Compensation Cafe

Want a Promotion? Start Reading Your Annual Report

Every one of us wants to be considered a trusted advisor to our leaders. But how many of us have read our company's annual report?

I think I can hear a pin drop.

It's a good thing that no one's talking, too, because our work doesn't deserve even a "meets expectations" unless we read the annual report each year. Here's what we're missing:

What the CEO has publically committed to do. Note to self: Have our employees written objectives that will roll up into this achievement? Who are the managers that are under the most pressure to deliver? Do they have the resources they need? Do they have the HR support that they need?

How the CEO and the Board talk to each other about the business. When strategy is communicated within the company what you typically hear are the headlines. These communications make you aware of the priorities, but don't imagine that you understand the strategy until you know -- and can talk about -- the reasons for the strategy.

Worried that you won't understand what the terminology and numbers in the annual report mean?

A. That's the best reason to read the report. You could use more professional confidence and savoir faire! 

B. It's easy to Google anything you're fuzzy about.

C. Most companies make a real effort to talk to the general business reader in their report. It's time to become one of those, don't you think? Plus you can learn so much, especially from the bigger companies, who often provide investor education along with their announcements.

Where the company is investing for the future. Can't get your leaders to think about talent management or even HR strategy? Follow the money. You'll find a lot of the information you need in the annual report.

If the company's heading in X direction, managers need to be equipped to support that strategy. If X division is expected to be the next big thing in terms of revenue . . .  Do they need more people? (Payroll and Recruiting) Will other employees want to be able to move into the division? (Policies and Salary Management) Are mergers and acquisitions on the horizon? (Planning and Staffing) Will there be greater emphasis outside of the U.S.? (HR Operations and Compensation Design)

Wondering why your ideas for X division or department are falling on deaf ears? It may be that they are not a focus for investment right now and you haven't noticed.

It's pretty straightforward, don't you think? If you're in Compensation but unaware of what's in the annual report, you really may not be doing your job as well as you could. On the other hand, if you're conversant with the annual report, odds are you're earning management trust and attention for your insights.

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication -- in an upcoming book. Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal with Towers Watson. Margaret 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.

Are Your Compensation Programs No-DOMA Ready?

Are Your Compensation Programs No-DOMA Ready?

First, congratulations to everyone who can now legally experience what is the best thing about my life, marriage. A quick shout of support for those still fighting on this front.

Second, over a month ago, Section 3 of the federal Defense of Marriage Act (DOMA) was ruled unconstitutional. This means that a marriage legally performed in any state must be recognized at the federal level. You may have considered what this means for your friends and employees affected, but have you considered what this means for your compensation plans?

Let’s be honest, when it comes to a showdown between personal freedom and your compensation documents, documents are always the higher priority! In this case, you need to review every plan, agreement, SPD and communication for the term “spouse”. You also need to review the same for every possible euphemism that has been created to avoid using the word spouse. For every instance you will need to determine, with your legal counsel, what needs to be done.

How will beneficiary forms be modified? Will you need new information (immediately)? What happens in a divorce or QDRO?  How do your programs define family for FMLA purposes? What about expat tax equalization? Do your programs change now that some of your employees have spouses?

Paul Chestovich of Maslon discussed some of the SEC regulations that public companies must follow. Beneficial ownership under Section 16 of the Securities Exchange Act of 1934 may now require you to report on newly deemed “spouses”. Paul mentions issues with Rule 144, Forms S-8, accredited Investors and more. What about the transactions performed prior to the ruling? What needs to be done? How do you reach out to your staff and require them to give you information on spouses in a way that is both efficient and non-invasive?

Many private companies require a spouse to sign stock agreements for both purchased and awarded stock. If an individual was married prior to the recent ruling, does this mean that these forms may have been incorrectly completed?

Have there been transfers of stock options that meet the spousal tax requirements? Do you have retirement programs that allow spouses to participate, even pre-death? Do you have employees working in a state where marriage is recognized and living in a state where it isn’t? Will this impact who can be transferred within your organization? I won't even get into insurance and benefit plans.

Obviously, there are far more questions than answers right now. Luckily, July and August are traditionally two of the slower months for compensation professionals. We have the time to read, review, discuss, modify and make these plans work for our newly lucky employees and for our already time-strapped compensation teams. 

What have you already done? What do you still need to do? Let’s build a comprehensive list on the comments section.

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.

Beware The Manager Bearing Gifts

A client once asked me why a Senior Accountant (non-exempt) reported to an Accountant (exempt).  This same company used the title “Supervisor” to describe individual contributor positions and it wasn't uncommon for Managers to report to Managers and Directors to report to Directors.

Given that these situations occurred in a large and presumably sophisticated company, one might ask - what’s the big deal, and is anyone being harmed?  Advocates say that offering an employee a special title is a harmless and inexpensive reward, one that doesn’t increase employer costs. 

I don’t think so. 

Source of the problem

·         Managers grant esoteric titles to those for whom they have limited means of reward.  “I can’t give you the increase you deserve, so let’s change your title to xxxxx.”  Like greasing a squeaky wheel for a short term fix they want to do something to keep the employee quiet.

·         Employees are given titles where none should exist, like the Secretary / Administrative Assistant promoted to Office Manager, while still performing the same job.

·         A “special” title is used because the position is considered so different from other jobs that it needs to be specifically identified.  Unique titles can also be seen as reflecting on the importance of the managers themselves.

A bitter harvest 

Let 's look ahead at what you can expect from planting these problem “seeds.”

·         Role clarity (job duties, business impact, decision-making, etc.) becomes blurred.  This in turn generates confusion as the company creates Senior Managers and Group or Area Directors and other in-between titles to differentiate the “real” jobs from inflated titles. 

·         When reviewing market competitiveness, the less accurate the title is in relation to the work performed, the more likely your analysis will be skewed.  Benchmarking unique, employee-specific and inflated titles hampers an accurate assessment of your competitiveness.

·         Those with inflated titles will expect the perks or privileges that accompany the title, and their absence could cause difficulties.  It’s an awkward conversation when you tell an employee that the import of their new level in the organization is “title only.”

·         Inflated titles can be a detriment to incumbents as well, such as the “Director” who now only qualifies for a “Manager” title with a prospective employer.  Opportunities outside your company are limited because potential employers would be reluctant to hire someone where the new title is lateral or even backward to that currently held. 

·         The natural extension of inflated titles is inflated grades / salary ranges, as the bogus “senior” position would be placed in a higher grade than the “intermediate” position.  This practice increases your fixed costs without a corresponding rise in either capability or performance.

·         Employees don't like giving up inappropriate titles.  Thus employee relations  issues will likely develop as you try to correct past practices.  You may have to develop creative “buy out” or "grandfather" scenarios.

What to do 

If you do find yourself in a situation with inflated and confusing job titles, what steps can improve your lot?

1.       Organize a cleaning exercise; start with the low hanging fruit and eliminate all unoccupied titles.

2.       Accompany that initiative by implementing tighter authorization procedures before a new title is created.  This would cut off the flow of new problems even as you address the core issue - incumbents. 

3.       Fewer job descriptions would be needed if wording was more generalized.  Standardized titles would clear away much of the role responsibility confusion.

The general nature of clerical duties (filing, record keeping, secretarial, forms processing, etc.) lends itself to standardization - which in turn makes it easier to transfer employees without having to “promote” someone when their title changes.

Remember though, that  title standardization makes more sense in a conference room than it does during an employee discussion.  A “Senior Depository Research Clerk” sounds more important than a “Clerk III” or even “Senior Clerk.”

Fewer titles provide greater role clarity, improved accuracy in assessing pay competitiveness, more control of labor costs and higher morale as employees know where they stand and what they must do to succeed in your organization.

A final caution: be careful of setting up titles without occupants "in case we want to promote someone down the road."  Guess what?  You will.

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 stevendepolo

Structure and Rules Aren't Always the Enemy

I enjoy working with entrepreneurs and am grateful to have many of them as clients.  I love their energy, their optimism and their sense of curiosity.  I also appreciate their healthy skepticism about structure and rules.

Structure and rules, even the most well intended, can get in the way of doing business well.  They can tempt manager and employees to hide behind "policy" rather than striving to understand and meet a customer's needs.  They can create paths of least resistance, becoming an obstacle to figuring out and doing the right thing.  For a business owner who truly believes in the power of his/her people, structure and rules can seem like mechanisms for disempowering and boxing those people in.

Many entrepreneurs, including those who have grown their businesses to respectable sizes and substantial employment numbers, wear their lack of structure and rules like a badge of honor.  Which it can be.  Sometimes.

But this attitude can create problems when it comes to compensation.  And the reason for this, in a nutshell, is what that resistance to pay structure and rules can say to employees.   (Remember: Everything we do in compensation is communication!)

When there are no visible structures or rules guiding how employees are paid, employees may conclude that compensation is all about how well you negotiate, how skilled you are at calling attention to your accomplishments (perhaps minimizing the contributions of others), and/or how willing you are to be a "squeaking wheel."  Without clear structure and rules in place, employees' confidence that their compensation is fair rests entirely on their trust in management to accomplish this on a discretionary and ad hoc basis.  Where trust in management is high, and particularly where those trusted managers have clearly articulated the intent and principles which guide their unstructured approach to pay decisions, this may be fine.  Good, even.

Where this isn't the case, where trust and faith in management has suffered a few blows, employees may conclude that is on them to get fairly paid, however they believe this is best accomplished.

What has your experience been?  Have you seen a "structure-less, rule-less" approach to employee compensation succeed?  Or fail?  What observations and lessons could you 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 to a 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 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 foodie in her spare time.  Follow her on Twitter at @annbares.

Creative Commons image "Easter Show, XX" by newtown grafitti

The Importance of CEO/HR Partnership to Creating a Culture of Recognition

Regular readers know my passion for employee recognition done right. Achieving that goal, however, requires much more than tossing out yet another recognition program. It requires creating a culture of recognition. And that cannot be done by one person (or even a team) who owns recognition. Every employee must own the culture, and they must be led by the CEO.

In the Switch & Shift blog, which is rapidly becoming one of my favorite business and HR leadership blogs, this post on the importance of HR to the CEO caught my attention. John Bell, retired CEO of coffee/confectioner Jacobs Suchard (now part of Kraft), shared the below wisdom on the CEO’s exclusive role and responsibility for establishing the culture of the company and setting the tone for success.

“Ultimately, it is the CEO who determines the corporate culture, whether it is good or bad. During my tenure, I was extremely competitive, action-oriented and results-driven. So is it any wonder that my employees held the same values?"

“I’ll explain the cohesion this way: Firstly, our cultural characteristics were monitored and measured. Secondly, we recruited for the right fit, the right cultural mindset, followed by skills. Thirdly, we understood and appreciated the fact that our superior financial results were the result of this modus operandi.”

The tone and style of the CEO directly impacts how others in the organization get work done. The CEO must own this responsibility and, if necessary, adjust his or her style to ensure employees are emulating the behaviors that will achieve needed results.

In the article, Mr. Bell shared four solid reasons why, to achieve desired goals, the CEO must partner tightly with HR. Just one of those reasons was:

1. “A strategic HR Team Can Be Instrumental in Helping a CEO Realize a Leader’s Greatest Sense of Gratification."
2. “A CEO should be encouraging, nurturing and allowing human beings to reach their full potential, both personally and professionally."
3. “Take a look at the perennial success companies. Often, they have a ‘way’ . . . a distinctive culture that works for them. The custodian of the ‘way’ is the Chief Executive Officer and the Chief Human Resources Officer. It is time to use the HR group strategically and bring their leader into the board room."
4. “The only person who can do that is the CEO.”

HR can provide needed detailed information on how the culture of the company currently functions, what works, and what hinders. The CEO owns the responsibility of creating, changing or continuing the culture that underpins success. A true partnership is necessary to ensure the CEO is making culture decisions with the right information and not purely on “gut reaction.”

How does your CEO partner with HR 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.

Developing Plans for a New Country --- It's Like being a Pioneer --- Part 4

This is part 4 ---- the last in a series.

As stated in Part 1, labor cost can be a large part of total cost in setting up an operation in a new country.  Therefore Compensation professionals need to be involved from the very beginning to set up plans that are both competitive and cost effective.

In Part 1 and 2 we looked at some corporate issues that need to be resolved before plans are developed for a new country site.  In Part 3 we reviewed some local issues.

For Part 4 let’s look at a few more local issues.

The employment contract  

Probably the biggest thing that U.S. companies must come to terms with is that the U.S. is the only country that has "employment at will".  (Some argue there are three countries.)  That’s an eye-opener for management --- sometimes even in-house legal counsel doesn’t know this.

U.S. companies sometimes try to do an “end run” by using fixed-term monthly employment contracts or long probation periods to mirror employment at will.  That way, no one ever has to be fired; the company can just stop renewing an employee’s contract.  But countries often regulate how long probations can be and how many times a fixed contract can be renewed. 

Another difference between the U.S. and other countries is the offer letter or “employment contract” as it’s called overseas.  In the U.S. an offer letter is 1-2 pages long and very general compared to an employment contract, and shouldn’t be used.

Employment contracts, on the other hand, are typically 10-12 pages long and cover things like:  holidays, vacation, sick leave, capped hours, bonuses, severance pay, pay rate, benefits, office location, work schedule, etc.  They’re like U.S offer letters and employee handbooks rolled into one.  Content might not be completely controlled by the company alone.  Sometimes certain policies, benefit plans, etc. are dictated by unions or collective bargaining units of some type.  

Laws in some countries mandate that employment contracts be in the local language.  A word to the wise ---instead of trying to keep up with which countries require/don’t require it ---- do it for all countries.  It just makes life simpler and insures that employees understand the contents.  Many U.S. companies keep two sets of documents --- one in the local language and one in English.

Choosing the best surveys

Selecting surveys by country:  This allows selection of whatever survey seems the best in a given country.  Probably 99% of all compensation/benefits surveys are done by global vendors --- but depending on the country or region some are better than others. This method allows you to pick and choose. 

Single global provider for all countries:  If you don’t have the time or bandwidth to research surveys for each country, it might be best to use one provider worldwide.  This is the simplest approach.  The downside is that in a given country, relevant competitors you want data from may participate in a different survey. The good news is, however, a global provider uses the same methodology across countries. 

Some surveys have been “marketed” very well at the corporate level of a company but not so much at the local level.  The best surveys I’ve seen have been marketed very well at both levels.  This is important if you want to have local buy-in

That’s it.   I’m through --- four posts on the same subject are enough.   Hopefully there are a few of you out there who’ve found this information helpful.

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 been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

Lunch with the CFO

My Café colleague Margaret O'Hanlon wrote an excellent post recently about the shared priorities and opportunities for teaming HR and Finance have.  You can read it here.

In the spirit of Hey, HR, Have You Hugged Your CIO Lately? Margaret advised having lunch with the CFO to get to know them better.  I’d like to pick up where Margaret left off and suggest some possible conversation topics.

Historically, both HR and finance have been used to thinking very separately about their data, business processes, and information.   In fact, it’s common for both organizations to spend inordinate amounts of time and resources reconciling the differences in their data, which is usually fairly stale.

Add to this the fact that not all HR executives are fluent in finance and you have what you might call a communication gap.  So unless you want to spend lunch sharing anecdotes about your kids - not that there’s anything wrong with that - here are a few tips for getting in the CFO’s head. 

Finance executives are typically driven by the need for accuracy, rigor, and discipline and not prone to hasty action.  They comfortable with spreadsheets because spreadsheets lend themselves to analysis, oversight and rework. 

These are all excellent qualities but tend to put a damper on conversations about hard to measure initiatives such as talent development and employee engagement.  As a result, it may be hard for the CFO to imagine how  closer collaboration with HR can help them. 

And yet, lack of collaboration can lead to last minute changes, faulty forecasting and - evil of all evils - budget surprises.

So let’s explore several mutually interesting topics to talk about, such as whether it’s better to cross charge v. moving an employee to new entity.  That's a great ice breaker and should see you through the starter salad.

Now gently lead the conversation to more advanced topics such as sales revenue per employee, which accelerators apply, etc., to show you really get that money stuff.  Then, if you want to impress, you can casually bring up real profitability by channel, i.e., direct v. indirect selling allowing for account size and support costs and how the numbers change when you use actual v. average people costs.

Next, if you don't feel you've got their full attention, ask a few intelligent questions about customer profitability factoring in sales, product and service costs broken down by support levels, special needs and “high frequency” customers.  Wonder out loud if you could reduce costs by leaving non-profitable accounts.

Most of the CFOs I’ve known could happily spend an entire lunch chatting about just that last one but if you work with a particular taciturn CFO here are some additional conversational shiny objects.

• Who is working on positive NPV projects, do they have the right skill and performance level and are they are at risk?
• How many positive NPV projects does each BU need to grow the consumer channel x% and do you have the skills in place to manage those projects?
• Are there projects that could be saved or decommissioned faster if you had better risk models in terms of people capacity, turnover, etc.?
• For workforce planning, would finance benefit from better information around PTO plans, demographics (i.e., % female under 40), etc.?
• What if you could reduce or eliminate the swag when it comes to estimating bonus payouts with more accurate and timely information on a quarterly basis?
• If your company is about to IPO, how can you ensure you have the right cash in the right currency in the right locations to cover higher than normal payouts?
• How much disruption is caused on the finance side of the house by not having insight into scheduled departures, large salary increases, relocation costs, expat allowances, etc.?
• What potential gains in accounting, tax and treasury strategy would be possible if less time was spent chasing data and more time thinking about how to create business value with it? 

By now the coffee has arrived and it’s time to remind your lunch companion that HR is the steward of the people, cost and risk information that is interesting to the CFO.  It makes sense to work more closely together to drive higher levels of financial performance and avoid unpleasant surprises.
  
Doesn't it?

Laura Schroeder is EMEA product marketing director 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.

Defining the Pay Philosophy with a Compensation Audit

Diagnosis should precede prescription.  It is generally a good idea to find out what the actual compensation philosophy of the organization really is before one begins to “fix” things asserted to be “problems.”  There are better methods than randomly throwing money at every issue.  At least, before you invest scarce dollars in corrections, don’t you agree that you ought to first discover what your total reward programs are supposed to accomplish?

Since every action costs money (especially pay decisions), it is important that any intervention be based on a broad consensus about what outcomes are expected from the remuneration system, where gaps exist and which programs should be maintained or improved.  It will come as no surprise to realize that most managers have absolutely no idea what their employer's formal philosopy is about the most important aspects of their pay and total rewards programs.  Such things are rarely openly defined.  Even those who claim to know the intended policy in any one area (like competitiveness or turnover control) usually have no idea of its relative importance. Sometimes they are unsure if their experiences are unique or if their views only apply to their own department.  Top executive opinions about the actual practices in each topic area as opposed to the theoretical ideal should be communicated and shared on a company-wide basis.

Here is one simple approach built from an original article by John Sullivan, PhD, back when he pioneered the ACA and ASPA certification programs.  The table below shows my first two column headings for such Compensation Audits, showing Category Area questions.

Each Perceived Objective or Policy offered three check-boxes in the next column showing the entire range relevant to that Category Area with terms like (for the Competitiveness objective/policy):

1. low, barely enough to attract/retain;
2. generally competitlve levels;
3. high, much more than others.

Other categories would have a different three terms defining the appropriate range span; for example, the choices for the Turnover category would be:

1. high or ignored as irrelevant;
2. modest or normal;
3. minimal.

The senior executives were invited to check one answer for each Objective/Policy area.

Next, each Objective or Policy category requested a priority weight for Relative Importance (low, medium and high).  A similar low-medium-high scoring continuum followed for rating the observer’s opinion of how successful current practice actually is in that category area.  Finally, short comments would be solicited for suggestions about what SHOULD be done regarding this status quo view: i.e., Ignore, Maintain or Improve.

A short cover memo clarified that everything would be confidential, there are no “right” answers and the anonymous results would be immediately input for a summary with statistical analysis and a group report.

Long story short, virtually every top executive was astounded to discover that almost everyone saw things the same way they did, despite their reluctance to openly discuss such philosophical and practical matters.  Many admitted in private interviews that they had been embarassed to admit that they did not know the answers and feared the humiliation of being thought stupid.  Senior officers are not eager to admit ignorance and thus tend to suppress discussions of topics where they feel insecure.

Without going into more details, it is safe to say that every fix based on such a preliminary Compensation Audit was extremely successful.  The work of any total rewards professional is tremendously eased by the existence of clearly articulated objectives and priorities.  The process also confirms the buy-in of the management levels involved in the exercise, since their overt consensus established the outcomes desired.

This particular Compensation Audit approach both facilitates remedial actions and provides CYA for the “fixer.”   You will get few opportunities to embrace a process that has proven so consistently effective for all participants, so create and try your own version!

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. 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.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.

Creative Commons image "Pencil N' Paper' by quacktaculous

Reimagining Rewards and the Value of Work

There's a wave racing roward us, all of us in HR and particularly those in the more "quantitative" field of employee rewards.  It is a wave of metrics and analytics, and its approach is raising questions (and anxiety) about its impact on what we do in designing and managing programs for rewarding work.

In his recent HRExaminer article Thinking the Unthinkable, John Sumser dishes up a nice summary.

Practitioners are about to be showered with an abundance of data and metrics. For the most part, the first round will be limited by their imaginations. Sadly, that’s a really big limiter.

HR and its processes are going to be automated in the immediate future. The administrative crap is more or less finished (which explains the lack of innovation in most HR software companes). Now, the more thoughtful parts of the business will come under the dome of digitization.

The first wave will be data visualization tools that expose the massive inefficiencies in our processes.

He also takes aim at the degree to which our current state of analysis focuses mostly, often exclusively, on averages and raises a tantalizing question about the way in which we value work.

Anyone who has been following our growing statistical literacy understands that averages hide as much as they disclose. For the state of the art to involve the recounting of averages is a sad commentary on how far behind our profession has fallen.

Rather than a sea of averages, we need to be looking at the value creation. A position (say agile programmer) that generates five times the value of a retail clerk ought to be a bargain at four times the cost and three times the schedule. And, the outliers that drive the average may well be the best (or worst) spent money in the budget.

Historically, our methods for valuing work have focused on the jobs people hold and have essentially followed one of two fundamental directions:

External or market based evaluation, where the value of the job is directly linked to its "going rate" in the relevant labor market, and

Internal evaluation, where the value of a job is established through internal comparisons which focus the compensable factors or dimensions (such as education requirements, problem solving, etc.) of the job.

More recently, skill/competency based work valuation methods have turned the focus from jobs to the workers themselves.  These people-based approaches place value on workers according to the skills and/or competencies the possess and are able to demonstrate.

All of these, however, involve a method of estimating the potential for creating value.  In the new era of more sophisticated analytics and tools, as we use visualization to better understand the work done in our organizations, what will we learn about the ways people and the skills they possess create value?  How will we be able to tie those lessons to our reward programs, so that we can move beyond traditional "pay for performance" and link work more closely and directly to value creation?

In case that isn't enough to get your head spinning, I also want to point you to a video John shared: "Media for Thinking the Unthinkable" by MIT's Bret Victor, embedded below (email subscribers may have to click through to watch).  At 45 minutes, it may be long for office multi-tasking, but worth your while to absorb offline.  Bret's central point: there are things that our human senses can't quite grasp, but we have proven adept over time in building tools that adapt these things to our capabilities (think microscopes and telescopes).  In the same way, we are now learning to build tools (better data visualization tools among them) that adapt many previously "unthinkable thoughts" to the ways our minds work.

Media for Thinking the Unthinkable from Bret Victor on Vimeo.

Don't think this applies to HR and rewards?  Think again - and watch out for that wave!

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 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 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 foodie in her spare time.  Follow her on Twitter at @annbares.

Making the CFO Your New BFF

It's all the rage in HR land. Many and various thought leaders and industry pundits exhorting us to build a more collaborative relationship with Finance.

Turns out that while it may make sense, it won't be easy. Towers Watson (TW) just reported research on how the two parties feel about the whole thing in a report called, "HR and Finance Partnership Opportunities." As TW points out "HR and Finance have a shared mandate: Reduce costs, sustain or enhance productivity, and keep the talent pipeline full . . . a tall order that neither function can effectively do alone." Thing is, HR seems to be the one asking for a dance partner, while Finance is saying, "I'm just fine, thank you."

When asked if they would like more collaboration in the future, here's how things turned out:

                                        Finance    HR

        More collaboration       49%         70%

        No change                   36%         25%

        Less collaboration         2%           0%

No surprise that Finance is the one hanging back. After all, HR is just one of many functions they need to work with. It's logical that we're the ones who need to make the first move to change the relationship. But if we have any hope of bridging the gap, HR also needs to note the wide disparity in attitude. And, just like in any other complex relationship that is at a stalemate, we need to be the ones to figure out how to initiate the change.

The TW research gives us some good insights into how to build a better relationship. Finance and HR seem to have  similar values: Invest in rewards to drive ROI and tie rewards to financial performance. We also seem to prioritize metrics in a similar way. But it looks like HR wants to work together on budgets more than Finance does. And Finance may want to have a bit more input into HR strategies than we currently want them to have.

Trying to figure what this means for you and your department? Take a look at the TW findings to see how you can use them to strategize with the people in your Finance Department. Consider putting more time into the personal relationships you have with those in Finance. If Finance and HR really do share that much in common, HR could take the relationship a long way by finding ways to listen to, and commiserate with, Finance.

Can you get them to lunch? Or just stop by their lunch table in the cafeteria . . . or, or, or. And give yourself time and permission to talk about something else but work for a while.

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication -- in an upcoming book. Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal with Towers Watson. Margaret 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.