If money alone could solve all problems, every issue could be reduced to an expense item. Life would be simpler. With unlimited budgets, HR could improve every enterprise with payroll adjustments alone. Compensation would merely be a matter of dispensing the right sums. All employees could be fully engaged by a simple cash payment.
As long as each pressing social crisis could be resolved by spending more, solutions to long-standing problems could be purchased with the stroke of a pen. All issues would be resolved by simply reallocating wealth. Student school test results would improve with each additional “investment” of money. Teachers will immediately become more effective when their salaries reach higher levels. (Haven’t you noticed that happen? Me neither.) Roads and railroads would approach the safety record of airlines, whose safety and customer satisfaction metrics would also improve. Cures to diseases would be discovered and homeless would disappear from their nests under rebuilt bridges which would become universally safe.
Happiness would abound throughout creation if financial constraints were abandoned, some believe. Could the real answer be that simple? Might paradise on earth be so easy to reach? Checkbook diplomacy might indeed bring world peace… but haven’t we been trying to buy answers to every global challenge for a long while? Despite the simplistic temptation to constantly point to money as the solution to every problem, actual experience doesn’t seem to bear out the assumption that all negative conditions can be bought into a positive state by a proper (greater) expenditure.
Companies don’t find that a higher payroll burden per employee makes for a fatter bottom line... even if their top executives seem to pay themselves as though that were true. Low-paying enterprises frequently outperform their bloated bureaucratic competitors who spend more on everything. Higher medical expenditures apparently don’t automatically translate into superior health care results. Fact-based medical research studies show that some of the most efficient health clinics spent less on patients than their peer competitors. Most nations around the world produce smarter students while incurring educational costs per student far lower than ours in the United States.
Spending more doesn’t seem to change much except to increase our costs for poor results.
In reality, money is noticed most when it is deficient. People are hypersensitive to personal underpayment (noted at the 90% felt-fair level) but rationalize high pay to themselves as appropriate (pay must reach 120% of felt-fair level before behavior changes). Since pay is a relatively weak positive motivational tool, it seem to confirm the general trend: money fails the acid test as the universal solvent.
If higher pay to everyone is not the answer, we need to find some other panacea to flaunt as the future source of promised perfection and pure economic equity. Maybe pass laws to criminalize wealth? Legislate an end to poverty? Gesture politics always seems to work well. Yeah, that’s the ticket. Go for image over reality, as usual.
And then I woke up. What is your similar nightmare… or dream?
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.
Image "Money Concept" courtesy of ponsulak/FreeDigitalPhotos.net
Isn't "Low-paying enterprises frequently outperform their bloated bureaucratic competitors who spend more on everything" just so true! Really interesting thoughts here, thanks.
Posted by: Greg Nunan | 06/09/2015 at 09:23 PM
Not all compensation jingles, as I always say, Greg. Spending more doesn't automatically create a superior culture, offer more career prospects or inspire engagement. Since that is hard for some comp people to remember, it is worthy of an occasional reminder.
Posted by: E. James (Jim) Brennan | 06/09/2015 at 09:49 PM
"People are hypersensitive to personal underpayment (noted at the 90% felt-fair level) but rationalize high pay to themselves as appropriate (pay must reach 120% of felt-fair level before behavior changes)."
That's the first time I've seen these figures - can you point me towards some more information on this subject? Thanks.
Posted by: Iola | 06/09/2015 at 11:55 PM
Iola: See the link at the bottom of this earlier article http://www.compensationcafe.com/2012/08/what-is-fair-pay.html referencing the studies of Elliott Jaques. Look for his findings on "felt-fair perception thresholds." It is a fascinating topic, supported by the more current research by Dan Airely, PhD, of "Predictably Irrational" fame, among his other books on behavioral economics.
Posted by: E. James (Jim) Brennan | 06/10/2015 at 01:47 AM
Is this what Compensation Cafe is turning into? It was once a forum for thought leadership and serious discussion about on total rewards. It seems to be morphing into Fox News! Of course people feel they deserve more. Lets face it, we all do. Does the author seriously believe that Rewards professionals should respond in this fashion when profits are indeed rising rapidly and salaries in North America are falling behind?
Posted by: Nancy Sudbury | 06/10/2015 at 07:52 AM
There are those who are undervalued and underpaid but I believe this discussion is focused on the total rewards fact that money alone doesn't buy happiness and is just one line item on the employee's (or individual's) satisfaction ranking as part of Maslow's hierarchy. Money doesn't automatically make employees perform better - and that is supposed to be one of its purposes.
Theories abound about what the magic number to be paid is and of course it varies per person, per geography, per needs. Is it the $70k -$80k mark we have heard about recently? Maybe, if you are single and living in North or South Dakota but probably not for a family of 5 in a place like California.
I don't believe everyone wishes for more money but they might prefer more scheduling flexibility, more perks, more time off.
If profits are increasing does that mean companies should automatically increase salaries which impact long term results? (See today's blog for the Finance guy's opinion I suspect on that.)
Can we create a more balanced approach to the haves and have nots? Probably, but for that we need to change the cultural mindset from "give me what I think I am worth" or "give me what that guy is getting because it isn't fair I am paid less" to "give me what I need" to live a reasonable, comfortable lifestyle. That includes the common conveniences of today with education, travel and life experiences. Of course this dream would change the world of compensation.
I don't advocate the same pay for every job but I think how we value them is part of the issue.
What would happen if the garbage collector made more than an athlete? If the teacher made more than the principal? Would we see a change in performance and/or career path chosen?
Posted by: Karen Kervick | 06/10/2015 at 10:27 AM
While Nancy whiffed, Karen nailed it. Nancy should review my past articles to confirm that I am much more sensitive to the various economic disparities than she suggests. A sincere attempt to encourage the recognition that total rewards encompass more than cash alone should not be confused with callous indifference to pay inequities.
No hard feelings, because this is a caffeinated conversation spot. Stay excited. Intellectual stimulation is the entire idea!
Posted by: E. James (Jim) Brennan | 06/10/2015 at 12:49 PM