Compensation Cafe

Cafe Classic: Are You Still Playing Follow The Leader?

Editor's Note:  Chuck Csizmar's Classic wisdom on why "that's what everyone else is doing" is neither a smart nor a career-boosting explanation of your program recommendations to the C-Suite.  Let's be better than that!

Picture the scene;  you've just completed a presentation to senior management, complete with analysis and recommendations for next year's compensation program.  Now you stand ready for the question and answer session.  Now is the time to defend your proposals.

With a carefully blank expression on his face your COO poses a single question . . . why does it cost so much?

Justification Or Excuse?

But you're prepared.   You've anticipated the question.   You know that properly answering this "why" question is your once-a-year opportunity to make your mark, show off your CCP designation and help direct the reward programs for your organization.

So chances are you won't respond with, "because that's what everyone else is doing."  Uttering that lame comment would suck the air right out of the room - and likely your career with it.   So you won't say that.  However,  just between us, would that actually be the truth of it?  Are your recommendations based on the unique status of your own organization's external competitiveness, internal equity, overriding Compensation strategy and financial affordability, or have you simply parroted what the Compensation surveys report that everyone else is supposedly doing?   Have you pushed the EASY button and followed the all-powerful lure of "common practice?"

Beneath the COO's simple question your senior leadership is really asking whether your proposals set a course to  simply follow the pack, or do they lead toward solutions crafted for your organization's own needs?  Follow the crowd or strike out your own path?

Are your recommendations for the company's compensation programs a compilation of "everyone else is doing it" rationale, or are those proposals based on what you feel is necessary for your own organization - regardless of the "average?"

Are Decisions Being Made For You?

Is your view of presenting competitive programs a reaction to the behavior of others, or because certain tactics also make sense for you as well?

• Raising Salary Ranges: Surveys will report the projected average increase in salary range midpoints for next year.  But how does that figure relate to the competitiveness of your own situation?  Do your ranges need a similar adjustment?  What would you recommend if you didn't have a survey whispering in your ear?
• The Average Spend: When survey sources report a projected average spend for next year, is that your recommendation as well?  And when responding to the why question, what else do you have to offer as justification?  Does the survey figure make sense for you?  Can you afford it?
• Pay Decisions: Are the survey sources reliable indicators (multiple?) that you can point to as the prime reason for making individual or group pay decisions, or are external sources only one aspect of your analysis, one element of your reward program strategy?

Before you make that next reward presentation ask yourself whether your decisions and your recommendations are adding value to the organization.   Or was your analysis complete once the survey data suggested a common trend? Gave you the answer, so-to-speak.

The easy way is to point at others, to argue the common sense of common action.  However that strategy bespeaks more of a Compensation Administrator than one who is charged with overseeing the proper design, competitiveness and effectiveness of the company's reward programs.

To be fair, sometimes what everyone else is doing is the right action for you.  Then again, the reported "average" may be no more than an arithmetic exercise that is less a strong trend than rather a convenient manipulation of data points.  Who's to say?

So be careful before you sign on to tactics decided upon by other companies.  That nameless average of common practice is not responsible for yourorganization's compensation programs.  You are.  And you'd better have a better reason for your proposals than that's what the survey said.

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 courtesy of The Old Brit

Curious About Job Architecture?

There's a lot of head nodding when you mention the term "job architecture" but at the same time, when you look closely, most eyes are unfocused. Many compensation organizations don't think about job architecture, but I think it's the best way to organize your jobs. Here's a primer to pique your interest, with a definition and an outline of features and benefits.

When you build job architecture you specify the hierarchy of jobs for every job family in your organization. With it, you are able to immediately answer specific questions about what jobs mean to executives, recruiters, managers and employees because the hierarchy follows rules about job levels and job value.

Executives will find that they have a map of the company's job infrastructure, which they can use for planning and budgeting. Going beyond job descriptions, recruiters will be able to identify the value of the job in the organization and the trajectory candidates' careers can take for in-depth candidate discussions. Managers and employees won't have to go a couple of rounds anymore, because they will have detailed information about the level of skills, experience and decision-making ability that matches with their current and promotional jobs.

So, you see, job architecture moves you beyond a traditional salary structure by adding dimensions that address job families, job level descriptions and career ladders. All valuable in themselves, but there are communication advantages too. Job architecture also equips your organization with a shared vocabulary for talking about job value, career steps and compensation levels, plus tools that everyone uses for compensation-related discussions and decisions.

Certain commercial salary surveys are built on a job architecture methodology. These will have some of the above value for your organization, whether or not you have designed your own job architecture. But when your organization has its own job architecture, you save time and eliminate the need to generalize about pricing, career planning and talent planning -- especially handy if you are overwhelmed by new candidates or facing the prospect of high velocity growth in the future.

Investment in job architecture design, while initially time consuming, will ultimately bring efficiency and speed, as well as a healthy culture, to your door.

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: Why Do Some Approaches to Compensation Communication Work Better than Others?

Editor's Note: It doesn't take magic to create memorable and impactful compensation communication.  Margaret O'Hanlon shares a Classic lesson about pattern creation and pay program branding.

Involved . . . Trusting . . . Motivated . . . Engaged . . . Future-focused . . . Committed . . . Curious . . . Excited . . . Determined . . . Confident . . . Collaborative . . .

We want our compensation communications to inspire employees to be all of these and more. (And, let's not even mention how employees were actually feeling before we initiated communications in order to work this magic spell.)

Ann Bares is no Harry Potter, but she talked about the magic she learned from an article titled, "Branding Is About Creating Patterns, Not Repeating Messages" by Marc Shillum. I heartily recommend you read Ann's Compensation Force article to hear her excitement about the insights in this piece.

Because patterns are what make some approaches to compensation communications work better than others. Here's what I mean. 

Adults are near sighted, relying on past experiences as if they were the lenses for their driving glasses. They search the world through those glasses, hoping for consistencies (with their past experience) and learning from anomalies as they cruise through the world.

The job of communications in an internal business setting is to highlight the consistencies and anomalies for people. If effective, internal communications creates patterns (or acknowledges existing ones) and then points them out to people. That's why effective communications can't possibly just be words on a page. It's a process (sometimes called change management) of building communities where many people work together to achieve the outcomes that the community is planning for.

Individual employees look for patterns before they decide to become part of a community. Being able to see the patterns helps them believe they belong there. Who are they watching for pattern creation? Their managers and sometimes the executives who are building the community. An important lesson for the HR team tasked with tracking the patterns.

When it comes to the compensation community, some of the patterns are straightforward. Is leadership saying the same thing about my pay this time that they said the last time? If not, am I hearing something that is a reasonable extension of the way we've done it before?

Also, am I seeing regular evidence that those words stand for something? Is there a pattern that I can see in the words, actions, decisions that you have led me to expect? For example, is my merit increase credible, based on the guidelines that my manager talked over with me?  

Why do some approaches to compensation communication work better than others? They realize that employees long for patterns.That linking business strategy with departmental goals helps make the employees' own objectives make sense. That linking departmental and business results with their own results helps them believe that their work has meaning. That linking performance management and career development demonstrates that their manager recognizes their contributions and value to the company.

The most effective compensation communications strategies take time -- the full calendar year -- to talk about and illustrate those patterns through manager/employee and executive/employee interactions. So that employees can see how the patterns help grow a cohesive, thriving community.

In my last post, I talked about a number of solutions to the abiding frustration in compensation communications. Solutions to resolve the lingering discouragement that the limited time and resources which we commit to compensation communications doesn't build understanding, trust and commitment.

Here's another solution to add to the earlier list. It takes time to create patterns like the ones I'm describing in this article. On your upcoming vacation, put down the paperback, take a stroll and dip a branch in some still water. Watch the ripples. The pattern spreads out, but you'll never notice it if you head off for lunch right after you pitch the branch.

Back at work, as patterns evolve within the community involved with your company's compensation program, the patterns become believable, then memorable to employees, and ultimately resolve themselves into "the way we do things around here." With time, thought and commitment to building patterns of understanding, discussion and behavior, your compensation communications can achieve this evolution. And it won't take magic.

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.

You Get What You Reward

A company's sales incentive plan is like the Pied Piper character from the old childhood fable; it plays a tune and the sales force follows behind.  Wherever the Pied Piper leads, the sales force will go - whether it be down the straight and narrow toward a bright tomorrow, or into the rough, down the hillside, through the brambles, and over the cliff.  Because the melody being played is about money, and when that tune catches the ear those chasing behind will follow it anywhere.

I was once brought in by a client whose sales incentive plan rewarded the sale of products that generated a loss on each sale.  And this practice wasn't part of a loss-leader tactic, either.  The sales reps were rewarded for their efforts - even though those efforts were detrimental to the company.   Bad behavior was rewarded, and therefore it was repeated - repeatedly.

Which begs the question, why would a tactical plan for incenting sales employees encourage actions that don't support the company's own self-interest?  Isn't anyone watching the store?

What Behavior Do You Reward? 

Do you know?

It's up to those who design the sales incentive plans to carefully pick the right pathway.  Because as long as the money is flowing the sales rep isn't going to raise a red flag and ask, "are you sure you want us to do this?"  That's not going to happen, as most incentive plans are not self-correcting.  The lemmings will race over the cliff as long as a dollar bill is waved in front of them.

Have you looked at the details of your own plans lately?  Do they outline a plan of action that rewards the right kind of measurements (sales volume, revenue, margin, market share, etc.) that support the company's objectives?   That drives employee behavior that will help deliver business success.  Do you expect a Return on Investment (ROI) for the incentive money you've targeted for payment?

Get Your Checklist Ready

While there might be more variations in sales incentive schemes than snowflakes in the winter sky, certain fundamental design elements do apply as prerequisites for success.

• First and foremost, the company must succeed.  Only sales targets whose achievement advances the company's bottom line should be used to incent employees.  On the flip side, are you paying for busywork?
• Spell out what you want the sales force to achieve.   Can employees repeat back to you what their specific targets are?
• Provide enough reward to change behavior.  Like any incentive, if you want to encourage a certain behavior you need to place a carrot out in front.  And that carrot had better be large enough to gain and hold attention.   Not enough reward usually equates to not enough effort.
•  The greater the selling effort, the greater should be the reward. The harder it is to make a sale the more you should reward a successful effort.   If your reps are simply taking orders (product sells itself), are you paying for what would have happened anyway?
• Make sure you can measure performance against quantifiable milestones. Being able to count to the beans will avoid potentially awkward conversations due to target misinterpretations and a confusing mission.  Are payments made based on measurable results or is discretionary judgment a key factor?

There are other important criteria for sales plan success, but unless you start with a clear map that details where you want your sales force to focus their efforts, you run the risk of missing the mark - which can be an expensive mistake.  You will need a team effort, not the disconnected activities of individually focused entrepreneurs.

The success (and continued use) of a sales incentive plan should be measured by the success of the business, not by how busy employees are, or even how much revenue is generated.  Unless activities can be measured and achieved, and support the company's business plan, you're better off with a straight base salary plan (horrors!).  Because providing incentive rewards based on efforts that don't advantage the company often means that you’re paying for busywork.

Ask yourself, does your sales incentive plan encourage the right sort of behavior, activities that will drive business success?  Are you paying for the results you need?  Are you getting your money's worth?

It might be time to check.

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 "Storm Troopers Carrying Reward," by Pasakaru76

Cafe Classic: Nine Ways to Sabotage Your Incentive Plan

Editor's Note: I'll bet there are more.  Add your own, please!

I continue to be amazed at the many ways that companies manage to sabotage their own incentive plan efforts.  Just for fun, I thought I'd compile a list of some of my favorite fails.  I'm sure you have your own to add!

1. The Borrowed Plan.  Why bother with the hassle of creating an incentive plan designed to support your company's competitive challenges, business priorities, values and culture when you can simply slap in the one your old employer used or the one that the guy from your networking group emailed you.  Easy, peasy.  Problem solved.

2. The Last Minute Roll-Out.  You just couldn't find the time to work on the incentive plan until your boss reminded you (again) that it's one of your KPIs for the year.  Thus reminded, you put one together quickly and slide it in place quietly two-thirds of the way through the fiscal year.  Maybe nobody will notice.  Heck, it's not like you're trying to get people's attention or change their behavior.

3. Refuse to Say What You're Trying to Accomplish.  Defining plan purpose and objectives? Seriously? This is the real world where we don't have the time for such academic exercises.  The Board has declared that there will be an incentive and so an incentive plan there will be.  I already have a design in mind that I like, so that's what we'll go forward with.

4. Ignore the Real Problems.  You and I both know that the reason for our drop in manufacturing productivity is the lack of organization and the poor communication surrounding all the recent product changes.  Engineering and manufacturing management haven't been on speaking terms in months, and plant employee morale is at an all-time low.  But senior management is insisting on an incentive plan to spur productivity, so let's give them what they want - no questions asked.

5. Ignore Funding and Cost Questions.  What will it cost?  What will it pay out under different scenarios? Return on investment?  Seriously, who has time to sit and figure all that out?  Plenty of time to worry about that at year end.

6. Documentation is for Sissies.  Formal plan documents?  You must be kidding!  We explained the basics of the plan at the quarterly staff meeting.  People basically get it - at least at a high level - and they're all excited about the possibility of a payout.  It's all good.  What could go wrong?

7. The Payout Fail.  So now it's year end, incentive goals were not met, the plan isn't going to pay anything out, and people are ticked.  Really ticked.  Yes, you probably could have explained it better and set the plan threshold more thoughtfully.  OK, it's a disaster.  So let's just pay them out something - anything - just enough to take care of all the complaining and get this whole thing behind us.  We'll start over with a fresh new plan next year, and this time we'll really mean it.

8. Squandering the Teaching Moment.  Plan roll-out was completed and the plan announcement memo from HR went out on time.  But now people are going to their managers with all these questions.  How is net income calculated?  What things can the company do to maximize earnings?  What does their department do that helps the company be profitable?  Are there things in their job that they could do differently to better their odds of earning an award?  Our managers are already busy and overwhelmed - they are not prepared for these conversations and they don't really have the time for the distraction.  What to do?

9. Balance? What Balance? Hey, management wanted us to use incentive to increase productivity, so we gave them a straightforward productivity-based incentive plan.  How were we supposed to know that a relentless, single-minded focus on productivity could result in problems with quality and employee safety?

What incentive plan fails have you witnessed?

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.

One Reason Pay Is NOT Skyrocketing

For several months many of us have wondered why base pay wasn’t spiking upward out of respect for the historical strong job market. The basics premise of our economy is the strong demand and short supply results in high prices.  This is true for peaches, cars, and people. With unemployment at very low levels and a job market continuing to create jobs at a rate of 210,000 per month, we should have been seeing pay rise far faster than our now sad 3% annual increase. It turns out the trickster was simple math.

On August 21, 2019, it was announced that our jobs reports since April 2018 were inflated by about 40,000 jobs per month. A new adjustment reduced this number to 170,000 jobs. This is about 125% over-reporting of the facts! This is the kind of error that would get any executive or compensation professional fired. It’s a level of error that could result in a maximum, instead of a target, payout on a highly leveraged incentive plan. It’s like paying your new Level 4 Accountant as if she was at Level 6 or 7. I think you get the point. In the real world this probably wouldn’t be an acceptable error.

The error does help explain the ongoing stagnation in base pay. We have posited that the lull was caused by the use of additional short term incentives. This ignores the fact that the majority of jobs have little or no incentive opportunity, We have read that the stagnation was due to low inflation. This ignored the whole “supply and demand” argument in a fundamental way. The fact is, job growth is just normal and what we have seen for most of the past decade. We were duped, but there is a bright side.

Our industry pay data, often maligned by people named me, stood up to this test pretty well. Even as politicians and economists bragged about the historically strong job market, we applied our principles. We looked at the data and applied our compensation philosophies. We adjusted when specific markets or positions moved to be more competitive, but we did not react to the fantastical world of growth that we could not see with our own eyes.

In short, we did our jobs and did them fairly well. We maintained our course because our data and experience told us more than the reports and breathless articles. Short-term incentives have increased, but mainly as a way to control budgets and most specifically support specific motivations. Some industries have seen explosive growth, but most have grown, or shrunk, as expected.

We have work to do but this is a strong confirmation that we have level heads and can apply what we know consistently. I should note that none of this truly defends average annual increases of 3% in a world where the stock market, housing prices, and medical costs are booming and executive pay has grown at about double the rate of the average person. It’s a start, a very good start.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. He is a leading expert on incentive plan and equity compensation issues and has written several industry resources including the only resource dedicated to 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 Duckbilled Platypuses of Compensation

Editor's Note: You thought hybrid jobs were a challenge!  Welcome to the age of the duckbilled platypi. Armed with this Classic "hunting guide," Dan Walter encourages us to embrace and rise to the challenges of today's unique (and often, as a consequence, critical) roles!

More than two years ago I wrote about “Defining Pay for a Compensation Unicorn”. A unicorn is a person with a skill set so specific and high level that it is hard to imagine them existing anywhere other than fantasy. Recently, some have referred to these people as “purple squirrels”. While the quest for these fantasy positions continues a more common person is the duckbilled platypus.

More than a unicorn, or even a hybrid, duckbilled platypus jobs combine skills so eclectic they won’t fit into any standard compensation data set. Imagine the body of an engineer, with the brain of a finance expert attached to the legs of a visionary in totally new industry. Or, business development acumen combined with deep technical expertise and a law degree. As companies explore new industries and build our new economy, these blended positions are becoming the norm at some companies.

Basically, if it looks like a duck, walks like a lizard, has the fur of a beaver, the eyes of a fish and the venom of a spider, you are hunting platypus.

Pricing and defining these truly unique jobs are where the art of the compensation professional is more important than the science. Like an impressionist painting, when viewed up close any single element is unlikely to make sense on its own. From the proper distance, blurred lines and indistinct details meld together into a single holistic picture. Companies often fixate on one set of details. Compensation professionals generally focus on the information that fits into their paradigm. Managers of these employees tend to fixate on the skill set that fits their own expertise. To truly understand these positions everyone must take a few steps back and view them for their entire being.

Once you have defined these positions, the fun really starts. Market data, refined and focused over years of evolution, does not easily accommodate these jobs. It is often impossible to clearly define the percentages of the jobs attributable to any specific aspect. The job may require skills from multiple industries as well as disciplines. Ensuring that these positions don't discriminate, meet your internal tests and can be defended in court may push your compensation expertise to its limits.

Regardless of the difficulty we may have in crafting the compensation for the platypi of our organizations, we must embrace their existence. We will see a continued movement to leaner, more nimble staffs. There is no stopping the growth of companies that bridge traditional industries. These two elements ensure that the breeding season for duckbilled platypus has just begun. You might as well start figuring out how build the perfect home for them.

Interesting fact: There is no universally agreed plural of the “platypus” in the English language. “Platypuses”, “platypi” and “platypus” are all acceptable. For more information click here.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. He is a leading expert on incentive plan and equity compensation issues and has written several industry resources including the only resource dedicated to 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.

Don't Do That! Bad Habits and Compensation

Here are three basics of our work.

1. Everything we do in compensation is communications.

2. Change management should be the foundation of 90% of compensation communications.

Why is change such a big part of it?

3. Most of the time, when we need to communicate it's because we're asking people to break old, out-of-date habits and replace them with new habits.

New business goals coming up next year? Employees need to change their priorities and the work habits they've formed to achieve them.

New incentive coming up next year? Performance measures are changing, that means employees' current behaviors/habits need to be readjusted, or even rejected, for the new goals to be met or exceeded.

New salary structure being implemented? Odds are that employees' perceptions of the meaning of competitive pay needs to be adjusted, let alone their level of trust in senior management and their own manager, too.

Whether you're developing an implementation plan or a communication plan, it's crucial to start by defining the habits, understanding and attitudes that exist now and will just be plain wrong when you move into your new plan or new compensation year.

The thing is, we never start this way. Instead we look at what's coming up and plan for that, as if all our great ideas will just replace the old ones when they are announced. No wonder there can be so much frustration about the effectiveness of compensation communications.

The real place to start is identifying what people are doing, thinking and feeling now and what they should be doing, thinking and feeling if the compensation communications are effective. Then telling the truth about how hard it is going to be to change those existing habits (we all have stories about how hard habits are to break). Plans to accomplish the changes you need to achieve get added to the traditional compensation communication plan.

When you look at the old habits and analyze how much they vary across the organization, you might decide that change will follow naturally from what you're announcing. That would be great, but be sure you're not being overly optimistic. And if you recognize that you will need to change out-of-date, "bad" habits, acknowledge that it will take work to get there.

I've written before about the value of the book, "The Power of Habit" by Charles Duhigg. Here's a short video that should make you a believer, too.

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: Forgive Dumb Questions

Editor's Note:  Jim Brennan points out that not all the silly questions posed in professional forums are the idea of the unfortunate asker.  A Classic lesson on keeping our sense of humor, humility and sympathy when responding to our colleagues online. 

Many “dumb questions” are voiced in response to management orders, so be charitable when you encounter an overly basic query from people who are supposed to know better.  For example, a question about Canadians being treated exactly like Americans for overtime purposes was raised a while ago in a LinkedIn professional discussion forum. 

Since the two nations have very different laws governing overtime, the answer seemed simple.   But it brought this private response:  Thanks Jim - My thoughts exactly, but I was asked to do the research.  While I had been pretty sure this wasn’t her idea, it was good to know that she was given that specific task to complete, because any human resource professional and especially a rewards specialist should have known that answer. 

Nevertheless, forums for professional discussion are filled with such silly questions.  Examples include:

• What is the pay inflation rate?
• How is the cost of labor different from cost of living?
• Why are lump sum payments superior to base pay increases?
• Doesn’t everyone everywhere want exactly the same rewards?

There is a lesson here.  Rather than criticize the inquirer when you receive a technical question with a rather obvious answer, it might be more appropriate to express sympathy for their plight.  The boss may have issued a directive to bring back a precise answer to a specific question.  Being commanded to ask a "dumb" question is no fun.  The unfortunate staffer is typically required to supply a direct response from outside experts that answers the exact question as defined by some senior executive.  The fact that the inside employee already knows the answers will cut no ice with some people.  Brennan’s Law #3 on Consulting applies:  When management concludes that someone from the outside is always smarter than an employee, they are saying, "no one with any brains could be expected to work here."

The implications are painful.  First, they have no trust in your competence.  Second, they don’t understand how the question that baffles a high-ranking executive like them simply displays their ignorance about matters that should be clear to any well educated manager.  While there can be other implications, too, solutions to the first two alone may be impossible to achieve.  If you can consistently demonstrate over time that your initial answer is always backed up by independent objectives sources, you may become trusted.  But there is little you can do to make up for the defects of whatever education system or experience history that produced your boss.

Situations inspired by feckless superiors might be best handled by reference to the latest Dilbert cartoons.  A sense of humor can be essential for survival in this field, and the camaraderie of friendly fellow professionals helps, as well.  With that in mind, what was the goofiest question you have received from a boss?

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 "Question Box" by Raymond Bryson

Cafe Classic: Developing Plans for a New Country is Like Being a Pioneer

Editor's Note:  As organizations of all types and sizes expand their operations across the globe - and as YOUR organizations contemplates a move into a new country - there are some critical questions to be asked and answered. Jacque Vilet provides her Classic tip sheet below.  You're welcome.

Once a company decides to set up a facility in a new country, there are important "people" issues that must be addressed --- hopefully on a proactive rather than a reactive basis.  Labor cost is a big part of total cost; therefore Compensation professionals need to be involved from the very beginning in order to set up plans that are both competitive and cost effective.

There are a number of questions that need to be addressed upfront before anything is done.

Corporate questions to resolve:

*Global or local compensation/benefits strategy?

*Market position set locally or globally?

*Individual or group bonuses/commissions?

*Local market competitive bonus targets or global bonus targets?

*If stock options are granted to employees outside the U.S., will it be designed on a local competitive basis or set on a global basis?

*Local job titles and salary grades or the same as corporate?

*Supplemental bonus plans locally competitive or the same as the U.S.?

While resolving corporate issues, there are site-specific issues that need to be addressed as well:

Local questions to resolve:

* What are the local labor/employment laws pertaining to compensation/benefits?
* Are there any “representative parties” (labor unions) that either dictate or require approval of compensation/benefits?
* Are there any cultural issues that might impact compensation/benefits?
* What competitors are located close to your new facility? 
* Are competitors well-known multinationals or lesser known firms? 
* Does your company have a strong company brand in the country?
* Do you have a need for college graduates?  If so, are there universities that have degrees relevant for your operation?  
* What is the unemployment rate overall and for the key jobs you need? 
* What has turnover been for key jobs for the past couple of years? 
* Is there a surplus of the key talent your company is looking for?
* What are the best surveys for this particular country?

Let's talk here about a few of the corporate questions:

Individual or group bonuses and commissions:   In individualist cultures like the U.S., both bonuses and commissions are usually designed for individual employees. This works fine.  However, in some cultures it doesn’t work as well.  For example, in Korea and Japan group bonuses/commissions would be the first choice.

If management is willing to be flexible, commission plans could be developed to please everyone.   The salesforce as a group in a country could have an overall quota that would be a total of what individual plans would have been.  They would have to meet that overall quota, but could work together to achieve it.

Group bonuses would work fine for groups of employees that work as teams for a full year.   But for the most part, individual bonuses would need to be used as most employees don’t work on teams full-time.

Market position:  If your market position in the U.S. is pegged at the 50th percentile you may have difficulty attracting people if you set the same position in other countries.  In “hot” markets such as India you may need to set your position at the 60th or 75th%ile --- at least for certain jobs.

Supplemental benefits:  Sometimes top management wants to offer the same benefits globally because they see that as “fair”.   In reality you may end up offering benefits that either no one has heard of or are not provided locally.   There is no reason to offer something that is not perceived as a “benefit”.   IBM made this mistake years ago when it put pension plans in every country where they had facilities.  No one had ever heard of pension plans, and employees didn’t understand them. Over time the cost became enormous.

I hope I have given you something to think about.   

If you’ve set up compensation/benefits programs in a new country, please feel free to share your experiences. 

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, Texas Instruments and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology plus an MBA. She belongs to SHRM, Human Capital Institute and World at Work. Jacque has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.