Compensation Cafe

Cafe Classic: What's That In Dollars?

Editor's Note:  Today we present Chuck Csizmar's Classic cautionary tale about the temptation we face to push the easy button when establishing pay levels and practices in other countries.

It's human nature to look for simple solutions to perplexing problems.  Simple avoids confusion, keeps you “on message” and helps (you think) create greater employee awareness and an appreciation of reward programs and policies.   However, when you're dealing with the diversity and complexity of international compensation it's just not that easy – nor should it be.   For those seeking the simple life it can be difficult to understand and accept that each country operates in a different environment from the next. 

There's no cookie cutter out there.

Perhaps because of its long history of isolationist tendencies, or a bit of Yankee arrogance, but U.S. managers tend to struggle with the challenge of this "no, we're not all the same" concept more than many other players on the global scene.

For the most part U.S. managers don't want to hear that pay levels in Finland, or Argentina or Tunisia are different from the U.S. - even for identical jobs.  Instead, they would rather treat everyone the same, call it globalization and with a pat on their shoulder consider themselves a one-world player.  But those who push such an agenda of simplicity foment and spread a misleading distortion of the facts, a twisted sense of reality that they'll find very costly to implement, and its inevitable results will more than likely irritate key talent within their workforce.

Consider the senior manager who simply wants to convert a foreign national’s salary into U.S. dollars – based on a concern over what they call “internal equity.”  The assumption the manager is under is that everyone pays approximately the same for an “XYZ Manager” - or should.

"We pay USD60,000 for the job; what's that in Euros"?  Or worse . . . .

"When we convert our UK employee 's pay to dollars the amount is less than their U.S. counterpart.  We have to do something."

No, no, no.

Other considerations:

• If simple conversion was a viable approach, why don't we see such formulae prominently displayed by highly reputable salary survey providers?  Why are all figures reported in local currency?

• Local national employees will be skeptical of the simplistic approach, as in their mind too many local realities would be ignored in favor of what is perceived as Company standardization for the sake of administrative ease.  And that somehow they're saving money at the employee's expense.

• Lacking a strong correlation between country pay levels you will either needlessly increase your compensation costs, or under-value your employee talent and risk disengagement – or worse.

I once developed a formulaic approach that explained to a COO why he should not establish internal equity between the U.S. and the UK by simply converting GBP into USD.   I factored in a host of elements, including local taxation, competitive pay levels, incentive practices, cost of living, required social charges, benefit costs, etc. to make my case.   My point was that a simple conversion would be a distortion of the economic realities that drive pay levels in both countries.

Sad to say, but the explanation was ignored and the COO, though he acknowledged the logic of my argument, continued to prefer a simple conversion to establish relative values in his own mind.  So every time the conversion issue arose we had to rehash the myriad differences between countries in order to remind decision-makers that apples are not oranges.  That there is no universal fruit.

To operate successfully on a global basis management needs to understand, to truly believe that each country operates like a separate and sovereign national entity, with distinct economies, taxes, competitiveness, employment laws, culture, statutory benefit requirements, etc. that make a 1:1 comparison with any other country a distortion that will cause you to either over spend or under spend your reward dollars.  Either result should be avoided.

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, "Money Logo," by Ivan Walsh

Sales Compensation: Chicken or Egg?

I am often asked to “fix” sales compensation programs. The thought is that a change of quota, leverage or commission percentage will demonstrably improve sales efficacy and revenue. Unfortunately, in most cases, it isn’t that simple. Providing a shinier sales incentive program without addressing sales roles, training, and tools accomplishes very little. To make real changes in your sales team you need to determine what should come first, the chicken or the egg.

To be clear, the egg came first (dinosaurs laid eggs before birds existed). The egg in this case would normally be the structure of the sales team and its approach to closing business. The chicken should be your sale incentive plan. In many young companies, the opposite is true. Sales at early-stage companies are often the result of an organic or even accidental process. This results in success for a small sales team with limited sales volume, but it seldom sustains the growth needed for ultimate success.

When the approach to sales incentives precedes the establishment of a defined sales structure and process, improving sales incentives can be driven by guesses. A compensation professional likes to mix just a little bit of science with their art, and sales incentives without a structure are basically 100% art. So, what do you do when you are asked to help fix these programs?

First, ask to see the organization structure. Take time to learn exactly what each role does, when they do it, and when they interact with or move the sale to another person or department. Ask a million questions and try not to provide too many early opinions. It’s hard to identify the good and bad before the full picture is known.

Next, determine what the job descriptions would be for each job if they had not already been written (and they often aren’t). Don’t start with the title or JD and find matching data. Start with defining how each role differs (they often don’t) and determine if those differences should receive differentiated compensation (they often shouldn’t).

Then, with an understanding of each role and an opinion on where incentives should be similar and different, go back to your sales team and ask more questions. Ask as many “why not” questions as possible. Salespeople are inherent problem solvers. Challenge them to help you determine the right structure, the right incentive focus points, and, ultimately, the right solution. Salespeople also like to be “closed.” They appreciate a strong sales process more than the rest of us, so get them to make your arguments for you.

Finally, with an agreement on how each role should work, you can provide real guidance. You can explain what types and levels of incentives can help keep people focused on their critical metrics. You can use your compensation expertise and math skills to show how your proposed approach can be both lucrative to the individuals and essentially free for the company (great salespeople pay their own wages). Blather on about how you have taken into account TAM, SAM, and SOM in your modeling. Then show them the numbers and close the deal.

There is a ton of technical knowledge required to be great at sales compensation. Most of that technical expertise is important for large sales organizations. For smaller groups, the technical piece is less critical. Focus on what people do and why they do it. Keep the programs as simple as possible and be confident that your best salespeople will always figure out how to work the incentive plan to their favor. Being a strategic sales incentive partner in a small or mid-sized company is mostly about asking the hard questions and letting the sales team take the lead on the solution.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He 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 a 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.

Lights, Camera, Pay-Action!

All too often, we find ourselves stuck at the table “strategizing;” a trending buzzword which simply put is the act of planning.  However, the overemphasis and meticulous planning of a total rewards strategy, or anything for that matter, is nothing without taking the blueprint into action. 

Granted scheming a well-conceived plan of action is integral, especially when dealing with pay.  Pay is already a sensitive topic; it runs deep with emotions and impacts people's livelihoods.  It’s for this very reason that organizations and their “strategic leaders” mustn’t’ sit too long at the table formulating or re-working their pay approach.  A time will come when the rubber must hit the road.

Sit idle for too long and you lose the ability to attract and retain key talent.  Action takes an air of confident assertiveness to press the “go live” button swiftly yet decisively.  Assuming a master plan is now in place, the following are a few key "action" ingredients, igniting life into the strategy:  

1. A proactive team – the individuals spearheading the initiative ideally are diverse in their backgrounds or job functions. Having this depth of representation creates advocacy, buy-in, and commitment from the entire organization. Most importantly, the “ego” must be left at the door.  Team members concede that the matter at hand is not about one's self-interest but rather achieving a common goal. For instance, the collective goal is to ensure the workforce has the right pay program or incentive mechanisms to drive the right behaviors, allowing all business lines to reward in a way that is favorable to the business achieving its goals.

2. Calculated risk is a reality of life, such that we cannot predict the outcomes in every situation. Although we can play out scenarios and stress test the good, bad and ugly, eventually we have to be Ok to let go and allow the plan to run its course. Risk aversion can be an Achilles heel; if we say our employees are our greatest asset we must then invest accordingly.  Fearing or prolonging a pay equity review could instead create increased disparity or, worse, deepen your liability and exposure.  Ignoring employee feedback and turnover statistics, or failing to do a market review because of the time, effort and costs involved, could not only hinder your market competitiveness, but could result in a much more costly market catch up to resolve. 

3. Timelines – when the due date is set then there must be enforced expectation and accountability of the participants to comply. Action feeds into a schedule of events, these pre-set dates function as markers or key milestones. Once in motion, we are continually assessing, evaluating, and pivoting as we hit these dates.  The timeframe is our forward-thinking roadmap, we only turn back to learn and improve from the past.

I am certain you as readers can “strategize” many more key points of action! Think also of our employees: they too do not have the time to wait around for what will be.  How can we as leaders expect action from them if we cannot deliver upon it ourselves?

Reena Paul (CCP, GRP) is a Senior Consultant with LifeWorks Compensation Consulting Team.  She is passionate about all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client-focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect with Reena on LinkedIn, or contact her directly at [email protected].  

Image source: Unsplash image with credit to GR Stocks 

Cafe Classic: Irked Enough to Care

Editor's Note: In this Classic post, a favorite of mine, Derek Irvine challenges us to see the difference between two types of "problem" employees and to realize the potential value of some of those squeaky wheels.  

Do you have any “malcontent” employees? The ones who are always complaining? The ones who, no matter what, are never happy with their job, their colleagues, their managers, the company?

What about “vocal” employees? These are different from the malcontents, though "vocal" employees also have no fear about expressing their opinions on how the team, project or company could be better.

A good argument can be made for exiting the true malcontents (those who are thoroughly disengaged). But too often the “vocal” employees are lumped in with them.

How do you tell the difference between the malcontents and the vocals? Listen to the intent behind their words.

A vocal employee will convey an attitude of: “I’m engaged enough to be irked.”

Employees who are engaged enough to be irked still care. If they didn’t care about the success of the project/team/company, they wouldn’t invest effort to complain or even register emotional concern.

The challenge for managers of vocal employees is to listen constructively to what is being expressed and then respond appropriately in one of three ways:

1)    Agree and take action. Acknowledge the employee is right in their assessment and then take action to implement changes.

2)    Disagree and communicate. Hear the employee out, but if the anger is genuinely misdirected (usually due to lack of a complete picture of the situation) explain to the employee more fully why things are the way they are and how the employee can be more successful within those boundaries.

3)    Agree and do nothing.  Acknowledge the employee’s point of view but take no further action.

The first two responses are fair and honest. Either could be appropriate and the best reaction depending on the situation. The third response is a cop-out. Refusing to take action or redirect employee emotion more productively will result in a “vocal” employee becoming a true malcontent.

Why am I writing about this in a blog about compensation and recognition? To employees who care, and “vocal” employees certainly do, truly listening to them and taking action is a powerful form of recognition. Validating employee concerns shows you pay attention to what is valuable to them.

Bottom Line: Listen to the employees who care enough to be irked.

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.

Bob's Your Uncle

I once lived and worked in England for five years as an expatriate, and during that time my HR team took great pleasure in confusing me with English words that held little meaning for an American.  Often, I could even repeat the phrase back to them, yet still didn't understand what the words meant.

As the Brits often told me, we speak the same language, but we don't.  My colleagues loved to "take the mick out of me" (poke innocent fun).

One example that has stuck with me the years is "Bob's your uncle."  Imagine the first time I heard that phrase.   What again?

Within the UK it's a common phrase that means "And there you go" or "Everything's fine now."  But the words just didn't make sense to me.  But like so many colloquialisms out there, finding the root cause going back decades or more proved a challenge.  It took me almost two years to find someone who could explain where the term originated (we didn't have Google back then).

Easy Peasy

Two hundred or so years ago there was a high-ranking Member of the English Parliament (Robert, Lord Salisbury) who held great sway (political influence) across the British Empire.  This was a powerful man, and one who believed in nepotism and political cronyism, so it was not unusual for even his distant relations to find themselves gifted with important government positions.

Such favored office holders with familial connections held positions of power, influence, and easy living.  Over time the phrase was born, that everything would be easy peasy (fine and dandy) if "Bob's your uncle."

And That Applies How?

Which got me to thinking about a message I had received a few weeks back from a recent graduate, one who wanted to make a career in HR, and specifically Compensation.  This inexperienced fellow posed a basic query, one often asked by those just beginning their careers.  "How can I achieve success in my chosen profession (Compensation)?"   He wondered whether there was a blueprint, a map, or a guide of sorts to keep him on the straight and narrow.  He had hoped to find a "Compensation for Dummies" book from Amazon.

Of course, there are no rules, no instruction manuals or pointed arrows on the road, each guaranteed to take you by the hand and show the way to career success.  Instead, the experiences of those who went before you are varied and distinct in so many ways, usually a compilation of diverse career choices, working for supervisors who influenced for good or ill, differing type and operating style of employers, and of course the series of unanticipated head knocks (lessons learned from mistakes) that one gains over the length of a career.

What happened to me may not happen to you, I thought.   There is no, "Read this and you'll be fine."

So, I condensed my experiences, career preferences, personal work philosophy, and gut instincts into a set of generic principles that could (or should) provide a solid platform of suggestions for anyone interested in career success, whatever the chosen profession.

Below is the essence of my response to that recent graduate, reflecting my thoughts for how a compensation practitioner can become a success.  It's not a complete list, the specific applications can sway in the wind along with the reality of personal circumstances, but the concepts are broad enough for individual interpretation.

• Understand your organization:  You need to know at least the basics of the business operations where you work.  What are your products/services and what advantages do they offer a customer or community?   What is the company's reputation, and why? Don't remain stuck in your office/cubicle but get out there and learn about what makes the business tick.
• Understand the compelling facts:  What is the business environment that your organization operates in, and how competitive is your reward program?  What story do the compensation metrics of your organization tell you?   What issues do you face with payroll, turnover, morale, engagement, etc?  Sadly though, all too many practitioners start and stop here.
• Understand your management: Who are these people who run the business and what are their management biases?  Learn the perspectives that each of them brings toward making HR and compensation decisions.  Know these leaders and take every opportunity to ensure that they know you.
• Understand your goals: If you don't know where you're going, or which pathway you're on, then any road will do. So, learn what defines success at your organization and strive to support efforts in that direction.  Make sure that your own objectives are integrated into the larger picture of overall success.
• Mix, stir and bake at 350 degrees until done!  Take all of the knowledge gained from the above, combine it with your own skill sets and experience, a little political deftness and then work diligently at making a difference, every day.

And there you are!  Follow these suggestions in pursuing your chosen career and everything will be fine. 

Bob's your uncle.

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 "Falling down cat," by Celine Q

Lego and the Art of Fixing Sales Compensation

Many of you may be familiar with the renowned Behavioral Economist and author, Daniel Ariely. He studies and discusses how work is about much more than just pay. One of his most famous discussions covers a study he did that asked people to build Lego sets. The basic finding was people didn’t like to see work they had performed taken apart. I love Lego (perhaps because I have a young child) and I think they translate well into many concepts of pay and organization design. In this article, I cover how Lego can be used to help you understand why it’s so hard to fix your sales incentives.

Lego are amazing. They often come in kits that provide instructions on exactly how to build the picture on the box. My son has built most of the world’s city skylines. I can’t get him to take one apart for anything. They also come in random sets of hundreds that require only your imagination and time. The trick is that after you have built something cool with a random set it can be as psychologically difficult to break apart as a completed designed set.

Given enough Lego and you can build just about anything. Sales compensation is similarly simple, flexible, and potentially complex. Do you focus people on volume, quality of sales, profitability, growth, long-term builds? This list is nearly endless. How you motivate people to stay focused is similarly flexible. Do you use commissions, SPIFFs, spot bonuses, long-term incentives, quarterly goals, annual goals, team metrics, or individual achievement? Do you focus on granularity or stay tuned with the big picture? Any program requires buy-in from so many people and groups. The final result is something that people depend on to pay their own bills and keep their company afloat. Making small changes is simple, but real change is hard.

Changing a percentage, or one metric, or adjusting a quota or sales region are done all the time. But these kinds of changes do not keep a sales incentive plan current with a company that has evolved and grown in any significant way. Markets change, products change, consumer desires change, trends blow like the winds. The tower you built with your Lego years ago may no longer be able to support your objectives. This is your starting point.

It takes a special kind of buy-in and commitment to get people on board with tearing apart the old Lego tower and starting over with a pile of bricks. This is often the only path to success, but it takes a long time and requires you to keep an old plan running less than optimally while your best people work on something better. The task is not for the meek. It is for bold and confident professionals who want to see their company achieve its true potential.

I have found that explaining things to stakeholders in these types of terms can often help gain acceptance and participation from those who can make the right decisions and champion the final program. Tearing apart your beautiful Lego building and starting staring with something new can be painful, but the result is something that uses your prior experience and boundless imagination to create something even better.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He 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 a 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: Pay Transparency and the SCARF Hypothesis

Editor's Note:  Some of my favorite Cafe posts over the years have been those tying science - particularly brain science - to the field of rewards.  A great example is this Classic from Stephanie Thomas, where she brings the lessons of neuroscience to the topic of pay transparency.

Everything we do, every thought we've ever had, is produced by the human brain. But exactly how it operates remains one of the biggest unsolved mysteries, and it seems the more we probe its secrets, the more surprises we find.

-Neil deGrasse Tyson 

I'm continually amazed by the things neuroscience is uncovering about our brains. These discoveries are interesting in and of themselves, but many of them have practical implications for the workplace.  I revisited an article about neuroscience and performance management by David Rock, Josh Davis and Elizabeth Jones, and I started thinking about how these insights into brain function might relate to pay transparency. 

Within neuroscience, two dominant themes are emerging: (1) the majority of our social behaviors are driven by our efforts to minimize threats and maximize rewards, (2) our brains treat our social needs much the same way they treat our needs for food and water. Many of our social needs manifest themselves in the workplace, and our behaviors to satisfy these needs, maximize rewards, and minimize threats, are directly observable within organizational life.

David Rock has codified a framework - the SCARF Hypothesis - that argues five aspects of organizational life have a marked impact on we respond. The five aspects of organizational life are:

• Status - the perception of being considered better or worse than others;
• Certainty - the predictability of future events;
• Autonomy - the perceived level of control over one's life;
• Relatedness - the experience of sharing goals with others;
• Fairness - the sense of being treated equitably, especially compared to how others are treated.

I would argue that each of these five aspects is not merely an "extra" or "added bonus" that we would enjoy experiencing in the workplace, but is - consciously or unconsciously - a real need, just like our needs for food and water. 

All of our interactions in the workplace act to either satisfy or deny these five needs. Having a transparent pay process (communicating to employees how compensation decisions are made and providing them with enough information to really understand those decisions) can contribute to satisfying each of these needs:

• Status: In terms of compensation, status can be tricky. A well-designed compensation system should differentiate between employees, providing different rewards for different levels of achievement. In reality, some employees will be better performers than others when objectively measured. Pay process transparency can help to keep the focus on these objective measures, rather than on amorphous or ambiguous rankings based on (in)correct perceptions. If employees understand what objective measures your pay program rewards, then status, as a need, can be re-focused on status relative to objectively measured individual performance toward satisfying performance expectations, rather than on a subjective perception that I received a smaller merit increase than my co-worker because I am subjectively valued by the organization less than my co-worker.  
• Certainty: A transparent pay process helps to manage employee expectations and provides predictability. Having a transparent pay process means that employees understand what is expected of them in order to earn bonuses, merit increases, etc. A little bit of uncertainty can be a good thing. Mild uncertainty triggers a mild threat response and generates just the right amount of dopamine and adrenaline to pique curiosity and motivate individuals to solve problems. Too much uncertainty, however, can generate panic and lead individuals to make bad decisions. Ideally, your employees will experience mild uncertainty about how to achieve what's expected of them, not about what is expected of them or what the pay consequences are of satisfying or not satisfying those expectations. 
• Autonomy: Autonomy and certainty are intertwined; greater autonomy leads to a greater sense of certainty about the future. If your employees do not understand the linkages between performance and compensation, they may feel as though they have no control over what happens to them in terms of their compensation. Without some sense of control over what happens to them, your employees can easily slip into a "flight" response, fleeing your organization in search of opportunities that do provide them with a sense of autonomy. Being transparent about pay can help your employees to see that pay is an output directly related to the inputs of effort and performance they contribute.
• Relatedness: Ideally, all employees should be working toward the overall strategic goals and objectives of the organization. While individual goals may differ, they should all be aligned with organizational strategy to keep everyone moving toward the same things. Being transparent about your pay processes can help employees understand how they each contribute to these strategic objectives, and how those contributions will be rewarded.
• Fairness: If your employees understand how compensation decisions are made, they still may disagree with those decisions, but they are less likely to view them as unfair. Perceptions of fairness are critical; as noted by Rock, "the perception that an event has been unfair generates a strong response in the brain, stirring hostility and undermining trust." If your employees don't perceive that they are treated fairly with respect to compensation decisions, it almost doesn't matter whether you're satisfying your employees' needs for status, certainty, autonomy, and relatedness. The "flight or fight" response will be triggered, and your organization will suffer the consequences of this response in terms of retention and engagement.

Note that all of the above is predicated on the assumption that your compensation decisions are non-arbitrary and based on an articulated set of objective criteria. If your compensation decisions are arbitrary, or you can't articulate the set of objective criteria used in those decisions, you need to address this issue before beginning to think about pay process transparency. 

Taking the time to make sure your employees' SCARFs are organized and addressed with respect to compensation can go a long way in boosting - and maintaining - productivity, engagement and willingness to show organizational commitment.

Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University. She teaches undergraduate and graduate courses on economic theory and labor economics in the College of Arts and Sciences and in Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals. 

 

Cafe Classic: Rewards and the Core Incompetencies of the Corporation

Editor's Note:  This Classic features a rewards-centered riff off an article written by speaker, author and influential business thinker Gary Hamel a few years back about the congenital disabilities of large organizations.  It's interesting to look at it again, given how organizations big and small got the proverbial rug yanked out from under them over the past year.  How well have his conclusions -- and my connection of those conclusions to rewards -- held up through the pandemic and as we look forward?  What would YOU say?

As part of a thought leadership series leading up to the Global Drucker Forum a few years ago, author and noted business thinker Gary Hamel wrote a bitingly ironic HBR post titled The Core Incompetencies of the Corporation.  In it he highlights a sample of "congenital disabilities" that plague large organizations of all types, leaving them disadvantaged in facing the winds of change and creative destruction.

Here's a quick rundown of the three "core incompetencies" Hamel notes, in his words:

Large organizations are inertial. They are frequently caught out by the future and seldom change in the absence of a crisis. Deep change, when it happens, is belated and convulsive, and typically requires an overhaul of the leadership team. Absent the bloodshed, the dynamics of change in the world’s largest companies aren’t much different from what one sees in a poorly-governed, authoritarian regime...

Large organizations are incremental.   Despite their resource advantages, incumbents are seldom the authors of game-changing innovation. It’s not that veteran CEOs discount the value of innovation; rather, they’ve inherited organizational structures and processes that are inherently toxic to break-out thinking and relentless experimentation.

Large organizations are emotionally insipid.  Managers know how to command obedience and diligence, but most are clueless when it comes to galvanizing the sort of volunteerism that animates life on the social web. Initiative, imagination, and passion can’t be commanded—they’re gifts. Every day, employees choose whether to bring those gifts to work or not, and the evidence suggests they usually leave them at home.

Hamel also argues that many of the fixes we toss at these problems -- he names business incubators, online collaboration, idea wikis and design thinking as a few -- are merely tweaks.  Band-Aids and braces. To build organizations that are truly fit for the future requires that we go deeper and address the foundational beliefs and tenets that underlie the structures and drive the behaviors of our organizations.

What does any of this have to do with rewards?  Possibly more than we realize.

An earlier Cafe article explored the notion (backed up by a case study and deep data dive) that organizations become what they reward and that pay is a critical expression of an organization's culture, beliefs and values.  Are the reward practices in our organizations -- particularly some of our larger ones -- reinforcing inertia, incrementalism and insipidity?  While we probably wouldn't use these words in our reward philosophy statements, it may be that these are -- in fact -- a cumulative result of some of our policies and practices.

If everything we do in compensation is communication, what signals do we send when we:

• Deliver sameness in employee rewards through our base salary opportunities, "merit" increases and even incentive pay results?
• Make it comfortable and penalty-free for employees to languish in their roles and decline opportunities to upgrade their skills and capabilities?
• Completely insulate employees from labor market messages about the value of their skillsets, particularly when that value is declining?

I understand that many of us in HR find ourselves torn between the compassion and perceived fairness of spreading reward dollars so that they touch all employees on the one hand and the tough love of using differentiation to communicate and drive the choices and behaviors key to business success on the other.  Ultimately and to paraphrase compensation sages Jay Schuster and Pat Zingheim: The best way to provide a secure future for those in it is through the organization's financial success.

The way we pay has consequences, sometimes enormous ones.  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 hiking and reading in her spare time. Follow her on Twitter at @annbares.

Creative Commons image "Rolling Roadblock" by B4bees

Hashtag Social Media and Rewards

As the war for talent rages on, employers have to leverage all sorts of techniques to reframe their employee value proposition and entice candidates to sign with them.  Likewise standing out as a candidate is not so easy either and herein lies an opportunity…

Used by many daily, for many they have amassed quite the following or number of “likes", while for others it has become their life’s work: I am referring to a small thing called social media. You might have heard about it! In all seriousness, social media’s interactive ability to share information, ideas, career insights, and other expressions via virtual community outlets and networks creates a new medium of talent and organization attraction.

There is value both as a prospective employee and as a recruiting organization to evolve our tactics, from the traditional CV submission and review process to instead tap into the likes of Tik Tok, Instagram, or LinkedIn.  Granted not all industries are cut out (yet) for this level of exposure; the reality is, however, that some are and many more will.

Remote work forced us to reassess our total rewards approach and, as our profession evolves, so shall we reassess our techniques towards talent management.  This is especially true knowing that the workforce will be predominantly millennials in a few short years with generations thereafter rising to employment level quickly.  Gen Z’ers have not seen anything other than interactive-based technologies. 

Knowing what lies ahead and the predictable reality of technologies' influence on work-life, employers should consider the following benefits of social media and how to integrate it into the hiring strategy:

1. For starters, be receptive and open-minded. Accepting different modes of “resumes”, whether a video or a personal website, creates a personable and interactive experience. As an employer it gives you a direct line of sight to the candidate's ability to be creative, their ability to market, be innovative, and to some extent their risk tolerance – it is not easy to put yourself out there.  How a candidate “submits themselves” is an indication of the key characteristics a traditional paper CV will not be able to profile.

2. Candidates are not the only ones interviewing.  Who we are as employers and our appetite to do things differently and evolve with the marketplace is in the spotlight.  Investing in our online presence creates opportunities and increases our breadth to attract from a diverse talent pool.

3. Breaking down the biases.  Systemic biases often exist in our HR practices and processes towards hiring, developing, and promoting talent.  Often our recruitment approaches are institutionally deep routed and unconsciously we may overlook a potential candidate.  Integrating social media presents an opportuning to re-write the playbook and reset the standards and guidelines of how it will impact our recruitment strategies, giving employers a fresh perspective in addressing issues around diversity, equity, and inclusion.

Only time will tell as to whether social media will become a feasible recruitment option, but knowing the trajectory of technology and its influence, I can only imagine that soon enough there will be "an app" for that!

Reena Paul (CCP, GRP) is a Senior Compensation Consultant.  She is passionate about all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client-focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect and contact Reena directly on LinkedIn

Photo by Alexander Shatov by Unsplash

Avoiding Analysis Paralysis

To effectively manage reward programs compensation practitioners and their senior management need to understand how competitive those programs currently are.  In making that determination, though, just how precise does the analysis have to be?  To what lengths should one go to increase the level of exactitude in the analysis, and is that effort worthwhile?  Does the effort to squeeze out greater precision bring more meaningful results?

In other words, what's the additional value of dotting the "I's" and crossing the "T's"?

As compensation professionals will tell you, the competitive “marketplace” for reward program surveys is an imprecise animal, subject to numerous variations and interpretations.

• One survey doesn’t use the same companies as the next survey.  Who do you believe?
• The ability to match job descriptions varies from precise to broadly similar roles.  Strange titles are a constant challenge.
• Surveys provide different mixes of industries, geographies, and revenue, and cannot report on the many non-participating organizations. Rates of organization growth are not reported.
• The use of weighted Average/Mean/Median/50^th percentile formats isn't standardized.
• International surveys often fail to provide enough information, as compared with U.S. surveys.
• The process of completing survey questionnaires is often not as carefully conducted as one would hope (perhaps an understatement).

In addition, the market is a moving target as population changes, organization shifts and changes in employee pay are considered.  This means that you’ll need to be careful of “aging” factors, such as adjusting data from date of collection to the current or some future date.   My practice is to "round" to the nearest 100 units of annual currency.  Is that distorting the data?

Pick a Number?

Do you think that a market rate of $47,570 for a job is an accurate reflection of current trends, or simply an arithmetic average of data that looks precise?  Would you fall on your sword over that figure? 

Using three surveys would likely provide three separate figures.  Let’s say your sources report $45,723, $47,612, and $49,375.  If cost, time, and effort are not factors to consider, then you could keep going, searching for that common denominator.  Purchase another (expensive) survey source.  Double and triple check your job matches.  But do you think that the extra source, the extra time and effort will substantially change your initial analysis, or are you simply looking to protect yourself?   Are you playing a defensive game to divert potential challenge?

For most of us a quick and straightforward analysis suggests that approximately $47,500 is reasonable enough.

While not advocating a sore thumb analysis I do suggest that you use a balance of time, effort and cost when conducting market analysis.  What you really need is to understand the market; that’s the key learning point.  Repetition is sometimes just that, more of the same with little increased value.

And what degree of precision are you being asked to provide?  Are your instructions to feel the pulse of the marketplace, to get a sense of what is being paid out there?  Or do you need a more precise result?  Is your audience demanding more?

Is the Market a Number?

What is that market?  Anything within +5% to -5% of a “market rate” figure is close enough for me.  Others believe that variable should be 10%, but in my view that leaves too wide a range that could distort your intent to provide the so-called “going rate” trend.

Caution:  You can find any number of analysis paralysis jockeys out there who advocate increasingly precise techniques to zero in on what they call your true market rate.  Just remember that many commercial survey vendors have built a business around encouraging organizations to slice and dice whatever information is available, trying to define and refine exactly what a “market” is paying, what jobs are exact matches and after a fashion what numbers you can rely on.

Part of their marketing strategy is to use custom designed evaluation techniques and proprietary job matching systems.  Use of such a strategy effectively marries your organization to the vendor, as one often cannot use proprietary language and techniques (the system) with other survey providers - without the risk of comparing apples and oranges.

The Leadership Perspective

From a senior leadership perspective, do you really need that depth of precision to make a business decision?

I think you don’t.

There's a place for precision, and a place for trends - for a “feel of the pulse.”  Usually, senior management wants to gauge the big picture - the overall strategy and its implementation status - letting professional specialists deal with the tactical matters and details.

Have a care in your efforts to be precise, because when you give senior management too many details they tend to dive in almost as a defense mechanism, as if they are expected to ask questions. Where they might otherwise have nodded their heads at key points in your presentation, you can instead find yourself immersed in detailed analytics that can bog down the decision-making process.

When senior management asks a question, office life becomes an “all hands-on deck” fire drill of employees rushing about to get the answers - to questions that might not have been asked in the first place if you had played your cards right.

Management wants your professional judgment.  They don’t want you to defer opinions to what a survey says.  Use survey data as a backup, as anecdotal information to assist the decision-making process.  Don’t feel that you always need to lead with it.

Standing back and pointing at figures is like leading with your chin in a fight. 

You won't like the results.

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 "Forgetting," by Leeks