Compensation Cafe

Are Your Compensation Plans Mission Critical?

A great reminder of an important design principle came my way during a recent presentation of a preliminary plan design to an executive group.

We were dealing with a plan that had become a little too complex, a little too cumbersome during the design process.  The CEO shared a story about what he and his product development group do when their design process culminates in a product that is just too ... clunky.  They step back and ask the question:

What is mission critical for this product?

This leads to a conversation about the core purpose of the product, what essential problem it is being created to solve.  Too often, the design process leads to a pile-on of extra features.  Hey, as long as we're adding that, why don't we put this in as well?  And wouldn't it be cool if it could also do these things?

Before you know it, it's bye-bye elegant and simple design, hello clunk.

As the CEO noted, once you return to an agreement about what is mission critical about the product, you can use that agreement to guide you in peeling away the extra, non-critical design elements and drill down to the core product features.

A great analogy and I knew immediately that he had hit this particular nail right on the head.  I directed us back to the opening of our presentation where we had summarized the plan objectives.  Over time and through a process that involved input from a number of constituents, our plan objective list had grown long.  Too long.  (Really, as I had reinforced for me here, more than three objectives for any plan will almost always put you at risk for problems.)  Could we develop a plan to do all these things?  Of course -- and we did.  The question is, could the plan really do all those things well AND provide a clear, engaging experience for those who participated in it?  Probably not.

And so, we went back to defining our critical mission.

Got a design clunk story of your own to share?

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 and fellow Compensation Café writers, Margaret O’Hanlon and Dan Walter will soon be releasing a new book on communicating compensation - stay posted! 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 photo "3D Bullseye" courtesy of www.stockmonkeys.com

Stock Buybacks: The Good, the Bad, and the Ugly

The Great Recession is long since over, company profits are high, and the stock market is booming. Yet most Americans are not feeling good about the “recovery”. While many corporate executives have received large pay packages --- almost none of company profits has “trickled down” to the average employee.  And this is at a time when employee productivity is at an all-time high.   Profitability is simply not translating into widespread economic prosperity.

Why?  Well probably everyone has their own belief about this, but I’m going to focus on the use of company profits to fund stock buybacks.  Some people believe it has created a lot of damage --- both for companies and the economy in general. 

The 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012 used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in R&D or higher incomes for employees.

From the end of World War II until the late 1970s, a retain-and-reinvest approach was the norm at major U.S. companies. They retained earnings and plowed them back into the company. They provided workers with higher incomes and greater job security and economic growth.

A turning point was the wave of hostile takeovers that occurred in the 1980s. Corporate raiders often claimed that CEOs of the targeted companies were failing to maximize shareholder returns. That criticism prompted Boards to align the interests of management and shareholders by making stock-based pay a much bigger component of executive compensation.  Result:  In 2012, the 500 highest-paid executives of America’s S&P 500 corporations averaged $30.3 million each in total pay, with stock-based rewards making up 83 percent of their pay package.

To increase stock prices top executives made massive stock repurchases, which helped them “manage” (read manipulate) stock prices.  That enabled them to maximize shareholder value and to meet Wall Street’s expectations for higher and higher quarterly EPS.  It also provided them with good-sized compensation packages.  The result: Trillions of dollars that could have been spent on innovation and long-term growth in the U.S. economy were lost.

Let’s look at this notion that a CEO’s main obligation is to shareholders.  It’s based on a misconception of the shareholders’ role in companies.  The majority of shareholders are  investors who sell their stock when it reaches a pre-determined price. They care about a company only in terms of its stock. They’re not value creators --- they’re value extractors.

But this is the real point I want to make.  The bulk of buybacks have come at a time when U.S. companies face new global competitive challenges.  Gary P. Pisano and Willy C. Shih of Harvard Business School have warned that if U.S. companies don’t start investing much more in research and manufacturing capabilities, they cannot expect to remain competitive in many advanced technology industries.  Example:  Cisco has focused on buybacks.  Its competitors --- China’s Huawei Technologies and Sweden’s Ericsson --- don’t do buybacks. They’ve been investing in innovation instead and improving their competitive posture. 

Top managements of U.S. companies don’t appear to be concerned about the impact of lack of value creation on the economy.  In fact an Apple executive once said a couple of years ago:  “We don’t have an obligation to solve America’s problems.”

It’s time for the U.S. corporate governance system to enter the 21st century.  If the U.S. is to achieve growth that distributes income equitably and provides stable employment, government and business leaders must take steps to bring both stock buybacks and executive pay under control. The nation’s economic health depends on it.

On a parting note, think about this.  No one would argue that the U.S. economy has always had a major impact on compensation.  But could it be that we are now at a point when compensation is having a major impact on the U.S. economy?

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 has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

3 Reasons to Empower All Employees to Give Discretionary Rewards

Our esteemed Compensation Café editor, Ann Bares, published a very good post last week on discretionary rewards. The article focused primarily on the unintended consequences of leaving these discretionary reward budgets solely in the hands of the manager – to which I say, “Hear, hear!”

Ann used a couple of illustrations to highlight the challenges of such programs, which boil down to:

1. The length of time between action deserving of recognition and reward and the actual receipt of that reward (because such programs most often take the form of annual bonuses).
2. The memory of a single person (the manager) over time to appropriately reward someone.
3. The unintended reinforcement of the manager and his or her concerns as the primary focus of employees.

Ann wisely titled her post “Discretion and Disempowerment.” If our goal instead is to empower all employees to delight each other, the customer and the manager, then it is necessary to also empower all employees to recognize and reward each other for demonstrating behaviors and achieving goals aligned with the company’s core values and strategic objectives.

How does empowering all employees impact the challenges referenced by Ann and enumerated above?

1. In-the-moment recognition reinforces much more strongly the actions, behaviors and results you need to see to achieve success metrics. Many employees try their best every day at their jobs. Sometimes, we are exceptional. Think of the lost opportunities if “Joe” did something exceptionally well in January but was not recognized for it until the annual bonus is distributed in December. Joe may not realize just how exceptional that effort was or that delivering that kind of effort more regularly is desired. If he’d been recognized in the moment, he would know beyond a doubt how much that exceptional effort is appreciated by others and the impact it had on success. Now he’s far more motivated and likely to repeat those behaviors and efforts again and again.

2. Even the best manager cannot see everything good happening every day or remember all those instances of excellence over many months. That’s why empowering all employees to recognize and reward each other is so powerful. Now you not only have exponentially more “eyes” looking to “catch someone doing something good,” but you are also reinforcing what “good” looks like for those doing the recognizing as well as receiving the recognition itself. In her post, Ann used the example of a basketball game in which there is no scoreboard and no one is permitted to tell players the score during the game. Only the coach knows. That scenario is just as ridiculous as attending a basketball game where all players are silent. I’ve certainly never seen a sporting event in which the players themselves weren’t encouraging each other constantly.

3. When all employees are empowered to recognize each other for certain actions, behaviors and results in line with core values and key objectives, then the priorities of the organization become first and foremost. Demonstrating those values and contributing to those objectives become the guiding principles for employees. Now, the needs of the customer, the colleague and the company have as much priority as the needs of the manager in terms of how employees are recognized and rewarded.

Who controls the distribution of discretionary recognition and rewards in your organization? Just managers/leaders or all employees?

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.

Pay Attention

The phrase “pay attention” is both a topic title and an imperative exhortation.  Regular readers of this site must pay attention to the attention being focused on pay transparency.  It is vital for self-defense and survival.  Casual visitors to our discussion forum might actually have a better understanding of the problem.  Compensation professionals could be too close to the situation to consider it objectively, to see it in perspective or to view the challenge as it appears to the average citizen. 

Journalists and broadcast commentators will eventually cease whipping top executives with repetitive “say on pay” stories.  When the public reaction becomes a yawn, they will seek new game.  Pay transparency is a broader topic that allows controversy hunters to shift their cross-hairs to a new target where exciting stories can attract a much larger audience.  There are relatively few CEOs around whose excessive compensation inspires a gag reflex, but there are millions of workers who know very little about how their own pay is set.  Not that many people have a personal interest in what top executives make.  On the other hand, every working person cares deeply about what they earn themselves.  And they care about what their family members earn.  That makes a large potential audience for tales of pay inconsistency, unfairness, inequities, confusion and even malfeasance that will resonate with far more people.  And we know those stories exist.

Reporters foment dissension and thrive on "shocking revelations."  Both mainstream media and special interest groups require interesting stories for their audiences, so they are strongly motivated to dig for examples that stir up passions.  Polemicists desperately seek outrageous headlines that attract notoriety.  Posturing, exaggeration and slanted argument has replaced factual balanced presentation in almost all media, because no one gets excited about boring things.  Pay is a topic that meets their needs.

The trend towards pay transparency will persist and continue to expand for a variety of reasons.  Executive compensation excess is a handy club with which unions continue to pound employers  as they desperately agitate for survival.  But CEO greed is a hoary old story retold every year.  Reporters crave new meat.  A relatively few juicy tales about a tiny percentage of top executives already attract media interest for attention-catching sound bites.  Imagine how they will feast on the many more anomalies discoverable in rank and file payrolls! 

As newspeople intensify their search for scandalous stories about wages and salaries, we here are already fully aware that there are lots of potentially embarassing examples in virtually every enterprise.  Transparency, whether voluntary or forced, will reveal what has been hidden.  What are we doing about it?  We know that the subject of pay deserves special careful treatment by human resources staffers and total rewards specialists. 

If we don’t pay attention to what is said about pay, any intensified examination of how we handle pay will certainly create confrontations. Exposure of problematic decisions may generate negative attacks on our profession.  Keeping silent while being assailed in public is not a very effective public relations tactic.  Pointing the finger at top management won’t work, either, because compensation experts are charged with the responsibility to provide authoratative advice on implementation tactics.  Challenges will require responses.  

The cameras and microphones are coming.  Are you prepared for the call of “action!"?

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 "Newseum Newspaper Headlines" by m01229

5 Possible Tipping Points for Pay

"The moment of critical mass, the threshold, the boiling point.¹" This is how Malcolm Gladwell describes the tipping point. It is the moment when things truly change and return to the prior state becomes hard, or even impossible. Responding to major changes like these tend to drive evolution or revolution. The results can be more volatile than expected and occur more quickly. There have been many compensation-related changes happening over the past couple of decades. I make the case for five elements that may be nearing a tipping point.

1. Pay for Performance.

Pay for performance is incredibly popular right now. I am one of its biggest proponents. But, as the use of P4P rises, so does the lack of verification of effectiveness, structure and communication for these programs. There is real potential for the abject failure of these programs as a whole. P4P is filled with potential risk. Failure will likely be seen in angry employees and struggling companies.

2. Pay Disparity.

It has been almost one hundred years since we have had wealth disparity in the United States like we are currently experiencing. Not all of the disparity is driven by pay, but as the wealth gap has grown, so has the pay gap. We are already seeing attention from the media, scrutiny from the government and discontentment among employees. While the first two get the most attention, it is the employees who will drive the tipping point. Unless they are given some path to correction, they will find a more volatile way to drive change.

3. Retirement Shortfalls.

The way we currently look at retirement has been around for just about the same amount of time as our oldest citizens. These senior people had a lot of help in preparing for retirement and we still have huge problems with poverty among the elderly. It is expensive to be alive. The shortfall between retirement funds versus needs has been well documented. We have built a society where people live a long time and can do so knowing that they are supported by funds that were designated long ago. As retirement funding changes and social security fails to keep up with the cost of living, will we see new “families” where employees spend as much time and effort supporting their parents as they do their children? Can the two-income work structure we have built support this additional need for time and money?

4. Pay Survey Use.

Pay surveys are useful ingredient in delivering proper pay. But, like sugar, overuse can be unhealthy. The flaws of the data and how we use it have been documented for years. Search on the term “survey” on this site and you will see what I mean. Pay surveys help make our decisions “feel” better. Sometimes at the expense of them actually “being” better. Are we prepared for the moment when the overuse of surveys becomes a rallying cry for those people outside of our profession?

5. Equity Compensation.

Many of you know that I believe equity compensation is an incredibly important element of pay. But, like other forms of pay for performance, it has often been used without a thorough understanding of its impact. The growth of equity compensation easily aligns with the growth in executive / employee pay disparity. Pay disparity is itself nearing a potential tipping point. Without thoughtful planning and better use of equity compensation, we may see it disappear like so many other formerly useful pay programs (defined benefit plans anyone?).

¹ The Tipping Point: How Little Things Can Make a Big Difference

Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with corporate strategy and culture. Dan and fellow Compensation Café writers, Ann Bares and Margaret O’Hanlon are happy to announce our new book: “Everything You Do in COMPENSATION IS COMMUNICATION.” Dan has also co-authored of several other books including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, “GEOnomics 2011” and “Equity Alternatives.” Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.

Discretion and Disempowerment

Ah, management discretion.

Leaders often have a great fondness for discretionary rewards, particularly in bonus and incentive plans.  And why not?  Discretionary rewards keep all the power and control with them.  Wild card in hand, they are free until the moment the reward decision is made to do whatever feels right, based on their personal judgment call.

But discretionary rewards have their pros and cons, and the flip side of putting all the power and control in the manager's hand is that none of it is left with the employee.  In an age where employers are increasingly seeking (and needing) an enabled and engaged workforce, this is an act of disempowerment.

In his book Motivating and Rewarding Employees, Alexander Hiam uses a simple story to illustrate this problem.

Imagine you are coaching a very strange basketball team.  It plays in a league where there are no scoreboards, and nobody is allowed to tell players what the score is. Instead, the officials keep a private tally and announce the winner at the end.

If that were the case, how would the players know whether they were doing well or poorly?  They'd have to check with their coach.  That's you.  And, of course, you would try to keep a mental tally of the score so you'd kow how the game was going, but since you couldn't tell them the score, you'd have to tell them what to do based on your knowledge of the score.  So players would look at you to see what your mood was and get cues from you about how hard to play.

As Hiam notes, it's really a stupid example because nobody would be willing to play under those conditions.  Yet when organizations create bonus plans (particularly when they put increasing amounts of total employee cash at risk with these plans) and make award decisions completely subject to management discretion, isn't that what they're doing?

Jerry McAdams, consultant and author of a number of books including The Reward Plan Advantage, refers to these plans as variable entitlements -- highly valued, generally misunderstood, reinforcing to those who get them and resented by those who don't.

As Jerry tells us:

The most insidious thing about discretion is the message it sends.  If your manager controls your bonus, you are going to serve and delight her (if you've got half a brain).  So, who is the customer?  The manager.  The needs of the real customer are clearly secondary to those of the manager.  The more management discretion there is in the distribution of variable entitlements (or rewards of any kind), the more confusion there is in the minds of employees as to where their allegiance lies.

Is there a place for discretion in rewards?  Absolutely.  But it should be thoughtfully considered and crafted, explicitly communicated and it might be best reserved to address the exceptions -- the circumstances which are unmistakenly beyond the control and abilities of program participants.  Total discretion in rewards suggests that everything is out of their control and ability.  A message of complete disempowerment.

Is that the way your reward dollars should be spent?

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 and fellow Compensation Café writers, Margaret O’Hanlon and Dan Walter will soon be releasing a new book on communicating compensation - stay posted! 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 "sad eyes" by hannah k

Dirt Under The Fingernails

Do you have a pet peeve at work?  Something that, when it happens just bothers the hell out of you?  That can ruin your whole day? 

I do.  In fact, I have several.  Here’s one of my most annoying poke-in-the-eye scenarios; the self-appointed or self-anointed expert.

Have you experienced the same?  Or perhaps to someone you know?  Some examples:

Management decides to hire a bright and shiny new MBA and then drops the youthful new employee into your department with a thud. The new hire is touted as the second-coming of Jack Welsh (GE) or some other management guru; someone who will know what to do, how to solve the department's problems, how to get the business back on track.  Because they have an MBA, you're told.

They're usually paid a ton of money, at least in comparison to what's paid to those who have to instruct them on how things are done here.  When you add in a touch of arrogance and self-importance you often have a recipe for internal conflict, passive resistance and eventual counter-productive results.

Why is that?  Resentment.  Too often what they know is what they have been told.  The employees see this, though management can look the other way. 

Here's another example

When someone is lecturing or offering advice about compensation issues, usually in a webinar, a workshop, conference  or even within a published article, I gauge the credibility of that advice, and the recommendations that usually accompany them, on the basis of whether I can take what's offered at face value.

If the advice or recommendations is coming from someone with dirt under their fingernails, who has walked the talk and spent time in the trenches of dealing hand-to-hand with employees and their compensation issues, then I listen and take notes.  On the other hand, if the presenter has a progressive track record of college, advanced degree, consulting firm and then telling me what to do at work, I confess that I usually have a less positive reaction.

I've been burnt before by the lack of "street smarts" that plague the new certificate holders, academics and "wunderkind."  So I don't read those articles.  I don't listen to those speeches.  Because in my view that's not experience talking, that's book learning and a view of common or "best" practice as studied by those who haven't walked a mile in my shoes.  It's "case study consulting."

My father used to complain that college was teaching me "book stuff, not common sense."  He might have been on to something.

When I fly, I like to see that the pilot has a bit of grey hair.  Gives me confidence that they've got some hours under their belt, and can likely handle themselves outside of the aircraft simulator.

For their part, a seasoned compensation practitioner is one who has been there, has tried different methods, has bumped their head a few times and has learned what works - and what doesn't.  Even more important, they've learned the why of things.  They’ve dealt with practical issues, with employees as well as managers, and they’ve gained a perspective about what works in their particular organization.

Those who have only analyzed case studies in a classroom environment simply don’t have the depth and breadth of practical experience to advise on the basis on anything other than what they‘ve read, what someone else has told them.

Because the circumstances within my organization, the internal dynamics, the office politics, the management bias, and even the workforce culture are not the same as you would find in the next organization.  There's no cookie cutter solution out there, nor off-the-shelf magic potion that works for everyone.  What I need is what will work for my organization, not yours and not some conceptual average "everyman" organization.

But that's me.  You may see things different.

Likely you have your own pet peeves.

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, "The God Complex," by angelofsweetbitter2009

Labels --- It's Time To Give Them a Hard Look

I was reading a textbook on organizational behavior recently that included a chapter on perception --- how we perceive things.  Stereotyping was discussed --- a means of organizing, identifying, and interpreting information in order to understand the environment.

We’re all familiar with stereotyping/labeling people. It’s become expected as well as accepted.  

What do you think of when you see these words?
++++ Nerds, introverts, blondes, liberals, jocks, hicks, Generation Y ++++

Why do we use labels?   Several reasons but the biggest one is that it helps us try to simplify our complicated world. If we couldn’t use labels, we'd quickly get overwhelmed.

Labeling serves a useful purpose, but it does have a down side. The biggest problem is we can easily get trapped by labels. Labeling encourages closed-mindedness.  When we start believing a label, we can’t seem to see anything beyond it.  It saves us the trouble of actually understanding something and still gives us the false belief that we’ve figured it all out.

People are not the only thing we label.  We are also guilty of labeling practices, ideas, processes, beliefs, philosophies, etc. How can we apply this to the world of Compensation?

Well --- what do you think of when you see these phrases?    
++++ Best practices, seniority pay, bell curve, performance reviews, counter offers, employee engagement ++++

We have a tendency to operate in a comfort zone and to want to “hunker down” with a specific viewpoint.   Counter offers?  “They’re a bad idea every time.  Everyone knows ole’ Jack has already left the company mentally.”  Oh?  Every time?  You mean 100%?   An absolute?  No chance for deviation --- ever?   I don’t know about you but I have a visceral reaction when I'm told something is absolute --- even in Compensation. 

Unless we consciously try to understand different views on a practice, process, etc. our minds will eventually close and we’ll become prisoners to a point of view we’ll never question.

Here's a quote that I’ve saved from Dan Walter, one of my colleagues here at Compensation Café:    “Even though there are great ways to do almost everything, there are very few absolute ways to do anything".

Here’s reality.  The world is changing fast.  Globalization has forced companies in the U.S. to change their “tried and true” business models (read as 100% always right) to get a foothold in emerging markets.  Selling, marketing and design techniques have had to change.   Given this, don’t you think it’s possible there might be a few practices that could/should change in Compensation?   Think we can peel off a few labels and see?

Something tells me that we’re going to see some big shifts.   You know the old saying:  “There is nothing certain except death and taxes”?  Well even that’s changing to --- “There is nothing certain except death and taxes and change”.

I don’t know about you but I’m going to re-examine my “sacred cows” to see what I’ve missed during all the time I’ve thought I’ve always been right.  

Are you with me?

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 has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. 

5 Signs You're Ready For a New Compensation Solution

Trish McFarlane wrote a great post recently about how you know you're ready for a new HR system, which I highly recommend if you are less than satisfied with your current HR solutions. 

I also thought it would be fun and topically relevant to adapt that theme for a compensation audience.  So, what are some of the signs it's time to throw out your compensation solution(s) and start with a clean slate?​

1. It takes too long to get the information. If it takes weeks to pull together information for compensation planning that may be a sign that your compensation tool isn’t cutting it.   If you can’t quickly and easily provide a managing director with a breakdown of people and costs that you feel confident in that may be another sign.  And if you can’t provide granular and accurate people costs to inform decisions about where to manufacture or package products… you see where I’m going with this. There are many reasons you want or need accurate and detailed information about compensation, performance, benefits costs, etc., and if you can't get it quickly the business will move on while you're still chasing it.
2. You lack insight into distributed lines of business.  If your company has different lines of business with no shared services, you may have no idea whether you’re paying consistently for the same jobs across the business.  You may also find it difficult to standardise compensation processes across regions, anticipate pending bonus or severance payments or budget for the next round of merit increases. For business leaders trying to shave 10 cents off the cost of producing each unit, the ability to analyse compensation, overtime and other pay related costs by location can make the difference between profit and loss.
3. You don't trust your data. If you’re trying to manage a scattered landscape of pension schemes, bonuses and special allowances put in place to adjust salaries to the desired level, you may want to think about a new solution that combines HR and compensation and provides an opportunity to clean your data.  If you don't know what people earn, and they don't know what they earn, you can't manage your total compensation spend effectively... and it’s probably your highest operating expense.
4. You spend too much time in Excel.  If you manage most or all of your compensation by spreadsheet you may also struggle with the proliferation of different versions of the same information. Are managers and business leaders frustrated by manual workarounds and back and forth volleying of spreadsheets?  Do you lie awake at night worried that inconsistent pay scales and manager behaviours - such as using undeclared office equipment as rewards in "offline" locations or emailing sensitive information around in spreadsheets - are creating a compliance risk?  Do you suspect phantom companies are paying employees in remote regions but you can't prove it?  If so, it may be time to get off Excel and look for a new compensation solution.
5. Your processes get lost in translation.   Particularly in global organisations, or companies that have grown by acquisition, managers may feel frustrated by having to mange rewards in multiple systems with different processes in different locations.  For example, in some locations they may have to rely on HR to print out merit letters and in other locations the information may be available online.  And if the merit review is managed in a separate solution and the organisation changes during the merit cycle, the result may be incorrectly allocated rewards, manual workarounds and a headache for the finance team.  Simply put, managing staffing, performance and compensation in different systems is a hassle for HR and business leaders alike and it may be time for a change.

This list is not exhaustive and may not apply to your organisation but if any of the above examples hit home, it may be time to rethink your compensation tool(s). ​

Picture courtesy of eHow.

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.

Before You Act, Think This One Through

The race will officially begin in just a few weeks. If you are on a calendar year increase schedule, you know exactly what I'm talking about -- budget meetings, rollout scheduling, and so on -- typically begins in September. Today you still have the bandwidth to think some deep thoughts. Take some time to be creative. Grab a cool drink, find a quiet place and think this one through.

Your plan design is communication. The design tells managers and employees how to act and what leadership considers important. How can you make a bigger impact this year? Instead of planning superficially, based on the way things have been done in the past, commit to making a bigger impact this year.

For example, people get tired of performance management yadda, yadda, yadda, mainly because their experience of it seems bureaucratic and unattached to the real world. Having a plan designed for impact and then studying where it worked or didn't is a business process, after all, with obvious value. Instead of accepting that performance management will always be unloved, think about how your plan can work better. What has your plan design been communicating that has caused these reactions?

Is it unlinked from real business? Get better educated about the business and make some inroads. Is it too bureaucratic? It's efficient to get everything online, but those applications can be really unwieldy and impersonal. Do some usability tests by sitting people down in front of the screen and having them talk to you about their reactions to what they have to do to input information. You'll learn a lot about how you may be frustrating their efforts and how you can improve things.

You may not be able to fix all of the problems unless you throw out your current approach and start from scratch. But if your performance management program is telling managers and employees to go through the motions, you can improve the impact you are making. The only place to go is up.

Then there's the issue of merit increases. (Major understatement.) Most companies report that their budgets will be quite similar to last year's.

Right there is a statement that communicates. Recognize that the automatic human reaction is, "Why?" Your company has been making a case for this very same budget, just about, for the last five or more years. Why is it happening again? What is this decision actually communicating.

Look around. What have managers and employees made of years of 3% merit budgets? Has it affected how they act? What can you do to have a better impact on what compensation means?

These are difficult issues, but your commitment to making an impact will be noticed.

Margaret O'Hanlon, CCP is founder and Principal of re:Think Consulting. "Everything You Do (in Compensation) Is Communication" the much-awaited ebook is in prerelease! (Tell everyone to check out www.everythingiscommunication.com or hold on until September for the final, final.) 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.