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08/25/2014

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Hi Dan --- I agree we put too much credence in surveys. BUT if we stop using them, or consider using other data points as well to make our pay decisions ---- it seems that will add fuel to the fire. Employees will then challenge the "discretion" used for balance. I am a big believer that surveys should only be one data point -- they're tricky. But for communicating with employees, showing them market data as an "objective" source would be more believable to them.

Hi Jacque

I agree, survey data is a useful tool, but we perhaps place too much credence in those numbers. I have seen people use survey data as if it was gospel. I have seen people accept survey data as unbiased fact, when it is often picked from very specific companies, or by specific providers to support a point.

Worse, people often depend on survey data when is can be easily proven to be flawed. The key to this and everything on the list is careful and informed usage.

Hi Dan,
Good post. I agree that the term Pay for Performance has become watered down and lost much of its meaning.

I have written on the pay disparity issue and think much of the downward pressure on the low and middle parts of the pay spectrum have been driven by the globalization of the workforce and technology tipping point. I think the some of these issues are starting to moderate as we some of the jobs starting to come back onshore. I believe this will continue to be one of the major social issues of our time.

I think the retirement shortfall will drive new work expectations as people realize that living longer also means working longer. You can’t expect to retire at the same age as previous generations with less valuable retirement programs while living longer, the math just does not work.

Compensation professionals need to find better ways to tie pay to results using pay surveys as a starting point and not a limiter. Too many use surveys to define the answer and not the question.

I also agree that equity compensation has not been used effectively. It seems like the poor alignment between value and company results has created a self-fulfilling prophesy of higher expectation. Much of this started as an unintended consequence of earlier executive pay regulations.

Thanks Trevor,

Great points. I hope that we will manage these issues to avoid a tipping point, but I expect that at least one of these five will "blow up" in the next 5-10 years.

I researching executive compensation pay disparity I have found that our use of equity has been flawed for at least 40 years (likely 50 years). The paradigm of equity was built on a far greater disparity in shares/option than can ever be supported in cash. (http://www.compensationcafe.com/2014/06/you-get-2-shares-and-you-get-4-shares-and-so-on-and-so-on.html). This flaw in allocating equity along with the amazing growth in the size of companies and stock prices in general has combined to drive the huge gap in executive / employee pay.

Of all of these I think I am most concerned about the potential (likely) retirement shortfall. Not only will people need to work longer (something that is harder to do when you are unhealthy), but their families will be forced to provide more support with thinner resources. 100 years ago most of the income came from a single wage earner and the elderly were often cared for by the adults at home who were not working. With the age of the two income family, there is less chance that someone will be home to care for the elderly. With the addition of working more years this lack of capacity is only going to get worse.

Compensation and HR professionals have only scratched the surface of this issue, but 10-15 years from now it will likely be on the front page of every industry website and the main presentation at every industry event. Probably with a title like "Retirement, The Perfect Storm, how come we didn't see this coming?"

As a sometime survey provider I can confirm that surveys do not tell you what to do. They are a snapshot of what is happening at a point in time.
Your decision is whether any adjustments to your pay are necessary and whether that is basic pay, or variable and performance related pay.
I can also confirm (as a boomer) that the pensions time bomb is ticking loudly for many.

Thanks John,

It should stop surprising me by now that people use survey data with th same confidence that I use multiplication tables. 4x4=16, 7x6=42...always. Survey data is not as perfect.

I guess that is why we learn compensation as a profession, instead of having someone teach it to us in 1st grade.

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