Compensation Cafe

How Money Can Buy You Happiness

Today’s post has ramifications on executive compensation, employee base pay theory, and the value of recognition for employee satisfaction and happiness. As you can see, I only like to tackle the large challenges – especially when you recall that compensation philosophies (at any level) are not my area of expertise.

Yet Jim Brennan, a fellow Compensation Café colleague, pointed out this article to the Café klatch, and I couldn’t resist calling “dibs” to write about it. It seems, according to the economists cited in the article, money can buy you happiness. Check out the article for the two graphs showing first, by country, that richer households experience more life satisfaction and second, by households within countries, that more money means happier countries. 

So what does this boil down to? As a country, though US households make more money (and this, in fact, has doubled in size since the 1970s), overall well-being is lower. The article concludes:

“That's not a reason to stop reaching for policies that grow the pie. But it might be a reason to consider better policies to divide it so that more reaches the poorest families.”

I’ll go the extra step the article does not – achieving more of a balance between executive compensation and employee pay. The Swiss passed the strongest “say on pay” legislation yet (though average Swiss employees are also among the highest compensated). The research is a good reminder that pay matters. Regular readers of my posts may be surprised to hear me say that as I usually fall hard on the side of the importance of employee recognition vs. cash bonuses, but don’t misunderstand me. Until base pay is right, fair and appropriate, then it doesn’t matter how much you praise and appreciate employees.

Then just yesterday I saw this article on how money can, indeed, buy happiness. It all depends on how you spend your money with research showing, “We find that people are happier when they spend money on others rather than on themselves.” The author also points out, “Give your time to someone else and you will elevate your level of overall happiness.” These have ramifications directly on employee recognition, which is my area of expertise.

Based on these two articles, I offer three lessons:

1) Compensate people appropriately and fairly, with no single person or band of employees (regardless of rank) earning exponentially more than is relevant to the role or function. In other words, realize that all employees, pulling together, move the ship forward, and should be relevantly compensated for doing so.

2) For many people, their pay cheque is already fully allocated for the daily expenses of life, long before they ever receive it. Rewards and bonuses often offer the most acceptable reason to splurge. When recognizing and rewarding employees for great work or performance, do so in a way that makes it easy for them to use their rewards for others. I’ve heard countless stories of team members redeeming rewards for the benefit of family members (a ballerina outfit for their daughter, a vacation experience for everyone) and not just for something they can individually enjoy.

3) Don’t forget the importance of time. We are all very busy. Our peers as well as those we manage know how busy we are. If we choose to take time from our busy schedules to help them; to answer questions when asked; to pause, notice their good work and recognize them for it, then that can be a tremendous boost to employee happiness in itself.

Can money buy you happiness?

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.

Is Co-Creative Analytics the Answer?

There's been a lot of talk about skill shortages at the Cafe lately. Jim Brennan points out that the educational system may be incapable of closing the talent deficit, resulting in a broken link between compensation and education. Ann Bares also discusses the skill shortage, and thinks the answer may lie in cooperation between the recruiting and compensation functions.

Addressing the challenge of the skill shortage in today's economic environment requires a new approach, and I think Ann may be on to something. I'm a big fan of interdisciplinary solutions. The interdisciplinary approach has led to advancements in disease prevention, economic development and global climate change. It has even led to the development of new fields of study like nanotechnology, genomics and bioinformatics. It brings fresh perspectives to old problems, and can lead to astonishing breakthroughs. 

It may be difficult to find a starting point for this inter-departmental cooperation, given that recruiting and compensation are each unfamiliar with the other's vernacular. Data may be the universal translator, and co-creative analytics may be the ideal starting point.

What is co-creative analytics? Here's how the process was described in a recent HBR blog post:

You put together ad-hoc teams that involve not only analysts with relevant domain expertise but also represent skills from other domains, which brings new ways of thinking to old analytical problems. Over a short two or three day period the team will brainstorm around the problem involved and bring together as much data and as many analytical frameworks as they can to both frame up the problem and outline potential solutions or at least pathways to solutions.

As Ann points out, the solution to the skill shortage may lie in a collaborative effort to better understand alternate candidate pools and identify the rewards strategies likely to attract and retain these candidates. It's easy to see how co-creative analytics could facilitate this collaboration.

This same interdisciplinary approach has applications in other areas of the organization. Performance management immediately comes to mind. A co-creative analytics approach could provide better alignment of individual performance goals with the goals of the organization. It's likely that based on different past successes and failures, different departments will approach a given organizational goal in different ways. Sharing those approaches across departmental lines can spark new ways of looking at old problems, pushing the organization forward.

What other kinds of organizational challenges could co-creative analytics address? 

 

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.