Excessive Overpayment vs. the Real Solution

Excessive compensation is one of the most popular options used to persuade people to stay in terrible jobs.  Rather than redesign the function or improve the support system to make the work more palatable, it is much easier to just offer fantastic pay.  More money is often seen as a universal cure for all ills, even though it may be the wrong solution. 

The fixation on cash as the consistant culprit is a cop-out.  It conveniently transfers responsibility for the issue from operational managers to the compensation specialists.  Assuming that a problem can be solved with money proposes a quick solution by payroll action before fully investigating the cause of the problem.  Jumping straight to prescription without ever entering the diagnostic phase is a recipe for disaster, but it offers the extra advantage of essentially changing the way the challenge is viewed:  if can be solved by money, it is not a management question but simply an expense cost item. 

When morale is low or turnover is high, granting big money might make a difference.  Or it might not.  Of course, the amount of remuneration is usually not a long term solution to any problem, but no one will turn it down.  Besides, attributing the issue to low pay suggests that a quick fix is possible.

Whenever turnover becomes a problem, someone always immediately concludes everyone needs more money. The continuous popularity of that frequently misguided approach fix shows up all the time. 

Best example of that inappropriate attribution situation was many years ago at the highest paying software department in Southern California.  Outside consultants were brought in to solve their continual IT turnover issue by finding the right pay level.  But the problem was not turnover, it was the manager. 

The IT head didn't do COBOL, FORTRAN, C+ or any other "modern" software languages of that era; but he was a long-time close friend of the CEO.  Backed by that power, he  bribed overqualified MIS PhDs to program in early Autocode, which he did know quite well.  That ancient computer language preceded machine assembly language and was so antiquated that these highly paid experts lined up outside the managers office every morning for help as they struggled to reconvert modern operating programs into ancient formats the manager understood.  The job was so frustrating that immense sums were required to hire and retain these experts.  Heightened qualifications were required to support the high salaries; and the more qualified the personnel, the more they earned even as they resented the waste of their highly developed credentials.  The exasperated programmers confidentially vented to the consultants that they knew they would have to take a pay cut to go anywhere else, but the situation was professionally frustrating.  Eventually each would reach the point where they finally quit before their advanced skills atrophied too much for other employment elsewhere.

The consultants immediately interviewed every employee in the department and followed up on recent quits so they could produce an undeniable consensus report where all source identities could remain anonymous.  Simultaneous technical audits and comprehensive pay surveys were also conducted, to confirm and document facts for a recommendation that could withstand CEO opposition.  Any report criticizing the chairman's poker buddy had to be bullet-proof.  

The solution was to replace the IT head with a competent MIS manager.  The consultants were fired, of course, because they uncovered an unwelcome truth. 

Watch out for those who  prescribe a fix without even doing a diagnosis and make lots of assumptions as they rush to judgment.  It’s impossible to close pay gaps that don’t exist.  Sometimes the gap is in our understanding, instead.

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 "Money Flying" by Tax Credits

Comments

[John A. Bushfield]

Jim - As an old HR weenie who led HR organizations big and small, I've never thrown money at a problem, unless money WAS the problem. It's a bad answer for a host of reasons, not the least of which is that it never works. If money is the problem, it can be a symptom of a dysfunctional comp system. Regardless, as you astutely point out, thorough investigation by competent people will likely expose the issue(s) that need to be addressed.

[E. James (Jim) Brennan]

Thanks for the confirmation, John. As often stated here, money is the most expensive solution and typically the wrong one, anyway. Even if it truly solves one problem, it usually creates another.