Compensation Cafe

The Promotion Timing Sweet Spot

Editor's Note: Today's post comes to us courtesy of guest contributor Chris Dobyns.

Promotions are probably one of the most misused, misunderstood, and therefore challenging tools that management has available in its recognition and reward toolbox. All too often, promotions and the promotion process in organizations will be adapted by supervisors and employees and used for a variety of purposes for which it was never intended. 

Purpose For Promotions

Over the years, any number of explanations of the purpose for granting promotions have been offered. So, what are promotions for? For the organization, promotion offers individual advancement to perform available work at the next hierarchical level, for the benefit of the work unit.  For employees, promotions obviously provide increased financial reward in exchange for their greater skill level and the corresponding value they contribute to the organization.  Promotions also convey an increased sense of status and prestige to the employee, as an intrinsic form of recognition and reward.

Compensation theory generally acknowledges that there are only two types of promotions: organization and growth.  Due to their abstract nature, growth promotions are perhaps more prone to misunderstanding and misuse.

Growth promotions are a means to recognize not only demonstrated and continued increase in the knowledge, skill and ability of employees to perform work of the same nature, but also the proven ability to perform higher level work on a sustained basis.

Identifying the optimal timing for recognizing an employee with a growth promotion is probably the most difficult challenge for organizations and particularly for supervisors. Making the decision on a growth promotion too soon -- or too late -- can have negative consequences for both the employer and the employee.

Promotion Timing – Too Soon

Making the decision to promote an employee before they’re ready can set the employee up for failure in their “new”, higher level position. If the employee has been trained and developed, and has been observed performing at the next higher level over a prolonged period of time, promotions that are granted too soon should occur very rarely. 

A highly-motivated employee who is promoted too early will often recognize this fairly quickly. These individuals will sometimes commit themselves to being successful, which can result in the person burning him or herself out  in order to meet the expectations of the organization, their boss, their co-workers, or their own expectations.

Promotions given too early can create challenges for the immediate supervisor, where the higher performance levels may not be fully met. The organization will also suffer while the higher level work is not being fully or successfully performed, but where the employee now represents an increased cost, due to their higher salary.

Employees promoted too soon – or perhaps just more frequently than is warranted -- can also create unrealistic, long-term expectations of future advancement for employees.  

Promotion Timing – Too Late

A decision to promote an employee too late can demotivate the employee, or the employee may elect to leave the organization.  Promotions that come too late can be as much a matter of perception by the employee, as reality; considerable research has shown that individuals are incredibly bad at assessing their own performance and potential. With either outcome, the organization loses out on potential value-added outputs from the employee, for the short-term, long-term, or both.

The Sweet Spot

If you promote at just the right time, everything is right with the world. The expectations of the employee and the needs of the organization are perfectly aligned . . . which may not happen quite as often as preferred. 

One of the keys to aligning all parties’ expectations is the familiar solution of regular communication -– principally between the employee and the supervisor.  The obligation of the employee is to communicate their future goals, aspirations and interest in being promoted.  The supervisor’s role is to listen, provide training and opportunities which will ready the employee for promotion, and communicate honest and candid feedback. Combining all these elements will help the employee shape their future expectations, align them to the future needs of the organization and ensure that, to the extent possible, everyone arrives at the promotion “sweet spot” as close to the same time as possible.

Everyone probably has a different perspective.  What’s yours?

Chris Dobyns, CCP, CBP, is Manager of the Office of Human Resource Strategies for one of the largest U.S. intelligence agencies. The Office of Human Resource Strategies is responsible for compensation and incentives, occupational structure, recognition and rewards, HR policy, and human capital program evaluation and assessment for his Agency. Chris has worked in the area of compensation for more than 30 years, and has been employed in various compensation-related positions by a number of large, private sector companies including, Sears, Roebuck, Arizona Public Service and Westinghouse Savannah River Company.

Incentives at Play: Private Versus Public Versus NonProfit Organizations

Three separate research reports issued recently by WorldatWork allow us an interesting peek at the state of incentive compensation and -- particularly -- the differences in practice and prevalence between public (WorldatWork, Deloitte), privately held and nonprofit/governmental organizations (WorldatWork, Vivient Consulting).  As someone whose work in incentives crosses these sectors, I found it interesting to consider some of the differences and similarities.

A few outtakes from the research are highlighted below for your reading enjoyment.  Note that these findings are focused specifically on short-term incentive plans (STIPs), defined as rewards based on the attainment of short-term goals typically over a performance period of 12 months (or in some cases less) and covering programs ranging from annual incentive plans to spot cash awards to gainsharing.  Note also that the nonprofit/governmental population reported here reflects primarily nonprofit organizations (government entities make up less than one quarter of the group).

Prevalence

As the charts below indicate, incentives are nearly ubiquitous among the public and private companies.  Nonprofit/government organizations haven't (yet) caught up to their for-profit counterparts in incentive use (with 78% responding "yes" to their use) but they do appear to be increasingly embracing variable pay as part of their employee reward packages.

Participation

Another area where nonprofit/government entities have made headway, but are not (yet) at comparable practice levels is in pushing incentive participation down into the non-managerial ranks.  The table below shows that privately held companies lag those that are publicly traded, and nonprofit/government organizations lag both of these.

Incentive Spending

Although Deloitte's report on publicly held companies did not cover this information, it is interesting to note (see table below) the differences in short-term incentive spending as a percent of operating income/budget between the for-profit privately held organizations and their nonprofit/government counterparts.  This data suggests that the latter group is stepping cautiously as it moves into variable pay programs, not necessarily a bad idea.

Effectiveness

Here is an interesting area of similarity.  While, again, Deloitte's public company report did not capture this information, the other reports find that (for-profit) privately held companies and the nonprofit/government entities are of a very similar mind when it comes to ranking the effectively of the incentives they currently have in place;  42% and 44% of participants in these groups rated their plans as effecitve, respectively.

Incentive Design: Number of Measures

As we look at data related to plan design, we see in the following table that nonprofit/government organizations tend to have more plan performance measures than their privately held and public counterparts.  This may be because the former group is newer at the plan design game and hasn't yet absorbed the lesson that "less is more" or (more likely) it may reflect the delicate balancing act that nonprofits in particular must undergo in recognizing both financial and mission-driven goals.

Incentive Design: Types of Plan Measures

Related to the final point above, one aspect of plan design where nonprofit/government entities stand apart from their for-profit brethren is in the use of non-financial or operating performance measures.  This difference is highlighted in the table that follows.  As noted above, this likely reflects an effort to ensure that employee rewards are strongly linked to the attainment of the organization's tax-exempt mission.

For those of you who practice compensation in one or more of these arenas, how do these findings square up with your experience?

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.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

 

When Market Rates Change Unevenly

How to respond when things change unevenly is a particularly thorny issue in the compensation arena.  It’s always WHEN things change, rather than IF, because change is constant even though the rate and type of change varies all the time.  Just as the wind always blows although the velocity and direction is variable, so pay also continually changes up and down over time.  Pay gusts can create quite a storm.

So how do you adjust a living human organization when parts of it change at different rates?  Any change in compensation always attracts a lot of critical attention, so caution is particularly important when market rate changes are not uniform. 

Let’s look at the typical example of a pay program review that shows the external competitive market rates of a few jobs changing at different rates than the vast majority.  Assume that perhaps 85% of all your benchmark positions show a rate of change that falls within plus or minus one-tenth of a percent (+/- 0.1%) from a central standard level like 2.9%, with most falling between 2.8% and 3.0%.  That example might also show 10% increasing faster than 3.0% and 5% changing at a rate slower than a positive 2.8%.  A really small portion like 1% might be running in reverse, with their current competitive market rates actually lower than last reported. 

The general rule of thumb is to wait a few survey cycles before adjusting downwards for outliers moving far beneath the modal central norm rate.  Patience is typically recommended because changes in reported compensation levels can be highly unreliable due to a wide variety of reasons; for example:

• The information came from a statistically insignicant and non-representative sample of the relevant universe.
• Initial preliminary survey reports could be incorrect or improperly summarized.
• The survey sample population was unique and exhibited weird behavior unlike the rest of the peer comparables who did not participate in that survey.
• Different competitive market sources used different collection, analysis and presentation methods.
• Pay movement as measured reflects the practices at employers with normal numbers of job incumbents, while your outfit has abnormal headcounts (either a lot more or a lot less of those particular creatures than at peer enterprises of comparable size, industry, etc.).
• The change was valid but temporary, reflecting a seasonal blip or abnormal circumstance outside the norm:  i.e., like a clock pendulum, today’s sudden movement will oscillate back to a different position the next time you look at it but the norm hasn’t really changed permanently.
• The result was accurate but localized or otherwise relatively irrelevant to your situation.

Let’s say that none of those excuses fit; the findings are real and demand action.  Once you determine that a change outside the norm is required, prepare to defend the decision. 

Moving pay up is popular, but reducing pay creates upset and requires very careful handling.  Say that you have undeniable proof that some jobs are now worth less than before.  A prudent reaction would be to wait until the same backwards-moving outliers like door to door sales jobs drop two years in a row before reclassifying them properly for the new verified lower status.  There also probably will be an equally tiny statistical sample of high-end outliers such as particularly rare STEM jobs where urgent supply/demand realities may require swifter response than biannually.  No rush if you slightly overpay a few jobs for a short while, but it can be fatal to underpay and lose key super-keepers who then in turn can't be effectively replaced at your current entry rate.

All things don't grow at the same pace, so sooner or later you will need to revise and reshuffle, reclassify and restructure for both proper external market matches and new internal equity parity relationships.  If the interal/external relationships move in opposite directions, you will have different and greater problems.

What do you think?

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 "Wipeout, Pleasurewood Hills" by spencer77

Without a Decent Salary, All Employee Productivity Bets Are Off

I’m a fan of China Gorman’s weekly stats-focused blog posts, which she calls “Data Point Tuesday.” Each week she shares an interesting and relevant chart, graph or statistic, explaining how it applies to those in leadership positions, and what we can consider doing with the information.

In the spirit of China’s posts, I’d like to share this Venn diagram by Oscar Berg I saw on the Harold Jarche blog:

 

The content of both circles doesn’t really surprise me.  Managers, thinking it’s a defining feature of a good manager, focus (perhaps excessively) on oversight, measurement, results driven bonuses and, most concerning, fear. Employees themselves, however, are much more driven by trust, recognition and the acknowledgement that they can do the job they were hired to do.

Far more interesting is the glaringly obvious union segment showing both managers and employees believe “a decent salary” makes workers productive. And that is, perhaps, an obvious lesson those of us in HR as well as in any leadership position should remember – an appropriate and fair base salary is the foundation of the work contract between employer and employee.

Without a decent salary, it doesn’t matter how well we recognize, trust or encourage employees – or even closely supervise, train or frighten them. Getting compensation right is deeply impactful on individual productivity and, therefore, on company success. Case-in-point – the fast food “living wage” fight and the ensuing debate. I point you to a prior post on how a fast food restaurant performs significantly better thanks to how it offers a decent salary and benefits to its employees.

Are all employees within your organization paid a “decent salary?"

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 @DerekIrvine.

Managers Hate Job Descriptions

Every employee out there, no matter what their job, has certain tasks or responsibilities as part of their role that they enjoy doing.  Likewise, there are certain other aspects to the job that they . . . enjoy quite a bit less.

Often their negative emotional reaction is strongly felt, and may be accompanied by an unprofessional facial expression.

I've worked in Human Resources my entire career, and personally have never liked being responsible for job evaluation.   A thankless task if ever there was one, and certain to impact the number of Christmas cards I received each year.   But that's another story.

Line managers have their own likes and dislikes as well, but it's a hard-and-fast certainty that they don't like to write job descriptions.  Why?  Because they hate them, and will scowl at HR whenever they see us coming.   We're the folks who insist on bothering them with this administrative hassle.

Yep, that's what most of them think.  But why?  What are the friction points that cause so many managers to grind their teeth when the subject comes up?

• Many don't see the point:  Most view the writing of a job description as a make-work effort, when "everyone knows" the job already.  So why do we need to fill out these forms, they grumble.  Why do we have to write it down?

Or, why don't you do it?

Many consider this onerous task as filling a need of Human Resources, not one of their own.  So it's not perceived as a necessity, not a priority and certainly the effort doesn't help them.  To be fair though, not everyone feels as strongly, but you'll see this reaction often enough to sense a common behavior.

• The formatting isn't manager-friendly:  So-called HR "specialists" are always tinkering with the template form, seeking a better way to describe a job.  But that "better" way usually results in a description preparation process that has grown overly long, tedious and a drudgery to follow.

After all, how many ways are there to describe the tasks and responsibilities of a job?  Here is where HR consistently shoots itself in the foot, by making the simple more complex, the straightforward more convoluted and an easy recording job becomes a trying ordeal.  At least that's the way it looks from the manager's perspective.

Some Managers will take a different tactic and will hurry through the process, or will have the employees themselves do the work (a separate challenge), perhaps will ignore select sections of the form, will fail to properly complete others, etc.  A real mess can be sent to HR.  But it's done!

• Rumor: better writers get better deals:  Managers don't look at themselves as writers, and they can't seem to shake the bias that better written job descriptions result in higher job evaluation or market pricing scores.  "If only I could word this right," is a common self-criticism, as if the reader takes every turn of phrase as gospel.

So another reason for delay is because they know they're not very good at writing descriptions, so they put off starting.  Just like a homework assignment.

• They have better things to do:  This is the bottom-line criticism, the core reason from many a complaining manager; "I'm a manager; I have a department / business / empire to run.  I don't have the time to waste writing job descriptions."  In other words, you do it - and they don't much care who the "you" is.

Not a pretty picture, is it?  But it doesn't have to stay that way.

In my next posting we'll take a look at how you can salvage this mess.  You might not be able to turn a frown upside down, but you can create a more accepting environment for preparing . . . appropriate descriptions with a process that everyone can live with.

Or you could go another round with your line managers.

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 "Hacking Job Descriptions," by Jujan Sonin

The Micro and Macro of Compensation

“Ignoring the whole to get to the point many times can cause one to miss the point.”  --- Unknown

Let me tell you a story. When I was just starting out in “international” HR I made a trip with my manager to Japan. (Keep in mind that I was a cultural neophyte.)  

In a discussion with the Japanese HR Manager I asked him a question.  He talked and talked and from my perspective nothing he said had anything to do with my question.   Finally he stopped and I looked at him and said, “So what’s your point?”   I immediately felt my manager’s shoe gently (?) pressing down on my foot and knew I had committed a faux pas.

My story illustrates one of the key differences between the cultural norms of East Asia and the West. Eastern Asian cultures tend to think holistically, seeing an entire situation and how its parts are connected. In contrast, Western cultures tend to think specifically, removing a subject from its environment and analyzing it as a single entity separate from the whole.

My question to the Japanese HR manager had focused on an issue specifically.  He, in turn, was providing background context holistically.

OK now hang on because I’m going to make a big leap.  What if we think about our company’s business representing the macro level --- subject to all the contextual issues in the world of business.  Issues such as external environmental impacts, financial turmoil, globalization, political upheaval, etc.  And HR/Compensation representing the micro level?   Meaning, do we as Compensation pros really stop and consider our decisions in context --- or do we make decisions based solely on our Compensation theories, rules, best practices, etc. at the micro level?

We’ve all heard/read more than we want to about how HR/Compensation pros need more business acumen.   I believe it means not just taking a course in Accounting or Finance.  It’s not just learning how to calculate the ROI of HR programs.  It’s not just about applying metrics.  It’s broader in context.   It means understanding the company’s business.  Sounds so fundamental doesn’t it?

HR/Compensation pros need to check their mind-set. The key question is not "does the rest of the business ‘get us' --- it’s do we ‘get the business’ ”?

As far as Compensation goes, it doesn’t mean:

•giving managers Comp 101 responses to their questions
•doing a “cracking good” analysis of a compensation problem and then making a decision based on that alone --- without taking a broader look at how that affects the business 
•designing an incentive plan that’s a “work of art” and that makes us positively giddy, but not checking to see if really makes sense for the company
•refusing to bend “the rules” when business reality says we need to
•identifying the risks we don’t want to take --- it’s about identifying the risks we need  to take. --- just like all the other company functions do

Ed Holton says it best:

"As disappointing as it may seem to some, HR(Comp) is just a means to an end.  So is Sales, Marketing, Engineering, Manufacturing, etc.   The real end goal is to make the company more successful.  The only tools and tactics we should be implementing are those that drive the company toward its strategic goals.”

So let’s make sure we are looking at the “whole” --- looking at things in context --- before we get to the “point”.  Or . . .  we may just miss “the point”.

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. 

We're Back!

Dear Cafe readers:

As you've likely noticed, we were essentially offline (except for a few intermitten spurts of service) from this past Thursday (4/17) evening until last night.  Our blogging platform, Typepad, experienced what is known in the business as a DDoS (distributed denial-of-service) attack, which crashes websites and other online services for can be (and were for us) days a time. Apparently similar attacks have hit several other high-profile tech companies in recent weeks, including Meetup, Basecamp, Vimeo, Bit.ly and others.

At any rate, we are thrilled to be back up this morning.  Thanks to all of you who checked in to express your concern over the past few days.

On to our regularly scheduled content!

Best,

Ann and the cast of contributors 

Beast Management and Pay Plan Design

There's nothing like the heady buzz -- and the intermittent moments of terror -- that accompany the chance to design a compensation program when fate presents you with the opportunity for from-scratch development of a new plan.  Or the chance to disassemble and rebuild a current one.

What are the obstacles to success, to creating the inventive yet business-grounded plan that will really make a difference in your organization?  How do you get past them?  Pixar President Ed Catmull draws on his experience in running an iconic artistic powerhouse to offer some tips on approaching our work with a creative and open mind while not losing sight of the realities of business life.  His advice struck a chord for me relative to my own plan design experiences, so I thought it worth sharing a few tidbits here.

First, he counsels, accept that your initial ideas may suck.  And be ready to get past it.  Many of Pixar's most beloved movies began with a story that bears no resemblance to the final product.  For example, Catmull notes, everything in and about the first version of the movie Up was thrown out, everything except a bird and the word "up."  The creative process requires iterations and the space to learn and move forward from initial mistakes and failures.

The challenge many of us encounter in our plan design adventures is the battle of good creative process over the "corporate beast", a term Catmull uses to describe those in the organization who want a quick solution and will push for design completion.  As a consultant, I encounter this all the time.  I sit down with a leadership group or a cross-functional design team, with the intent ot hammering out a set of objectives and a few guiding principles -- and all they want to do is jump to the whiteboard and start sketching out plan design.  The urge to skip to the end and "get 'er done" can be overwhelming.  Even my best Cheshire Cat cautionary (Don't know where you're going? Then any plan design will get you there!) can be rendered impotent when faced with the power of le bete.

The trick to managing the beast, Catmull tells us, is finding a way to protect the process for just long enough ... but not too long.  In other words, it's a careful balancing act.

If the beast engages too early, it screws it up, and if you let them [design team] wander along too long then you screw it up, so you have to find a middle ground. There is nothing about this that is easy but the temptation is to make it easy.

This can be the biggest challenge of all -- reading your organization well enough to appreciate the nature of your own corporate beast and determining how much process your constituents can endure in the service of the best possible design outcome.  And then putting your reputational capital on the line to enforce and protect that process.

How have you managed your own corporate beasts?

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.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

Creative Commons image "roar" by onosendai2600

3 Ways Pay for Performance is like a 50 Foot Putt…on Glass

I watched an amazing video the other day. Professional golfer, Rory McIlroy, was challenged to attempt a 50-foot putt on a glass surface. After missing his first attempt, Mr. McIlroy was successful on his second try. How does this relate to compensation you ask?

1. Focusing on accuracy is essential…regardless of the environment

Golfers must putt on all types of surfaces in all types of weather. The best professionals have similar scores in almost every tournament, regardless of the conditions. It’s not always possible to know what to expect. When you watch the video, you might be tempted to write off Rory’s success to luck. But, his first attempt only missed by a mere half an inch. Amazingly, this meant that as the ball was hit there was only a margin of error of five one-hundredths of an inch between success and failure. He focused on the correction, made a tiny adjustment and the ball dropped in on his second attempt. Accuracy at the start is critical to accuracy at the finish.

2. You have to practice…a lot

We often focus on a task only when a deadline looms. Worse, we seldom spend time “trying out” compensation ideas during our slower times. Ask any professional athlete, musician or artist and they will tell you they practice more than you can imagine. Great golfers have made hundreds of thousands of putts during practice. Photographers publish one picture for every hundred or thousand they take. How many sales compensation plans have you designed just to track potential results? How many long-term incentive programs have you created in a hypothetical mode to prove your proof of concept before you make it real?

3. If you miss your goal, you have to be ready and willing to try again…immediately

Adjustments should be expected. Almost no one, not even the pros that practice all the time, get it right the very first time. Failure is not necessarily a reason to jump to something else. You may just need to adjust and try again (and again). Have a plan for how you would approach things differently if it doesn’t work. Be ready to put that plan in action as soon as it becomes clear that the prior attempt is unsuccessful.

So much of what we do is like putting on glass. The surface is unfamiliar and things move faster than expected. Something that looks smooth at first glance is bound to have curves and undulations over time. Our margin for error is small and success may offer only fleeting praise. But, focus, practice and quick adjustments can allow you to be successful in even the most challenging and unexpected conditions.

Dan Walter is the President and CEO of Performensation and is focused on the needs of small and mid-sized public and private companies. Dan is working with fellow Compensation Café writers, Ann Bares and Margaret O’Hanlon on a new book due later this year. 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 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.

Keeping A Secret

Are the employees in your organization aware of their salary grade, of the minimum, midpoint and maximum values of their salary range?  Do they know where their job stands in the company's hierarchy (mine is bigger than "x," but smaller than "y")?   In effect, do they know how they and their job are being valued within the company's compensation program?

If they don't know, why not?

Is this privileged information, tightly held by Human Resources and only doled out in small drips, when asked?  Is it on a "need to know" basis, and sometimes the employee doesn't need to know?

The big secret

Some companies don't tell an employee their grade or salary range; or if they do, that's all they give out - the employee's present status as a single, unrelated piece of information within a huge jigsaw puzzle that is the organization's hierarchy.  In such a case the employee is unable to find out the grade or salary range of any job other than their own.  Without a frame of reference, such a restricted disclosure isn't very helpful in planning their next career move.

As a side issue, employees also won't know if they're being treated fairly.

Limitations on disclosure are strictly for the benefit of the company.  No one will say that the employees don't want to know, or that such information isn't important.  Instead,  reluctance to disclose is inherently a management decision meant to advance tactical considerations in support of their own agenda.  In other words, it helps management freedom of action when employees are kept in the dark.

But what's such a bad idea with informing employees about the broader compensation structure, to let them know where they stand within the organization?

Unless . . . .

• There's something to hide

• Or something that the employee shouldn't discover

• Or a policy or practice that can't be easily defended

Given these potential cautions, while the concept of open disclosure often gets the heads nodding as a grand idea, negative practical implications may point in the opposite direction.  Employees could face the same stonewall that their parents had to deal with;  "interesting concept, but not for us."

What could go wrong?

When the pay structure is posted on the wall for the first time, there for everyone to have a look-see, the phones will start to ring. That signals the start of the "what about me?" questions.   Let's look at a few common scenarios that managers would dearly love to avoid dealing with.

• After five years of good performance reviews, why am I still paid at the bottom of my salary range?  This could be the hardest question that a manager receives.

• Why is that job (go ahead, point at anybody) in a grade higher than mine?  No manager wants to defend job evaluation results, especially as it's an usually a subjective process.

• Why is the job I want to bid on only a lateral move?

• If my job is so important (manager said so), then why is "job x" in the same grade?

Management doesn't want to get these calls, because often times they're woefully unprepared to answer the employee's questions.   And they want to be liked by their employees, to have someone else be blamed when employees are upset.  So wouldn't it be easier if the employee just didn't know?  Wouldn't it be easier to operate the business with employees left in the dark about their grade and salary range status, rather than face potentially awkward questions out in the light?

It does make sense, but for who?

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 "Naughty Secrets IMG_0781" by stevendepolo