Context: Background, environment, framework, setting, or situation surrounding an event or occurrence.
Context has always been important to me. For example, I don’t like digital clocks. I don’t like seeing the exact time without a reference point. I like to see the clock face with all the numbers and the hands. I need context. Guess I’m just an analog girl in a digital world!
It’s the same at work. I always thought there was a strong connection between compensation and organizational design. I couldn’t “do” compensation unless I had organization charts. Today context is so much more than that.
Bear with me. I’m going to tell a story that I hope will make you see a parallel to compensation.
A relative of mine has had to have his entire 30 year old house re-wired. When the electrician looked at it he told him that the wiring was completely up-to-date when initially installed and met the then required code. So what happened in 30 years?
The builders didn't anticipate the information age. How could they know that the house 30 years later would have HDTV, a DVR box, a laptop port, an iPod speaker system, and a smart phone charger all operating at the same time. What worked 30 years ago, doesn’t work now.
It isn’t just wiring. Think about it. In other industries besides construction I think you would agree that very few products, services and business practices/processes are the same today as 30 years ago. And it’s even more complicated today.
Companies are now operating in a very different business landscape than the one they faced even 6-7 years ago --- pre-recession. The major issues they face now are such things as economic uncertainty, financial turmoil, globalization, global interconnectedness, political upheaval, etc. These issues are all contextual and they have a huge impact on industry.
Business example: U.S. companies learned the hard way that business models that worked in the U.S. did not work in emerging countries. Realization and acceptance of this took a long time and resulted in a lag to market and lost business. Management had to realize their historical model was no longer an absolute.
I think this example may be reflective of a problem in Compensation today. Can you see the parallel? Is Compensation in the same state of denial? Theories/concepts developed in the past and accepted as absolutes may not be serving us well today.
Just as companies had to change their business model to compete in global markets, why should we assume our models are any different? Well, you say, our theories have been scientifically tested. But business models in the past were researched and tested as well.
(Hint: Research cannot keep up with all the changes taking place today. And it probably never will. So we can’t wait for the comfort of experts to bless the practices we will have to use today/future in order to deal effectively with all the issues we face/will face.)
We need to think holistically. We need to be able to venture out of our comfort zone. We need to be more flexible and adaptable just as companies are learning to be. We need to look at the larger context and how all the parts are connected.
Understanding our companies’ business is important but it is just as important to see the broader context and build in some contingency plans for changes that are bound to occur. Our companies are doing the same thing.
What do you think?
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 expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.
Jacque: Good analogies like that help illustrate relationships. The external environment for compensation certainly shapes the delivery systems of any total rewards program. Government regulations today are far different than in the past.
Global legal requirements have changed a lot. You are right on target: i.e., a 1950 automobile does not meet modern legal driving standards. Likewise, some classic old pay programs may be problematic. For example, how can we continue to use fixed job evaluation plans designed long before all the current nondiscrimination legislation existed? Specific tactical delivery systems must be altered to meet the new realities.
Human nature, however, probably remains much the same. The reinforcement strategies behind total reward programs tend to rely on more durable worker behavior patterns. Yes, there ARE changes in motivational drivers over time, but laws change faster than the people who make and alter them. Business models require quicker review cycles for those reasons. And comp plans based on models disrupted by new regulations must be replaced by ones responsive to that new reality.
Thanks for an article that should be shared with any senior management grown too complacent about any reward system that has gone unmodified for a long time.
Posted by: E. James (Jim) Brennan | 01/30/2015 at 01:39 PM
Thank you for the comment Jim. I'm not talking about government regulations though. Yes they are included but just one. The other things that affect business also affect how we design/deliver compensation. We hopefully don't just react to government law changes --- we react to the same things our companies react to and just like they plot a strategy given the realities of the business world we have to do the same. We exist to facilitate our companies' strategy. Of course within the law.
Posted by: Jacque Vilet | 01/30/2015 at 05:46 PM