Compensation Cafe

Could Big Data Bring Big Dilemmas?

As we in HR work to absorb and apply the possibilities that data and analytics present for the design and administration of employee pay, we often look to our peers in Marketing - always several steps ahead of us in this game - for lessons and insights.  With this in mind, it is also appropriate that we heed the cautionary tales that emerge around Marketing's leading edge push into the Age of Algorithms.  Specifically, the degree to which Big Data may be creating a new potential and power to discriminate.

We're already seeing this dilemma rear its head in Marketing, as Michael Schrage highlights in his recent HBR blog post Big Data's Dangerous New Era of Discrimination. In his article, he shares a few examples of the segmentation opportunities that marketing analytics have created and raises important questions about how they might be used.

Going more granular, as Big Data does, offers even sharper ethno-geographic insight into customer behavior and influence:

• Single Asian, Hispanic, and African-American women with urban post codes are most likely to complain about product and service quality to the company. Asian and Hispanic complainers happy with resolution/refund tend to be in the top quintile of profitability. African-American women do not.

• Suburban Caucasian mothers are most likely to use social media to share their complaints, followed closely by Asian and Hispanic mothers. But if resolved early, they’ll promote the firm’s responsiveness online.

• Gay urban males receiving special discounts and promotions are the most effective at driving traffic to your sites.

My point here is that these data are explicit, compelling and undeniable. But how should sophisticated marketers and merchandisers use them?

HR systems are home to a host of demographic data about our employees.  To what degree do we seek and apply the insights that quite likely exist there in managing and seeking to improve the productivity of our workforces?

Just one case in point.  Several years ago, I wrote a post about a study titled "Rewarding a Multigenerational Workforce" that had just been released by WorldatWork.  In the summary of findings, the study's authors noted that a majority of organizations responding (56%) did not, at that time, even consider generational differences when designing total rewards programs and gently chided employers for not realizing "the importance of evaluating the needs of each generation uniquely and rewarding them accordingly."

The study's intent was clearly not to encourage discrimination but rather to encourage a more informed and evidence-based approach to reward design.  Nonetheless, I think the concerns that the report raised for me and many who commented on this post present us with an early example of the potential dilemmas we may face as the data increasingly available to us brings ever more specific revelations about the preferences for and responses to rewards in different worker segments.  Sooner or later, we will find the need to ask ourselves the question Schrage raises (and I paraphrase below):

Where, in our corporate cultures and strategies, does value-added personalization and segmentation end and harmful discrimination begin?

Your thoughts?

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 serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of 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 foodie and bookhound in her spare time (now reading Katherine Boo's "Behind the Beautiful Forevers: Life, Death and Hope in a Mumbai Undercity").  Follow her on Twitter at @annbares.

Creative Commons image "Puzzling" by jhritz

For Want Of A Nail

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

This proverb has come down in many variations over the centuries, yet the principle it embodies remains as true today as when first recorded.  If you ignore the small stuff long enough it will eventually become the big stuff; big problems, big expenses, big challenges to fix.  And big headaches.

Examples are legion; forgetting that simple oil change for your car; not taking the time to brush your teeth or take your daily medicine; delaying the install of free virus protection for your computer; or simply procrastinating as a way of life.  The little things can get lost in the midst of our active lives, but we ignore them at our peril.

Lack of action, lack of attention will bite you in the butt, eventually.

For compensation practitioners the "little things" are often not so much the "I can do it later" catch-all busy work we all seem to have too much of, but the fundamental building blocks that anchor the foundation of your rewards philosophy, your programs and ultimately your cost structure.  Screw up the details here and the consequences can be serious.

For example, if you ignore your salary structure ("oh, we looked at it a couple of years ago") you run the risk of it becoming irrelevant.  And an irrelevant structure becomes a recipe for inequitable treatment, special deals and increased payroll costs. As does ignoring the blinking danger signals from your dashboard metrics.

And while managing job descriptions is usually relegated to the junior staff, inaccurate or out-of-date documentation can be the bane of your existence, from cost control to employee morale issues to court action.

Little things aren't always unimportant things

How can a fundamental building block become a "little thing"?  It's all in the attitude.  Folks like to focus on the exciting projects, the sexy initiatives and those experiences that can help build and polish their resume.  Routine tasks are often given short shrift while we look elsewhere for the interesting, the challenging, the more visible aspects of our jobs.  Or the jobs we'd like to do.

Ask yourself, who would want to work on a merger or acquisition project?  The hands go up.  Who wants to work on an international project?  The line of those  who are interested quickly forms.  But if you would ask, who wants to work on maintaining the existing reward system?  That is, worrying about documentation, about record-keeping, about the fundamentals. 

Not so much interest there.  Boring!

But somebody has to do it.  Because if you don't, the wheels will come off the car, sooner or later.  And then senior management will be asking, "who's responsible"?

Perhaps the answer is to mix it up, to have a bit of the humdrum blended in there with the exciting stuff.  So maybe you're working on job descriptions and job evaluations part of the week, and then an HR Transformation initiative later on.  You can be market pricing surveys on Monday and Wednesday, but on Tuesday and Thursday you're re-designing the management incentive scheme.

Ahhh, but I know what you're going to say.  Who among us has the option of picking and choosing our projects, so that we'd be able to unilaterally design our work schedule, to blend the routine with the exciting?  That never worked for me when I was in Corporate America.

But isn't there something to be said about doing the job, any job, well?  Doing so says a great deal about you as a professional, and as a person.

Don't lose sight of what you might consider the "little things," the basics and routines that need to be completed "just because"  in your work.  Think of it like changing your oil.

You and your car will be better for it.

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 clowder of cats.

Creative Commons image courtesy of Jeffrey Beall

Are We Treating Employees Like Adults?

(Important:  The content of this article as well as linked articles concerns exempt employees only.  Non-exempts are not included for obvious legal reasons.)

I just read an interesting article in Harvard Business Review entitled “How Netflix Reinvented HR”.   Netflix’s HR philosophy is built on treating employees like adults.  What a novel idea . . .

Here is a quote from the article:

"Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost. If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake." 

By the way, Netflix has over 2,000 employees so it’s not a start-up environment.  Keep this in mind as you read the article.  

Here are some creative things they do to demonstrate “adult treatment”:

*Vacation:  It used to be treated on an honor system when they were privately held.   There were no records kept.  When they went public the auditors said Sarbanes-Oxley mandated a formal tracking system.  Instead Netflix did some research and found out that no California law mandated vacation time. (They are based in California).  So they went “informal” and did away with the accounting “rigmarole”.

*Expense policy: --- It consists of five words:  “Act in Netflix’s best interest”

*Performance reviews:  They did away with formal reviews.  They feel that performance reviews are driven largely by fear of litigation. “The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement.”    Instead they offer employees very generous severance packages (which they sign for) and show them the door.  All done with a large dose of dignity.

*Salaries, bonuses and stock: Netflix’s base pay is way above average but they don’t pay performance bonuses.  They believe bonuses won’t make employees work harder or smarter. They let employees decide annually how much of their compensation they want to be in base salary and how much in stock.  They trust that their employees are adults and can make good decisions.  Vesting is immediate ---- no “golden handcuffs”.   There is a lot more detail to their stock plan but space does not permit.  Please read more here.

Netflix is not the only company to become more innovative.   Bloomfire, a high tech company, offers a Free Time Off (FTO) policy.  It’s up to employees and their managers to schedule time off – balancing personal and business needs.  The CEO of Bloomfire says:  “I’m not some kind of new age touchy feely hippy guy either.  I learned my leadership craft at the U.S. Naval Academy."

Here’s another innovative practice:  Zappos has a hiring process in which a new employee, after one month, can take $2,000 and leave if he/she doesn’t believe he/she is a good “fit”.  Zappos feels this is a cheaper, less stressful and more honest (translate “adult) way to deal with employees who feel they would be "misfits" at Zappos.

All of the above made me think.   At companies like these the HR/Compensation people are business people first and HR people second.   They don’t get hung-up on traditional HR/Compensation methods.  And they put a lot of emphasis on educating employees about their business.  If they’re going to ask employees to act in Netflix’s best interest, employees have to know what that means.  That's just good ol' common sense.

There have to be some rules as some behavior can’t be tolerated.  But for the most part maybe companies should trust employees to act like adults.  What is the organizational behavior term --- self-fulfilling prophecy?  When we treat employees like adults they have a much higher probability of behaving like adults.

Maybe we need to review our Compensation policies and see what kind of message they send.

Photo courtesy of:  Dynamic Small Business Network

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. 

Perverse Disincentives and Effective Deterrents

Amid all the buzz about perverse incentives that backfire, lessons about punishments that reward undesirable performance should be shared, too. 

A former warden of Leavenworth Federal Penitentary taught me an important lesson about perverse disincentives and effective deterrants some years ago.  (No, I was NOT one of his inmates.)  As as we worked together on a project for a different federal agency, he shared his practical findings about negative reinforcement learned while trying to reduce misbehaviors among the most dangerous prisoners in the nation. 

The dilemma the warden faced was simple.  Many of the inmates under his supervision were already facing a lifetime in prision and had a “nothing to lose” attitude about rules.  The traditional remedy for serious offenses was solitary confinement.  This most severe punishment earned them positive feedback in the form of greater respect from fellow convicts.  Being sent to “solitary” was a mark of distinction, showing a level of toughness that won approval in the machismo permeated atmosphere of the maximum-security prison.  Other inmates felt that offenders who could endure weeks without human contact, living on bread and water, deserved admiration and approbation.  They were honored and respected by their fellow cons for enduring what all considered harsh treatment.  The intended punishment created a rewarding experience.   A month on bread and water in solitary was a perverse incentive.  The admiration it produced increased the probability that the offender would repeat the undesirable behavior the punishment was intended to extinguish. 

The warden made a few simple changes to disrupt the inverted perverse consequences of being sent to “the hole.”  Prisoners in solitary confinement were issued fluffy pink pajamas and fed oatmeal porridge and milk.   When they emerged from the new conditions of their “hard time,” they were met with smirks and ridicule.  Recidivism rates plummeted dramatically.  Being babied like unruly children in a manner that lowered their status in prison had a much stronger corrective effect on their subsequent behavior than the classic old treatment.  Their status in the eyes of fellow convicts was much more important to them than the discomfort of solitary confinement.  Losing prestigue was more painful than being denied human contact.  Mental punishment was more motivating than physical punishment. 

Aversion therapy will never be as popular as giveaway programs, but it still may have a valid place in our toolboxes. 

Skepticism is justified, however, since there are so darn many situations where perverse DISincentives occur.  Bad behavior is frequently rewarded in one way or another by “punishments” that create more positives than negatives, in the eyes of the performers.  A day can hardly pass without some “pop-icon celebrity” exciting their fan base by some outrageous illegal action that brings them publicity in the form of “news.”   

Those who grew up before the ancient Disney movie “Song of the South” became politically incorrect may not know the old story about the briar patch, but that folklore lesson still applies here, today.  Familiar examples may change over time, but human nature rarely does.

What other success stories can you tell about effective disincentives?

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 "DSC1408" by HockeyholicAZ

His Employment Agreement Says What?

When is the last time you looked really hard at every single employment agreement and plan document that touches your executives’ (and future potential executives’) compensation? As executive compensation retains its top spot on the list of most controversial issues for compensation professionals, it may be time for a thorough review and audit. These agreements were often created before you got to the company. They may have even been finalized without a review from anyone in compensation. And, they often contain sweet little promises that can explode like a flaming bag of excrement on your compensation doorstep.

These agreements are often written to entice someone to work at your company in lieu of immediate cash. This means they often include guarantees for things like raises and bonuses. Usually the guarantees cover only a few years and you may feel comfortable that these clauses have run their course and are no longer an issue. Just remember that multi-year guaranteed bonuses are considered factors in motivating excessive risk-taking when evaluating executive compensation. This may come into play when ISS is evaluating the 3 P’s (Problematic Pay Practices) for your company.

But, guaranteed bonuses are not the sleeper in your agreements and plans. The silent killer may be Change-in-Control (CIC) language. CIC language is designed to be very long-term. It is also an area where few people correctly remember the details until an event occurs. This is can be especially problematic when someone has been promoted to a publicly visible position, but has an employment agreement from prior to the promotion. The problem may be found by shareholders, or their advisors, when they look into things after the individual is promoted. Maybe the issues will only come up after a CIC deal is in process and Bob or Sally come into your office and ask when they will get paid out now that everything they have is vested. It is an avoidable situation that never ends pretty.

It no longer surprises me when I ask a client for all of their agreements and it takes days, and sometimes weeks, for them to find them. It no longer surprises me when I ask in presentations how many professionals have read every word of every plan and agreement documents and only 10% raise their hands. But it does surprise me when these issues only come to light when it is too late to anything to easily correct them. This year gather everything into one place and read it. Be one of the 10% in my next presentation. Even better share your own story of a time when an employment agreement caught you buy surprise (post anonymously, of course!)

P.S. Sometime between when I posted this article early the morning of January 27, 2014 and when you read it ISS will have released details about “QuickScore 2.0”, their updated benchmarking method for corporate governance issues.  You will be able to preview your company’s data and submit comments between January 27 and February 7, 2014. You may want to look into it, or wait until my next post when I discuss some of the highlights.

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 Known That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is 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 Incentives Can and Cannot Do

Incentive compensation.  Powerful stuff when used well and - unfortunately - potentially even more powerful when misused and misdirected.

How do you know when an incentive plan is a good idea and when it is not? 

For starters, it is important to have a sense of the circumstances you are fixing to drop them into and the objectives you (or the prospective plan "sponsor") hope to achieve by putting them in place.  If you don't, start there.

Next, you'll need to face up to the reality that there are problems which incentives cannot fix (and may even make worse).  What follows is my own list of what incentives can and cannot do.  Readers, I suspect, will have their own lists as well - which I would encourage them to share here too.

Things Incentives Can Do

1.  Incentives can focus.  Incentives call out top priorities for employee attention.  This is one of the most potent capabilities of incentives (assuming you are clear on the implications and consequences of that "focused" attention).

2.  Incentives can guide.  Incentives are communication tools, pointing employees to where their efforts can create the most value.

3.  Incentives can share the rewards of success.  Incentives provide a mechanism through which employees can share in the economic success they help create.

4.  Incentives can weaken silos.  By tying groups together with shared performance metrics and reward opportunities, incentives can encourage teamwork and collaboration across business or functional lines.

5.  Incentives can promote development.  Incentives can help drive and reward the development of critical skills and capabilities.

Things Incentives Cannot Do

1.  Incentives can't fix broken organizational structures and processes.  If your structure and processes are so bad that you have to dangle money to "motivate" people to work around them, you'd be well advised to bring resources to bear on the real problem (which is not a lack of rewards).  Barring that, better have a really clear idea about the type of workarounds people are likely to attempt in pursuit of that extra cash.

2.  Incentives can't fix bad job design and staffing decisions.  Incentives are not an alternative to designing and staffing work roles in ways that make good performance possible and even likely.

3.  Incentives can't serve as a substitute for enforcing policies and job requirements.  Following policy and meeting job requirements should be considered a condition of employment, not something you "purchase" with extra compensation in order to avoid confronting those morale-depleting slackers.

4.  Incentives can't get you off the hook for providing regular feedback to employees and correcting work efforts that are off the mark.  And THAT is because...

5.  Incentives cannot manage your employees for you (honestly, this doesn't even work with most sales jobs) and they are not an alternative to setting and communicating clear performance expectations.  Although there will seemingly ALWAYS be managers who want to give this a shot. 

What can you add to these lists?

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 serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of 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 foodie and bookhound in her spare time (now reading Brad Stone's "The Everything Store: Jeff Bezos and the Age of Amazon").  Follow her on Twitter at @annbares.

Creative Commons image "Yellow Light" by wfyurasko

A Little Goes a Long Way

If you're a regular on Compensation Cafe, you know that you can often hear us singing, "Everything you do in compensation is communication." With that ringing in my ears, I thought we'd take a quick look at some of the everyday compensation things we do in job analysis and documentation. Where do the communications come in? What messages are we sending? And how can we up our our game?

A little understanding of how your daily compensation work qualifies as communications goes a long way towards building trust and contributing to employee engagement.

Here we go.

Job analysis and documentation are tedious tasks that we are trying our hardest to automate. The thing is, our insights come from going deep into the data, which is hard to do when the computer organizes things for us. Sometimes automation gets in the way of really understanding what differentiates an Engineer I from and Engineer II. How do we supplement? With meetings and/or interviews with the people actually doing the job.

Here's the common belief about what inteviews accomplish in the world of employee communication. By interviewing employees, they obtain insights into how the base pay structure is built. Employees get to see what's going on and have input into information-gathering about their job. In other words, employees (should) become more satisfied because they have learned a bit and had input.

But our definition of communications should not be limited to information exchange. Communications affects minds and hearts -- and hearts are where you have the deepest and most lasting influence on people. Employees' feelings shift towards trust when they have input into decisions that determine their worklife, as long as their input is listened to. Employees' feelings shift to the positive when you get personal and interview them.

Feelings? Aren't they the "soft stuff" that doesn't belong at work. Nope, nope, nope. It's just plain obvious that feelings influence engagement -- and building engagement is a big part of why we earn our salaries. By showing employees respect (through interviews), they're likely to become more open-minded and receptive to Human Resources and our methods. And more sympathetic to our claims of pay competitiveness. 

Asking everyone to submit job profiles, questionnaires or job descriptions? I've been through a number of companywide projects of this sort, and I know how much of a hassle it is to get everyone to submit their information. But it's generally true that the worst offenders are the biggest skeptics. It may seem counterintuitive, but if you're in a company where trust is an issue, imagine what you would communicate by going out and interviewing the people who don't fill out and submit their forms? It would make it that much more difficult for the unbelievers to have any credibility. (There's that feelings stuff again.)

I know we are all short on time and broadbased interviewing usually has a consultant or three lending a hand, so here's another approach. Think about minds and hearts. Identify a list of jobs each quarter that qualify for personal attention, either because of their complexity, visibility, contribution to innovation -- or because the job incumbents are the most ornery in your organization!

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.

Who Are You Talking To?

January is a busy month with compensation communication, but just how effective is yours?  Perhaps all you're doing is talking to yourself.

____________________

I read a movie review the other day and noticed that, in the first few paragraphs there were two words that I didn't immediately understand.  The words "bifurcated" and "atavistic" were used, presumably to help readers better understand what the reviewer thought of the movie.

Well, those two words are not part of my everyday vocabulary, and upon reflection I might be able to explain "bifurcated," though aren't sure what that has to do with the subject movie.  As to "atavistic," I think that I've heard the word before, but really don't know what it means.

Now I consider that my intelligence level is a bit above average, so I have to wonder - who the heck was the reviewer talking to with their review?  I certainly didn't "get it" as far as whatever points they were trying to make.  And NO, I didn't drop everything to look up those two words.  What I did do was stop reading the review.

Who are they talking to?

This is especially important when considering your compensation communications.  If you want someone to hear what you have to say, to understand your message or point of view, to learn from reading your words, you have to talk to them at a level they are comfortable with.  Not you.  This is not about you.  Or at least it shouldn't be.

There's a lot of information out there, a problem for our times, some would say.  So if you want to get your message across, you need to be able to reach your target audience with as simple a message as you can.  So they all can understand, so they can repeat it to others, so that they'll remember it tomorrow.

Is your text written at the New York Times 8th grade level?  If not, why not?  Don't try to impress your audience.  It doesn't work.

Losing your audience

A similar experience happens when listening to a speaker at a compensation conference, a webinar or even at your local professional  association meeting.  The speaker uses a word or phrase that is foreign to you.  "What did they say?"  Your mind stops listening as it struggles to identify the strange word and what it means - and then to put it in context.  Maybe you'll figure it out.  Maybe you won't.  Meanwhile though, the speaker has kept on talking - but you haven't been listening while your mind was paused.  Now you have a struggle to catch up.  Maybe you can.  Maybe you can't.

And then it happens again.  Another mind pause while you mentally translate, "what was that again?"  And so it goes, and you never quite fully understand the speaker's message. 

That's not communication.  That's a speaker talking to a mirror.  You're incidental.

The writer's club

That's what I call it, to describe the majority of contributors to professional journals.  I'm on the article review committee for one of those magazines, and I often wonder who these authors are writing to.  If they were trying to educate or explain practical tactics that would assist practitioners with their immediate problems, then I'm afraid that many an article wouldn't pass muster.

That's because many articles (check it out) are written by academics and consultants, not practitioners who have dirt under their fingernails from working in the trenches.  As a result practical advice (what can I do now?) is usually in short supply. What we all too often get instead is conceptual "stuff" from the view at 30,000 feet, broad inspirational white papers that you just know your senior leadership won't even consider.

This isn't always the case, of course, but how many of those articles are you able to wade through before your eyes glaze over?   Not just read the words, but learn from?  Heavy stuff.  Heavy lifting.

When someone is communicating, is actually reaching you with their message, you listen, you absorb, you learn.  It's the same for me.

So talk to me, not to the mirror.

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 clowder of cats.

Creative Commons image courtesy of angelofsweetbitter2009

3 Lessons for Truly Global Employee Recognition & Rewards Programs

This post is inspired by Jim Brennan’s “Travel, Currency Issues and Compensation” post last week. In his post, Jim shared:

“A recent story shows a different type of travel/comp relationship.  Currency problems in some nations have made travel an occasion for some people to ‘make money’ by acquiring U.S. dollars and converting them on the black market upon their return.”

This is a very broad example of unintended consequences from artificially controlling currency, but there are lessons we can learn about globalization of programs, especially those that impact compensation, recognition and rewards. I’ll leave compensation impacts to my Café colleagues who are true compensation professionals, but I’ll dive into three clear lessons for employee recognition and rewards.

1) Recognition and rewards are not compensation.

Poorly designed programs can be too easily gamed, even by well-intentioned mangers, to make up for perceived deficits in employee compensation. The conversation often sounds something like this: “John, I’m sorry I couldn’t give you a big enough raise this year, but here’s a $1,000 recognition bonus to show you how much we value you and your contributions.” Recognition (and any related rewards) are always the icing on the cake of compensation. As I’ve said before, if base compensation is not appropriate, no amount of recognition can make up for the deficit.

2) Equitable awards ≠ currency conversion.

Many companies make the mistake of applying simple currency conversion to award amounts when expanding a recognition and rewards program globally. This, however, gives a very inequitable rewards experience. In the US, for example, a $100 award might buy a very nice dinner for two, but with only currency conversion applied, could buy the restaurant in India. This is another classic example of employees in some geographic regions “making money” off of employee rewards.

3) Standard of living is relative.

Seeking to get closer to actual purchasing power, too many companies will apply a simplistic tool such as the “Big Mac Index” or a more complex Purchasing Power Parity Index (PPPI). Neither works well for employee recognition and rewards, however, as few employees would choose a Big Mac as a reward. PPPI itself is too broad as it also includes the costs of doctor visits, rent, gasoline, groceries and the like – again, not rewards someone would choose in a recognition program. A true, global standard of living index should be used that removes these elements in appropriate for rewards when considering equitable award comparisons.

In what other ways have you seen recognition and rewards misapplied, misinterpreted or misused globally?

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, Montreal and Boston. Follow Derek on Twitter at @globoforce.

HR Won't Get Far Without Finance (and vice versa)

Here’s a question for you: When you’re creating a strategic compensation plan to attract and retain critical skills, how closely do you work with the CFO? 

If you answered, “Not at all,” fasten your seatbelts because closer collaboration between HR and finance is going to be 'the next big thing' in innovative, high performing organizations.

If you haven’t had a chance to read Jaque Vilet’s most recent post Are Employees “Costs” or “Assets”? I highly recommend it.  Jaque succinctly outlines the trade-off between cost and value as well as the inflection point where human assets begin to appreciate. 

Another key takeaway is that few HR organisations are able to track total employee costs such as turnover, lost productivity, recruiting, interviewing, hiring, training, customer dissatisfaction, reduced or lost business, administrative costs, lost expertise, etc. 

Some of these are opportunity costs and therefore difficult to quantify but the closer you can get, the easier it is to connect the dots between business strategy, talent investment and business performance.

An excellent example of HR and finance working together to drive better business results can be found in a recent Fortune magazine article ‘Questions for Starbuck’s Chief Bean Counter’, which is an interview with CFO Troy Alstead.  He talks about creating strategic advantage with people. 

Here’s the recap: Starbucks has grown from about 100 stores to 20,000 stores since Alstead joined in 1992.  In a time of economic uncertainty and belt-tightening, 70 million people go to Starbuck’s each week. 

In fact, Starbuck’s has had a fabulous year at a time when other retailers are negatively impacted by reduced consumption and fragile brand loyalty.

How do they do it… and keep doing it?  Essentially, by not missing a single opportunity to connect with consumers and deliver what they want. 

People strategy plays a huge role in this: “Our baristas…provide experiences.  The products we offer are the platform, but the real magic and the reason we have the brand strength we have… is because of the fantastic experiences provided in the stores.”

Starbucks hasn’t just excelled in customer service, however - that would be too easy! 

• They’ve also made strategic investments in mobile applications to help drive customer loyalty with online rewards programs. 
• They use customer data to tailor their offerings to different market segments and consumer profiles. 
• They use social media to engage with rather than sell to customers.
• They’ve built significant capabilities to execute a diversified growth strategy, while keeping the store experience at the core of everything they do. 
• They’ve made several strategic acquisitions such as Teavana to expand their offering to a larger consumer population. 

Doing all of this successfully requires a clear business strategy, high employee engagement, a robust framework for evaluating strategic investments as well as world class capabilities across financial planning and analysis, eCommerce, customer service, social media, and brand diversification... just to name a few.

This kind of result is only possible when HR and finance team up on strategic planning and execution.

So get a jump on the competition and go grab some lunch with the CFO!

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.