Now Playing - “The Statistics”

In our world of sound bites and summaries, statistics are playing an increasingly important role. They are the basis of infographics. They are used in catchy headlines. They provide support for arguments, both real and imagined. They also provide ammunition for the ongoing wars about compensation, engagement and more.

The real question is should they have this power?

I have gathered some recently reported statistics that have been touted as important, forecasting or eye opening. I then compared them to prior statistics that came with the same dire warnings.  Feel free to follow the links to explore the wonderful Internet for yourself.

The Mythical Dream Job Warning

2013: Only 14% of US workers believe they have the perfect job and more than half want to change careers, according to a new poll released on Monday (July 1, 2013). Link to article

2002: Only 19% of the US Population love what they do. Link to article

So, let’s make this clear. 80-85% of people don't have the perfect dream job or love what they do. In more than ten years, this number has not dramatically changed, but each time it is reported it is done with great drama.

Engaging Conversations Past and Present

2013: 52% of employees are not engaged. Even worse, 18% of employees are “actively disengaged”. Link to article

2003: 55% are not engaged and 16% are actively disengaged. Link to article

Engagement has been a buzzword in our industry for decades. In the past 10 years, we have improved from 71% being disengaged in 2003 to only 69% being disengaged in 2013. We wring our hands about this every year, but the “improvement” is easily within the margin of error. Perhaps we would be better off putting even more time and effort into rewards and compensating the 28-31% of employees who seem to be buying into our work.

CEO to Worker Pay Ratio

This next set of numbers is the most fun. All three statistics are from 2013. Depending on whom you ask, CEOs make between 204 and 354 times the average worker. If I gave disparate ranges like this to my clients, they would send me back to the drawing board for a bit more effort.

2013: In 1950, CEO to worker pay ratio was only 20-to-1, increasing to 42-to-1 in 1980, 120-1 in 2000 and now to a record high of 204-1 in 2013. Link to article

2013: CEOs are paid 273 times more than workers in 2012. Link to article  

2013: CEOs make 354 times more than the average worker. Link to article

A quick update and interesting fact about Say on Pay

Advocates for Say on Pay say it is a way to help control outsized compensation. I did a quick review of Say on Pay Failures (55 so far) compared to the recently released Equilar / New York Times CEO compensation data. Of the 55 companies who failed 2013 Say on Pay votes, only 2 had CEOs in the top 55 in total compensation.

Paul A. Ricci of Nuance Communications

Wellington J. Denahan, Annaly Capital Management

So, what does this all mean? First, we need to stay focused on the people who like their jobs and are engaged with our companies. A majority of people will never get there. While can't ignore them, we can’t let them distract us from those who are real players on the team. Second, we need to understand that statistics cannot be warped to anything, but as the CEO:Worker pay ratio shows, they can be distorted to the point of no longer telling a useful story. Third, Say on Pay is not about high CEO pay, it’s about pay or performance that do not seem to correlate.  Finally, statistics, as they are used in the media for public consumption, are not our greatest source of truths; they are simply numbers looking for believers.

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.

Comments

[Jacque Vilet]

Lies, damn lies and statistics! For too long we've had a love affair with statistics. Even "shaky correlation" is hyped as "cause".

http://www.tlnt.com/2012/11/19/lies-damn-lies-and-statistics-engagement-company-performance/

[John Nichols]

CEO ratio: Of course all three may be correct so it is important to understand the source, what is included, the sample, and why they are reporting the data.
A gut instinct suggests the ratios are too high to be maintained, especially for CEOs who are really employees/managers with special skills like most others rather than entrepreneurs who invest their whole being to developing their company.

[Dan Walter]

Thanks Jacque,

As someone wise once told me.
"Sooner or later it will rain. Just because you are dancing when it starts, doesn't mean your dancing had something to do with it."

Cause and effect is often in the eye of the beholder (or in this case, dancer)

[Dan Walter]

John,

Quite likely all three are perfectly accurate and essential not useful. I do agree that huge spreads between CEO pay and average worker pay are unlikely to be in the best long-term interests of anyone. But, until one of the two following things happen we won't see a major change.

1) people at the top need to see their returns reduced as a result of the spread.

2) Workers need to make it a point to not work for companies with such large spreads.