and (as a non-PhD) I often find it to be a real slog with little payout for the effort.  I give props to WorldatWork for attempting to bridge this gap with efforts like Kevin Hallock's "research for the real world" column in workspan magazine, where the good professor distills and explains the key findings of recent studies in the reward field.  (Although I also have to chide them for discontinuing mailing hard copy of the Journal to premier members, so that I am forced to regularly search online if I want exposure to articles like Greene's.)

Evidence abounds that evidence-based management is in our future.  We can either get on the bus or end up underneath as it roars by.

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.  Ann was recently named President Elect of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and has joined the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards.  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 giftsponge.com

Will the 1 in 401(k) Stand for Once Upon a Time?

An important shift in our industry was reported this week. It's not about compensation if you stick with the formal definition, but it really is. You'll see.

IBM has announced that the company is reducing it's 401(k) contribution schedule in 2013. The Company will now make only one 401(k) contribution a year, on December 31. Workers who leave the company before Dec. 15 will not receive the match unless they are retiring.

Wow. To give you a rule of thumb, Aon Hewitt's 2011 survey indicated that 84% of U.S. employers match contribution each pay period, 3% match monthly and 3% match quarterly. Only 9% match annually and odds are those contributions have a profit-sharing rationale.

Contributions made throughout the year compound, of course, so IBM employees will be losing that investment advantage (aka higher long-term returns). The once-a-year match also undermines the wise investment strategy of dollar-cost averaging, enabling employees to invest regularly so they can smooth out the impact of the market's ups and downs. And then there are those employees who are motoring toward retirement without the fuel that their financial planning had relied on.

You also might be wondering what the new schedule is going to do to IBM's turnover patterns, with most people leaving for greener pastures in the first quarter?  You would think they have that all worked out, wouldn't you?!?

Forbes and The Wall Street Journal picked up on the story as, "the latest in a series of moves big companies have been making to rein in retirement-plan expenses in recent years . . ." As we know, IBM is famous for making sweeping retirement plan changes that serve as inspiration for other companies itching to shake up the status quo as long as a good amount of money falls out.

The Wall Street Journal reports IBM's explanation as a change that, "reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment." Which may be true, but the explanation is a pretty chilly use of words.

When I read the news, which also got billing in the Daily Stat blog of the Harvard Business Review, I thought that this was a topic that we would want to keep an eye on -- for a lot of reasons. What do you think?

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 and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards, Communications and Change Management with Towers Watson. 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.

Related articles

IBM 401K program pared down, will others follow suit?

Pay For Achievement, Not Just Because of It

You can pay people to do work, or you can pay people because they did work. In the world of incentives, you really should be doing both.

Consider the following. You are working at a mid or low paying job and someone asks you to chip in on an important (to them) and difficult (to you) project. You know you will have to work extra hours, maybe miss that movie you really wanted to see, or worse. Let’s look at two scenarios.

Scenario 1.

The person who requests the extra work tells you that you will get more money if you get the work done. They even offer you a multiple of that amount if you do a great job.

Scenario 2.

The person who requests the extra work gives you some money, or maybe a gift certificate, or something else in which you would find value, prior to you getting the work done. In a best-case scenario, they also offer you a multiple (perhaps a lower multiple than Scenario 1) of that amount if you do a great job.

In Scenario 1, the offer of what you will gain must be sufficiently large and enticing to stay in your mind during the difficult work. Essentially, you must drive your own motivation. You may swear a bit as you work on your own while looking out a dark window. You may even think you got a raw deal, as you wait for the potential reward for your efforts.

In Scenario 2, you eat the cupcakes you bought with your up-front reward. Or maybe, you quickly make reservations at the “apology restaurant” (paid for by the company) where you will take your better half after missing your movie night. Regardless of what you are working on, you can see, taste, or touch some part of your motivation. Sure, the dark window still annoys you, but at least you have a counter-balance.  And, if you do a great job, there is even more at the end of the trail!

In our first example, you WILL get paid because you DID something. In our second, you DID get paid, because you WILL do something. For one the motivation is pull and in the other the motivation is a push (with a pull as well). I have found that compensation programs that provide both push and pull are incredibly effective. I have also found that many companies miss this easy opportunity.

I have seen the push come from something as simple as a nice, but unexpected pre-effort dinner. I have also seen companies build some value into the their long-term compensation programs right from the start (consider the ESPP with a discount on the day you join.)

This process is regularly performed for executives and other critical employees when they are hired, but how long does that “sign-on bonus” continue to have impact? Many companies have recognition programs, but how many recognize hard work before it must be performed? I know what you’re thinking. “What if they never get the job done?” There is always a risk when you pay someone in advance, but you would never expect to get something sent from Amazon without prior payment. Perhaps you consider evolving the compensation/reward contract to include pre-incentives for specific circumstances.

Ask yourself this. Would Scenario 1 or Scenario 2 work better to get you to do something special? Which do you practice at your company?

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

Compensation Conundrums

Since this will be my last post for 2012, I thought I would leave you with some basic questions I have about compensation that I haven't been able to resolve.  Let me clarify.  I know WHY these issues exist ----- I just don't know why we ALLOW them to exist.  You know the old saying:  Doing the same thing over and over again hoping for a different outcome is the definition of insanity.

Here goes:

1) If compensation is indeed a dissatisfier, then why do we spend so much of our time designing incentive plans, stock plans, etc.?  Since every employee has his/her own threshold of “satisfaction”, are these extra plans a means of making sure everyone’s threshold is met?  Or are we just following our competition by providing such plans even if we know better?
2) If “pay for performance” is such an engrained philosophy in the U.S., then why does it seem to apply only to employees below the rank of executive?   We know it, so why don’t we do something about it?
3) If stock plans seem to reward executives for short-term, quarterly stock performance when they were originally designed to reward long-term performance, why do we still use them?
4) If compensation is a dissastisfier, why don’t we focus on non-monetary forms of recognition to reward outstanding performance instead of giving more money in the form of incentive plans?
5) If using merit matrixes that include range position as a factor in assigning pay increases creates so much dissention, then why do we continue to use them?  Must we insist on being “purists”?
6) If our compensation plans are so simple and easy to understand, why is it so difficult to craft communication pieces that employees can comprehend?
7) Why do we consider what the competition does our “holy grail” when, if we truly think about it, we realize our company is unique and may require different solutions than Company A, B or C?
8) If we blithely spout “one size does not fit all”, then why do we turn around and try to force fit our U.S. practices on other countries where they truly DON'T fit and do nothing but irritate employees? 
9) If compensation’s main goal is to align with corporate business strategy, then why do some of us go off in a corner and design our own philosophy and strategy that may or may not support our company's goals?  Do we believe our strategy is better even though it doesn’t “fit” with our company's strategy?  Or worse, do we not even know what our company's strategy is?
10) Why is it that we are assailed with information that says we are not providing top management with the data they need --- and ignore it.  What keeps us from stepping up to meet their needs?

Again, I think I know the answers.  What I don’t understand is why we don’t change what we do.  What does that say about us?

Surely, in your heart of hearts, you have some conundrums of your own. I invite you to come up with your own list.

As for me, I’ll continue to struggle with how to address mine in 2013.

Merry Christmas and Happy New Year!   See you in 2013!

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 expatriate herself twice during her career.  Her true love is working on 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  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 two much loved, 4-legged children.

Image courtesy of magicalmaths.org

Thanks, But No Thanks - I'll Stay an Employee

Ownership path? Not impressed...

My, how times have changed. When I was a kid just starting my career, being offered partnership in the firm was a coveted opportunity, an important milestone indicating that all of the hard work you put in to developing your craft was really starting to pay off in big ways. I remember the day the offer was made to me - I was 34 and I couldn't say yes fast enough.

Things today, however, are a little different. The partnership track doesn't hold the same allure for many younger workers as it once did. 

A recent study by Investment News found that only 36% of young people planning to enter the financial advisory business ranked an ownership path as one of their top three incentives that a firm could offer. Flexible hours, cutting-edge technology, and bonuses were ranked as more important than ownership opportunities.

Within the legal field, making partner isn't necessarily the golden ticket it once was. Robin Sparkman, Editor in Chief of The American Lawyer, says that not only does today's path to partner take longer, the demands are a lot more stringent. Many younger attorneys are thinking twice before making that kind of commitment to one firm.

Legal and financial advisory services may not be the only sectors affected. The Bureau of Labor Statistics estimates that the average worker today stays at his job for only 4.4 years. The average tenure is expected to be even shorter for Millennials. A survey conducted by Future Workplace found that among those born between 1977 and 1997, 91% expect to stay in a job for less than three years.

With less concern about long-term stability, less emphasis on long-term loyalty to one company, and a greater interest in building a career that provides fulfillment and stays true to personal values, saying no to partnership opportunities may be a growing trend.

This could pose some problems for the standard exit strategy for current business owners and partners. While they may want to sell to the next generation, the next generation may not be buying. According to Marjorie Fox of Fox Joss & Yankee, "we've talked in concept with some of our folks about passing on the reins over the next 10 years or so, and we've gotten a little push-back."

Succession planning is never easy. Senior partners may be reluctant to acknowledge that they're approaching the next phase of their lives. Handing over control of something you've worked your whole adult life to create can feel like a daunting task. It's even more difficult when the person you've chosen to pass the torch to doesn't extend his hand to receive it.

But the growing trend of choosing "employee" over "owner" may have an upside. According to Patrick Hammer, President of HFS Wealth Advisors, "it's important that we know what we're good at and what we're not good at, and some people would be bad at being a manager or owner." This self-selection may lead to a future generation of leaders that truly understands the great risks and responsibilities of ownership and is ready to rise to the challenge. It may mean that when the reins do get passed, they will be in the most capable hands possible.

Whether we view it as good or bad, we have to face the fact that workplaces are changing. Our total rewards strategies - and succession plans - must recognize that younger workers may say "thanks but no thanks" to equity compensation and the ownership path. They're not easily impressed with traditional rewards...

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., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

Image courtesy of Getty Images

Pay is a Leaker

Pay can create leaks or make holes but it can't activate engagement

How to maintain low-cost engagement parties with small budgets seems to be the theme of the season.  We are not talking about the formal premarital status of a couple intending to enter the state of matrimony but instead address the psychological term for a deep dedication to work.  Employee engagement shows itself in a sense of personal emotional involvement and identification much like ownership.

Employee engagement is not something you can create.  Engagement is an employee choice.  Management can establish the conditions in which engagement can thrive but cannot command or dictate it.  People have their own motivations.  The best any employer can do is to offer a menu of reinforcements, reward systems, and consequences for positive organizational behaviors that are attractive to your particular workforce.  Such factors as communications, empowerment, incentives, performance feedback and working relationships are called “drivers” because they are considered effective in enhancing employee engagement. 

Pay is not generally considered a “driver” of employee engagement.  Yes, the reward and remuneration process that encompasses recognition, communication and feedback is certainly an engagement vehicle, but the dollars, pounds and euros themselves are not “drivers.”  I would go so far as to identify pay as a “leaker” that can deflate engagement but can’t directly increase it.  Passion for an occupation and enthusiasm for a work role can’t be bought with money.  But it can be quenched by pay cuts or starved by inadequate compensation.  Workers who are financially challenged due to low wages find that intrinsic satisfaction won’t pay the rent or put food on the table.  Once income rises to the hygiene level that removes it as a dissatisfier, the subject will perk up and become potentially open to responding positively to other reinforcement techniques that can activate employee engagement.  Until remuneration is at least minimally acceptable to the employee, they are unlikely to become engaged in their work.

Since low pay or demotivational reward practices can turn engagement off, it is therefore important to pay people right.  Decent salary is a necessary but insufficient precondition for engagement.  That point should be emphasized, because enterprises face problems where pay lags or is delivered by a process seen as inequitable.  They must first remedy those issues before they can ever dream of engaging their workers.  Pay can’t float your boat, but cracks caused by negligent inattention can sink it.  Once the leaks have been plugged, the boat can move across the waters towards its destination. 

With this understanding, it may become clearer that employee engagement simply requires “enough” pay rather than immense compensation sums.  The hard part of that challenge is determining when pay is sufficiently adequate to permit a supportive environment for engagement initiatives and finding the money to plug the gaps where they exist. 

 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 photo "Drip"  © 2011 J. Ronald Lee

Don’t Forget the Cake along with the Annual Bonus Icing

As we approach the end of 2012, our thoughts are turning to end-of-year standards such as the annual bonus, the holiday party, and the like (at least this is true for the vast majority of us in the Compensation, Recognition and Total Rewards space). And this is well within the spirit of the season – giving and acknowledging the gifts of others.

Yet these traditional approaches are fraught with challenges. In just the last couple of weeks, I’ve skimmed more articles than I care to count on office holiday parties gone wrong or what to do to plan the perfect office party on a limited budget. The holiday party isn’t the true end of year challenge, though.

The annual bonus is.

My Compensation Café colleague, Dan Walter, ably pointed out why in his post yesterday about cash or cachet. As Dan said:

“Cash is great. Let’s face it, we could all use more of it and would be happy if someone gave it to us. Unfortunately, every company has a limited amount of cash to spread around.  Even in the best years companies do not have an endless supply of money. In our current era where 3% is considered a good merit increase and broad-based LTI incentives seem to be losing ground, we all need to find better ways to stay competitive in the battle for talent.”

A SmartPulse poll earlier this week tells us why we should be concerned about the limited amount of cash to spread around.

 

Of course, we can read between the lines on these results in several ways:

1. Those leaving were already planning to leave and are just waiting until they get the extra cash.
2. The bonus amount so insulted some, it was the final straw.
3. The bonus doesn’t matter to the majority.

Regardless of how you read this, the solution is not to give, as SmartBrief suggests, “an extra few dollars in their bonus to avoid the possibility of losing them and spending multiples of that money finding and training someone new.”

Why not take such a simple solution? Because the challenge is much more complex than that. A recent Right Management survey shows 86% of US workers say they intend to look for a new job in 2013. (Be sure to read Mark Toth’s post on reading between the lines on those results.)

Regardless of intent to actually leave in the new year, think of the consequences of 86% of your employees not being fully focused on the task at a hand because they’re daydreaming about their next job or surfing job boards if even passively looking for one.

A few extra dollars in the annual bonus isn’t going to solve that problem. Look, I’m not saying don’t do an annual bonus at all. Just remember that it’s only one element in Total Rewards, and it should merely be icing on the cake after a year’s worth of ongoing, timely, frequent and very specific recognition and rewards. That’s what builds loyalty and increases retention among your employees – a continuing sense of knowing that what I do every day matters and makes a difference in the success of the team, the company and the customers.

While icing alone may be nice treat, enjoying the entire cake is surely more enticing.

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.

Image credit: Martin Senekal Confectionary Design 

Will Your 2013 Sales Plan Make It Through the 1st Q?

Zig Ziglar was a good friend of salespeople. His unflagging optimism will be missed. While most people in sales adore their life work, they will admit that it is very tough emotionally. When losing is considered an opportunity, you know that it takes a very special person to love the work. When winning is based on your ability to build relationships, a truth that good salespeople know, the ups are affirming but the downs can feel like it's all about you.

That's why Zig Ziglar's quotes are well loved. "If you dream it then you can achieve it." A real pro knows you've got to learn from each sales encounter. If you do it well, trust between you and your client will turn into mutual satisfaction, which is another way of describing a sale isn't it?

Effective sales are relationship-based and so are effective sales compensation plans. That's why the "transactional" communications that are so often used to explain sales compensation plans -- here's the formula, notice the threshold and multipliers, etc. -- will not leverage sales goals as successfully as you might hope.  

Human nature needs to be taken into account. Sales reps won't truly understand their quotas until their first incentive check. They'll nod their head at the sales meeting but muddle through until that check. Then the questions come. Questions that will be far be too late for those 1st Q numbers.

Look beyond your high performers to build sales. Fast forward to your payout dates, and think about what your core performers will need to get there. Most sales comp is based on complex measures. Salespeople are often faced with aggregate quotas achieved through a range of sub quotas or targets. Knowing the plan formula won't help sales reps identify interdependencies between targets or understand how to develop priorities that align with the overall sales strategy. Plan ahead to turn core performers into high performers by giving them tactical and strategic insights to increase their results.

Communication on your sales plan really matters, both to your relationships with your sales force and to your numbers. Don't assume your typical sales compensation explanations are building relationships or delivering the best results. Admit that your human nature makes it difficult to get beyond your own feelings about each of the sales people.

One of Zig Ziglar's most well-loved sales quotes is, "You will get all you want in life, if you help enough other people get what they want." A good description of sales compensation and sales management, don't you think?

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 and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards, Communications and Change Management with Towers Watson. 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.

Cash or Cachet?

Archimedes was quoted as saying, “Give me a lever and I can move the world.” I am sure that he was probably referring to the world of total rewards and compensation. Properly leveraging total rewards is a delicate act. You must use the right instruments and amounts. An even more difficult aspect is determining the optimal balance point. Often, more depends on perception than actual differentiation.

We’ll start with the obvious. Cash is great. Let’s face it, we could all use more of it and would be happy if someone gave it to us. Unfortunately, every company has a limited amount of cash to spread around.  Even in the best years companies do not have an endless supply of money. In our current era where 3% is considered a good merit increase and broad-based LTI incentives seem to be losing ground, we all need to find better ways to stay competitive in the battle for talent.

You may be able to find more value in non-cash compensation instruments, if you are willing to build their cachet before you start giving them to employees.

Luckily, cachet can be more important than cash. With proper planning and communication you can create a cachet for nearly any compensation or reward element. Without building this critical perception element, it’s difficult to get true value out of any non-cash component of a pay package.

Recognition and reward programs of the kind often discussed by Derek Irvine at this blog, are very useful tools for communicating “social status” at a company. Unfortunately, these instruments cannot always be appropriately sized for higher-paid staff members. And, these programs do not help if there are already issues with keeping your staff at competitive total compensation levels. When common recognition programs won’t work and merit increases no longer catch employees’ attention, what should you do?

Instead of offering differentiated merit increases, I have seen companies offering flatter raises to everyone. They then boost the total compensation of high-performing staff members by granting awards from well-communicated “special” LTI programs. These programs are communicated long in advance of awards being given. The goal is to build a perception of a unique status that is similar to that held by job titles in certain organizations. Unlike inflationary job titles that are hard to take away and can result in more costs that planned (read Chuck Czimar’s great post), special awards are just that…special.

These awards can be given for meeting pre-specified criteria or they might be given based on unplanned discretion or links to other performance factors. The trick is communicating the cachet of the program in advance. It must be clear that the program is for the “above and beyond.”  If the awards are given in equity, they may result in the same, or less, total compensation accounting expense as cash. That expense can be spread across multiple years. In effect, you are giving the same amount, or more, to the employees, but it can cost your company less.

Like anything in the world of compensation these types of programs must be designed, communicated and administered carefully. But, if you need to move the world when nothing else will, they just might provide the lever you need. Cachet, instead of cash, may be the best solution to Archimedes dilemma.

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

What Does J.R. Ewing Have to Do With Compensation?

Being from Dallas, I just can't let the opportunity go by without pulling J.R. Ewing into a post.   Some of you might know that Larry Hagman who portrayed J.R. in the TV series Dallas died over Thanksgiving.

J.R. Ewing was larger than life --- a mover and shaker, a bad boy, someone that “stirred the pot”. 

OK what does this have to do with compensation?  I  think that HR might want to act a little more like him on some things.  No, I'm not crazy.  Read these suggestions and see if you don't agree.

1) Start taking some risk.  One thing about J.R. --- he was good at taking risks.  And he was pretty good at knowing when a risk was worth taking and when it was not. 

HR as a profession has a long history of being risk averse.  Aside from avoiding obvious labor law risks, we need to see risk as not just a challenge but an opportunity. In a recent report from the Conference Board, one of the three top challenges that keep HR from having a "seat at the table"  is a low tolerance for risk.  Taking calculated risk is what drives innovation.   In the future, knowing the risks to take will be just as important as knowing the ones not to take.

2) Break free of old "stuff" that's not useful anymore.   J.R. always kept his eye out for new schemes. And he didn't expect his past tricks in deals to work in future business deals or . . . ah . . . with the ladies.

Breaking free is sort of like cleaning out the closets.   I challenge anyone who says that XYZ process, plan, program, methodology is an absolute in the compensation field and will never change.   Not in today's world.  

I’m not suggesting a cavalier tossing of everything we’re doing today---- not even J.R. would recommend that.  BUT it can’t hurt to re-examine our compensation programs periodically with an open mind to insure continued "fit" with business strategy.   And it doesn't hurt to think about future possibilities for compensation before the need arises.

Remember: If you find a good solution and become attached to it, that solution may become your next problem.

3) "Stir the pot".   J.R. loved nothing better than to shake things up. 

What I mean is don't be afraid to stimulate new thinking, and consider fresh ideas and opinions even though you may disagree.   When you run across what you consider "bad ideas" --- think about them and figure out what you don't like.  Sometimes the answers are quite revealing. 

Talk with company executives.  Brainstorm with them.  Talk about some "what if's" --various scenarios if business strategy changes.  Get them involved in discussing the impact of these changes on employees.  

Talk to employees.  No --- I don't mean sending computerized surveys to all of them.  Instead, select a broad sampling, and talk to them in small groups.  Face to face.  (Gee, what a novel idea!).  Learn what motivates and is important to them.

4) Promote fun with compensation.   No one had more fun in life than J.R. 

Maybe I'm alone in my thinking, but to me compensation today doesn't seem to do much to excite people, even considering the impact of the recession.

Listen, I don’t have all the answers --- not even most of them.   But I am a cheerleader for the cause.   I hope you join me.

Hmmmm . . . . now how can we put some “fun” into compensation?   

Rest in peace J.R.

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 two much loved, 4-legged children.

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