Compensation Cafe

Earning My CEUs in the Doctor's Waiting Room

There is a lot to be learned sitting in the doctor's waiting room. I thought I'd let you in on some of it.

This month, Money is telling our employees that it's a great time to ask for a raise. Their position is the risk/return trade off is in positive territory because, "the job market is really strong and a lot of employers are concerned about losing their most experienced and talented workers."

Well, it's not that all our patient employees aren't anxious for us to finally break open the piggy bank, but aside from a sense of rising expectations, I haven't heard about a rush on for raises, have you? If you have, could you tell us? And if you are getting a rush on raises, how aggressively are you negotiating?

Flipping to another page, I found out that Money has also got our number. (And it's one of those things that is better to know about yourself -- however painful -- than to willfully overlook.) They report that two-thirds of people asking for a raise (from us) get at least some of the money they request. Look in the mirror and try to keep a straight face while denying that one.

Here's a really interesting one -- and once again, look deep in your heart to see if you can truthfully deny that this is how things work. Money reports research that suggests that in money negotiations, you're better off to frame the negotiated amounts as a range, say $70,000 to $75,000.

Giving a range makes an individual seem cooperative and puts a manager/HR in the position of seeming impolite if countering with a much lower number. The research indicates that you should choose your range wisely, though. Most who are shooting for a $70,000 salary would offer a range of $65,000 to $75,000, let's say. However, the negotiator (that's us again) will fix on the lowest number, so it's better to make that your preferred salary.

Another negotiating stance they suggest is proposing a single specific number, like $72,500, if you want to appear self confident, and signal that you've done your own salary research. (Just thought you'd want to know the message that type of new hire is trying to send.)

Yes, I did wait quite a while to wait for my doctor, but it turns out that there's even more to learn about our HR world from a consumer-driven magazine. April 14 was Equal Pay Day, they reminded me -- and I felt sad that I had forgotten about that important day, named not that long ago. Then they listed the 25 careers in which women are the most underpaid, and boy was I shocked. Numbers 1,2,5,6,7 and 8 of the biggest pay gaps between women and men all have something to do with the financial industry. In those jobs, the percent of women's earnings to men's range from 54.7% to 63.6%. (I'd be really surprised if differentials that size are entirely due to work breaks!)

And then I got to learn the 11 occupations where women earn as much as, or more, than men. They are a pretty wacky combination of professions but pretty darn cool, too.

• Media producers and directors, 106.2% (Women's earnings to men)
• Cleaners of vehicles and equipment, 105%
• Wholesale and retail buyers, 103.3%
• Transportation security screeners, 102.5%
• Social and human service assistants, 102.3%
• Special education teachers, 101%
• Transportation, storage and distribution managers, 100.5%
• Dishwashers, 100.2%
• Counselors, 100.2%
• Industrial truck, tractor operators, 99.9%
• Massage therapists, 99.9%

Want to step away from Excel and into the real world? Learn how to increase your influence through more strategic practices in the popular eBook, Everything You Do (in Compensation) Is Communication. You'll find it @ www.everythingiscommunication.com. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal at Towers Watson.

8 Things You've Gotta Know about Equity Compensation

Equity compensation continues to be a confusing topic for compensation professionals and with good reason. Equity compensation is not just variable compensation. It’s variable, variable, variable, variable compensation. There’s the variable of stock price. There are variable numbers of shares, units, options or rights. There are variable types of awards, variable vesting timing, variable (for international participants) currency rates and for many recent awards, there are variable performance conditions. So, it’s not just four variables I mentioned earlier, but six or more variables that come into play. This can be tough to grasp in the compensation world where everyone would really like some level of expected consistency.

In addition to all of the variables, there are all of the rules, regulations, reporting obligations and stakeholders with a legitimate claim in the design, communication and administration of these programs. In this swirl, there are some big truths you simply ought to know.

1)     It’s an “except when” set of rules.

There are an insane number of rules that must be followed. The seminal guide for just Section 16 Forms 3, 4 and 5 filings is more than 1,000 pages long! But, even worse is that it seems every rule is followed by a statement that starts…”except when” and then a bunch of arcane details. It’s hard to lock down your knowledge when everything seems a bit liquid.

2)     Accounting (“compensation expense”) really matters.

You will never master every aspect of accounting. One of the most enticing benefits of equity compensation is that the company can have a fixed compensation expense while delivering variable value to the participant. This requires careful planning and execution. It also requires not changing horses, or sometimes, even paths, midstream. If you aren't including your accounting department early, you should be prepared for some rude surprises.

3)     The world is a big place and it turns out that every country has its own set of tax, security, currency and other rules.

Two decades ago, when I first started in this field, it was common to offer the same awards globally. It was also common to let your global participants figure out the consequences on their own. Nowadays, that’s just dumb. Many countries have more intricate rules than those in the U.S. The consequences for both the company and the individual can be devastating when not planned and executed perfectly. But, there are also upside opportunities to offer competitively differentiated, tax-preferred awards in some countries. You may be able to lower the cost of programs through tax chargebacks and other planning mechanisms. The most difficult aspect is that countries around the world may change their rules at any time. I receive several country updates every month.

4)     Plan design cannot be done in a vacuum.

Compensation professionals are often in a hurry.  They are busy and it can be frustrating to incorporate a big team in the plan diagnosis and design process. Very few successful companies succeed in a vacuum over the long run. The best practice for a minimally effective design team is to include people from Legal Accounting, Payroll, Corporate Tax, Stock Administration, an Executive stakeholder and an external expert (or two or three) who truly know their stuff about your stuff.

5)     Stock administration systems are far more limited than your imagination.

Whether you use one of the “name brand” systems, outsource to a TPA, or build a system in house (please don't build a system in excel) the limitations are met very quickly. This is especially true when you include performance criteria or international participants. Often someone on the design team will say “no” early. You might be surprised how often it’s because they know that the best-designed plan will fail if it cannot be executed or communicated effectively.

6)     Taxes are hard. Really hard.

If you think the rules behind income and tax are hard for you to master, imagine being an engineer or line worker, or even an executive without any training in the topic. So many companies try and avoid the topic altogether. “We don’t want to provide tax advice.” This is the cry from Legal. Here’s the deal. If your participants don’t fully understand the what’s, how’s and why’s of your plan, they will never get good outside tax advice. You risk spending a lot of time and money creating a program that creates confusion, angst, anger and demotivation. Get professional help in learning the tax rules and communicating them to your plan participants.

7)     You should join, or at least follow, these organizations.

NASPP – The National Association of Stock Plan Professionals
GEO – The Global Equity Organization
NCEO – The National Center for Employee Ownership
World at Work
ECE – Equity Compensation Experts. Free and a good place to keep up on industry events, webinars and news articles.

8)     It’s still worth the effort.

After reading this, you are probably wondering why in the heck companies even have these plans. That’s like asking why someone has a really good kitchen. Either one, when used improperly, is essentially a waste of money. But, when used expertly, they can become everyone’s favorite place. They can bring surprises, joy and satisfaction to an otherwise mundane world.

This article is longer than I typically post here. It could have easily have been five times longer and not covered everything you need to know. You can learn additional basics here. If you have a specific question about where to find information or about resources and books you may want to purchase, please write a comment to this post or feel free to email me directly.

Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with company strategy and culture. Do you want to be a better business leader? Get your copy of “Everything You Do in COMPENSATION IS COMMUNICATION” written by 3/8^th’s of the Comp Café, Dan Walter, Ann Bares and Margaret O’Hanlon. It’s a practical guide to improving the communication process (with how-to worksheets). Dan has also co-authored of several other books you may find useful including “The Decision Makers Guide to Equity Compensation”, and “Equity Alternatives.” Dan welcomes connections on LinkedIn. Follow him on Twitter at @Performensation and @SayOnPay.

A Smooth Sea . . .

... Never made a skilled sailor

I saw this phrase the other day and it really caught my attention.  Folks on LinkedIn, Facebook and other social media are always posting cute, profound or overused phrases that describe personal motivation, self-discipline or even the meaning of life, and I usually ignore them.   I can't figure out the point of highlighting the obvious. 

But this one gave me pause.

Think about it.  If you want to progress in your career, then you have to show those who are higher up than you that you have what it takes.  That you're capable of rising to the occasion, making the tough decisions and by your knowledge, skill and experience getting the job done.  And how do you show that?  Fix something, improve a process, change behaviors, save money, make the act of change work for you and your organization.  Have an impact.

Conversely, those who only administer reward programs (sometimes known as treading water) don't do much of that change stuff and are often viewed as having reached a "career plateau," or as others might view it - they've reached a dead end.   Administrators are not the cream of the profession, and rarely rise to the top.  

Is it time to look in the mirror?

Where are we going?

Of course, you have to be in the right environment in order to have the opportunity to shine, to enact those wonderful results.  And while we would all like to be employed by smooth running operations, the heroes of our success story are those who created all that smoothness and efficiency.  Not those who came after, who benefit from it today by pushing the "continue" button..

In a practical sense though, how many really smooth running businesses are out there?  It's a fair statement to make that just about every organization has some program, policy or procedure that isn't working right.  They all have some aspect of their reward programs that might not be broken, but could be seriously bent or considered charitably as less than effective.

Not sure of your environment?  Try this.

• Ask questions:  Become the "Curious George" of your organization and learn all there is to know about your current reward programs.  You'll need to understand the "why" as well as the "what" and "how."

• Talk to management:  Gain from their perspective as to expectations, comfort level with the status quo and their willingness to accept change.

• Set up metric milestones:  Set up a series of base line statistics that describe current elements of your reward programs.  From there you can measure progress toward specific goals. And you'll also have a graphic story to show management.  Numbers can trump words.

Change for the sake of change

On the other hand, have a care that you don't try to force an issue.  I've seen compensation practitioners push hard to inject new policies, procedures and even cultural initiatives where they simply would not work.  Something they should have known from the start.  We've likely all experienced some form of the "round hole, square peg" scenario - where certain ideas are doomed to fail due to management bias, a deeply entrenched culture, employee demographics or a host of other reasons unique to that organization. 

But some practitioners will still push an aggressive agenda, more for their own betterment  (resume enhancement, improving their personal experience, career checkmarks, etc.) than for the improvement of their organization.

I've seen it done.

So have a care; using your organization as a personal experiment or Petri dish to try out the latest trends can be a problem for you.  And for your organization.

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, "Sailing," by Bruce Tuten

What do Dead Horses Have to do With Compensation?

  “When you discover you are riding a dead horse, the best strategy is to dismount.”                                     ---- Dakota tribal wisdom                            

Simple common sense don’t you think?   However, truth be told, the world of business is full of dead horses.

What’s the definition?  It’s any program, project, policy, or established way of doing things that is out-of-date, irrelevant and not in sync with a company’s strategy.  Surprisingly, management often tries to keep the dead horse alive.

Instead of “dismounting”, management tries (as a last ditch effort) to revive the dead horse in question.

Perhaps you have seen some of these attempts in your company.  For each business example, I've created one for how it might look in Compensation:

1)    This dead horse is too big to fail.   The company has sunk too much money in the project/product/service and it’s cheaper and easier to spend a little more money to fix it than it is to cut it.   It’s called the "sunk-cost effect", otherwise known as throwing good money after bad.

Compensation:  A large, very expensive _____  compensation study (fill in the blank) has taken six months so far with a lot of money spent and no end in sight.  No one believes it’s relevant anymore --- including you --- but you’re afraid of cutting it and risk management’s wrath for money and time that’s been wasted.

2)    Visit other companies to see how they ride dead horses.  After looking at several companies, management comes up with a “best practices” model to use in resolving their dead horse problem.  This is in spite of the fact that the companies aren’t in the same industry and don’t have the same business strategy

Compensation: In an effort to decide whether to offer tuition assistance you do a benchmarking study.  Companies reviewed don’t offer it so you decide your company won’t either. One important difference --- the average age of employees in the companies reviewed is 45; your company’s average age is 28.

3)    This is the way we’ve always ridden this horse.  This is the CEO’s pet project/program and has been a major reason for the company’s success in the past.  To end it s/he would have to reverse his/her position with the Board by admitting that it’s no longer relevant.

Compensation:  The company has always used an anniversary date approach for its annual review/merit program.  However now the company really needs to set employee performance goals in sync with FY business goals.  No one in Compensation has had experience with focal review programs and has deeply embedded biases in favor of the anniversary date approach.

4)    Engage a consultant to study the dead horse.  Management is convinced a certain program/process needs to continue as is, but no one internally wants to go against the Board who recommends it be killed.  So management hires a outside consultant and drops hints of further business if s/he provides a recommendation to the Board that the program be continued.

Compensation:  Compensation has been asked to develop a recognition reward program for all employees and management is requiring that the same rewards apply to all employees worldwide.  You know that awarding $50 to an employee in Japan would not be considered appropriate. So you hire a consultant who recommends that the actual reward be decided at the country level.  Now you can deliver this message to management with no fear of retribution.

5)    And when all else fails, promote the dead horse to senior management.     Maybe s/he won’t be noticed there!

We have to selectively abandon the past.  Not everything ---  just those programs/processes, etc. that are no longer relevant.   If we focus too much on the past and present, we’ll lose touch or be left behind when the future arrives.

Do any of our readers have an example of dead horses in their companies?  In Compensation?

 

*The 10 underlined dead horse statements belong to Vijay Govindarajan.   The explanation of each one is my contribution.

**Please note: Absolutely no horses were injured in the writing of this post. I certainly don’t advocate attempting to ride a dead horse, nor do I advocate working in a company that attempts to replicate said state.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel. Her expertise encompasses many areas of HR --- compensation, benefits and wellness, learning/development, strategic workforce planning and mergers and acquisitions. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. She has certifications from HCRI, World at Work and Human Capital Institute 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.

Put Some Skin in the Game

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

As a federal employee, not much captures my imagination when it comes to new legislation, since many of those proposals seemingly have the stamina of a fruit fly -  but mostly for the many unanswered questions they generate.  However, I spotted one a week or so ago that caught my eye, and really got me thinking.

The bill, offered by Rep. Tom Cotton, proposes to, among other things – directly tie future pay increases for some federal employees to increases in median household income in the U.S. – after adjusting for inflation, and ostensibly through this linkage, reinforce for most of the 2 million federal employees their stake in the economic success of the United States, and that they have “skin in the game.”

At the individual level, this idea will probably have very limited appeal for the average federal employee. But why not consider this idea?  Let’s take a closer look.

Just Basic Incentive-Based Compensation, Right?

Well, maybe. On the face of it, some of this conforms with general-accepted incentive compensation plan design.  These are the handful of the team-based incentive programs requirements that I came up with:

• Objectives are specific and achievable.
• Objectives are communicated to employees in advance of the beginning of the performance period/cycle.
• Accomplishing the stated objective(s) have a clear purpose and have pre-determined and measurable goals.
• All program participants are able to contribute approximately equally to accomplishing the goals and objectives.
• Incentive program should be designed to elicit the desired outcomes and behaviors
• Business rules are communicated before the program is rolled out and establish: participant eligibility (full-time / part-time, proration), performance measures (quantitative, qualitative, sensitivity, thresholds), plus any other provisions for the program.

So far, so good?  And the role of government (and all government employees), is to ensure the improvement of general economic conditions in the U.S., right?

Revisiting the Role of Government

A quick refresher from my high school civics class reminded me that something in Preamble to The Constitution states that the primary purpose of government is to:

• Establish justice for all
• Insure domestic tranquility
• Provide for the common defense
• Promote the general welfare
• Secure the blessings of liberty

Some broad statement of principles, but worth noting. . . strangely nothing about federal employees working collectively to increase median household income.

Good Intentions, But There May Be a Few Holes

Reflecting back on the basics of incentive compensation, some of the flaws in this proposal are immediately evident. First, is the very tenuous ability of federal employees to positively influence median household income in the United States, and how exactly are they supposed to accomplish this?  If the U.S. economy was a more isolated and independent “island”, influencing its economic conditions might be possible. However, in an increasingly complex, interconnected, global economic system, this is almost impossible.

The Law of Unintended Consequences . . . on Steroids

We all know that what gets measured, gets managed.  And since our ability to affect conditions on a global basis may be limited, we should anticipate an inclination to influence conditions at the federal level, a little closer to home. That could be realized by bringing new drugs or other consumer products to market faster, but achieving that by granting regulatory approvals just a little bit faster than in the past, by easing the application of existing compliance standards, criteria or judgment.

It’s quickly obvious, that without a conscious, directed and unified effort, it might be as likely that some action(s) by federal employees could just as easily have a negative impact on the U.S. economy, and in turn lower the average median income – or worse.

Fun and Games Aside

In the end, government and the purpose of government are not a game.  If you want employees to have a stake in the future and success of their organization – even to include some broad or limited element of employees’ compensation, you need to ensure that they know and understand what they’re being held accountable for, and more importantly, that they can legitimately influence those outcomes, when you ask them to . . . put some skin in the game.

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.

Image "Money in Pocket" courtesy of posterize / FreeDigitalPhotos.net

 

Sisyphusian Compensation Principles

Spending eternity rolling a rock up a steep incline should deserve high pay, right?  The ancient Greek
Myth of Sisyphus contains lessons for those who ponder economic values and psychological motivations in the workplace.  Read carefully, because there will be a test.

One of the most ubiquitous principles in compensation is inherent in the term itself.  Comp implies a balanced payback for work efforts.  Rewards are delivered in exchange for sacrifices of sweat, stress, decisions, acts, etc., that are clustered into occupations or jobs that earn remuneration.  There is generally an assumption about balance in the exchange: work that is harder or more important tends to be paid more than easy or nonessential activities.  History has also proven that employers are apt to accept the argument that duties that carry the greatest negative characteristics warrant higher wages, all else being equal. 

So… what is the value of performing an unpleasant job?   There are more examples than assembly line occupations.  Service roles and white-collar functions can also feature distasteful drudgery.

At the beginning of my HR career, I witnessed a little old man trudging in to work looking like he carried the world on his shoulders.  Or an anvil.  Back bent, head down, face scowling, he clung limply to the escalator as it dragged him up five stories to his bureaucratic Civil Service post in what is still probably one of the largest and most boring filing warehouses in the world.  Having studied the classics, the image of Sisyphus immediately came to mind.  Imagining a similar despair at toiling in endless futility, I felt sorry for the modern victim.

As closing time approached in this immense palace of paper (long before the electronic records of today), all the permanent parties sat diligently clutching some single document in front of them on their desk during the last fifteen minutes.  They sat in tense immobility as their burning eyes surrepticiously tracked the clock hand ticking slowly towards the magic moment.  When the bell rang indicating the end of the work day (it was/is a union shop), the regulars jumped to their feet and escaped their imprisonment.

Imagine my shock when I happened to be close enough to the down escalator at that moment to see my pitiful morning character suddenly transformed.  Leaping down the automatically descending steps two at a time, he looked twenty years younger.  Head up, eyes sparkling, he raced through the flood of fellow civil servants, bouncing with joy.  He came alive at the prospect of fleeing his dungeon of depressing toil.  Whatever motivated his existence was now in sight.  Family, bowling league, social clubs, a good book… makes no difference.  He took no pleasure from his job or his workplace.  It offered frustration, pain and suffering.  Elsewhere was his reason for living.  How awful!

At that very moment I first resolved never to allow myself to become stuck in a function where I spent most of my waking hours doing tasks that destroyed my soul.  Life is too short to waste the majority of it doing distasteful things.  What wage value can be placed on mind-deadening labor?  Some prices can be too high to pay or to accept.

In later years, I saw many situations I likened to squirrels caught too far out on the limb… people stuck in high paying jobs they despised but could not afford to abandon.  Vowing never to fall into that trap, I was pretty successful.  But that luxury came at a great cost.

Can you guess what the cost was?  Bonus points for any who can also name the facility referenced in this story.

E. James (Jim) Brennan was 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.

"Sisyphus Pictogram Man " from FreeDigitalPhotos.net

To Attract and Retain . . . and Beyond!

 

Everyone together, let's sing the compensation communications theme song.

One, two, three:

 

 

 

We designed the plan to attract and retain employees,

With our new way of paying, we'll attract and retain the best,

Attraction and retention is the heart of our Total Rewards,

Guess that's why we keep repeating . . .

        (One more time, with gusto)

Oh, oh, attract and retain, attract and retain, attract and retain!!!!!

OK, I am cracking wise. But I'm doing it to make A REALLY IMPORTANT POINT.

Every time I am hired to do compensation communications, I try to edit "attract and retain" out of the communications. Every time, someone in Human Resources insists it comes back. Now, I ask you, which part of "attract and retain" says to me, as an employee:

• Finally, I'm going to get recognized for what I contribute
• Wow, I know what I need to do to make my company successful
• At last, I'm going to be involved in work that matters
• This place is getting better and better -- I'm so happy I work here
• I'm thinking I need to change my approach to that so we can increase (revenue, product value, customer satisfaction, collaboration, innovation and so on) and/or decrease (margin, expenses, time to market, and so on)

In fact, I bet the volume gets muted once they hear "attract and retain" because it has no real meaning to the employee. It just has the quality of a mantra; and if the halls are quiet, you can hear it seeping out through the walls of HR offices.

Pay is supposed to get people excited or, at least, attentive. I feel no emotion at all when I hear, "Attract and retain."

When consultants say, "engaged employees outperform their peers," (you know, the employees that are juiced enough to donate their discretionary effort), the consultants have numbers to prove it. When employees say they want to know more about why their job matters and how they can help, they mean it. Knowing the answer to, "Why?" and "How?" sounds like professional growth and career opportunities to an employee. Why do we keep ignoring this?

Why, why, why, do we keep ignoring an opportunity that has been measured, proven and even longed for? "Attract and retain" may pump up the VP of Talent and the Head of Engineering, but that's just about it. With executives repeating that they are too often disappointed with HR's effectiveness, when will we admit that we need to reach out to, communicate with and connect with more than just those two people in our organization?

Companies that have connected with their employees to talk about "why" and "how" do much better financially than those who don't. They have the courage to make the investment in talking openly with employees rather than cutting things short, hiding behind stale terminology and rushing back to their Outlook calendar.

You can show this courage, too. I swear you will attract employee attention with your innovations. Plus, your executives will retain you for your wisdom . . . Just check out our Compensation Cafe archives if you want an insightful, practical refresher course on "why" and "how."

Ready to make a difference in your company and your career? Turn the popular eBook, Everything You Do (in Compensation) Is Communication, into your handbook. Just type your way over to www.everythingiscommunication.com. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal at Towers Watson.

An Argument for Unfair Pay

Laszlo Bock, SVP of people operations at Google, has a new book, Work Rules!, hitting the market this month. As to be expected, there’s been a good deal of news coverage, excerpts and blogs about it, including this one in Fortune with Mr. Bock’s “10 things to transform your team and your workplace.”

Today, I’d like to call your attention to two of these.

In seventh place on Mr. Bock’s list is “Pay unfairly” with this comment:

“Ninety percent or more of the value on your teams comes from the top 10%. As a result, your best people are worth far more than your average people. They might be worth 50% more than your average people or 50 times more, but they are absolutely worth more. Make sure they feel it. Even if you don’t have the financial resources to provide huge differences in pay, providing greater differences will mean something.”

To compensation pros, I’m sure this isn’t groundbreaking. I’ll ask my colleagues here in the Café to weigh in, but this seems to me the principle behind the idea of merit pay (at least as originally designed). I agree with this approach. Those who work harder and deliver more value deserve more pay. It’s the last line in the above quotation that gives me pause. We’ve all seen “merit pay” differentials erode in the last several years with top performers getting, perhaps, a 3% pay increase vs. average performers receiving a 2% increase. Considering this is barely above a cost-of-living increase, I wonder if the difference is enough to drive the desired impact.

So, yes, pay unfairly, but don’t rely on that as a sole differentiator to set apart exceptional effort. Additionally, help employees (at all levels of performance) see the greater value of what they do, which is Mr. Lazlo’s first tip: “Give your work meaning.”

“Work consumes at least one-third of your life and half your waking hours. It can and ought to be more than a means to an end. In too many environments, a job is just a paycheck. But as Wharton professor Adam Grant’s work demonstrated, even a small connection to the people who benefit from your work not only improves productivity but also makes people happier. And everyone wants his work to have purpose. Connect it to an idea or a value that transcends the day to day and that also honestly reflects what you are doing.”

Help people draw this connection. When people demonstrate desired behaviors in line with core values or strategic objectives, recognize them for it. Make this recognition quite explicit to help them connect the dots and see the deeper meaning. Better yet, offer differentiated recognition awards calibrated to various factors such as level of effort, contribution, and result achieved. This enables you to involve more people (hopefully, the vast majority of employees) in recognition activities while also ensuring those who go above-and-beyond are recognized as doing so.

Once again, it’s the combination of pay and recognition that drives the greatest reward for employees – of all abilities and levels.

What would be on your list of ways to transform your team or workplace?

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. He is the co-author of "The Power of Thanks" and 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 and Boston. Follow Derek on Twitter at @DerekIrvine.

The Secret ALL GREAT Companies Know About Pay

I generally write about incentive compensation, executive compensation and performance issues, but today’s post is written from a very different perspective. I hope you will bear with me on this.

“Living Wage” is a term thrown about casually in the media and among politicians. It is not minimum wage. In fact, it has a very specific definition (read more on it here). A living wage ensures individuals make enough for their family to exceed the poverty threshold. I think even that definition falls short of reality.

But, this post isn't about the political ramifications of a minimum wage or a living wage. It is not about altruism, or what is doing the “right thing”. It is far more self-serving, perhaps even selfish. This is about how paying people better can result in improved company performance and how that can result in your executives and shareholders making more money. (See I told you it was self-serving)

Think about the term “living wage.” I’ll bet you don’t consider keeping employees poor as a reasonable threshold. Seriously, why ask people to work if being poor is the end result. If your goal is to keep your employees poor, then you don't need much in the way of strategy or execution. But, if your goal is the attract, motivate, retain and engage good employees, then “living wage” should refer to the LIFE you want your employees to live, not some form work-subsistence compromise.

Only after you have determined your definition of a living wage can you decide how much money that requires. And, only after this has been done will things like incentives, recognition and other rewards make any sense or have any long-term impact.

BUT HERE’S THE SECRET THE BEST COMPANIES ALREADY KNOW… Once you pay people enough for them to appreciate their lives, everything you add to that equation begins to have real impact.

Recognition programs and words of thanks have little meaning if your employees don’t believe you appreciate them enough to make sure they can afford clothing, housing, food and education. You don't have to directly provide those things, but living wages should allow for them.

To take this a step further, bonus programs have real meaning if they can be used for something special, rather than to catch up on paying debts that have accumulated from everyday expenses. Vesting events and payouts from long-term incentive plans are exciting when the event is about expanding a person’s future rather than simply making up for base pay that was too low to cover essentials.

Most importantly, if you pay a real living wage, your work environment will improve naturally. People will come to work with less angst, stress and anger. Communications about company and personal goals and objectives won't be clouded by and underlying storm of discontent. 

Of course, paying a living wage is not in everyone’s budget. This begs for more research on business models and whether we, as people and companies, truly want our employees to be able to experience even the smallest version of the American Dream. But that’s a topic for another article.

Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with company strategy and culture. Do you want to be a better business leader? Get your copy of “Everything You Do in COMPENSATION IS COMMUNICATION” written by 3/8^th’s of the Comp Café, Dan Walter, Ann Bares and Margaret O’Hanlon. It’s a practical guide to improving the communication process (with how-to worksheets). Dan has also co-authored of several other books you may find useful including “The Decision Makers Guide to Equity Compensation”, and “Equity Alternatives.” Dan welcomes connections on LinkedIn. Follow him on Twitter at @Performensation and @SayOnPay.

"I Don't Want To Do That"

Ouch.  That phrase coming from senior leadership is still ringing in your head.  You just delivered a fact-based and what you considered compelling argument in support of your compensation program recommendations, and the best you received in return was an indifferent "nahhh"?

They don't want to do it.  They didn't even give you much of a reason to ponder, to argue against, never mind provide you with a rationale that you might be able to circle back on with an adjusted recommendation.  The door was shut.  They're not interested.

It happens

Frustrating as the experience is, anyone who has been in the compensation profession for any length of time can tell you that yes, rejection happens.  Sometimes it happens a lot.  It's not unusual for those in senior leadership to harbor pre-conceived notions, biases, and preferences (pro and con) that are coupled with a stubborn or even arrogant demeanor.   It may seem that they don't even listen.  They know better than you and they run the business.  Deal with it.

Talk about trying to push a boulder up a hill!

You do have options though.  To avoid smacking your head against the wall you could serve up proposals that reflect only what you already know they want to hear.  You could be their "yes man" and play to their preferences or help feed their biases by agreeing with them.  That may not be doing your job as a compensation leader, but it would increase the likelihood of receiving a YES response - or at least better your odds.

But if you go down that road what do they need you for? That's using you to hold up a mirror, and then to administer whatever it might be that they agreed to support.

You could do that.  I've seen it done.  I've seen people make a career out of that strategy.  Keep your head down so that it doesn't get chopped off.  Compensation management becomes compensation administration.

Because changing the mind of senior leaders with their heads in the sand, or those safeguarding their own self interests can be a difficult and stressful process.

Odd man out

Then again, maybe you want to stand for something, to believe in something.  Maybe as a professional compensation practitioner you feel strongly enough about something (program, policy, procedure, decision) that you're willing to raise your hand and say, "wait a minute."  You know something is wrong and you know how to fix it.  Or at least you know that the ship is going in the wrong direction.  You could be the principled fellow with the persistent voice of persuasive argument, the architect of change, the champion of compensation professionalism.

You could also find yourself out of a job.  Because sometimes rocking the boat can get you tossed overboard.

Or, you could decide that you would find greater job satisfaction by working somewhere else.  Having to deal with mental dinosaurs and the stubbornly backward may be more than you want to keep struggling with.

Strike a balance

But have a care first.  Let's not throw the baby out with the bath water.  Perhaps the right direction for you is neither right (what they think they want) nor left (what your profession suggests is the better strategy), but closer to the center by presenting a balanced viewpoint.  So bend a little, become knowledgeable of those management biases and present reasoned arguments that both incorporate those preferences and still move the organization in the direction you feel is better

Rome wasn't built in a day, but they got it done, one building at a time.  If you push in the right direction you may only get half a loaf from a recalcitrant management, but it's progress.   And the next time you might get more.  Just keep (gently) pushing.

Frustrating?  Yes.  Will you lose some battles?  For sure.

But what an achievement you could gain.

Because to give up is to become an administrator.  Would that work for you?

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, "Screaming Kitten," by GalgenTX