Compensation Cafe

Compensation Singularities

Editor's Note: Today's post comes to us courtesy of guest contributor Joe Thompson.

Have you heard of the Compensation Singularity Rule?

I’ll confess that I had not heard of it until quite recently when one of my clients made me aware of the concept.  Frankly, I’m surprised that I hadn’t learned of it sooner because it appears to be an enormously versatile rule that can tremendously streamline the market-pricing process.

The client – one of those Washington, DC inside-the-Beltway agencies – was greatly concerned that their latest salary survey analysis was obviously wrong and needed to be fixed immediately.  It seems that the agency had just lost a senior cybersecurity executive to a private sector company which had reportedly offered the individual a salary of $600K.  (That was according to Fred, who had heard it from Nancy, who had overhead Susan talking about it … but, I’ll put the provenance aside.)  As a result, the client knew, empirically, and unequivocally, that the going market rate for all cybersecurity professionals was measured in the multi-hundreds of thousands of dollars per annum range, significantly above the ranges indicated in the salary surveys.  It turns out the client had applied the Compensation Singularity Rule.

The Compensation Singularity Rule (CSR) states, in part:

A singular compensation data point is vastly more reliable and is far more effective for determining true market rates than hundreds of thousands of compensation survey data points, provided that the singular data point is sufficiently large compared to the median survey rate.  A singular compensation data point that is near, or below, the median survey rate (some sources use P75 vice P50) must be considered an outlier, clearly spurious data. 

A major part of the versatility of the Compensation Singularity Rule lies in the fact that only the magnitude of the singular data point needs to be considered; one need not be concerned with job location, level, industry, duties, or other tedious aspects of job matching in order to apply the CSR.  The Rule can also be used to conclusively demonstrate that compensation is the sole determinant of what makes a job offer competitive (though that is a subject for a different post).

Now, I’ll admit that I had to look the rule up.  WorldatWork hadn’t started teaching it when I took my last course with them, but I’m sure that they’ll have to start soon, based on the frequency at which the Rule seems to be used and cited.  Apparently, it is already widely taught in some of the most prestigious and venerated institutes of higher education including YouTube, Instagram, and WhatsApp.

As wizened compensation professionals I’m sure that you’ve realized that I am being tongue-in-cheek; you have all likely faced this phenomenon in the past.  It seems that no matter how many reputable surveys you have used, how many curated data sets you have drawn upon, or how meticulous your analysis, the Compensation Singularity Rule will always garner the attention of employees and executives.  Compensation singularities seem to have a sort of cognitive gravity well.

Unfortunately, rational discussions about job/industry matching, the nature of right-skewed salary distributions, sample sizes, statistically significant data sets, etc., don’t seem to help in these cases.  Pointing out the obvious – that if the going market rate was truly at the singularity rate, every other employee would have already left for those salaries, too – can end the immediate compensation hyperventilation, but seems to leave people with the nagging suspicion that you have practiced some form of logic legerdemain.   You can free the person from the gravity well, but the effects still linger.

So, what techniques have you found to most effectively address compensation singularities?

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.

Image: https://archive.briankoberlein.com/2015/01/22/pointed-debate/index.html

Rising from Failure

It's happened to me, more than once, and likely has happened to you as well.  Rejection.  Failure.  The boss or even someone in senior management didn't go for your idea.  Maybe they weren't even nice about it.  You might have thought that your recommendations were good ideas, but they didn't gain you the approval you had hoped for (too expensive, too controversial, too complicated. etc.).  But hey, you can fix things and get back in there to pitch your proposal again.

But what if the rejection was more complete, a one-word NO and the meeting ended?  What if you were shown the exit before really getting into the details.  You zigged and they zagged.  You missed the boat and the boss wasn't afraid to tell you so, and even by how far you had missed the mark. 

Ouch.

Now, what do you do?  Before you head for the aspirin or other pain relievers, let's look at how you might approach the before, and then the potential after of any presentation.

Before

To get ready to pitch an idea to your boss, or to senior management for that matter, it's best not to "wing it" when getting your presentation ready, but instead to thoroughly prepare yourself.  You might set up a checklist to help you remember some do's and don'ts.

• Remember the formula for any proposal:  State the problem, then the impact and ongoing cost.  Pause then to let the gravity of the circumstances sink in.  Then offer a solution (your proposal), followed by how the problem would be solved, along with projected costs.  Finally, paint a picture of the success to be achieved because your proposal has been approved.

 

• Don't try to overwhelm with facts and figures:  You're a professional and already have their trust, that you know what you're doing.  Focus your efforts on the key program changes and only use summary statements and figures.  You shouldn't have to "prove" your case with reams of data.

 

• Get ready for "gotcha" questions:  They will come, so prepare by asking yourself - what do you think they will ask?  Are there possible glitches or challenges that should be addressed early on?  Survey your staff for devil's advocate thinking. The tactic here is to anticipate.

 

• Double check your figures and your text:  Sounds minor, but don't let yourself stumble over embarrassing math errors or typos.  And yes, someone will notice.  Someone highlighting even a minor error could prove a costly distraction in the middle of your presentation.

Now you're ready.  But being ready only assures a smooth presentation.  Something can still go wrong.  Don't be blinded by a personal bias toward your work that may not be shared by those responsible for making the ultimate decision.

If everyone smiles and you get a green light, you needn't read any further.  But if you play the percentages it's likely that something will slide off the tracks, from a minor mishap to a major derailment.  If so, what do you after the meeting?

After

Your reaction to a "failed" presentation depends a great deal on the specific aspects of what went wrong, who said what to whom, and whether your proposal needs a band-aid or major surgery.  But consider a few basic responses that should serve you well.

• Making adjustments:  Listen to what they said, nod your head and commit to reviewing your materials and then prepare to resubmit in a fashion that addresses their concerns.  Get back into the fight!

 

• A different perspective:  Think hard about why you didn't win the day.  Maybe they have a perspective that you hadn't considered.  Maybe they raised concerns that you hadn't addressed.  Learn from the experience.  Adapt and push on.

 

• Half a loaf is better than nothing: There's nothing wrong, and a lot of good that can follow a compromise.  Even if the powers that be won't approve everything you asked for, take what you can get.  Getting halfway to a goal positions you better than if you remained at the starting gate.  Next time you'll move even closer.

 

• A defeat is seldom unconditional:  Even if your proposal was rejected, you likely raised important issues and created a dialogue with the decision-makers.  That's a good thing.  You also got them thinking, and likely created an environment where raising the same issues again (in a revised format) will perhaps receive a better reception.

So, don't give up when your precious ideas and recommendations get slapped down.  Instead, get up, brush yourself off, adjust your thinking as necessary and prepare to fight another day.

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, "Pie Throwing," by Seth Lemmons

Cafe Classic: Let's Clear This Up and Get Moving

Editor's Note:  In this tight labor market, it's a good time to consider the Classic question of giving a fair shake - from all perspectives - to candidates who've been unemployed for a longer period of time.  Take it away, Margaret - and let's discuss.

According to Professor Peter Cappelli at Wharton, you can change the world.

He's writing for you and me (our bosses, our staff, our colleagues), to shake loose some untested/invalid perceptions, when he points out:

"The way to get hiring of the long-term unemployed started is to recognize that there is no objective case in this economy for not considering a candidate who has been out of work for a while. Therefore, excluding them out of hand is a form of prejudice. The people at the top of organizations [that's you and me] need to point out that excluding such candidates is likely costing us money because we are ignoring potential good hires, just as it costs us money to exclude women, minorities, older individuals, and anyone else who has the potential to do the job

It's the right thing to do . . . and it's also the financially sensible thing to do . . ."

Like the money angle, but still skeptical about the talent aspects? Here's some empirical data from Professor Cappelli:

"What we do know about job candidates who are long-term unemployed, which is related to job success, is that they are persistent. Millions of other unemployed facing this job market gave up looking and dropped out of the labor force . . ."

Of course, you can't change the world unless other people are aware of your plans. Why not tweet, distribute and discuss the article on the HBR Blog Network, "Why HR Needs to Stop Passing Over the Long-Term Unemployed?"

And confront the truth that attitudes about hiring are "tribal . . . I learned to be biased from my boss, who learned a generation ago to be biased from (sic) their boss . . ." as Barry Deutsch writes in a comment about the HBR blog article.

I can hear it . . . even if you are not saying it out loud, "Oh come on, their skills are rusty." Once again, reality -- rather our shared, untested opinions -- has a lot to offer. As Professor Cappelli gently reminds us, " . . . one doesn't forget how to do a job in six months, and all new hires require some time to learn how your operation works." This may not be the whole story but it is the heart of it.

Engaged employees, excited about working for you (not just focused on your dollars), anyone?

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.

Proposed Update to FLSA Could Be Good News!

I don't usually follow the progress of proposed regulations. Instead of tracking all the versions and eventually trying to recall which version was approved, I find it's simpler to wait until a new regulation is a) approved and b) completely spelled out. Nonetheless, I'm intrigued that the Society for Human Resource Management (SHRM) recently announced that they are supporting a proposed update to the Fair Labor Standards Act's (FLSA's) definition of "regular rate" of pay.

As we all know, the FLSA specifies that nonexempt employees must be paid at least 1.5 times their regular rate of pay for hours worked beyond 40 in a workweek.

We've stuck by the FLSA's intimation about what "regular rate" of pay means for 50 years so there's no doubt it's time for an update. (After all, most of you were not even born yet when this started.) But, in practice, regulations have been less than black and white about what a regular rate of pay means in certain cases.

The murkiness has caused some of the more nervous companies to cut back or avoid perks that could be considered potential candidates for the regular rate of pay definition, just in case they would qualify employees for higher rates of overtime pay. If there is no complete definition of regular rate of pay, their lawyers ask, what if the government counts T-shirts and anniversary bonuses? Other benefits that some companies are skipping are valuable candidates like tuition reimbursement and employer-provided meals in fear of bulking up the regular rate of pay.

SHRM is publicly supporting the DOL's proposed new rule specifying that the following are excluded from the definition of regular rate of pay:

• Anniversary bonuses
• Public transportation subsidies
• Discounts on gift cards
• Discounts with vendor partners
• Tuition reimbursement
• Employer-provided or discounted meals
• Noncash awards (such as coffee cups and T-shirts)
• Raffles

To clarify, the definition would continue to include most bonuses, shift differentials, on-call pay and commissions.

Take a look for yourself and you'll also get some insight into the comments the proposal received from interested companies at: What Perks Must Employers Include in Overtime Pay Calculations? Most, but not every company, that commented are in favor of the change. Why are there naysayers? It's worth a close look.

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: On Paying People to Overcome Hurdles the Organization Puts in Front of Them

Editor's Note: Yeah, you know what we're talking about - because I'll bet you've seen this in your own place of work.  Screwy organization structure, reporting relationships, job design and policies and procedures (to name a few) create such issues that leadership is "forced" to request your assistance in designing an incentive plan to fix the resulting problems.  This is our call to Design Incentives Responsibly.

You probably know the drill.

Management says that they are going to put in an incentive plan to improve productivity.  What's really happening is that they are trying, through the sheer power of financial inducements, to drive people to figure out how to push product out the door in the face of poor internal systems, dysfunctional management practices and a culture that punishes those who challenge authorities and make waves.

And then it is the incentive plan that gets the bad rap when it doesn't prove successful in "motivating" people to push through the brick walls that the organization has erected in their paths.  Or because some people, in an effort to earn an award against difficult odds, devise creative and unanticipated means for moving the performance bar.

So when a manager approaches you with the request that he/she needs to put an incentive plan in place in order to get people to do "X", I would submit that your first question (in an appropriately sincere and service-oriented tone) might be:

Why aren't people doing X now?

Then:

What kinds of things do you think get in the way of doing X - what obstacles and challenges do people encounter when they try to do X?

And, finally:

If we put an incentive in place tied to doing X, what will people likely do in an effort to overcome these obstacles and challenges and earn an award?  Is there a possibility of any undesirable behaviors and outcomes as people try to achieve X in the face of these obstacles and challenges?

Granted, not every manager will sit still for this conversations, but the better ones will.  I have found it educational, insightful and even entertaining to push this simple conversation through to its conclusion. 

And, best of all, you'll be setting the stage for the important and ultimately more productive conversation about the true nature of hurdles to employee performance and how best to address them.  (Hint:  Incentive pay may not be the answer.)

I do acknowledge that there are times and situations where everyone in the organization is up against difficult, even impossible odds, and an incentive plan can be the centerpiece of a strategy and partnership for moving forward together.  Too often, however, incentives are an ill-informed or even lazy choice by leaders who are unwilling to do the heavy lifting involved in actually managing the performance of employees.

Incentives are a powerful tool.  Let's do what we can to ensure they're designed and implemented responsibly!

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 "Overcoming Obstacles" by the U.S. Army

3 Critical Lessons I Learned in Retail

Sometimes we need to go back to our roots to be better compensation professionals. I have listed three lessons I learned while serving the public in retail establishments. I didn’t know that these would apply to a career in compensation when I started working about one-hundred years ago.

Lesson 1. Acknowledge them when they walk in, even if you can’t immediately help them.

My first “real” job in high school was scooping ice cream at Baskin Robbins. I lived in San Jose, California. The summers were hot. Ice cream was popular, and there were not yet many places to get really good ice cream. Larry Nichols, the owner of the store personally taught me this first lesson. This should be used for every person you meet at work.

 “When they walk in the door, look up, say hello and let them know you will be with them as soon as possible. If you do this, they will wait at least 5 minutes longer, and be happier, than if you say nothing.” These were his instructions. They were tested at some point on nearly every busy day. It was annoying to interrupt your work one-hundred times a day just to tell people you couldn’t help them. But Mr. Nichols was right. People who weren’t acknowledged were far more likely to leave or complain.

Most of us want to hide when things aren’t going well. Most of us want to be left alone when we are truly swamped. Remembering Mt Nichol’s lesson can help you avoid upset employees, or ex-employees. It’s simple and effective.

Lesson 2. Always plan for more. Bring what they asked for. Bring it in the next size. Bring something similar and bring something completely different. This lesson is especially useful when dealing with executives.

I sold shoes for a while. The best sales person in the store told me to always be prepared for more. “Sizes aren’t the same for every brand. No matter what they ask for, bring the next size up or down. It will save you time and help close sales.” He also told me to bring a similar more expensive pair and a pair that was completely different. The more expensive pair made their choice seem like a better bargain. The different shoe was there to spark conversation. I was always amazed by the number of people who came in for hiking boots and left with Birkenstocks or cowboy boots!

Giving people exactly what they ask for doesn’t always work. Having a ready back up plan or add on provision can quickly move you forward. You may never even take the idea “out of the box,” but its existence will often give your confidence to preempt potential issues.

Lesson 3. No Problem. This should be used for yourself, just as much as it is used for others.

This was the simplest and most effective lesson I learned. I worked for Nordstrom when its customer service was the stuff of legends. When I was hired, they gave me a round blue pin that said “No Problem” in white letters. We were supposed to where them at all times. The phrase was meant to be the answer to nearly any question a customer might ask. Initially it served to communicate that we were there to help. Eventually it became a mantra and then a mindset. No problem became the reality of working at Nordstrom. Nothing seemed like too big of a deal. Everyone knew that you were doing your best and failure only occurred if it was simply unavoidable.

When NO PROBLEM is your answer to nearly every question, people take you very seriously when you say something may be an issue. When you constantly put up roadblocks, it can feel like you just enjoy roadblocks. Compensation is a service center. Nearly everything within reason can be done with the right data and senior support. Senior support comes easier when people understand you are doing your best all the time.

Applying each of these lessons effectively and consistently will take practice.  Try them in 30 days chunks and monitor the results. You may be surprised how much better your workdays become.  If you have a similar lesson, please share it in the comments!

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: The Number of Subordinates Rarely Affects Pay

Editor's Note:  Is a job worth more because the incumbent has a lot of people reporting directly to them?  Should that be, or is it (in fact or from what evidence suggests) a compensable factor? Pay myth buster Jim Brennan takes on this Classic question.

The number of direct reports a manager may have usually has little impact, if any, on compensation.  Senior managers in Twenty-First Century enterprises are generally paid for the results they achieve rather than the number of individual subordinates at the level right below them.

The impact of the total number of employees at an enterprise was addressed last year in an earlier article, but the effect of changes in direct-report counts was not discussed.  So, let's have at it!

In broad and general terms, when organizations increase the number of subordinates or the number of functions reporting to a position, they tend to clone the managers who actually supervise people.  As organizations grow, they generally create multiple duplicate management jobs serving small segments.  Most initiate amoeba-like fission actions to split the jobs.  Some re-organize them into more homogeneous focused sections. 

The reallocation and distribution of headcount responsibility can be a complex task but it usually is controlled by senior management.  Span of control results are only occasionally an important variable among non-executive posts.  Even for Directors and above (General Managers, Department Heads, VPs, etc.), the number of underling bodies in the reporting chain is rather irrelevant today.  Return on assets invested or the amount of revenue generated tend to move independent of the number of direct reports.  Those ROI and sales size metrics are much more relevant to competitive pay in most industries than direct report numbers or even cumulative subordinate counts.  Remember, there can be major differences between those subordinate numbers, too: a VP over 5 directors who each supervise one manager who supervises two others might have a cumulative subordinate headcount of 15, while a Director with merely 2 subordinate managers who each have 20 underlings would have a total of 40 in their cumulative subordinate number.  Placing weight on such variables is a difficult and dangerous practice.  Organizational designers have learned that those who can produce better results with fewer subordinates and lower payroll costs are worth more to the enterprise.  

The ancient age of highly structured rigid vertical pyramid hierarcharies might be fondly remembered by those few remaining survivors of the empire-building days when the more bodies you could employ, the higher the remuneration you could command, but most organizational development experts shudder at the prospect of turning the clock back.  Mind you, each industry and every organization has its own unique tradition; and they all tend to be defensive, change-averse and self-reinforcing. No single practice is universal.

Overall, I'd guess that headcount gets about the same weight as the average temperature of your work location; it could have minor effect or it could be vital, depending on the related management outcome expectations, with no one rule governing everywhere.  But "number of subordinates" remains an extremely popular metric to flaunt, typically used to negotiate fair (more) pay.  If it is relevant to internal peer rank or external competitive market price, it might be acceptable as long as it can be applied universally forever without fear of hypocrisy or contradiction.

Has anyone found anything different?

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 image "hierarchy" by jurvetson

Fish or Cut Bait

Or in poker terms, "Are you in or are you out?"  Someone is expecting you to make a call.  Sitting on the fence and dithering as life goes by will get you little more than a sore bum – and certainly not a thank-you.

Picture this:  What do you do when a senior executive looks you in the eye and asks you a direct question about your thoughts on a controversial topic that you're responsible for, or involved in?  When they want to know where you stand.  In that scenario, you'll find yourself unable to play the glib politician who hems and haws, spouts unrelated talking points or even attempts to misdirect the conversation.  You 're caught on the spot with no wiggle room.

You pause but find that they're still waiting - still looking you in the eye, expecting.

What's it going to be?  Do you tell them what they want to hear, or tell them what you really think?  Stick your neck out or pull it back into your shell?  You've only got a moment to weigh your options.

The Role You Play

It's at this point that you find yourself defining and confirming your role in that organization, or at least as how senior management looks at you.  Are you to be seen on the front lines leading (managing, directing, etc.) Compensation, or are you safely behind the firing lines administering the Compensation function (maintaining the status quo, performing repetitive routines, providing admin support, etc.)?  Are you willing to stick your head up, or will you be keeping it down?

Chances are that you've reached the level of your present role because someone felt that they could trust you with responsibility, to either lead or administer.  You know your job, or at least the technical aspects of it.  You have the title of someone in charge, someone who is expected to understand the complexities of your profession and how those intricacies relate to your business operations.  Thus, how you handle yourself when the chips are down becomes your "rep," how you are known - for good or ill.

Remember too, that first impressions are hard to shake.

Decision-makers project self-confidence to stand up for themselves, to provide their best professional advice based on their knowledge of the subject matter and their personal experiences.  On the other hand, fence sitters often display a fear of making a mistake, or worse, of getting someone angry with them.  Like any good (?) politician, the cautious administrator would rather first read the polls (know what the questioner wants to hear) before speaking out.  That's called being flexible with your opinion.

If perchance your role is still gelling within the organization, or senior management isn't quite sure yet what they have in you, now is the time to make your mark.  Or to quietly withdraw from the field.

On the Other Side of The Coin

But lest we advocate for too much candid free speech, let's give a mournful call out to those in management who push themselves too far by their over-the-top self-confidence.  Here you would find the arrogant so and so who loves to make declarative sentences to their staff, as if to say, "I have the answer.  The rest of you better catch up." 

Declarative sentences of absolute certitude made to peers and subordinates leave the listener with the option of either complete agreement or being placed on the defensive - as they clearly are in the wrong.  However, it is rare for such "answer man" comments (“this is the way it is”) to be made to senior management - the boss - as such arrogance would likely cut short their career.

When talking to colleagues or staff, however, such self-promoters rarely modify their statements with "In my opinion," "I think," I've read (or heard about)" or in any way admit to the possibility of other viewpoints.  This is the way it is.

Do not be this person.  You will not be liked or respected.  You may be listened to, simply because of where you sit within an organization chart, but that only places a false smile on the face of those subjected to your over-the-top self-confidence.

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, "Dad Fishing," by Richard Gifford

Cafe Classic: Ideas Are Compensation

Editor's Note:  Jim Brennan challenges us to think beyond the boundaries of the conventional definition of rewards - both in the programs and experiences we create for employees and in our own work.  No risk (or potential peril or threat) - no reward!?

Ideas are also a form of compensation, stimulated by challenges that cannot be overcome by routine habits or rote behaviors.

Just after reading a short article with a sidebar “quote of the day”...  It is a law of nature we overlook, that intellectual versatility is the compensation for change, danger, and trouble ...

Nature never appeals to intelligence until habit and instinct are useless. There is no intelligence where there is no change and no need of change.   H.G. Wells(1866-1946)

I received a link to this story about the state of HR and had an aha! moment. These thoughts intersect and overlap.  Conflict and crisis generate new approaches, but those who give form priority over function tend to produce boring uncontroversial pap that offers little nourishment to the mind and less inspiration for the soul.

The underlying discouraging message of this status quo situation, that process can be more important than the product, is a grievous threat to the total rewards profession.  Yes, all compensation is communication, and communication can be a form of compensation, too, but image is not necessarily reality.  How things are shaped does not alter their substance.  Put bluntly, no matter how good your process, despite how nicely you format your presentation and carefully dress up the material, sometimes it is merely putting lipstick on a pig.

The quality of the method followed does not assure the value of the output result.  Anyone who has worked in a research function knows that meticulous process conscientiously followed and painstakingly tested over time frequently produces a dead end.  That is valuable information, of course, proving that one should not again waste their time going down that exact same path.  But following a disciplined process offers no guarantee of either inspiration or success.  Exciting new concepts do not usually spring from conventional roots.  Breakthroughs are frequently almost accidental leaps of conceptual imagination where intuition flashes a spark to jump a gap never before bridged.

A muscle unexercised will never grow strong.  A mind unchallenged will never reach its full potential.  A person who avoids “change, danger and trouble” will probably be denied much intellectual compensation. 

Readers here will never suffer that loss.

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 image "ideas muertas" by Cesar Santiago Molina (csm_web)

Ready for Cutting Edge Communications?

The major consulting firms are announcing that a new era in benefit communications is coming, with big advancements in technology. It got me wondering when, and from where, will the cutting edge improvements in compensation communications be coming? We have no place to go but up, so improvements could happen at any time. The only obstacle is money, of course, which -- candidly, frankly and truthfully -- is insurmountable in most organizations.

So are we just going to let compensation communications be left in the dust? Face it, those auto-messages provided by compensation and performance management administration systems don't qualify as communications, so don't even try to count them in. They are equivalent to robocalls for the most part (and you know what that means).

What if you could innovate without changing your budget? Would that ever be possible? You know I wouldn't have brought it up if I didn't have a pretty good idea to pass along, so here goes.

This year, make managers your primary communication audience. Figure out all of the ways that you can support them in pay and performance decision-making and give them first shot at your budget. Employees may come out short when it comes to Qs and As etc., but wouldn't that be solved by having a manager that can give expert answers on his/her own? After all, that's the way it's supposed to work.

What if you built a FAQ library that helped managers think through salary increase decisions (as well as explain the decisions to their employees)? Or how about building an online resource that helped them understand the pros and cons of giving everyone the same bonus, and showed them simulations for different payout scenarios? How about a deep briefing on what competitive total compensation means and how Human Resources makes it come about? Or a group case study simulation that covers  pay decisions for a whole division, with each participant taking a department, and then collaborating on standards for ratings and increases across the division?

You have your own wish list, I bet. Get together with your colleagues and blue sky it for once, listing everything you wish you could do for your managers -- and everything you wish your managers could do. Then, before you choose your priorities, list the outcomes for employees that would come from each of your ideas. Step back and look at those outcomes. If you gave managers what they needed, would you be addressing employee needs, too? I bet you would get closer to "effectiveness" than if you started by putting employee needs first once again in your planning.

"If you can push through that feeling of taking a risk, really amazing things can happen." (Marissa Mayer, Yahoo!) Compensation communications needs investment, no question about it, but let's not shut out thoughtful innovations this time through.

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.