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Derek reminds us again of the long pay increase weaknesses that have all but disabled the ability of base pay changes to reinforce desired behaviors. We keep warning about it here (http://www.compensationcafe.com/2015/02/make-me-whole.html) long before the surveys confirm our predictions, proving the value of following this group's prescient articles.

Note that 1.7% was the Social Security COLA based on the urban hourly wage CPI index, so it only reflects that market basket. Such tiny incremental changes complicate financial reinforcement planning over time. It obviously forces more attention on contingent rewards and broader consequence options than relying on compounded cash alone.

Interesting additional thought, that performance expectation emphasis may swing again, from output results back to process. Hope we don't return to the bad old days where attitudes are subjectively "evaluated." Keep in mind that as pendulums swing from time to time, each clock is set differently and hardly any two move in exact unison: variety will persevere even while gross trends shift.

Hi Derek,
I don't think the trick is to abandon one pay component for another. For me, the trick is to create a full tool kit of components that complement each other. Each component has its strengths and weaknesses.

Recognition programs in themselves are no better than performance increases if not done right. I believe the 91% of companies with at least one recognition program relates to the use of anniversary awards which typically add little value.

In order for a car to drive optimally you need four wheels. For rewards to work you need to find the right balance for all reward components.


Hi Derek.

Couldn't agree with you more.


There are so many factors at work in the flattening of wages.

1. Survey data. The more people adhere to survey data, the more it will repeat itself.

2. Difficulty in correctly surveying complex compensation, like equity grants. The extreme variability of these grants is seldom shown in data. Some companies use this as advantage that results in far larger payments than shown in data, Others use it as an excuse to keep pay low, since "market data" does not support the larger payments (and the company or its shareholders do not really like the use of equity compensation.)

3. Tight budgeting at publicly held companies. With shareholders grinding for every penny of EPS/TSR. Finance departments and CEOs have little motivation to have pay grow any faster (for anyone but executives)

4. A lack of business acumen on the part of many compensation professionals. With pay accounting for as much as 70% of revenue at small companies and seldom less than 40% at very large companies, compensation professionals effectively drive the single biggest budget line on the books, but seldom ensure they have a position at the real budget table. Much has been said and written about "getting a seat at the table". This must happen if any real change is to occur.

I can go on, but I must get my own post for tomorrow finished....

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