Editor's Note: Today's post comes to us courtesy of guest contributor Joe Thompson. Because of the breadth of his topic matter, we've decided to feature his post across two days. The first two Immutable Laws were covered yesterday. We present the remaining three to you in today's post, beginning with the Third.
The Third Immutable Law of Compensation: Compensation is always done for, and by, people. [And as Stephanie Thomas reminded us: “beautifully ugly, messy, unpredictable people, each one as unique as the next, each one variable from minute to minute.”]
First Corollary: Compensation strategies, decisions, and execution will always be based on subjective elements, even if those elements are cloaked behind the stalking horse of objectivity (which is usually given a label designed to prove it is unassailably objective such as “the data is impartial,” “it’s based on data science,” “the spreadsheet said,” or the ever powerful and difficult to surmount label, “but everybody knows”).
Second Corollary: Compensation strategies, decisions, and execution will always contain errors or assumptions that cause them to go awry. (See Dan’s Third Law of Compensation Motion.)
Third Corollary: In order to approximate fairness and equity, there will always need to be decisions about what finite set of factors should be considered compensable and at what levels they should be compensable.
Fourth Corollary: Compensation strategies, decisions, and execution will always appear “unfair” to large elements of those to whom they apply, though often for completely different reasons.
The Fourth Immutable Law of Compensation: It is impossible to completely, accurately, and precisely know what “the market” actually looks like.
First Corollary: Every market analysis is the result of a cascading series of subjective assumptions, approximations, and decisions (such as which surveys to use, which jobs to benchmark, which aging factors to use, etc.).
Second Corollary: The “market rate” is not a real or static thing that can be reliably measured or determined by disinterested observers in a repeatable series of experiments; it cannot be defined by some infallible International Bureau of Remuneration and Measures.
Third Corollary: Managers and employees will always believe that low pay (especially their own) is the direct result of the compensation team not properly understanding the “real” market.
Fourth Corollary: Managers and employees will always believe that Glassdoor.com, PayScale.com, or their “cousin’s-buddy-who-knows-a-guy-that-works-at-this-other-company,” always have a much better grasp on the “real” market rates then the compensation team.
Fifth Corollary: Managers and employees will always believe that a market rate which is higher than their current salary is more accurate than a market rate which is lower than their current salary.
The Fifth Immutable Law of Compensation: Compensation is never an end unto itself; it is always a means to an end.
First Corollary: For employers, the ‘end’ ought to be aligned to, or at least related to, a business outcome that furthers the enterprise-level interests of the business.
Second Corollary: For employees, the ‘end’ is usually related to a personal outcome (often tied to a perceived standard of living the employee believes they have “earned”).
Third Corollary: For congressmen, the ‘end’ (at least when it comes to telling others how compensation should be administered) is always aligned to the ability to pander to special interests or otherwise secure votes.
Fourth Corollary: The vociferousness, volume, and certainty with which a person dispenses conventional wisdom on compensation practices is dispensed is inversely proportional to the person’s level of expertise on the matter.
Now. These Laws (and Corollaries), as I’ve laid them out, reflect my view of the compensation universe and align with the content posted on the industry app. If I’ve failed to include something, or I’ve erred in my analysis, please let me know.
Joe Thompson, CCP, CCMP, is currently employed as a Human Capital Strategic Consultant at Booz Allen Hamilton where he assists clients with a wide range of human capital challenges. He has delivered human capital solutions across the talent management lifecycle including recruitment, job analysis, hiring, compensation and incentives, workforce planning, HR policy, attrition, performance management, change management, cyber human capital, and human capital program design, implementation, and evaluation. Joe has worked in the area of compensation for 10 years and, prior to Booz Allen, he has worked in the U.S. Intelligence Community and in the U.S. Navy.
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