Cafe Classic: Pay Happiness? Ready, Aim, Fail.

Editor's Note: So what do we aim for when we are striving to do the right thing with our pay programs and practices?  Is it pay happiness?  Is it the amount required to "take pay off the table" for the particular employee (as Dan Pink advises us to do)?  Some thoughts and some research around this Classic compensation question.

A recent headline dishes up this startling finding from a recruiting firm's research:

A majority of workers are not making their desired salary level.

How many of you are surprised by this finding?  Yup, that's what I thought.  In what universe could this be considered news?

I've long held that we should begin any and all compensation work by explicitly acknowledging the fact that most employees want more money than they are currently making (and by ceding, at least implicitly, that our efforts are unlikely to change this fact).  I confirmed this with some informal research of my own a few years back when, in the process of poking fun at examining the core tenet of Dan Pink's compensation advice -- just pay them enough to take the issue of money off the table -- I set out to discover just how much enough is for most people.  (See initial findings here, with follow-on data and discussion here and here.)

Here is a quick summary of what I discovered from my non-scientific sample of about 120 individuals responding to the question "how much more base wage or salary would your employer need to pay you -- if any -- in order to 'take the issue of money off the table' for you?"

• Only 10% of respondents indicated that the money issue was already off the table for them - no need to pay them more.
• Responses to the "how much more" question ranged from the 0% noted above to 200% at the other end, indicating that some respondents would need to see their base pay essentially tripled before the issue of money could come off the table.
• The magic number, the overall mean response? 29.5% more to take the issue of money off the table.

When asked what influenced them most in providing their response, the number one influencer cited (46% of respondents) was external comparisons -- their own beliefs about how their pay stacks up against those in other organizations doing comparable work.  The number two influencer (cited by 29%) was living expenses -- the cost of things they wanted, needed or planned to purchase.

My point with all of this?  Too often, we in HR and Rewards approach our work as though our objective is to make people happy with their pay.  The challenge is that this is largely an unaccomplishable feat.  The question of what is required to take the issue of money off the table for people -- to remedy their pay angst and make them happy with their compensation -- is a complicated and highly personal thing.  If we define the solution to our problems as pay happiness, we've essentially made that problem an unsolvable one from the start.  Ready.  Aim.  Fail.

Instead, I believe that we should be aiming for clarity and understanding.  What the Hay Group and Loyola University coined, in reporting on their research on reward fairness a few years back, as procedural fairness.  Procedural fairness involves creating and communicating a compensation process that can be understood as clear, fair and consistent by most people.  Procedural fairness essentially means bringing transparency to the "how" of compensation.

Bottom line:  We can't define success as all/most employees saying "I am happy with my compensation."  Instead, we should aspire to having our employees say something along the lines of "I understand how and why I am paid as I am, and it makes sense to me."

That's what I think.  You?

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

Comments

[E. James (Jim) Brennan]

Everyone wants to be paid exactly what they are worth, as long as it's more than they're getting. (Brennan's First Law of Pay)

[Kerry Chou]

This is spot-on Ann and well put!

[Ann Bares]

Jim,

As usual, Brennan's law is on target!

Kerry,

Hey - so great to hear from you. Thanks for the kind comment. Hope you're well!