Compensation Cafe

Work, Rewards and the Devastation of Working Age Dementia

Let's file this one under the category of total rewards.  I think it touches every element of the reward portfolio and speaks to the core of the employment relationship - the notion of work itself.

A U.K. study titled "Managing Employees with Dementia: A Systematic Review" was published earlier this week in the journal Occupational Medicine.  The research draws on 44 papers and articles which explore the management of employees who developed dementia between 30 and 65 years of age - referred to as "early onset" or "working age" dementia.  People who develop dementia during these years are often employed when the symptoms first appear and can experience difficulties at work to to mild cognitive impairment for several I

Most of us have been exposed to dementia - with parents, grandparents, etc. impacted by Alzheimer's or another form of the condition.  Those of us who have experienced a loved one fall victim know first hand the devastation that the diagnosis, the symptoms and the damage that its eventual progression brings. It's hard to imagine facing this as a younger, working adult. 

As study co-author Dr. Richard Heron says:

There remains much stigma around mental health, and particularly the 'D' word, Dementia, which is perhaps becoming as feared as the 'C' word, cancer was. 

With early detection and anticipation of more effective treatments on the orizon, a diagnosis of early dementia should not mean the immediate end of a working life.  People will have a range of capabilities that do not change overnight once a diagnosis is made.  They will have differing reserves to draw on, and differing home and work demands to take into consideration.  With the right support, care and occupational advice, many will be able to continue safe, healthy and productive employment, well beyond their diagnosis.

The authors take a stab at a list of suggested practices for employers, which range from risk assessment to identifying and implementing reasonable accommodations.

For me, the underlying imperative in this topic is the importance of work and of being productive in our lives as human beings.  And the desolation that can come from the loss of responsibility.  This is an often unacknowledged thread that runs through much of what we in the rewards field (and in the HR profession overall) do in our own work.  The person who brought this lesson home for me most clearly was my mother.

My mom grew up with hard work.  As the oldest daughter in a farm family of ten, she was pulled out of school and put to work in the field when her older brothers left to join the armed services.  She went on later in life, with five children of her own, to return to school and earn the GED she was denied as a younger woman.  She worked many years at a local garden center (she had a magical way with blooms) and for a women's clothing store that offered a great employee discount (with four teenage daughters, you can easily see why this was a good idea).  She washed floors and baked cookies after we went to bed; I honestly don't know when the woman ever slept.

Today is the two-year anniversary of my mom's death, which was preceeded by at least a five-year struggle with Alzheimer's.  Although her onset of the disease was certainly late in life, I thought a lot about her as I read and reflected on this study.  She spent her final year in an exceptional memory care facility with excellent staff.  When we first arrived with her, as part of our orientation the staff asked about what she enjoyed doing.  Did she like puzzles, listening to music, watching any particular TV shows?  Our advice: Put her to work, give her responsibility for whatever chores she can do, and she will be happy.  She became the queen of laundry folding - and when I visited, we would fold towels and sheets together (with her correcting my sloppy corners, just as she did when I was young).  There is no substitute for the dignity and satisfaction of doing work - and doing it well.

In our workplaces and in our economic and political spheres, I hope we never lose sight of this.

What lessons have you learned from your experiences with loved ones and dementia?  Have any of your organizations had to address and create solutions for employees with working age dementia?

Ann Bares is the Founder and Editor of Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting and survey administration services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys reading in her spare time. Follow her on Twitter at @annbares.

Image courtesy of openaccessgovernment.org

5 Ways to Fight the "Peanut Butter" Syndrome

When it's time to link salary increases to performance ratings, the famous "peanut butter" syndrome comes to mind. You know, the one where you give managers a merit budget to allocate . . . and they give the same increase percentage to everyone in their department. It's like spreading peanut butter evenly, a favorite simile in the compensation industry.

Every year you hear, "this will never do," and every year it happens. It's especially common in small companies, but large companies have their pockets of peanut butter lovers, too.

It's worth putting some thought into how you can overcome this predictable predisposition -- if you consider it a problem. BTW, most practitioners do see this behavior as a problem, in that these managers are both rewarding negligent performers and chintzing out on the stars, therefore missing the goals of managing performance by a mile.

The solution needs to be customized to every company, of course, based on your culture and the values of your executive and manager groups. Here are a few perspectives to consider.

Emotional intelligence -- Experience shows that most companies need to grapple with the peanut butter challenge. After all, it's common to find individual managers who are uncomfortable judging their employees' performance and/or managers who believe that differentiation is bound to cause unmanageable bad feelings within the department. These are often the same managers who are paying employees more than range maximum. In other words, they are just not comfortable looking at how their actions affect their employees in anything but the simplest framework. Which leads to the next observation.

Value to department/company -- Some companies ask managers to consider not only employee performance; but also, the individual's long-term value to the company. One approach is to take into account whether the job is critical to the bottom line, to ongoing innovation or to strategy upgrades. Another approach is to project the individual's long term value to the company. Does the individual have the potential to deliver at a noteworthy level that will advance business operations both now and in the future? Experience shows that some managers are more comfortable counting these perspectives into the rating decisions, especially in smaller departments.

HR review -- HR review and sign off of proposed merit increases (before they are communicated to employees) is one way of working with managers. It gives you the chance to coach inexperienced or unwilling managers -- that is, if you put enough time on your end-of-year calendar for one-on-one meetings. Instead of treating each meeting as an administrative checkoff, interview each manager about her/his thinking and increase choices. Your influence will  build more consistency into the decision making process, too.

Calibration meetings -- Some companies allocate time for the managers in each Division or function to meet with a facilitator. The managers present their increase proposals and the group works together to ensure that consistent guidelines for decision-making are shared across the group and that the stars are rewarded appropriately, given a shared budget.

Merit matrix -- The classic solution for the peanut butter quandary -- but its value is minimized when a manager gives everyone the same rating!

Remember, some companies have begun to put their differentiation efforts into incentive payments rather than salary increases. Incentive decisions can also be peanut buttered, as I'm sure you've noticed. Build discipline into your reward logic. Differentiation in incentives holds up best when different employees have different incentive goals. If everyone in the company or department is sharing the same performance goal(s), the logic of differentiation doesn't hold up quite as well -- unless you reserve higher increases for jobs that obviously make a direct hit on the bottom line.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. A former Board member for the Bay Area Compensation Association (BACA), Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Cafe Classic: Faith, Trust and Your Pay Program

Editor's Note: Do your employees believe what you say about your pay program?  How do you know?

I've had the chance to work with many organizations that have decent, even quite good, compensation programs and practices in place, but where employees are simply not buying it. They resist "corporate" messages about the pay plans and they invent and spread all manner of rumors about them.

In circumstances where trust issues are focused primarily on compensation (rather than being part and parcel of a larger issue of faith in leadership) and after taking the necessary steps to ensure that the pay program itself isn't necessarily at fault, I find that information - clear, detailed, credible and truthful - can be the compensation or HR professional's best weapon. 

There is often a common thread running through situations like this.  In my experience, communication about the compensation program in these organizations tends to be broad and relatively flavorless.  Buzzwords and platitudes abound; descriptive specifics not so much.  Compensation communication comes off like a sales pitch, and that is the way employees perceive it.  Messages are completely lacking in any of the descriptive detail that might make them believable.

And by descriptive detail, I am not suggesting things like "Jack Brown just got a 10% salary increase, raising his base to $95,000, despite the fact that he was only 'meets' at his last appraisal."

What I am suggesting is that:

Instead of just saying the program is "competitive", tell employees about the market strategy you use in benchmarking, show them the list of surveys you use and explain why each is a good fit, then walk them through how market data is gathered for a sample job.  (This is also a good opportunity to explain to them why you don't use free stuff from the internet.)

Instead of just saying jobs are assigned to salary ranges based on "market and internal equity considerations", walk them through an example of how the market pricing and/or job evaluation process works for a particular job.  Perhaps use this as an opportunity to explain the purpose and use of salary ranges (and hopefully your practice matches the intent here.)

Instead of just saying that every job has a "bonus opportunity", remind them of the objectives of the bonus plan, how it was designed and why, and the purpose of the different mechanics.  Make sure the calculations are clear by going through a couple of "what if" scenarios.

You get the picture.  Specifics.  Truth.  Clarity.

Death by detail?  Perhaps.  Not every employee group wants, needs or will even sit still for this level of detail -- I'll grant you that.  But I have found that spending an hour, or even more, doing this kind of information sharing and straight talking in front of employees who have lost their faith in the program can make a real impact.

That's my experience.  What has yours taught you?

Ann Bares is the Founder and Editor of Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting and survey administration services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys reading in her spare time. Follow her on Twitter at @annbares.

Image courtesy of economicnoise.com

The Death Spiral of Your Compensation Programs

Have you ever asked yourself, how effective are the Compensation programs in your organization?  Are they still doing what they were intended for, still delivering the right bang for your bucks, the proper ROI?  Do you give them a thumb’s up?

Or don’t you know?  Have you reviewed the programs, or conducted an effectiveness audit in recent memory?  Or is your role simply to keep your reward programs afloat and running?  Kind of like an administrator.

“If it’s not broken then don’t fix it” is a commonly used phrase for a reason, especially if the house isn’t on fire.  Perhaps “letting sleeping dogs lie” is a philosophy built into your DNA – or in that of your leaders.

You may be comfortable playing the couch potato.  All is well.  But then again, how would you know when damaging storm clouds start to form on the horizon?  When they’re coming your way.  Would you know when trouble is brewing, when the death spiral has begun for those compensation programs?

Would you know what to look for?

Continuing our house analogy, I suggest that you should look for telltale signs of the rot that may be forming behind the wall or under the floor, because when it becomes visible (obvious) and the wall/floor is stained – at that point it’s much harder to fix.  It’s more painful and costly to remedy.  And by then the pealing alarm bells will have the attention of senior management – and not in a good way for you.

This looking for trouble tactic is much the same at work. You should look for warning signs that your compensation programs may be coming off the tracks.

Warning Signs

Here are some examples of what could be going wrong.

• When you catch yourself routinely saying that you “pay competitively,” but in fact, the salary range midpoints of your structure(s) are less than prevailing market rates.  When were they last updated?
• When you repeat to everyone that, yes you do pay competitively, and your midpoints do reflect the external marketplace, but what is actually paid to employees is instead much less than the market.  Sort of like not walking the talk.
• When you discover that payments from your variable pay programs (annual incentives, sales compensation, etc.) reward less for performance and more based on entitlement and administrative ease of processing. “It’s been twelve months; where’s my check?”
• When you believe the recruiting brochures that you have a Pay-For-Performance program, yet 98% of employees still receive an annual increase.
• When flexibility of decision-making often trumps established guidelines, best practices, and potentially even the application of fair and equitable treatment.  This is when managers play “Let’s make a deal” or “I am the boss.”  And if you let it happen, more skeletons will go into the closet.
• When new or revised compensation programs are rolled out lacking appropriate communication, training or even monitoring devices. “Send out the announcement memo and let’s go to lunch.  We’re done.”
• When title inflation has become such a worrisome issue for the HR database that titling anomalies have permeated the organization with confusing and inconsistent labels.  It may seem like you have as many job titles as you have employees.  Don’t believe that “special” titles are a no-cost gift.
• When you find yourself with a plethora of “senior, lead, coordinator and assistant-type” titles that confuse more than clarify the hierarchy of job roles.  Promotions become an almost automatic step, based more on the length of service or job performance than substantial differences in job descriptions.
• When you consistently defer decisions on pay increases and/or program design or administration to the outside consultants; when you use the terms “Hay” grades or “Mercer” salary ranges.  When your consultant contacts are on speed dial.

Or the problem(s) could be something else.  Check your compensation metrics to see what’s working and what isn’t.  Where you are going in the right direction, and where perhaps you’re not.

Saving the Patient

Like any other “patient” being treated for an illness, the evidence of individual symptoms – warning signs - may not be the endgame for you.  Most everything can be fixed.  But if you find multiple symptoms, that could signal a real problem for you and your organization.  Problems that affect your payroll costs, employee morale and engagement, retention and even your organization’s bottom line.

If your single largest expense, employee pay, is not working, or even working against you with counter-productive compensation programs, it is up to you to be on the front line of defense.

So, you had better be looking. And you had better be prepared to sound the alarm.  You’ll need to catch damaging policies, practices or procedures in time, before too much damage is done, before the pain incurred has reached the attention of senior management – or at least your boss.

The deeper the hole of problems you’re facing, the longer and harder may be the cure.  If you find that you’re in that sort of hole, throw away the shovel!

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, "Chaos Rodeo," by Jurvetson

Cafe Classic: Thanksgiving * Share the Gratitude

Editor's Note: Great lessons for this U.S. holiday dedicated to gratitude - from our the Irish member of our team. Thank YOU, Derek!

I have the honor and privilege of posting today, this last day before the American Thanksgiving Day holiday. I point this out as an American holiday as I am Irish. But I must admit, I've adopted many of the practices of this day as I appreciate greatly, indeed, the principles behind it.

The members of my team and a good many of my colleagues are American. I've asked them what they think of Thanksgiving. Answers ranged from comments on the good food, to opportunities to see family (and the sometimes outrageously funny stories around that), to football and naps.

But the one comment that has stuck with me is this: "Thanksgiving is my favorite holiday of the year. It hasn't been commercialized like Christmas or Easter. There is no real societal pressure like on Valentine's Day. It's simply a day to gather with those you love and be grateful for what you have, both material and non-material."

In that spirit of simple giving of thanks, I'd like to share with you what I am grateful for this Thanksgiving and invite you to do the same in comments:

I am grateful for my family and friends! I have a wonderful group of people who not only love me, but hold me accountable to proper work/life balance. That said...

I am grateful for my work! The last few years have been very difficult, indeed, for many people around the world. I am not just grateful to have a job, but that the work I do helps organizations around the world change their cultures into positive ones of recognition and appreciation, thereby creating much happier and engaging environments for their own employees to work within.

I am grateful for my colleagues! The most important factor that makes my work so enjoyable is the people I get the privilege of working with every day. To a person, they are smart, talented and generally fun to be around.

I am grateful for the Compensation Cafe! This site has given me the opportunity to share my thoughts on employee recognition and rewards, sure, but more importantly it's given me the opportunity to learn from the best compensation professionals in the world!

I am grateful for you! Readers of Compensation Cafe have taught me just as much with their thoughtful comments over the years, both to my own posts as well as the posts of my Cafe colleagues. Thank you for caring so deeply about your profession that you spend your valuable adding your insights and expertise.

Share your gratitude! As you wrap up your work today, consider pausing on your way out the door to tell your colleagues, co-workers and team members why you are grateful for them.

What are you thankful for?

As Globoforce’s Vice President of Client Strategy and 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 a leader in the WorkHumanmovement and 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.

A CEO Pay Maximum? Nope, Nope, Nope

Pay has been in the news so often lately, it can be hard to choose a topic to write about. But on November 12, 2018, I read an article titled “Setting a maximum wage for CEOs would be good for everyone.” The author was Mark Reiff, a person with an impressive academic resume who asks if setting a maximum wage could “be the long-awaited solution to economic inequality?”

I’m not going to bury the lead. The answer is no. No, a maximum wage is not a solution to economic inequality. In fact, it isn’t a solution for anything.

We can all agree that the highest paid CEOs make a lot of money. In fact, in 2017 the 200 highest paid CEOs were paid as much as $103.2 million and no less than $13.8 million. Certainly not chump change. It should be noted that at least a few of those CEOs were also the founders of their companies. As a reminder, founder pay should be looked at through a different angle of the prism than non-founder pay, but that’s a topic for a future article.

We all know that CEO pay has risen faster than the average pay of average workers. Many people may not realize that CEO has not always risen faster than the pay of the best, or highest in demand, workers. Again, a topic for a future article.

Let’s get back the maximum wage. Mr. Reiff proposes that we start by limiting CEO pay to $10 million annually. There are a few big problems with this idea.

1. If $10 million is the max, then every single one of the top 200 paid CEOs (and many below them) will be paid $10 million within a year.
2. The United States does not control pay levels in other countries. Our best 20 CEOs would be hired away to other countries (or the companies themselves would leave) within months of the rule taking place.
3. The money saved on CEO pay would provide practically nothing new for rank and file employees.

Of these three, the most relevant problem is number 3, the lack of impact on rank and file employees. If the goal is to lessen the income gap, a CEO will do nothing. Assume you are a company who currently pays your CEO $15 million.  You have to cut pay by $5 million to stay under the max. If you had only 3,000 employees, each could get a $1,666 annual increase. But the increase would probably be shared on a pro rata basis, so your lowest level employees might only get $250-$500 more each year. Inequality is not solved for the price of a used iPhone.

Here is Mr. Reiff’s example of why his proposal makes sense.

“Steve Jobs is an excellent example here, for Apple faltered when he left, and began to thrive again only when he came back, for a salary of $1 a year. So companies need not worry about losing the best candidate to someone who pays more. Very good people will work for say, $10 million a year, especially when given a chance to run a company. And these people are just as likely to do well as those who might demand $100 million.”

There is so much misunderstanding packed into those three sentences that there simply isn’t room in this article to address them. Let’s start with this simple fact. Jobs owned tons of Apple stock. As the company became wildly successful, he became wildly wealthy. Much of the pay cited by Mr. Reiff in his examples of high compensation, is pay delivered in stock and other non-cash elements. His own example contradicts his intent.

Since we know this will not happen, some of you may wonder why there was a need for an article at all. The truth is that CEO pay is often a real problem. It’s essential that we remind people of what can be and cannot be accomplished by modifying CEO or other executive pay.

Dan Walter is a CECP and CEP and works as Managing Consultant for FutureSense. He is passionately committed to aligning pay with company strategy and culture and is considered a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on Performance-Based Equity Compensation than Dan refers to as informative written Ambien. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

Cafe Classic: Stats Literacy is About Developing Your BS Meter

Editor's Note:  Honing your BS meter with a sound understanding of statistics has never been more important, as Stephanie Thomas notes in this Classic post.

My Cafe Colleague Ann Bares wrote a post at Compensation Force entitled "Stats Literacy: A Survival Skill for the Age of Data." She references John Sumser, who said that "statistics literacy looks like a survival skill for 21st Century organizational life."

This couldn't be more true.

Statistical literacy, however, is more than just brushing up on the long-forgotten concepts and formulae from your Stats 101 course. The concepts and formulae are important, but the reality is this: without highly specialized training far beyond Stats 101, you're simply not going to have the quantitative skills cut it on the "technical" side of Big Data. 

The limits on the size of data sets that can be processed can now be measured in terms of exabytes (one exabyte = 1,000,000,000 gigabytes) of data. Handling these kinds of massively large data sets requires a particular set of skills: one part quant, one part IT, one part philosopher, and one part translator/communicator. Possessing these skills in the requisite proportions is a rarity, and it's why good Big Data analysts earn Big Bucks.

Does this mean you should just scrap any efforts on improving your quantitative skills? Absolutely not.

Focus your statistical literacy training on developing your BS meter. You can improve your ability to critically evaluate empirical analyses simply by knowing what questions to ask. Here are three examples to give you a flavor of what I mean:

• Were any additional studies performed that aren't presented here? It's not uncommon for multiple study approaches to be used in evaluating a data set. In some instances, different analyses lead to different conclusions. One study may indicate a strong positive relationship between wellness programs and employee retention, while another study may indicate that wellness programs have no impact on employee retention. It's important to get the big picture and evaluate all of the results, not just the ones that support a particular position. Hiding data or analyses should set your BS meter to high alert.
• What is the logical explanation for the reported relationship between X and Y? Big Data gave us data mining, or exploring large data sets for identifying previously unknown patterns. Big Data also gave us data dredging, or searching for relationships among variables with no pre-defined expectations based on logic and no validation of that relationship. There has to be some underlying explanation for the relationship. If the explanation seems contrived, it probably is, and you may have to call BS on this finding. 
• How does this result generalize from the sample to the larger population? Even though they have access to exabytes of data, analysts often focus on smaller samples within the larger data set. These samples can be smaller in terms of people (e.g., employees, customers, suppliers, etc.) or they can be smaller in terms of time (e.g., summer months, pre-Christmas holiday season, etc.). What is true for a given subset may not be true for the population as a whole. It's important to understand how a given result translates to the population at large. If it's not translatable, it's not usable.

As noted in the Harvard Business Review, "even as companies invest eight- and nine-figure sums to derive insight from information streaming in from suppliers and customers, less than 40% of employees have sufficiently mature processes and skills to do so."

Statistical literacy is about being able to make good decisions by balancing analysis and judgment. Successfully maintaining this balance is a critical skill for the 21st Century workplace.

Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University. She teaches undergraduate and graduate courses on economic theory and labor economics in the College of Arts and Sciences and in Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals. 

Tips for Handling Promotion Requests

This time of year, we give managers a range of communication tools to help with pay and performance management discussions. An often overlooked topic is how to talk with an employee who is requesting a promotion.

There's a lot at stake when employees ask about promotions. The experience makes employees feel vulnerable since they are asking to be judged. Because it takes a lot for them to work up the courage to ask, they can be emotional during the discussion. Plus, many younger employees -- who are sure they are doing an outstanding job -- are expecting the company to "just" take care of them, so all they have to do is point out that they've been overlooked. Most don't understand that a promotion often comes after a process of planned development and self-promotion.

Recognize that it's not uncommon for employees to start looking outside the company if they don't like the way the conversation goes. Yet managers are often at a loss about what to say to employees who ask. Feeling like their backs are against the wall, managers can make real mistakes. The common mistake is when a manager indicates that if the employee completes "X" things, a promotion is sure to follow. Of course, no such promise can be made. When the manager is unable to follow through, the employee may resign and move on.

If you want to coach your managers about talking with employees about promotions, provide them with a discussion guide that includes some of the following advice to pass along to employees.

No one can promise a promotion. It is an achievement that needs to be nurtured through self improvement and career development, including a fair degree of manager feedback.

Earning a promotion typically comes as the result of a series of coaching and development discussions that are focused on the employee's career goals.

Managers play the role of advisor, but employees need to research their career interests independently to build their case for moving up.

Managers need to indicate their availability to employees who are focused on career growth. They also need to encourage employees to talk with those whom they consider successful to learn how these individuals went about their own career movement.

While employees have objectives to achieve, the competencies designated for the job they have their eyes on are critical to readiness for the promotion. These competencies describe a level of communication, independence and leadership (for example) that should be demonstrated by the employee before a promotion into those responsibilities is granted.

Promotions are far more available when there is turnover, leaving open jobs to fill. If an employee's job is not being reevaluated because of company changes, promotion through retitling happens far less frequently. That doesn't mean that career moves, special projects or salary increases reflecting increased responsibilities aren't available, it's just that the employee needs to seek them out.

Managers should encourage the employee's dedication to growth and learning, and point out any other competency that is especially valuable in your company's current business situation.

Finally, make clear that the manager should close the conversation by calendaring the employee for follow-up career development conversations following the promotion request (instead of hoping the employee will just forget about the whole thing once the door is closed!) Recommend that they give the employee feedback to consider and suggestions for research in preparation for their follow-up conversations.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. A former Board member for the Bay Area Compensation Association (BACA), Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Cafe Classic: Pay is a Leaker

Editor's Note:  Herzberg's theory of motivation, often referred to as the two-factor theory, holds that pay is a "hygiene factor," necessary to avoid dissatisfaction but not something that by itself will provide satisfaction.  In today's Classic, Jim Brennan provides a memorable and important explanation of this phenomenon - one that so many of us in the field learn the hard way.

Pay can create leaks or make holes but it can't activate engagement

How to maintain low-cost engagement parties with small budgets seems to be the theme of the season.  We are not talking about the formal premarital status of a couple intending to enter the state of matrimony but instead address the psychological term for a deep dedication to work.  Employee engagementshows itself in a sense of personal emotional involvement and identification much like ownership.

Employee engagement is not something you can create.  Engagement is an employee choice.  Management can establish the conditions in which engagement can thrive but cannot command or dictate it.  People have their own motivations.  The best any employer can do is to offer a menu of reinforcements, reward systems, and consequences for positive organizational behaviors that are attractive to your particular workforce.  Such factors as communications, empowerment, incentives, performance feedback and working relationships are called “drivers” because they are considered effective in enhancing employee engagement. 

Pay is not generally considered a “driver” of employee engagement.  Yes, the reward and remuneration process that encompasses recognition, communication and feedback is certainly an engagement vehicle, but the dollars, pounds and euros themselves are not “drivers.”  I would go so far as to identify pay as a “leaker” that can deflate engagement but can’t directly increase it.  Passion for an occupation and enthusiasm for a work role can’t be bought with money.  But it can be quenched by pay cuts or starved by inadequate compensation.  Workers who are financially challenged due to low wages find that intrinsic satisfaction won’t pay the rent or put food on the table.  Once income rises to the hygiene level that removes it as a dissatisfier, the subject will perk up and become potentially open to responding positively to other reinforcement techniques that can activate employee engagement.  Until remuneration is at least minimally acceptable to the employee, they are unlikely to become engaged in their work.

Since low pay or demotivational reward practices can turn engagement off, it is therefore important to pay people right.  Decent salary is a necessary but insufficient precondition for engagement.  That point should be emphasized, because enterprises face problems where pay lags or is delivered by a process seen as inequitable.  They must first remedy those issues before they can ever dream of engaging their workers.  Pay can’t float your boat, but cracks caused by negligent inattention can sink it.  Once the leaks have been plugged, the boat can move across the waters towards its destination. 

With this understanding, it may become clearer that employee engagement simply requires “enough” pay rather than immense compensation sums.  The hard part of that challenge is determining when pay is sufficiently adequate to permit a supportive environment for engagement initiatives and finding the money to plug the gaps where they exist. 

E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries.  After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

Creative Commons photo "Drip"  © 2011 J. Ronald Lee

Do You Own or Rent Your Compensation Programs?

The above may seem like an odd question, but in my experience, there are some organizations who seem comfortable in “passing the buck” to consultants and commercial compensation surveys to make their reward decisions for them.

As a consultant myself I’ve worked with organizations who routinely referred to their HAY grades or MERCER salary ranges when communicating with employees.  And when a compensation program question was posed to HR many times a call would go out to the respective consultant responsible for that area – to get a decision made.  In some circles the decision-making process could literally mirror the three blind mice, with HR seeing, hearing and saying nothing without a consultant’s input.

“I Didn’t Do It”

Compensation practitioners know that they are always subject to possible criticism over their decisions; job evaluations, market-pricing, setting salary ranges, performance management issues or even recommendations for or against management requests.  So, wouldn’t it be nice for them if they could say, “It wasn’t me. They (consultants or survey sources) made the call.”  Someone else that they could point the finger at.  Let someone else take the heat.  And it does seem more difficult for managers to change a consultant’s mind than for them to put pressure on the home-grown resource.

Good Idea?

These scenarios serve as an excellent example of the “Easy Button,” where an answer is provided without a lot of time or effort on your part.  You don’t even have to think about it!  And if the answer is challenged the consultants usually have plenty of resources to deal with justifications and counter-arguments – at a further price of course.

Having an answer-man on call relieves the political pressure that might otherwise be brought to bear. Because contentious issues can quickly become political issues, and you don’t want to get on the bad side of certain people.  Having an answer provided in the format of a prestigious letterhead can be very comforting.

And if you don’t take responsibility for program design, implementation and sustainment issues you don’t need a costly staff of employees to do that work.  I once worked with a major client who kept only two compensation people on staff – Managers - because the outside consultants did the rest of the work.

Bad Idea?

Is this concept giving you a bad taste in your mouth?  Before you dismiss this approach out of hand, as in “We’d never do that!” let’s look at some pros and cons.

 

Pros

• Easy button – let someone else make decisions. You’re very busy and have a lot on your plate right now. Wouldn’t it be wonderful to be able to pass off some decisions to objective professionals?  Someone who wouldn’t be influenced by emotions, personalities or internal politics?

• Less pressure – “What can I do? This is what the consultant said.” Your critics are kept at bay because you didn’t make the decision. And as long as their invoices keep being paid your consultants won’t be influenced by criticism of their answers.  In fact, they’re usually expert at dealing with critics.

• Don’t need a staff  - alleviating pressure on your FTE count.  Consultants are used as needed, so full-time staff may be an avoidable luxury.  As long as you can afford the charge, of course.

Cons

The above arguments are powerful stuff for the administratively minded, and if your goal is to keep floating along with minimal impact and have time to join the company bowling team, having an “Answer Man” available as needed can be an attractive strategy.

But there are some downsides you’d have to face.

• Loss of personal respect - by managers first but will soon include the employees themselves as they come to realize your risk-averse tactic. What’s that phrase about being an “empty suit?”  Why should anyone talk to you?

• Management loses control - of compensation programs and the message. Outsiders will become perceived as the real authority behind your programs, further weakening your position.

• Objectivity becomes rule-setting – because outsiders can never be knowledgeable enough about your employees, your culture and the human element behind many good decisions. Who knows your jobs better? Who knows where exceptions need to be made? Compensation programs need to make sense for the organization, and sometimes that isn’t black or white – but a steady stream of grey.

The takeaway here is that, in order to maintain an effective compensation program, you need to take control.  You need to be sitting at the desk where the buck stops.  Consultants should be used to feed information into your decision-making process, and to make suggestions based on their knowledge and experience.  But it is not in your best professional interest to abandon your responsibilities and let someone else make the actual decisions for you.

That would not be a career-enhancing move.

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, "Boba Fett Reward," by Pasukaru76