Trick or Treat? I've Emailed 200,000 of Our Coworkers about Our Compensation!

Maybe you've already heard about this. In early October, a Portland, Oregon-based Wells Fargo branch employee emailed CEO John Stumpf that it was time to take some of the banks' profits and turn them into employee compensation. The employee, Tyrel Oates, also cc'd 200,000 of his coworkers using all of the internal email addresses he could cobble together over a couple of days of fiddling around online.

Mr. Oates opened his email with the observation that:

With the increasing focus on income inequality in the United States. Wells Fargo has the opportunity to be at the forefront of helping to reduce this by setting the bar, leading by example, and showing other large corporations that it is very possible to maintain a profitable company that not only looks out for its consumers and shareholders, but its employees as well.

He goes on to belittle Wells Fargo's benefits and 401k contributions because they don't increase his income. He also mentions, "Though Wells Fargo does not allow the formation of unions, this does not mean we cannot stand united."  His proposal is for the company to take $3 billion of the company's reported second-quarter $5.7 billion net income and turn it into a $10,000 increase for each employee. Here's a link to the full email, which I encourage you to read.

To paint the complete picture, the story got picked up by The Charlotte Observer, The Huffington Post, The Washington Post, Business Insider, Time.com, MarketWatch and his local media outlet, The Seattle Times, just to name a few. Adjectives chosen include: "brazen," "ballsy" and "brave."

I imagine you're feeling some tension in your neck at this point. Yes, this could happen to you. To the compensation practices you've approved. To your company's reputation. You've heard from many of us at Compensation Cafe alerting you to the media's growing interest in employee pay, why employees have a point and what you can/should do to improve the compensation communications situation in your company.

After all, many of us who write for Compensation Cafe believe that everything we do in compensation is communication. Here's a true life example of what our lengthy recession has done to many employees' belief in, and understanding of, our pay practices. If nothing else has, this Wells Fargo example should inspire you to act. It's becoming clearer that it's not business as usual any more and you can't remain focussed on  spreadsheets.

Get out of the office. Find out what's on people's minds. Listen carefully when they explain how and why they feel the way they do. Be sure you have sound reasoning behind your 2015 increase practices -- and make double sure that your managers are implementing (and talking about) compensation practices as recommended. If not, why do they feel the way they do?

Many of you do not have in-house communications professionals, so let me finish with a snapshot of how Wells Fargo is handling this case based on a short conversion I had with them today. To their immense credit, they reminded me that Mr. Oates was their employee, to whom they have a responsibility for confidentiality and privacy, and that this is an in-house topic. Their formal statement is:

Wells Fargo values and supports its team members. This is why we provide market competitive compensation that combines base pay with a broad array of benefits and career-development opportunities for team members. Team members receive an annual performance and salary review. And all of our team members’ compensation levels exceed the federal minimum.

It's not very satisfying, but take note. I am sure that their conversations with their Wells Fargo employees go far beyond these generalities . . . and I've invited a Wells Fargo representative to visit Compensation Cafe via an interview sometime in 2015. I really want us to continue to learn as much as we can about compensation as communication, so we can go out and make real improvements.

Margaret O'Hanlon, CCP is founder and Principal of re:Think Consulting. She brings deep expertise in communications, compensation and career development to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal with Towers Watson. She's wondering if you've read what's on page 12 of Everything You Do (in Compensation) Is Communication? We're not talking about the same old stuff. Find out at www.everythingiscommunication.com. Margaret collaborated with Ann Bares and Dan Walter to bring this ebook into the world. Filled with innovative ideas, practical tips and experienced advice, it's a quick read and a valuable resource for building your influence as a compensation strategist. Come visit and tell us what you think!

Comments

[Guest]

The CEO actually did respond to this. 40,000 employees received promotional raises last year. Hard facts on the organization's committment to internal growth and rewarding people for that growth is also a good strategy to quiet the critics.

http://www.mpamag.com/real-estate/wells-fargo-ceo-sort-of-responds-to-employee-raise-request-20022.aspx

[Margaret O'Hanlon]

Thanks, I read that, too. Thing is, promotions are in a different category than recognition and reward for doing your current position. Culturally, banks tend to do more promoting than other organizations, so promotions may stand in for merit increases in that situation, but that is not the case in other industries.

Anyway, I was always certain that Wells Fargo had pay practices that made sense within the business, but while Mr. Oates likely has more extreme feelings than most, employee understanding of why they are being rewarded and how valuable it is (both as pay and Total Rewards)seems to be a public issue now. Most companies will have lingering employee skepticism and confusion due to the extreme measures taken during the recession, and to some extent continuing today. Unless, of course, they make an effort to talk about them.

[Chuck Hunt]

Compensation professionals deal with difficult issues regularly. While the column has good basic advice - it is hard to argue the value associated with a better understanding of the issues facing employees throughout the organization you support. While I found Mr Oates approach to the issues naive, with little perspective of the larger trends that create and amplify inequality, I was also deeply disappointed in the faith that Ms O'Hanion places in the ability of a market based compensation system to produce correct answers within market ranges.

A radical view of the process might assert that the game is rigged by those in power and the workers are being held down by the implicit cooperation between companies to create the appearance of a market that is fair but is fundamentally asymmetric and unfair. As a committed capitalist, I have a far different perspective.

Capitalism is a technology and as such, well tuned and implemented it produces great results for society. But even in the best implementation, the results are not guaranteed to be optimum (Economics 101 is not conceptually wrong but the system is too complex to arrive reliably at a global optimum). Without getting into the issues raised by market based compensation (i.e. compensation between organizations set at comparable rates that reflect the market value of comparable jobs) and the potential for market inefficiency in such an asymmetric environment, the trends in the United States over the last 40 years are clear. Over this time, adjusted for purchasing power, real income for most wage earners has not maintained a reasonable connection with productivity increases and has been flat or declining for decades. During this same period, the earnings of the top 10% have as a group grown faster than productivity in the economy and the higher you go in the income distribution the greater that trend has been.

These trends are impossible to easily reconcile with the concept of an efficient, neutral labor market. I stated earlier that Mr Oates was naive. Even if a company's compensation program was flawed (and I would leave it to others to make that judgement in the case of a specific organization), it is inconceivably unlikely that Mr Oates' proposal would be the correct approach or answer. The attention that his (arguably ill advised) email has touched off is hard to ignore. Some of the attention is mere sensationalism. However, just like most viral videos are wildly popular because they touch on deeper hopes and fears, Mr Oates has at least touched on deeper issues that are difficult to ignore. Ms O'Hanion, has recognized the need for communication and that has real value but has not addressed the deeper issues that are both beyond compensation professionals to solve independently and that increasingly call into question the system used to establish and maintain market based compensation as currently defined.

I would encourage compensation professionals to add the following topics to the discussion:

1) Are there unintended systemic effects on the economy that are created by or enhanced by the application of market based compensation that have negative effects on the economy and if there are, how might market based compensation be changed to deliver better results?
2) Are changes to compensation ranges within your organization reflective of both changes in the market and changes within the organization such as productivity, profitability, etc.?
3) Are different trends in the compensation for various positions within your organization in line with the value delivered (e.g. a position that has a compensation trend less than inflation and productivity would be expected to be delivering less value to the organization by the differential while a position delivering increased value would be closer ore even higher than the overall trend.)
4) Would changes to your compensation program, that were different than market trends, allow your organization to attract and retain personnel that would enhance the organization's competitiveness, productivity, and profitability?

Fair compensation - being able to honestly communicate that employees are being compensated in line with similar positions at other organizations has real value. We all want to be treated fairly. Adding a clear understanding of why they are collectively being compensated above or below the market has the potential to not simply avoid demotivation but if well designed and implemented, to motivate and reinforce how your organization creates and delivers value - that would be a message worth delivering.

[Margaret O'Hanlon]

Chuck, you've covered many important points that we at Compensation Café have thought and written about over the years. I hope you have a minute to wander through our archives and that you keep reading our work.