Hammers, Nails and our Compensation Biases

It's called the law of the instrument.  The concept is said to have originated with philosopher Abraham Kaplan, who said "I call it the law of the instrument, and it may be formulated as follows: Give a small boy a hammer, and he will find that everything he encounters needs pounding."  The more popular version comes from Abraham Maslow's The Psychology of Science (1966) and is typically presented as "if all you have is a hammer, every problem looks like a nail."

Sound familiar?  It ought to.  The law of the instrument is alive and well in the field of compensation, compliments of the biases we all hold.

Let's start with the more general bias, that compensation is the fix for every organizational challenge.  Turnover an issue?  Pay them more!  Engagement a problem?  Pay them more!  Employees not meeting performance standards?  Put in an incentive plan (a.k.a. pay them more ... but on a variable basis)!

Never mind taking the time to understand and clearly define the problem so that we can ascertain the best solution.  Pound that hammer and move on!

Sometimes the general bias is ours.  Whether through lack or experience, maturity or confidence, we simply respond to situations with the tool we have most readily available.  Other times, we encounter bias in the leaders we are trying to serve or advise.  They want the quick fix; they don't want some HR or compensation professional digging around in their area for information or answers.  Backs up against the wall, we give them what they want.  And when it doesn't work, they rail against us for our lousy pay plan, which fails to fix a problem that had nothing to do with money in the first place.

Then there are the more specific biases we have toward a particular compensation approach or choice, either because we've had great success with it in the past or just because we find it intellectually appealing.  It may be a particular affection for broadbands, for group incentives or for skill-based pay.   It may be a specific metric that we believe belongs in every sales compensation plan, regardless of the circumstances.  It may even be that we think 360 degree feedback is always the right, or always the wrong, thing to do.  It may be a smaller, more finely tuned hammer, but we swing it just as indiscriminately.

Bottom-line, we all have our biases.  The trick is to be aware of them, be open to understanding the unique business and people reality in every organizational challenge, and be willing to explore other possibilities beyond pounding something with our favorite hammer.

That's what I think.  You?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting 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, is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Creative Commons image "Hammer" by homespot hq

Comments

[E. James (Jim) Brennan]

People naturally stick to the familiar and comfortable proven solution. As covered here in an 8/26/2010 article ("First, You Eliminate Pay as the Solution"), compensation is such a compelling and controversial subject that it usually must be addressed FIRST before management can move on to other potential "fixes"; but that simply increases the pressure on the total rewards advisor to grab the best (and not just the favorite) tool from their kit for the instant situation.

You can't blame folks for preferring to use methods that have proven successful in the past. However, you CAN fault them for not conducting a careful diagnosis before they again automatically assign their favorite prescription.

[Jay Schuster]

I don't know. To be honest at one time I believed I had the answers to nearly every challenge, issue, or application before I confronted it. Now I honestly don't know. I often have more questions than answers and this cascades me into testing and retesting what biases I have left. The broad generalizations about what makes people and organizations 'tick' need evaluation and testing more now than ever before.

My favorite 'bias' is the 'bias to explore'. Remember at one time everyone thought the world was flat and we would sail off the end of it if we went too far. We still have a lot of 'flat world' concepts in our profession and that is what makes 'bias hunting' so much fun.

[Ann Bares]

Jim:

Compensation first? I think I still hold to one of favorite maxims "Incentives are your worst first solution" (courtesy of Paul Hebert). In my experience, management that has been successful in getting a compensation fix in place, whether appropriate or not, has rarely been willing to spend additional time/energy considering the real root causes of the issue they are attempting to address.

Jay:

I love that - the bias to explore. I think I must share that. While my experience (certainly not as comprehensive as yours) has shown me that there are certain truths and principles that cross all organizations where rewards are concerned, I also believe that every organization, its leaders and its people have a unique story -- and I get a charge out of helping them create reward plans that support and celebrate that story!

Thanks both for your thoughts and comments!

[Jay Schuster]

Ann and Jim:

You two folks are in the 'information line of fire every day'. Ann with this blog and Jim with a 'life on the telephone' talking to ERI customers. I would really like to get some insight from both of you about what people are saying about our profession and where it is going. What really matters to them now? Has this changed and how?

If 'exploration' matters, what should be the focus of this exploration? Where should the profession 'put it's future'? What do your customers tell you every day, Jim? Ann, what 'on the side' input do you get about the 'stuff' on this blog?

An 'explorer' wants to know!!!

[E. James (Jim) Brennan]

Ann: My point is that compensation usually must be eliminated as the issue before most managers are willing to look further. It is all too easy, as we all know, to throw money at every problem even when it has nothing to do with compensation. Those who start and stop with comp fixes spend their money but the situation doesn't change except to become more expensive. Once proof is presented that pay is not the panacea, people will move on to more productive solutions.

Jay: the transformation of the profession is too big a topic for a short blog; besides, you have other exploration tasks for next week.

[Ann Bares]

Jay:

Wow - you ask big questions! Exploration - and conversation about the profession and its future - is one of the big reasons this blog is here. So glad to have you part of the dialogue. Given our format, as Jim notes, we are inclined to raise and debate these one "small question with big implications" at a time.

Jim:

Thanks for the clarification. Agree that this is the inclination of most managers and insofar that the "compensation problem" is an essential question of competitive pay levels, it may even be logical to "take compensation off the table" by fixing the problem and then looking for/at deeper root issues. The circumstance I more commonly encounter, however, is one surrounding variable pay and incentives, where the "fix" managers seek may be something like individual incentives. The issue there, and the reason I am advocating pushback, is that putting this fix into place not only misses the real issue and risks unintended consequences, but it squanders resources (available pay dollars) that might have done some real good had a plan been designed with an understanding of the real issue at hand. Unwinding a misdirected program like this may not be easy.

But you are right to point out that this is an uphill, often unwinnable battle. Perhaps only a path for the truly stubborn to insist upon. Guess I've shown that I qualify in this regard.

[E. James (Jim) Brennan]

I really DO agree with you that it is dangerously foolish to willy-nilly apply the same favorite fix to every issue. That is often called, "a solution in search of a problem." What people seek is not always what is needed. Prescription should FOLLOW diagnosis, not precede it.

[Vidal F.]

Very interesting article Ann.
I have been living for the past few years in a society that seems everything as "nails" and boy they have a powerful "hammer"!
You often hear things you would never hear with solid conviction it is the “right answer” when they haven't even figured out what the question really is:
"He said he wants to spend more time with his family, hence the resignation - Nail it: Give him more money..."

"She is looking for career growth and being this a family Co. it would be difficult - Nail it: Not a problem, raise her performance bonus."

“He resigned because his boss sucks, and he can’t take it anymore - Nail it: throw more money at his pension fund and while you’re at it, give his manager a raise to see if he behaves better”

I kid you not!!!

The easiest way is and will always be to throw cash at it - but then it’s only a matter of time till the problem surfaces again.
The laziness prevents people from exploring, investigating and addressing the root-cause instead – and this is what brought us to where we're today.
Most business leaders are way too busy running their business to concern about proper reward’s approach, but are quick to lay-off people when things go south.

[Ann Bares]

Vidal:

Great comment and examples. Funny because they (unfortunately) ring so familiar/true.

You hit the nail on the head with your observation that, too often, our leaders can be too busy running the business to concern themselves with applying rewards appropriately and productively. Sometimes it is a laziness thing. Sometimes it is a "don't let anybody lift that rock and discover what's underneath it" thing. Sometimes, maybe, we (as the HR/comp pros) aren't bringing our case for doing the "right" thing persuasively enough to the table, in the language of business results and financial impact.

Thanks for sharing your perspective and experience here!