Compensation Cafe

Shock & Awe

When you first look to purchase compensation surveys for your international population, it’s going to be a real wake-up call.  For those accustomed to only US surveys, you will find that the available data in many countries is more limited than what you’re accustomed to seeing, as are the number of companies involved.  What won’t be reduced though is the expense.  Quite the opposite.  If you have multiple countries to deal with, your budget for credible compensation data will likely become a multiple of your US experience.

 When I worked overseas my budget for compensation surveys was 3-4 times my previous US budget – and I only had to worry about Europe.  What a shock that was – spending much more while receiving less.

Each country is like a separate USA, a unique national entity having country-specific labor laws, employment regulations, tax structure, competitiveness challenges and variations of economic strength.  For each, you will need a country-specific survey to assess the local competitiveness of your employees.

International HR practitioners will need to adjust their thinking to react effectively in smaller countries, where the working population is limited and so is the number of survey participants.  It will be difficult to slice data by geography, industry or employee segment, as the data points grow smaller and smaller with each criterion.  For example, a well-regarded Mercer survey for the Netherlands showed 81 participating companies, while the US survey totaled 500.

Availability of locally-grown survey data is another challenge.  I have tried to locate such sources, even those provided only in the local language, in order to create a greater “buy-in” sense from management, but with limited success.   As a result, even global companies with non-US headquarters tend to use multi-national consulting firms.

Accessing International Resources

Should you require information for international compensation practices, below are a number of useful sources, each of which can be tapped via a Google search.  Note: many of the non-US sources focus on limited employee segments or functional areas, which may limit their usefulness during a general search.

Should you only have a few positions (2-3) in a given country you can reduce costs through individual job pricing, vs. the purchase of an entire survey.  Having more than a few positions though would render this tactic economically unfeasible.  A few notable sources (though others from the above list may also be able to help):

• Birches Group
• ORC
• ER Limited

Another effective strategy for reducing costs is to age current survey data forward, coupled with the use of biennial purchasing.  However, when using this strategy have care to limit its use to countries with stable economies.  Using such standard growth figures would miss the mark in countries showing greater volatility.

The Cost Of International Operations

Too many HR practitioners and their Managers fail to take into account the expenses involved in keeping their international compensation programs competitive, especially where the organization has a small employee footprint.  For companies new to the international scene, and for those with small populations in several countries, the shock of survey costs could be daunting.  Many times the result is a reluctance to purchase the data, in some cases letting matters on the ground continue to fester – potentially overspending and/or creating debilitating equity problems for themselves.

Call it the cost of doing business, but if you’re going to maintain effective operations overseas, and you want to provide a competitive reward package (of course you do!), it would be unwise to shortchange the process by guesstimating or otherwise trying to make-do without credible information.

The cost of surveys is a fraction of the possible financial impact that could result from retaining non-competitive reward programs.

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, "Surprised!," by Rockin Rob

Do You Have a Meretricious Merit Program?

That raise doesn’t mean what you think it means! Employees keep hearing how great our economy is performing. Jobless rates are at near all-time lows. Talent acquisition professionals are wailing about the availability of great talent. While all of this is happening, we are once again seeing predictions that annual merit budgets will be around 3%.

Merit: the quality of being particularly good or worthy, especially so as to deserve praise or reward; Synonyms:  excellence, goodness, standard, quality, level, grade, high quality, caliber, worth, good

…and the similar sounding, but far different,

Meretricious: apparently attractive but having, in reality, no value or integrity.  Synonyms: flashy, pretentious, gaudy, tawdry, trashy, garish, chintzy, loud, tinselly, cheap, tasteless

The arguments for 3% increases are strong and clear.

1. Inflation has been lower than 3% for several years (it’s currently around 2%).
2. Employee Engagement scores have remained steady.
3. Employee retention is generally strong.
4. Automation and efficiency have increased productivity enough to make up for slightly less enthusiastic performers.
5. Everyone else is doing it.

The arguments against are also strong, but a bit squishier.

Let’s be honest. The optics aren’t great! Does an increase that beats inflation by 1% resonate with any of the synonyms of the word “merit”? On the bright side, this nominal level increase also doesn’t scream “meretricious.” It kind of communicates disinterest or unimportance. In a world where companies regularly claim their “employees are their greatest asset” the term 3% Merit Budget seems a bit flaccid.

“But we’ve increased our incentive compensation budget!”, insists the crowd of executives and compensation professionals. While in concept this may be true, in reality, this is often where meretricious raises its painted face. Too often our cash incentive programs do not payout rationally and in line with performance. This happens when metrics are selected, and goals are set, with too much hope and not enough tactical expertise. The chances of someone being paid “target” are lower than they are led to believe. As my cowboy nephews might say, the plans end up being “all hat, no cattle.” The result is a lot of expectation and a lot of disappointment (or a seemingly random reward).

Equity programs can be even more troublesome. They are usually designed and executed as if each company looked and acted very much like every other company. Imagine if your sales compensation looked the same as sales compensation for an entirely different industry. This is the case for most equity compensation. When you add poor communication programs to the mix, we shouldn’t be surprised that most people have a hard time understanding the value of their equity or even the reason it was given to them.

So, what should you do?

1. Instead of following common practices, find or create best. The middle of market data is an unlikely place the find the “best” anything.
2. Make sure your CEO understands and passionately supports your approach to pay. Without this, even the best plans will fail. With this support, even average programs can be successful.
3. Be honest with your employees. Don’t sell what you can’t give. This means designing budgets and plans that are realistically achievable. It also means communicating something in addition to the best case scenario.
4. Consider doing something bold. In a world of 3% budgets consider 5% in a great year.

The trend of 3% increases will only be broken when a few successful brand-name companies do something different. Until then, doing something different is your competitive differentiator. You don’t have to tell anyone except your employees, and they will love you for it.

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. Dan is also a leading expert on equity compensation issues and has written several industry resources including the one-of-a-kind Performance-Based Equity Compensation. 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: Geographic Pay for Executives

Editor's Note:  Back by popular demand and ongoing inquiries, here is Jim Brennan's Classic advice on the application of geographic salary differentials to executive pay.

Pay varies by geographic location.  Executive positions, however, tend to be treated differently, for a variety of reasons.

Wages and salaries for the same job have different competitive levels in other cities. The degree of pay difference from a national norm also varies by income level, with entry positions showing the greatest sensitivity to local practices, particularly in places that override the federal minimum wage.  Low-income workers are typically tied to jobs close to their homes.  Professionals and managers tend to be paid on a regional basis, since they are more apt to commute farther or to be recruited away by nearby rival employers; that drives up the area rate to a higher more stable equilibrium point for their jobs.  Directors and top executives operate in a national (if not international) job market for their talents. Local competitive market conditions for jobs tend to create pressures for companies to pay whatever is right for that particular place; but many employers hold their executives to a different (usually national) common standard rate. 

Location does make a difference, even in top executive compensation.  Researchers who have studied this for over forty years¹  see geographic pay differentials continue up into top executive levels.  All else being equal, executive pay still varies by geographic location. Chief executive officers at same-sized hospitals in California earned 25% more than their peers in Indiana, for example. 

Most employers with multiple locations have some salary structures that vary by area, but those variations don’t usually apply to top officer pay.  It is rare to see an enterprise with formal geographic differential policies in effect extending all the way up to the executive officer level.  

There are many reasons why employers don’t pay all jobs according to the local pay pattern.

In the federal government, jobs paid according to the General Schedule can earn localized pay, but the geographic variances stop at the Senior Executive Service and the Executive Schedule levels.  Private employers do much of the same. If a company has separate pay by location, the geographic pay differences are usually greatest at the lowest levels where the entry jobs are affected by the minimum market-clearing wage rate.  Employer area pay practice variances tend to change at different job levels, but, typically, the differentials taper off and stop at some level. 

The theory behind the conventional practice is that if you are recruiting in the national labor market for a particular job level, then you should be using national pay scales.  And if you are recruiting from local or regional labor markets for a particular job level, you should be using local or regional pay scales.  That common-sense approach argues that companies should limit their special location-specific pay scales to cover only jobs filled by people expecting local rates; those expecting national or even international pay levels can be treated differently and local competitive variances may be ignored.

Even though the actual proofs of geographic pay differentials extending through CEO levels beyond $500,000 are indisputable²,  most employers don't choose to capture the reality with a separate offset to their top executive salary structures as they do for lower levels.  It just isn't worth the trouble, particularly when the executive total comp packages are so large and complex that the influence of any one component variable can be hidden or overshadowed by many others.  Nevertheless, the reality remains true:  even at firms of identical size in the same industry, executives working in Manhattan earn a lot more than they do in central Kansas; but most organizations find it more appropriate to exclude senior executive jobs from geographical pay differential programs than to call attention to an additional premium added to jobs already paid premium rates.  That would appear excessive.

It really makes little difference to most top executives, since most work in big cities where the “national scale” applied to their positions is quite competitive.  In fact, basing national pay on the headquarters competitive market tends to create excessive overpayments when those big-city metropolitan rates are applied to subsidiaries in lower-paying areas.  Few CEOs of major firms are employed in the small towns or rural areas where pay differentials tend to be low. 

Besides, when companies decline to apply geographic pay differentials to top executives, it makes them look modest and conservative; and they certainly need to burnish that image as much as they can.

¹ D. Thomsen, “Geographic Differentials in Salaries in the United States,” Personnel Journal (Sept. 1974): 670

² D. Thomsen, ERI Update, (Vol. 76, Oct 2006): pg. 3, bottom 

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.

The Means To The Ultimate End – Decision Analytics

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

Have you ever had the experience of having said something pretty profound, but you didn’t realize it until someone pointed it out?  No, it doesn’t happen to me very often either, but it did last week.

Possibly as a result of some prior public prognosticating, I was contacted by the organizers of a future HR conference and asked to informally discusss what I thought might be the key trends for HR that were “just up the road.”  In an almost hour-long conversation, I reiterated some of the now familiar topics of big data, predictive analytics, applied behavioral science, data visualization and leveraging machine learning, artificial intelligence and other algorithm-driven techniques. At some point I apparently collapsed all those topics and unwittingly summarized them with the term “decision analytics”, which was declared by my listening audience to have surpassed the threshold of profundity (I think that’s an actual word).

 Decision Analytics – The Holy Grail of Business

Profound or not, I’ll acknowledge having something of an “epiphany” thanks to the listeners on my call.  Prior to that time, I’m not sure that I can say with a straight face that I fully realized the true purpose for all the various techniques and strategies that are undertaken to gather and analyze data. 

Turns out that all of that work is to allow someone to make an optimal (good) decision, by increasing the degree of certainty or confidence associated with the decision, while at the same time minimizing risk. Ostensibly, the “good” decision is then converted into an action which results in an outcome that approximates the fulfilment of a goal or objective. 

After making a mostly unnoticed “recovery” from my surprise epiphany, the conversation went on to further discuss that the beneficiaries of increased good decision-making in the future could be wide ranging – whether in the context of just business, or more specifically with regard to decisions affecting human capital management and pay and compensation. 

Good Decisions – A Many Splendored Thing

Armed with greater relevant data and more accurate and reliable predictions based on that data, the beneficial effects of improved decision-making in business are nearly limitless. With comprehensive information and an understanding of global economics, world events, technological progress, the geopolitical climate and a granular level of understanding the influence these factors have on the products or services that your business offers – what better decisions would be possible?  At my current employer, we openly and explicitly refer to this overarching goal as providing our leadership with “decision advantage.” 

With an improved understanding of the needs or wants of their potential customers and their likely behaviors, business can better appeal to or influence customer behaviors – and their buying decisions. Likewise, consumers will also continue to benefit from the ability to better understand and quantify their true needs and to make appropriate comparisons of available products and services, in order to make optimal buying decisions. 

Human Capital Management – The Decision Analytics Goldmine

The advent of improved decision analytics can also be anticipated to have substantial implications for the human capital management domain, to include issues affecting pay and compensation. 

With more relevant data to inform improved predictions, better decisions will likely be possible relative to:

• Optimizing the selection and fit of job candidates for existing vacancies
• Progressing toward the goal of near real-time labor market pricing
• Customizing pay/benefits delivery (type, amount, timing, frequency) optimized to individual employee needs, circumstances and career/life stage, to maximize productivity, satisfaction and engagement on the job
• Increasing the precision and effectiveness of pay and rewards budget planning and administration
• Improving the accuracy and effectiveness of workforce planning and workforce strategies

Beyond Human Decision-Making

Improved decision analytics would seemingly predispose good (or at least better) human decision-making.  However, decision analytics still cannot completely eliminate the influence of human biases, emotion, intuition and other irrational and cognitive limitations.  The likely solution hints at the future role of artificial intelligence in decision analytics and perhaps the wisdom of removing human beings from the decision-making process entirely.  Perhaps.

I recall the words of a former co-worker who liked to gently remind everyone to “always make good choices.”  The rise of nearly universal information availability in the next 3-5 years, combined with further advances in decision analytics, should put the goal of always making good choices . . . almost within reach.

Everyone probably has a different perspective.  What’s yours?

Chris Dobyns, CCP, CBP is currently employed as a Human Capital Strategic Consultant for the Office of Human Resource Strategy and Program Design for one of the largest U.S. intelligence agencies. The Office of Human Resource Strategy and Program Design is responsible for organizational effectiveness, personnel assessment, compensation and incentives, occupational structure, recognition and rewards, HR policy, human capital program design, implementation, evaluation and assessment and internal consulting. Chris has worked in the area of compensation for more than 35 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.

Original image "Good vs. Bad Decisions" courtesy of Chris Dobyns.

They Have Your Back

Ever wonder if there is anyone to talk with when you need help on a topic or situation? On the lookout for colleagues who are willing and prepared to defend you and your work?

You don't have to just wish for these people and cross your fingers. There are steps you can take to make sure that kind of support is there when you need it.

I was reminded of the importance of someone "having your back" as I was working with a client recently. The executives at a small start-up were struggling with an unhappy employee who was hurting morale. I suggested they contact their attorney, who recommended they fire the employee on an at-will basis right away. Then the company lined up their professional employer organization (PEO) to join the dismissal meeting.

Were these just "CYA" moves of nervous newbies? Absolutely not. Their interface with the attorney and PEO delivered more than technical advice.  Because of the collaboration, the attorney and PEO will be far more likely to get the company's back (wholeheartedly) if the dismissed employee decides to make a legal move.

There are a number of people that any compensation professional should consider a supporter who will come to your aid in a  (inevitable) tight situation. Here are the primary people, with suggestions on how to build these relationships.

Your boss is at the top of the list, of course. I don't need to give you advice on this relationship, since there are volumes everywhere you look. What I do want to pass on is the article, "What to Do If You Think Your Boss Is Shutting You Out." If you feel that you can't rely on your boss, check it out. 

We've written a number of Cafe blogs about the importance of a strong relationship with Finance. They need to bless just about any big idea you come up with, so the typical relationship of mutual discomfort is bound to get in the way. Here are just two Cafe articles that offer suggestions for building a stronger relationship: "Making the CFO Your New BFF" and "Lunch with the CFO." The articles work together, with the second preparing you to talk about specifics like Net Present Value (NPV) and other analytics with the executive.

You should be able to name a number of executive sponsors who understand not only the importance of effective compensation, but also have the strategic insight needed to make compensation work. If you can name them, great. If not, plan to groom some. You should be able to reach out to at least one executive in each Business Unit and know that she/he would get you on their schedule pronto if you are in a pinch.

If you are planning a major innovation or facing cutbacks, these executives would be automatic candidates for your advisory group. Timing will be critical when you need to reach out to them, so make sure you are building these relationships throughout your career. Given the different types of situations you might face together, there may be times when you should be ready to ask them explicitly, "Would you be willing to have my back on this?" and feel confident of the answer.

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: Can Your Compensation Philosophy Do THIS!?

Editor's Note:  Life continue to move fast and unanticipated change is a given.  Can your compensation philosophy keep up?

The topic of compensation philosophy was raised recently in a conversation I had with a group of local executives.

As companies migrate to new products and services, to new customer profiles, to new technologies and competitive sectors, and to new partnerships, unless this happens purely by merger and acquisition, the people and the work must follow along.  Rarely does this happen smoothly and predictably.  More often it happens in fits and starts, where we pounce on opportunities and then scramble to assess the implications after-the-fact.

From a compensation perspective, this doesn't just bring new jobs and different skill sets into the picture.  It can also mean a shift to a whole different competitive labor pool and a challenge to the principles and assumptions on which your pay program is built.

It can mean that one day you're competing with the local manufacturing industry for talent and the next day you're up against Yahoo or Google.  One day things are in steady shape and the next you're bringing in a stream of very different talent that upends internal pay relationships in a way that  ripples through half the organization.  One day you have a relatively homogenous workforce and the next you are facing a glaring delineation between them that built today's business and them that will build tomorrow's.

This is when you discover that your traditional compensation philosophy, that beacon of eternal wisdom that is supposed to guide all compensation decisions, is of little help in steering through the morass.  A declaration that you intend to "establish salary opportunities at the 50th percentile of the relevant labor market" doesn't bring much comfort when you're straddling a moving fault line.

While reflecting on these issues raised by the executive group over the past week, I ran across The Agility Factor, an article published this week in strategy+business (authors include Edward Lawler, among others).  The article highlighted four routines that distinguish "outperforming" companies from their peers by helping them anticipate and respond to events, solve problems and implement change more effectively.  This agility, the article notes, is more than just the ability to change.  It is "a cultivated capability that enables an organization to respond in a timely, effective and sustainable way to changing circumstances."

Quick summary of the four routines of agility described in the article:

A dynamic strategy - including not only an enduring purpose, but also an intent and identity relative to that purpose which is flexible enough to change on short notice.

A perception of environment change - maintaining continuous contact with and drawing information from the environment, which can be evaluated against the company's existing identity, intent and business model.

Response testing competencies - resources are available and can be quickly deployed to experiment with and learn from new ideas.

Change implementation - having the authority and the ability to change habits and practices embedded in line operations, rather than being limited to staff/headquarters groups.

I think this suggests some interesting possibilities for making our compensation philosophies more agile and responsive.  Most compensation philosophy statements that I've encountered (and this includes the ones that I have historically partnered with clients to develop) focus on the organization's objectives, principles and intent relative to how it pays its people.  The result, however, can be a somewhat static document that leaves us helpless in the face of wrenching change. 

Taking a cue from The Agility Factor, what if we made our compensation philosophies more dynamic by:

• Ensuring that our statements of pay purpose and objectives, while clear and robust, will allow us to stay true to some enduring principles while still retaining the flexibility to respond to unanticipated changes in the business environment?

• Defining and articulating our commitment to the routines of ongoing environmental sensing, information gathering, idea generation, experimentation and learning?  This means that our contact with the environment must go beyond annual benchmaking studies.  This sensing must be grounded in a deep understanding of our current and any emerging business models, as well as implications for our workforce and how we reward them. It also means a commitment to regular experimentation and learning.

Your take?

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.

Creative Commons image "gymnast showing a bad back bridge" by Rick McCharles

Mistakes Can Boost Your Career

Can you recall an instance at work where you made a mistake, an error in judgment, a bad decision?  An "oh cripes!" moment that you would have liked to have had back again?  Perhaps it was a rash decision, a lapse in sound thinking, or simply poor planning that caused you to take a wrong step.  And if you were unlucky, that error was noticed far and wide.

You remember how you felt then, don't you?  You were likely embarrassed, surprised or even angry.  Certainly, you felt awkward that you had messed up and that people had noticed.  To cap it off, in that memory of yours the wrong people had noticed, hadn't they? 

Bet you won't do that again!

Perhaps not, but that doesn't mean you shouldn't stick out your neck again.  Turtles don't make for good leaders.

Because when we make a mistake and learn from it, when we use a negative experience to help us prepare for the next opportunity, we grow as professionals - as individuals and as leaders.  That painful lesson will be more deeply embedded in our consciousness because we did screw up, made a bad decision or used poor judgment.  It's human nature for us to remember our foibles, and because of that to hopefully not repeat those circumstances where we had burned our fingers.

If we were risk-averse and played it safe throughout our career, if we avoided decisions, kept our head down, didn't stretch ourselves, we would likely never fly high.  We would also never be noticed by the higher-ups and our career would never quite get us where we wanted to go.

No pain, no gain?

If you use your mistakes as a learning experience, what would you learn if you never make a mistake?  Chances are your ego would swell with self-importance and what had been healthy self-confidence would have morphed into supreme over-confidence.  You would start reading your own press releases, and on that pathway lies a steep cliff.  It's only a matter of distance.

I remember my father telling me, "at least try."  That's good advice for managers too.

So take a calculated risk.  I'm not talking about a roll of the dice, but a decision or an action plan based on your knowledge and experience.  Use your professional judgment and put a stake in the ground.  Stand up for something.  Learn from the experience.  And if you stumble, pick yourself up again and get back in the fray.  Just don't make the same mistake twice.

While most companies talk about the advantages of risk-taking, many don't walk the talk.  Instead, some organizations simply get rid of those who had the misfortune to make a mistake.  In such an environment there is always someone out there trying to trip you up (passive resistance, nay-sayers, the overly critical, etc.), or to take advantage when you stumble (enter the political animal).  All of which sends a powerful message that risks are only entertained when in fact they aren't risks at all.

On the other hand, creativity and innovation will be fostered in an environment that nurtures decision-making, that encourages measured risks as a method of stretching oneself.  Instead of killing the risk-taker when they stumble such organizations seek to stretch the capabilities of their employees by encouraging them to do more than they thought themselves capable. 

Remember, it's only a risk if there's a chance of failure.  Employees who are not afraid of making decisions, of standing up for themselves, of taking a risk for the good of the organization - they should be valued, not criticized or otherwise penalized.

In an atmosphere free of threats and quicksand the leader can emerge and thrive - to the betterment of the company and the employees. 

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, "2008 Spa-Fr . . . .," by Dave Jenson

Cafe Classic: Why Working Less Helps Us Work More

Editor's Note:  In today's Classic, Derek Irvine poses an interesting challenge to the notion of pay for time worked and whether even going so far as to pay people to work less should be on the table.  What do you think?

How do we compensate people?

Vastly oversimplifying (and discounting benefits entirely for the moment), we compensate people based on:

1. Time worked
2. Results delivered

Many argue in today’s knowledge workplace, people don’t really get paid for time worked any more. While that’s valid in many cases, it’s not entirely true. How many of us in the “knowledge economy” still show up at the office because “face time” is considered more valuable than results delivered, even when that face time comes at the opportunity cost of two hours spent in traffic instead of working?

Perhaps we should be paying people to work less. Indeed, if we did, the vast majority of employees would be more productive. At least, that's what research in a New York Times article by Tony Schwartz points to:

“In most workplaces, rewards still accrue to those who push the hardest and most continuously over time. But that doesn’t mean they’re the most productive.”

In the article, Tony points to research study after research study showing our bodies function in 90 minute cycles, whether we’re awake or asleep. At night, our sleep cycles range into and out of deep sleep in 90-minute intervals. Athletes and musicians accomplish the most in practice sessions when those sessions run for 90 minutes, followed by a break.

Tony refers to these rest breaks as “renewal.” Time intervals in which our bodies, our thought processes, renew themselves and prepare for the next big push.

But this isn’t just necessary on the micro-level of 90-minute intervals. Employees who vacation more –who take longer and more frequent periods of renewal – are actually more productive. Also from the New York Times article:

“MORE vacations are similarly beneficial. In 2006, the accounting firm Ernst & Young did an internal study of its employees and found that for each additional 10 hours of vacation employees took, their year-end performance ratings from supervisors (on a scale of one to five) improved by 8 percent. Frequent vacationers were also significantly less likely to leave the firm.”

Don’t worry. I’m not advocating a 35-hour work week or two months as standard vacation policy. I am arguing for building renewal into the cultural rhythm of the organization. Think for a moment about your office culture. Do employees hang out and chat while getting a cup of coffee, or do they quickly grab a cup and scurry back to their desks? Do employees gather for lunch to chat and catch up, or do they eat their sandwiches while hunched over their keyboards?

The answer to those questions often lies in the company culture – what’s expected of employees. I’m an advocate for those moments of downtime, however. I can’t count the number of terrific insights, new ideas and innovations that were first discussed over the lunch table, or during a quick walk to the coffee bar next door.

We need to consciously encourage our team members and colleagues to renew while at work. To, yes, work hard, but then take reasonable (and regular) breaks to renew, to catch up with friends and colleagues, and – yes – to innovate.

If building in periods of renewal is so beneficial, what is it about “renewal” that leaves organization leaders cold? I believe it’s because the results can be hard to measure in the short-term and the renewal itself looks a lot like slacking off.

And that’s where our measures of what we compensate come back into the conversation. Are we compensating employees for the hours (and minutes) locked at their workstations, or are we compensating them for the results delivered?

If the answer truly is the latter, than we need to find ways to free them for the renewal necessary for ever more productivity, innovation and insights at work.

Do you take “renewal” breaks? What do they look like in your organization?

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.

Cafe Classic: Do I Have To?

Editor's Note:  We have often, here at the Cafe, discussed the challenges faced by HR and Compensation pros who serve smaller companies - not the least of which is recognizing (and getting leadership to recognize) the importance of moving beyond informality and complete discretion in making critical people decisions.  In today's Classic, Chuck Csizmar addresses this challenge relative to expatriates and overseas assignments.

Recently a U.S. client asked me to explain why I recommended that they create an international assignment letter for their expatriates.  They only had a few employees overseas and previously had resisted the call to what they described as “playing the lawyer card.”  They felt that management could effectively deal with the circumstances of each expatriate situation as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

It's not unusual for small companies to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, in most cases such casual and hurried arrangements have proven painful and expensive experiences for all concerned.

• The shock employees and their families faced when they came to grips with actually living in a foreign country, vs. simply visiting. 

• The constancy of unforeseen and confusing localized situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction for the employee that they lost focus on the job.

• Relationships with headquarters suffered as the employee asked for more and more consideration to redress what they considered coverage gaps in their terms and conditions. 

Providing an assignment letter is a smart idea.

• Protection: Confirming the assignment terms & conditions protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity: Accepting an overseas assignment is a major step for any employee, as well as for their affected family members.  Clarifying the assignment terms and conditions ensures a smooth assignment for all parties involved.

• Cost control: Define company-paid expenses and conversely what they will not cover.  An understanding will mitigate issues from arising once the expatriate reaches the host country. 

• Standardization: Your international policy should treat all expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be repeated for every assignee.

So how bad can it be, playing it by ear and leaving terms and conditions to be developed over the duration of an employee’s international assignment?  Aren't flexibility and quick thinking positive management traits?

When you court the inherent risks that accompany an undocumented assignment, you should be prepared for:

• Unplanned additional costs

• Constant re-negotiations with the expatriate

• Disgruntled employees and / or affected family members

• Greater risk of assignment failure

Short cuts usually limit the financial and emotional protection the expatriates are going to rely on - at the same time that the company has committed a substantial amount of money to place them far from home. 

When preparing an international assignment letter, you should include the following (as applicable):

• Title, compensation and assignment duration: Critical elements of status and reward in the host country.

• Housing and cost of living allowance: Should include the amounts involved and the frequency of review.

• Benefit coverage: How will home country benefit protections be handled in the host country.

• Relocation: The policy coverage for the employee’s residence, to include movement of household goods overseas.

• Property management: What will happen to the home country residence?

• Tax preparation: Assistance provided in both countries.

• Home leave: How often, and in what circumstances?

• Schooling, language, cultural orientation.

• Repatriation: Strike a balance between the employee’s concerns and the company’s natural vagueness for what the future might bring.

These represent only a portion of the questions that your expatriate candidate will have.  Should your company consider taking a casual approach to sending an employee overseas, be aware of the risks involved.

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.

This Valentine’s Give Them Pizza and Say Thanks

It’s Valentine’s Day. Every year we dedicate this day, with tons of candy and flowers, to showing people that we love them. Maybe we should be using pizza.

We love our employees. We all have a statement somewhere claiming they are our greatest asset. We pay people just to attract other people. We study and design programs to keep them motivated. We plan years ahead just to retain them. And we are constantly on the prowl to find new and better ways to engage them. A new study, from Dan Ariely, of “Predictably Irrational” fame suggests that very short-term cash incentives may not be doing what we think they are doing.  They may be doing the opposite.

Ariely’s new book is “Payoff: The Hidden Logic That Shapes Our Motivations.” He recently discussed one of the studies covered in the book. Researchers created four cohorts of employees at a company that makes computer chips. One group was offered money, a second compliments, a third pizza and the last was a control group that wasn’t told about the study.

As you may have guessed, the Pizza Group killed it! They outperformed the control by 6.7%. There is no mention of the type of pizza, but we assume that Hawaiian-style was not offered. The Complimented Group outperformed by 6.6%. Not shabby for simply being nice to people. The Money group outperformed the control, but by only 4.9%. It was only $30 bucks, but unless that pizza was by Wolfgang Puck, the money was the most expensive incentive of the three and resulted in the lowest improvement.

By now you should be calling the local pizza parlor and ordering a few pies, but wait, there’s more! The Money group basically collapsed. Within a week they were actually underperforming the Pizza and Compliment groups. Again, there is no mention if the Money group had to smell that delicious pizza or watch their peers getting glorious accolades, but let’s just assume they had to experience both (it’s more fun that way).

One takeaway is that people love pizza. Duh! Another is that people like to hear that they are valued. Again, DUH! Lastly, we now know that some people aren’t inspired by $30. As a test of this last theory please give your significant other a twenty and two fives instead of a card and flowers. Let me know in the comments how that works out for you.

Of course, we can all agree that this was a pretty lame incentive plan design. The metrics and leveraging were all wrong. The communication was nowhere near what a great compensation professional would have done. The measurement periods were too short and on and on. But we can probably also agree that many of our own incentive programs may be no more effective or impactful than a slice and a high five.

It’s Valentine’s Day don’t forget the flowers and card or pizza and thanks, cash is a fairly touchy way to show your love.

The link to the Inc. article that inspired this post can be found here.

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. Dan is a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on Performance-Based Equity Compensation. 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.