Compensation Cafe

Cafe Classic: Loving the Way Your Numbers Make Me Feel

Editor's Note: We quant-heads in the reward field are prone to focus on data and facts - and give little attention to feelings - when we communicate about pay to employees.  We do this at our own peril, as Cafe compensation communication guru Margaret O'Hanlon frequently reminds.  Want your programs and plans to work better?  Check out the research and advice she offers in this Classic post.

Did you think we're just standing on a soapbox when we say that we believe that, "Everything we do in compensation is communication?" Well, for those of you who don't buy the "soft stuff," it's time to pay attention. It turns out this insight into our work is even more accurate than we first thought. 

There's an entire field of psychological research that is helping us understand that, 'People don't interpret numbers objectively; instead they base their opinions on how numbers make them "feel."'

That's right. Perceptions influence emotions, as we all know from Psych 101. Ergo, we react to numbers similarly to the way we react to MLS Home listings -- almost impetuously. If we take just one look and the place looks run down, we're moving on, even if we know the interior looks like the Property Brothers just pulled out of the drivewy.

Here's a short take on the research, highlighted in The Daily Stat of the Harvard Business Review:

If research participants were informed that their error rate on a task was 5%, compared with an unseen other person's score of 2%, they rated their own performance more poorly than if they were told their success rate was 95% and the other person's was 98% -- even though the two statements convey exactly the same information. That's because the difference between 5 and 2 looms much larger in people's minds that the difference between 95 and 98 . . .

Anybody start wondering yet how a world of 3% merit budgets has contributed to collaboration and engagement? We perceive more extreme differentiation between smaller numbers than we do between larger numbers (say total salary, for instance). Yes, how you communicate continues to have real influence on engagement and performance.

Researchers have been studying how we perceive these issues of "justice" because, " . . . justice perceptions are crucial for determining a wide variety of outcome variables in organizational contexts." You betcha, and we all have our dazed and amazed stories to tell about employees (let alone managers) who reacted in a completely surprising way to information they were given.

As communicators know from their professional training, people don't deliberate on numbers or any other information, they react immediately and emotionally. Now for a taste of the science involved. Years of industrial-organizational research tell us about the influence of one proven psychological dimension -- people are generally self-serving. We are constantly repeating, "Mine, mine, mine" in our heads like the hilariously self-serving seagulls in "Finding Nemo."  Industrial psychologists know that this always needs to be factored into their research protocols.

A short example of the takeaway lesson -- when it comes to reporting incentive results, it's more likely to be perceived as substantively positive to say that you've achieved 96% of goal that to say you missed the goal by only 4%. Unless, of course, you have critical business results to improve upon. Then you'd be better off shining a harsher light via the smaller number, in order to encourage employees to feel emotionally driven to achieve the targeted results.

If you're interested in finding out more about the why and how, I encourage you to download the research paper. It includes quite a lengthy publication reference list.

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: Influencer Networks - A Hidden Key to Recognition Program Success

Editor's Note:  We sometimes get fuzzy the difference between recognition and compensation as implements in our rewards toolbox.  To the rescue comes Derek Irvine with a Classic lesson on the unique aspects and opportunities - particularly the social opportunities - that recognition plans offer. 

I know readers of Compensation Cafe know this, but let me state the obvious – compensation and recognition are very different. A raise, for example, does not count as “recognition.” But one major difference between the two not often discussed is the public nature of recognition activities vs. compensation changes.

Sure the drumbeat for pay transparency has been increasing, but the likelihood of public, constant discussion along the lines of, “Hey! I just got a 5% raise for my performance last year!” seems pretty remote. Should that day somehow arrive, however, I still don’t see such publicity advancing the flow of positivity and a powerful culture of praise.

And that’s the beauty of social recognition – the truly social aspect. That’s the key element that drives culture change, increased employee engagement, and improved productivity. It’s the people involved every day, looking around for greatness around them, and appreciating and praising their colleagues for it.

Because of its public nature within the company, some assume it’s far easier to communicate change around social recognition. This isn’t true. As with any change, key messages need to be defined and ideal mechanisms identified to convey those messages. One such mechanism that is often ignored is the powerful communication network existing among your people already – your influencers.

Shel Holtz tells this story in Ragan.com:

"I first read about internal influence networks in a Harvard Business Review article sometime in the late '80s or early '90s; in any case, I haven't been able to find it. I was able to apply it for the first time during an engagement while working in the communications practice at a human resources consulting firm. We were about to communicate some very controversial changes that could throw the organization into chaos. We mapped the influencers in the company and brought them into a series of meetings where we shared the situation and our planned communications. They offered their critiques. We incorporated nearly every suggestion they made, even if we didn't necessarily like them; it made them owners of the message.

"We didn't tell them they had been chosen for these meetings because they're influencers. Most of them didn't even know the other people in the room. As far as they knew, they were randomly selected for focus groups and agreed to keep the information we gave them confidential. When the news finally did break, though, as we had thought, employees sought out their local influencer for a read on the situation. And, also as expected, they supported the change and even helped explain it. In the end, the change produced little tension. There was no need to get the word out in this case; it spread like wildfire."

Your influencer network is powerful, and it exists today. The big question is, what message are they helping to influence? Is it the one you want? In Shel’s illustration above, there are three key steps to identifying and utilizing your influencers to best effect:

1. Identify – Who are your influencers? It may seem daunting to identify them, but many can be discovered just by keeping your eyes open. Who’s the “Office Mom?” In the cafeteria or breakroom, who always seems to be center of the lunch crowd? Who’s the person with a reputation for spreading gossip far and wide?
2. Involve – If you want your influencers to proudly carry the message you want, you must give them ownership over that message. That means involving them in the decision-making around the messages to communicate, including when and how.
3. Unleash – When it’s time to introduce change, turn your influencers lose. Let them carry much of the message for you. Trust them with the change.

When introducing social recognition into your organization, these influencers are critical to most important message to convey – permission. In many organizations, peer recognition is often a very new concept. Giving employees explicit permission to notice, appreciate and reward their colleagues is necessary for viral adoption of social recognition. Your influencer network – your Appreciation Ambassadors, if you will – carry that message of permission better than leadership ever could.

Who are the influencers in your organization? How are they used today?

As Globoforce’s Executive 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: Are You a Pay Data Exchanging Scofflaw?

Editor's Note:  In the spirit of public service, we share this Classic reminder that the exchange of information about employee pay between organizations is governed by federal law. 

It seems innocent enough.  Just a little sharing of helpful information between trusted colleagues.  After getting pushback on engineering salary levels, you pick up the phone and call a fellow HR professional in your network whose company has similar positions and ask about their salary practices.  Naturally, in the spirit of kind reciprocity, you share back a little of what you're doing for these roles.

What could be wrong?

Can you say collusion?  Or illegal price-fixing?  How about wage theft?

Several conversations in just the past week have reminded me that few HR professionals (including, surprisingly, a number of compensation specialists) are aware that the conduct of both formal and informal (a la the phone call mentioned above) is regulated by the Sherman Anti-Trust Act of 1890.

Time out for a bit of history.  The Sherman Antitrust Act, named for its author, Senator John Sherman of Ohio, was original passed to limit monopolies and other restraints on commerce.  It is the Act's provisions on pricing and competition which impact those seeking information on compensation practices via salary surveys. 

Here's the bad news:  The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), the bodies with primary responsibility for enforcing our nation's anti-trust laws, have determined that organizations conducting their own salary surveys could be seen as practicing illegal price-fixing.  But here's the good news:  In an effort to provide guidance to HR and compensation professionals seeking to determine competitive pay levels while avoiding antitrust violations, the DOJ and the FTC have jointly published a series of Anti-Trust Safety Zone Statements, which have been interpreted  to provide a "safe harbor" for this exchange of information.

The DOJ/FTC Antitrust Safety Zone Statements are highlighted below for reference (note that these were initially developed with health care organizations and activities as their focus):

Antitrust Safety Zone: Exchanges of Price and Cost Information Among Providers That Will Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies

The Agencies will not challenge, absent extraordinary circumstances, provider participation in written surveys of (a) prices for health care services, or (b) wages, salaries, or benefits of health care personnel, if the following conditions are satisfied:

1. The survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
2. The information provided by survey participants is based on data more than 3 months old; and
3. There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider

The conditions that must be met for an information exchange among providers to fall within the antitrust safety zone are intended to ensure that an exchange of price or cost data is not used by competing providers for discussion or coordination of provider prices or costs. They represent a careful balancing of a provider's individual interest in obtaining information useful in adjusting the prices it charges or the wages it pays in response to changing market conditions against the risk that the exchange of such information may permit competing providers to communicate with each other regarding a mutually acceptable level of prices for health care services or compensation for employees.

Keeping a finger on the pulse of the pay market, particularly for hot skill jobs and in-demand talent, is an important and necessary part of managing a successful compensation program.  We simply have to make sure we're staying within the boundaries of the law when we do so.

Let's be safe out there!

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

Image "Woman Telling Something to Man" courtesy of ImageryMagestic/FreeDigitalPhotos.net

Compensation Communications that Hit the Mark This Time

What have data and analytics got to do with compensation communications? Oddly enough, these numbers can help you give your communications a more personal tone, make them more user friendly and enable you to bridge the gap between HR-speak and employee-speak. In other words, they can help you get your message through and cut down on the frustration you feel when you work so hard on communications but still get a bad rap from employees.

We'll talk about how this works in a minute, but let's start by checking out this comparison. Imagine you had to tell the Compensation Committee that the company couldn't afford one of their proposals. You'd certainly explain it differently than if you were explaining to your family that you couldn't afford something. To dig a little deeper, notice that your explanations about affording an X-box would be different for a 16-year old than for a 11-year old. In each of these examples, you'd think about how you could influence your "audience" to agree with you before you spoke with them. Of course your explanations for the Comp Committee would have far more detail than the ones you used at home. In other words, you'd customize your communications to each audience.

Recently, the big consulting firms have talked about "personalizing" HR communications. That may be a good long-term target, but I'm talking bout much more basic practices. You can use employee data and analytics to learn how to talk in a more relevant and engaging way with your employees. You'll do a better job, and get better scores on the annual engagement survey.

Many clients are surprised to learn that you "take things apart to put them back together again" when you design compensation communications. Think back to the earlier example. Comp Committee or 16-year old, you need to analyze what it will take to persuade them before you talk. Back at the ranch, data and analytics show you how to convince your employees about the important points you need them to understand and support. Here are a few illustrations.

Take a look at the number of new hires that you have. If your numbers are over 10%, there are a lot of employees who 1) haven't yet heard how the compensation program works in any detail, 2) don't know what their role is in the pay for performance process and 3) don't have experience working with their manager. If you only communicate a synopsis of the program, you'll have a lot of people who don't really know what's going on, and who will be frustrated by the communications. Instead, plan how you are going to get them to the same level of knowledge as the rest of your employees. And when you are writing the materials, make sure there is information at the "expert" level as well as the "beginner" level so incumbents don't have to wade through the same amount of detail as the newbies.

Take a look at the percentage of employees in the first third of their range. This is a good example to show how to choose wording and messages to connect with your employees. If you've got 25% or more of your total employees in the first third of their range, it would be unwise to introduce your compensation philosophy as, "highly competitive with rewards that recognize contributions to the company's success." Many of your employees are not experiencing your practices that way, and are likely to respond with cynicism.

Take a look at the percentage of employees in the last third of their range. If you cap their increases at the maximum of the salary range, and you use the same description of your compensation practices, you'll be met with the same problem of cynicism, but for a different reason.

Percentage of departments who've received comparatively lower merit budgets? Odds are the root cause of this practice was their waning impact on business results. If you want to influence these employees to reengage, you'll need to talk about how merit practices are linked to business results. You'll also want to use a total compensation context for your communications, rather than salary focused, to remind employees of their broad rewards opportunities.

Of course, there are new compensation practices to take into account as well. If you decide you are going to institute a geographic differential for remote workers, the percentage of those affected will influence what you say and how you say it. And, of course, if there are any short term possibilities of layoffs or rightsizing, the size of the action--as well as the departments affected--should influence how you talk about compensation this year.

The metrics and analysis that you use should be far more detailed than the sample given, but they give you a good idea of how to start. What defines an audience? They have unique, ingrained attitudes and beliefs that will affect how open they are to your influence.

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: Use And Abuse of "Retention"

Editor's Note:  The pursuit of employee retention is a good and healthy thing ... until it isn't.  Chuck Csizmar offers cautionary advice in his Classic post on the topic.  Step carefully!

In some circles the word "retention" has an identity problem.  Some would say that, if you don't want someone to quit your organization, any extra money you give them as an inducement to stay can be considered "retention." 

When you don’t want a valued employee to leave your organization, one who might otherwise do so, what are you going to do?  You’re going to make it worth their while to stick around. You’re going to offer them more money.  I say offer, because you need to put a carrot on a stick – an inducement to get them to remain while it might be otherwise in their best interests to leave.

This concept is very broad, and if not applied carefully can be used to justify any manner of increases for any manner of employees.  It can become the opposite of what you intended when you designed your reward programs.  Wide discretion and rationale subjectivity could replace pay-for-performance, internal equity and the balanced foundation of your structured reward programs.

What a retention should not be, is an end around effort to give employees more money; a callous attempt to “beat the system” of annual pay increases – to find another way to give selected employees more money - outside the system.  The game is played by throwing down the fear card; talent will leave us.  We can't have that.

So have a care.

And then there's the retention bonus

When should you consider a bonus as a retention tool?

• You’re selling a business or a piece of your organization.  If the performance of the business falters during the sale process the value of that business could be negatively impacted, so you need people in place to maintain proper operations.

• When you’re closing down an operation and laying off the workforce.  Someone has to stick around to make sure that the operation remains as effective as possible for as long as possible, and then to turn off the lights.

Employees who manage an operation that’s been offered for sale are typically considered as part of that operation, so they'll be leaving the parent organization.  In effect, they're being let go with the rest of the for-sale operation.

If perchance these leadership employees might still be retained by the parent organization their efforts should be considered a project.  So you should consider a retention bonus when you’ll be losing the employee(s), not when it's simply a project for them.  Projects can be a great objective for the annual management incentive plan.

You have to offer a large enough incentive that they'll remain until the end. Too little and they could be lured away by a new employer's offer.  You could phase in retention bonus payments, in stages, but always keep the largest piece until the end.

You could also tie payments to results; otherwise you might pay out monies for someone who is simply sitting there, working on their resume and playing computer games.

How much is enough?  Enough to get and keep their attention, so a hefty percentage of their annual base salary is a good place to start.  It would be money well spent, so I’d advise you consider up to 50% for the leaders, and ~25% for senior staff.

How many should be included in the program?  Keep it small, only those deemed critical to continued operations.

To be clear, any offer of a retention award would be forfeit should the employee leave prior to the agreed upon date, or if their performance is considered “poor.”  Note: you might have trouble in a failing or “for sale” business to determine gradients of performance.  But obvious failure to perform (against your pre-established objectives) should have a penalty.

Retention as a concept can be a slippery slope, so be careful where and when you step.

Chuck Csizmar CCP is the 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.

 

The New Remote GEO Differential

It is time for a real change in pay. Like most real changes this is not a change driven by desire, it is a change driven by necessity. Less than ten years ago headlines crowed that working from home had failed at Yahoo and that everyone was being called back into traditional offices. Just a few months ago working remotely was usually viewed as a privilege of the few who had proven themselves worthy. Today we have entire companies working from their living rooms, and inlaws’ places in the country. Things have changed and will never go all the way back to the “old ways.” Our practices must adapt, quickly.

As soon as you have employees in disparate locations you have issues with pay. Geographic differential (GEO Diff) rates are the “go-to” solution to solve this problem. These rates show the differences in pay between two, or many locations. They allow us to confidently pay an engineer in Nashville, the home office location, less than an engineer in new San Francisco office. Lower cost marketplaces result in lower base pay. It just makes sense to pay what the market requires. We simply apply the GEO Diff and move on.

We have moved to a world where individuals, instead of employers, can choose their location. This is no longer a privilege for the unique few, but a reality for many successful businesses. If your employee chooses to move from Nashville to San Francisco should they get the same increase as if the company dictated that they needed to be in that location? It would seem that the correct answer is…no.  But that breaks the base pay paradigm that we used for decades. How do we adapt?

Most companies will operate with a blend of “in-office” and remote employees. For this purpose, “in-office” is any location that is dictated by the company (even if it is an office at home). Remote is any self-selected location (even if it is in a company location). I am suggesting the creation of an entirely new GEO Diff. The “Remote GEO Diff.”

The remote GEO Diff is a manufactured differential from your home office pay. It is designed to reflect your pay philosophy and the value (or discount) you place on a job that is being performed by employees at the location of their choice.

Example: Assume your home office location is exactly aligned with the national average for base pay. Your market data indicates that an Accountant 3 should be paid $100,000 at the 50^th percentile, your targeted level.

1) Let’s say your company wants more people to work remotely. You may set your Remote GEO Diff to 5% above the home-office location. You would pay people this amount even if they worked in the home office city, but NOT in the home office itself. If the person moved to San Francisco, you would also pay them based on the remote GEO Diff.

2) Your company offers amazing benefits and prefers people to work from the home office to reduce the complexity and costs of delivering these benefits. You may set your Remote GEO Diff to 10% below the home office rate (yes, even if the person is work from home in. the same city).

3) If you open a new office in San Francisco you would still apply a traditional GEO Diff to ensure your mandated location pays competitively. The same would be true if you opened an office in a less expensive location.

The New Remote GEO Diff is a way for you to have remote employees, pay people consistently, and reflect your company's approach for total rewards and compensation philosophy. It is already being done at some companies, so your time to get prepared is not before the 2020 compensation planning surge this coming Fall.

There will be more on compensation in the remote place to come in future posts.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He 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: Reward by Showing Career Options

Editor's Note:  Career opportunities are a vital part of an effective total rewards program, and the lack of such can create strategic risk and vulnerability. Jim Brennan explains in this Classic post.

With the basic principles of dual career ladders covered in an excellent recent post by a co-contributer, let’s expand on the topic.  The idea is to offer more alternatives for work advancement than only one track -- into management.  Most employees want to get ahead, but some people don’t want to supervise others.  Instead of forcing individuals whose prime talents and personal interests are better suited to individual contributor roles into unwanted management jobs, dual tracks can let them choose what they do best and like most. 

By the way, the concept of offering separate job progression tracks need not be limited to dual career ladders separating managment paths and individual contributor roles.  When management careers can range from supervisors continually monitoring many immediate subordinates to senior executives who manage broad functions with no direct reports, simple partitions can get complicated.  Likewise, individual contributor roles can also involve diverse career paths in specific technical, professional, administrative, sales, research and other functional vocational areas. 

Designing flexible programs for employee career movement can enhance the impact of organizational reward systems. 

Some employers have created extra career job steps with extraordinary higher pay grades for continued super-senior professional track progression.  By paying a few emeritus subject matter experts far beyond normal parameters, they thus hold key contributors who supply institutional memory.  Golden handcuffs can reduce turnover, eliminate replacement costs and save productive time otherwise lost in training.  Extraordinary total rewards that retain select high-performing veterans can increase operational efficiency in potentially problematic areas like marketing or software programming where ignorance of past history can be very expensive. 

With a bit of foresight, many possible problems can be avoided.  For example, switching employees from one ladder to a different track can be a major issue if transitional bridges are not created in advance.  Establishing consistent criteria for advancement from one level to another is another important precaution.

A lack of alternative career ladders leaves the company vulnerable to the negative effects of the Peter Principle.  It’s a terrible outcome to find that when you promote your best individual contributor to team supervisor, you lose your best producing worker and gain your worst supervisor.  Or the opposite can happen.  A supervisor with a gift for training, guiding and inspiring subordinates who is switched to an individual contributor role can be wasted in an analytical job where they yearn for contact with other people.  If the organization has no alternative career track with a suitable slot for either type of misfit, both sides lose. 

One school of thought says there are no bad employees, just bad matches between talents and assigned jobs.  All the knowledge, skill and ability in the world will be wasted if workers are not assigned where they can apply their greatest talents with maximum leverage for the benefit of the enterprise.  Placing the right person in the appropriate position is the essence of human resource management. 

Multiple ladders reduce the risk of misplacement.  Firms without even dual tracks typically experience churn among the most talented who are in "the wrong" ladder.  It does the company little good to be pleased with a worker who is personally unhappy with their career prospects.  An effective analyst frustrated by roadblocks to her desired progression into management will eventually leave, either physically or emotionally.  Likewise, a competent supervisor who simply wants to work alone will either neglect his leadership duties or seek another job opportunity.  When there is only one path upwards in pay and status, options for mutual employer/ee benefit are severely limited.  Frustrated top performers will look outside for more suitable prospects.  Meanwhile, your marginal workers will cling desperately to their jobs and demand infinite seniority increases.  Losing your best while retaining your worst is a combination to avoid. 

Practical and effective career progression programs have an immense impact on employee value propositions.  They are a vital part of reward systems.  Take care to design mutually beneficial paths for job movement.  Failure will waste talent and the money spent for it.  Success can create an environment where engaged workers are pleased by their career advancement options.  Whichever happens, it may determine your next career move. 

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 "Risk v/s Reward : Choosing the right Career path" by Youthopedia Media

Let Me Tell You a Story

When you are trying to grab the attention of Senior Management to listen to your ideas, remember this; they like a good story, especially one with pictures. 

If you’re addressing your company’s single largest expense, its employee pay programs, the pictures become charts & graphs that help to illustrate the points being made. 

Pictures capture attention and build memories much better than text or even the spoken word.  Show a picture and the image is locked in, while reliance only on text can be a risk as memories can quickly fade.  "He said what?"  Also, the drone of dry prose can grow boring and is liable to lose the attention of all but your strongest supporters.

Attention grabbers that work: 1) speedometer style formats that graphically indicate the current situation against the target; 2) the green light, yellow light, red light approach, again to colorfully paint a picture that stays in the mind; and 3) pie charts, tables, even regressed lines that show a story.

People remember images because they capture the imagination, while they could have a harder time recalling (and taking to heart) what you said or what you wrote.  So, concentrate on your supportive imagery.

Make the story a short one.  I once worked for a CEO who thought any proposal could be reduced to a single piece of paper, with plenty of white.  “If you need more than that,” he would say, “it’s not such a grand idea.”

You Need a Plan

However, before you settle on the visual format best suited to sell your case you should focus on the data points necessary to make that case.  Remember the adage that a dream without a plan is only a fantasy?  If you don’t take action steps to convert ideas to reality, what you’ll be left with is smoke & mirrors – with no results to show for your efforts.

For those of you who have ever been on a diet, you treat it like a project plan, right?  Experts advise that participants write down everything they eat, have goals to strive for and milestones to gauge progress.  It helps to have a plan and to keep score - to know where you stand and where you’re headed.

To accomplish this at work you should create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) - and then establish baselines (current state) and forward-thinking targets for each performance indicator.  This key step will help you understand whether your intentions are being fulfilled and whether the ROI on employee rewards is at the level your company requires.

Commonly used HR metrics:

• Average salary / wage

• Compa-ratios (comparison of pay to a range midpoint)

• Count of employees per segment (hourly, non-exempt, professional, management)

• Average performance ratings

• Average annual pay rise for each performance rating

• Count and average promotional and “equity” increases

• Voluntary turnover (employees who decided to leave)

• Average employee age and length of service

We could go on and on, but you get the point.  Refine these and any other quantifiable factors by further segmentation - per salary grade, employee group, male / female, etc.  Make sure that each metric is measurable because accuracy and objectivity count.  A compelling argument demands precision, while subjective aspirations like attitudes, relationships and other vague goals are little more than "feel good" goals.

To make these metrics work for you, avoid make-work arithmetic exercises that do nothing more than capture minutia.  Be certain to measure what is important to your business – not simply what data you can capture.  You don't want your senior leaders to say, "So what?"  Make sure the importance of the metrics is clear to management (or can be made so).  Management needs to grasp the importance of what success looks like, to understand why your metrics are important and what achievement would mean for the organization.

Once you have the right metrics established (collectively called the “dashboard”) and a baseline in place, you'll readily see where the problems lie, as these visual can be powerful and compelling.  Now set specific targets going forward to improve the identified weak areas, creating periodic milestones to mark your progress. 

What to Look For

Every organization has different pressure points.  However, if your metrics data indicates any of the following situations, management should be informed.

• Average performance ratings that exceed how the business was rated

• A workforce where key segments are approaching retirement age

• Promotion and “equity” increase activity that overwhelms the reward budget

• Low compa-ratios that indicate you are not paying your salary ranges

• Unexplained voluntary turnover

• Any figure that is an unpleasant surprise

When you’re telling a story to management, make it compelling – with facts and pictures that feed off the critical metrics analyses that form the pulse of your business.  Then bring home the sale by showing how you plan (the proposal) to solve the challenges being faced – with practical strategies designed to end your story on a happy and successful note.

Chuck Csizmar CCP is the 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 "Concentration," by mabilletdoux

Compensation Communications: Should I Say How I Feel?

Many of our colleagues would say that compensation has nothing to do with feelings. The whole business has to do with facts and only facts. That's why there are certifications for practitioners in our business. There's a right and a wrong way to do our work, and a big part of it has to do with knowing the difference between good and bad data.

On the other hand, feelings have a lot to do with compensation COMMUNICATIONS. That's why I want to talk about them today. Addressing feelings through compensation communications is tricky business. If we ignore the connection, though, we can create serious misunderstandings among employees. And if we understand the connection, we are more likely to have interested listeners for our communications who will do what we've asked them to do.

Just as with compensation design, there's a right and a wrong way to deal with employee communications. An early planning step involves defining what you want your audience to "KNOW, DO AND FEEL" as a result of the communications. Then once you get your communications drafted, you test them against these goals. The words will need editing and the methods you are using will need adjustment if they don't: 1) transfer the knowledge you have prioritized, 2) prepare managers and employees to act on the knowledge, AND 3) inspire feelings that build engagement.

Let's look at an example. Responsiveness is always a favored trait because it is the foundation of effective teamwork and communication. It is especially important now, when everyone is working remotely and on multiple teams.

Say the Compensation Department thinks it's a good idea to highlight, mid-year, the traits and competencies that have emerged as priorities in our new work environment. Responsiveness is one of a group of competencies that will be communicated as reminders through a campaign that includes email, manager discussions and videos on the intranet. If you put all that work in to developing communication materials that mean well, but don't take into account that employees are feeling burnt out right now, there will be little or no interest in your campaign. Plus, employees might feel annoyed that you are ignoring their current burden.

On the other hand, what if the campaign talks about the downside of unresponsiveness and illustrates (perhaps humorously) what happens when a colleague is unresponsive? You'd be acknowledging everyone's typical experience, and they would be far more likely (engaged) to be open to acting differently (as you also illustrate in your campaign.)

Take another example -- you need to communicate the bad news that mid-year bonuses will not be paid because of business conditions. Everybody's been working full tilt. They may understand why there is no funding for bonuses, but they will still be disappointed. There will also be feelings that some money could have been found somewhere given how hard everyone is working. Communicating in that context, you can't change employees' minds, but you could influence them. Your "FEEL" goal in your "KNOW, DO AND FEEL" planning could be to design the communications to build a belief that the lack of bonus is suitable to the business situation. Explanations of product results or share behavior could be used as part of your explanation. Giving employees a context for your no-bonus decision makes it more likely that you will influence employee feelings.

Some may still disagree that feelings have anything to do with compensation communications. There are some situations where that is certainly true. I once worked with a major software company that limited its compensation communications to "KNOW" and especially "DO" with no assessment of feelings at all. They had a very cohesive culture, engaged employees and a no-frills engineering mindset, so this strategy worked well for them. "FEEL" was being treated effectively in other ways in the company. I don't know how many of us would describe our own company's culture as cheerfully cohesive these days, though.

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: Compensation in Context

Editor's Note:  Context matters.  Our pay programs are now operating in a world where businesses and work are operating in an enormously different environment and face significantly different demands than even 6 months ago. Understanding this is critical to effective reward management, asJacque Vilet lays out in this Classic post.

Context:  Background, environment, framework, setting, or situation surrounding an event or occurrence.

Context has always been important to me.  For example, I don’t like digital clocks.  I don’t like seeing the exact time without a reference point.   I like to see the clock face with all the numbers and the hands.  I need context.   Guess I’m just an analog girl in a digital world!

It’s the same at work. I always thought there was a strong connection between compensation and organizational design.  I couldn’t “do” compensation unless I had organization charts.  Today context is so much more than that. 

Bear with me.  I’m going to tell a story that I hope will make you see a parallel to compensation. 

A relative of mine has had to have his entire 30 year old house re-wired.  When the electrician looked at it he told him that the wiring was completely up-to-date when initially installed and met the then required code.  So what happened in 30 years?

The builders didn't anticipate the information age.  How could they know that the house 30 years later would have HDTV, a DVR box, a laptop port, an iPod speaker system, and a smart phone charger all operating at the same time.  What worked 30 years ago, doesn’t work now.

It isn’t just wiring.  Think about it.  In other industries besides construction I think you would agree that very few products, services and business practices/processes are the same today as 30 years ago.  And it’s even more complicated today.

Companies are now operating in a very different business landscape than the one they faced even 6-7 years ago --- pre-recession.  The major issues they face now are such things as economic uncertainty, financial turmoil, globalization, global interconnectedness, political upheaval, etc.  These issues are all contextual and they have a huge impact on industry.

Business example: U.S. companies learned the hard way that business models that worked in the U.S. did not work in emerging countries.   Realization and acceptance of this took a long time and resulted in a lag to market and lost business.   Management had to realize their historical model was no longer an absolute.

I think this example may be reflective of a problem in Compensation today.  Can you see the parallel?  Is Compensation in the same state of denial?  Theories/concepts developed in the past and accepted as absolutes may not be serving us well today.

Just as companies had to change their business model to compete in global markets, why should we assume our models are any different?  Well, you say, our theories have been scientifically tested.  But business models in the past were researched and tested as well.

(Hint: Research cannot keep up with all the changes taking place today.  And it probably never will.  So we can’t wait for the comfort of experts to bless the practices we will have to use today/future in order to deal effectively with all the issues we face/will face.)

We need to think holistically.  We need to be able to venture out of our comfort zone. We need to be more flexible and adaptable just as companies are learning to be. We need to look at the larger context and how all the parts are connected.

Understanding our companies’ business is important but it is just as important to see the  broader context and build in some contingency plans for changes that are bound to occur.  Our companies are doing the same thing.

What do you think?

Context:  Background, environment, framework, setting, or situation surrounding an event or occurrence.

Context has always been important to me.  For example, I don’t like digital clocks.  I don’t like seeing the exact time without a reference point.   I like to see the clock face with all the numbers and the hands.  I need context.   Guess I’m just an analog girl in a digital world!

It’s the same at work. I always thought there was a strong connection between compensation and organizational design.  I couldn’t “do” compensation unless I had organization charts.  Today context is so much more than that. 

Bear with me.  I’m going to tell a story that I hope will make you see a parallel to compensation. 

A relative of mine has had to have his entire 30 year old house re-wired.  When the electrician looked at it he told him that the wiring was completely up-to-date when initially installed and met the then required code.  So what happened in 30 years?

The builders didn't anticipate the information age.  How could they know that the house 30 years later would have HDTV, a DVR box, a laptop port, an iPod speaker system, and a smart phone charger all operating at the same time.  What worked 30 years ago, doesn’t work now.

It isn’t just wiring.  Think about it.  In other industries besides construction I think you would agree that very few products, services and business practices/processes are the same today as 30 years ago.  And it’s even more complicated today.

Companies are now operating in a very different business landscape than the one they faced even 6-7 years ago --- pre-recession.  The major issues they face now are such things as economic uncertainty, financial turmoil, globalization, global interconnectedness, political upheaval, etc.  These issues are all contextual and they have a huge impact on industry.

Business example: U.S. companies learned the hard way that business models that worked in the U.S. did not work in emerging countries.   Realization and acceptance of this took a long time and resulted in a lag to market and lost business.   Management had to realize their historical model was no longer an absolute.

I think this example may be reflective of a problem in Compensation today.  Can you see the parallel?  Is Compensation in the same state of denial?  Theories/concepts developed in the past and accepted as absolutes may not be serving us well today.

Just as companies had to change their business model to compete in global markets, why should we assume our models are any different?  Well, you say, our theories have been scientifically tested.  But business models in the past were researched and tested as well.

(Hint: Research cannot keep up with all the changes taking place today.  And it probably never will.  So we can’t wait for the comfort of experts to bless the practices we will have to use today/future in order to deal effectively with all the issues we face/will face.)

We need to think holistically.  We need to be able to venture out of our comfort zone. We need to be more flexible and adaptable just as companies are learning to be. We need to look at the larger context and how all the parts are connected.

Understanding our companies’ business is important but it is just as important to see the  broader context and build in some contingency plans for changes that are bound to occur.  Our companies are doing the same thing.

What do you think?

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.