Compensation Cafe

Cafe Classic: Faith, Trust and Your Pay Program

Do your employees believe what you say about your pay program?  How do you know?

I've had the chance to work with many organizations that have decent, even quite good, compensation programs and practices in place, but where employees are simply not buying it. They resist "corporate" messages about the pay plans and they invent and spread all manner of rumors about them.

In circumstances where trust issues are focused primarily on compensation (rather than being part and parcel of a larger issue of faith in leadership) and after taking the necessary steps to ensure that the pay program itself isn't necessarily at fault, I find that information - clear, detailed, credible and truthful - can be the compensation or HR professional's best weapon. 

There is often a common thread running through situations like this.  In my experience, communication about the compensation program in these organizations tends to be broad and relatively flavorless.  Buzzwords and platitudes abound; descriptive specifics not so much.  Compensation communication comes off like a sales pitch, and that is the way employees perceive it.  Messages are completely lacking in any of the descriptive detail that might make them believable.

And by descriptive detail, I am not suggesting things like "Jack Brown just got a 10% salary increase, raising his base to $95,000, despite the fact that he was only 'meets' at his last appraisal."

What I am suggesting is that:

Instead of just saying the program is "competitive", tell employees about the market strategy you use in benchmarking, show them the list of surveys you use and explain why each is a good fit, then walk them through how market data is gathered for a sample job.  (This is also a good opportunity to explain to them why you don't use free stuff from the internet.)

Instead of just saying jobs are assigned to salary ranges based on "market and internal equity considerations", walk them through an example of how the market pricing and/or job evaluation process works for a particular job.  Perhaps use this as an opportunity to explain the purpose and use of salary ranges (and hopefully your practice matches the intent here.)

Instead of just saying that every job has a "bonus opportunity", remind them of the objectives of the bonus plan, how it was designed and why, and the purpose of the different mechanics.  Make sure the calculations are clear by going through a couple of "what if" scenarios.

You get the picture.  Specifics.  Truth.  Clarity.

Death by detail?  Perhaps.  Not every employee group wants, needs or will even sit still for this level of detail -- I'll grant you that.  But I have found that spending an hour, or even more, doing this kind of information sharing and straight talking in front of employees who have lost their faith in the program can make a real impact.

That's my experience.  What has yours taught you?

Ann Bares is the Founder and Editor of Compensation Café,  Author of Compensation Force and Partner at 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, reading and hanging out with family in any spare time.

Creative Commons Image "Trust" by Nguyễn Phát

Cafe Classic: Reviving Your Compensation Plan

Editor's Note:  Jacque Vilet shares a Classic story and example for bringing new life to your compensation plan.

I’ve been reading a lot lately about what Compensation will look like in the future and I remembered a project that I had once worked on. It was in Hong Kong --- the Asia Pacific headquarters of a global company. 

Word was the employees were not happy with their pay package.  Some wanted more salary, some more medical, some more vacation, etc.

For example, one single man told me it wasn’t fair that the company decided everything about his package and didn’t ask him what he wanted/didn’t want. He wanted more vacation and would take less salary in order to get it.

I couldn’t see anything unreasonable about his request.  Yes, some companies offered flex benefits --- but this situation included cash compensation as well.

Most companies continue to design traditional programs based on a one-size-fits-all approach. Instead of this, what if companies changed their approach?  What if they handed over control to employees to configure the amount of their own benefits, perks, and cash compensation --- creating a package unique to their own personal situations.

I talked with a random sample of employees --- young, old, single, married with/without children.  This was a diverse group and I could see why their needs/wants might be different.  The recurring theme was that they would like to have some say in how their pay package was structured.

Long story short --- the regional Controller and I calculated the total cost of each employee’s current package.  Then to keep things simple, we gave each one a pie chart with sections apportioned for each pay component and its percentage of the whole pie as well as the cost of each one.

Employees then drew their own pie charts reconfigured to show components they wanted in the future as well as the percentages of each to the total package.   Since they had the total cost of their current package, the total of their new package had to match it. The company wanted employees to have at least some medical and life insurance coverage so there was a minimum level for these benefits that had to be included.  Everything else, the employee decided.

As we went through this process we saw several positives that we hadn’t anticipated.  Getting employees involved accomplished several things:

1)    Employees became aware of the total cost of their package --- not just the cash portion.  Traditional “benefits statements” are fine, but this was different.  Just seeing their package was not as good as knowing they could change it.

2)    They talked at length among themselves about the ramifications of choosing greater/lesser amounts of each available component they could “flex.”

3)    Compensation and benefits became transparent and employees gained a better understanding of how Compensation worked.

The result?  The best communication of compensation and benefits the company could ever have hoped for.

Unsophisticated?  No doubt --- but it was a start. Administrative burden?  The Controller was willing to take on the extra work.  It helped that the number of employees was only ~40.   Best practice?  This became the best practice for THEIR company.

I’m not aware of any formal research that's been done on this approach but is that really important?  If it works, isn’t that the real test?  Besides research studies can’t keep up with the pace of business today.  Companies have to be nimble and quick to change course.  Compensation needs to be too.  Waiting for research to tell you if a practice is OK will leave you behind in the dust.

We have an increasingly diverse and young workforce that has different values and work-life issues.  Getting free Friday lunches is great, but some employees would rather work through lunch in order to leave the office early to spend more time with family.

With that said who can argue with giving employees more control and at the same time making Compensation more transparent and better understood?

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.

Creative Commons image "Revived" by Scott Price

Cafe Classic: A Basic Truth of Compensation Communications

Editor's Note: Margaret O'Hanlon urges us to face up to the truth of pay communication with this Classic post and helpful advice.

Managers are the compensation communicators in your company. Not HR, not Legal, not even the CEO whose job is to explain why your compensation program makes good business sense -- but doesn't have to explain another 3%ish increase to a new parent.

Do your managers have everything they need to make your work successful? After all, you are asking them to finish your compensation communications project for you, and you need them to do it well.

How do managers feel about being the messenger THIS year? Make sure you know or there is no way you can predict how things will turn out.

Have you invested enough time and dollars making the whole compensation communications process easier for them? They are the ones who will go eyeball to eyeball with their employees which means that, in one sense, they are going to the line for HR. Give managers discussion outlines, FAQs that will help them prepare to talk with employees comfortably, in some cases even give them scripts. If your managers get together for calibration meetings, include communications on the agenda and make it easy for the individuals to speak frankly.

How do managers feel about your company's leadership? If there are issues of trust or questions about resources, don't expect managers to hide their feelings. HR can't fix these problems over night, but you should acknowledge that they play into end-of-year discussions. Go out to talk with managers individually. Show that you can be open-minded but still hold them to a standard. This isn't an area where email communications will have any effect.

How do managers feel about your company's pay practices? Do they believe you are paying competitively? Do they know how you go about it? Even if you do pay competitively, once rumors start you can bet that it's going to be difficult to change peoples' minds. Educated managers are unlikely to give rumors any credence, plus they will be able to spot the real problems for you.

Margaret O'Hanlon brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm is re:Think Consulting. 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 everythingiscommunication.com. She is a member of U.S. Masters Swimming.

Cafe Classic: Lights! Camera! Action!!

Editor's Note:  Classic advice from Chuck Csizmar on presenting to senior management and why a picture is worth a thousand words!

When you’re trying to grab the attention of Senior Management, remember that they like a good story, especially one with pictures. 

If you’re addressing your organization's single largest expense, the employee pay programs, then those pictures become charts, graphs and other visual aids that illustrate the presentation points. 

Visuals capture attention and build stronger connections and memories than text or even the spoken word.  Show a picture and the image is locked in, while relying only on text becomes a risk.  The drone of dry prose can grow tedious 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 illustrate current status against objectives; 3) pie charts, tables, even regressed lines that illustrate a story; and even 4) stick figures or other "folksy" characters that integrate humor with your message.

People remember images because they capture the imagination.  They'll have a harder time recalling (and taking to heart) whatever you said or whatever you wrote.  So concentrate on your supportive imagery.

Make the story a short one.  I once worked for a CEO who thought that any compensation proposal could be reduced to a single piece of paper, including 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 old 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 – an illusion - with little results to show for your efforts.

For those of you who have ever been on a successful diet, you likely treated the effort like a planned project.  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.

T o accomplish this you should create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) - and then establish baselines (current state) and targets for each performance indicator.  This key step will help you understand whether your costs are being contained, whether the ROI on employee rewards is at the level your company requires, and where your problem areas are.

Commonly Used HR Metrics:

• Average salary/wage

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

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

• Average performance ratings (latest cycle)

• Average annual pay rise granted for each performance rating

• Count and average of 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 each metric is measurable because guesses don't count.  A compelling argument demands accuracy.

To make these metrics work for you, and to avoid a series of make-work arithmetic exercises that do nothing more than capture minutiae, be certain to measure what's important to your business – not simply what data you can capture.  Make sure the importance of the metric is clear to management (or can be made so).  Management needs to grasp the importance of success, to understand why a metric is important and what achievement would mean.

Once you have the right metrics established (collectively called the “dashboard”) and a baseline in place, you'll readily see where the problems lie.  Then set specific targets going forward to improve on these weak areas, and create a series of 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 itself was rated

• A workforce where key segments are approaching retirement age

• Promotion and “equity” or pay increase "adjustment" activity that overwhelms the merit budget

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

• Any figure that is an unpleasant surprise

When you’re telling a story to management, make it compelling – with facts and visuals that feed off the critical metrics analysis that forms the pulse of your business.  Put a picture in their head. Then bring home the sale by showing how to solve these challenges – 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 "Lights Camera Action" by Maranda Ripperger

Cafe Classic: Pay Communication -- Avoid the Parent Trap

Editor's Note:  Too often, we fall into "parent speak" when responding to employee questions and challenges around their compensation.  Margaret O'Hanlon shares ideas on how to avoid the Parent Trap and other pay communication pitfalls in this Classic Capstone to her series on how to be a better communicator!

We all know the parent mantra:

• I understand this situation far better than you do
• Do what I am telling you, you'll find out it's the best way
• I don't want to hear about it (shorthand for, "You'll realize I'm right once you've done it")

Parents resort to these tactics when time is short and everyday tasks are at hand. However, so much of HR-speak comes off that way, too. And then we wonder why HR communications are unpopular -- a reaction that is especially unnecessary and undermining when it comes to compensation communications. You'd think that we'd get the benefit of the doubt, since the topics that we are talking about are money and rewards, but it's not the case.

Here are some suggestions to break the "parental tone" habit.

Brainstorm a new topic -- what's on employees' minds -- instead of assuming that you already know everything you need to know. Imagine how much you could learn and how much these insights could help everyone prepare for planned HR activities if you held a meeting, invited the right people (including a line advisor, maybe), and free-formed the teams' ideas on today's employees' and managers' thoughts, perceptions, attitudes and challenges. Then break what you find into subgroups -- this Division vs. that; this product area vs. that; new managers vs. experienced managers; and so on. It's easy to see how much richer your communication and implementation plans would be as a result of this conversation. Of course, free forming isn't often a compensation professional's strength, so mix up the group with those who can help you get going.

Recognize that your compensation and performance management software annoys a small or large subset of your employees and managers. It's just a given. Stop acting as if the programmed instructions are enough, thank you very much, that's what we paid the provider for. Admit what the tough spots are and add information in your reminder emails that can help people find their way around them. If you don't know what they are, ask a few managers.

Push your communications one or two notches up higher on the transparency continuum. Again with the meetings! But today, this really can't be overlooked. The HR team should create this challenge for themselves, develop a contract among themselves to make real progress and determine a measure or two to hold themselves accountable.

What is the hardest thing that you're asking managers to do this year? Even if it hasn't changed from last year, plan how you can support them better, so they will be more successful and/or less stressed this year.

Has anyone ever used a hotline during performance review or compensation discussion time frames? I know it sounds dicey, but in the right circumstances and by promoting it as a coaching option, it could be considered as a way of diminishing the "I don't want to hear about it" tone to HR's performance management and compensation end-of-year activities.

You know you're good, but are you a great communicator? This is Episode 5 in a series on improving employee loyalty through better, uncomplicated end-of-year compensation and performance management communications
Episode 1 = Expect More (From Yourself) This Year
Episode 2 = Value End-of-Year Implementation--How to Make It Important, Worthwhile and Useful to help you get started
Episode 3 =Tips for Improving Manager Meetings to give you new strategies
Episode 4 =The Tip That Will Change People's Minds

Margaret O'Hanlon brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm is re:Think Consulting. 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 everythingiscommunication.com. She is a member of U.S. Masters Swimming.

Cafe Classic: Aligning Incentives, Performance Metrics and Strategic Objectives

Editor's Note:  What can an experiment involving singing, dancing and posing teach us about performance pay?  Plenty ... as this Classic from Stephanie Thomas reveals!

How clear is the line of sight between your performance pay programs, strategically linked performance metrics and the organizational strategy? Do your managers see these performance measures as they really are (imperfect proxies for larger, intangible strategic constructs), or do they focus on the performance measures themselves as the ultimate goals?

Let's say that one of Company X's strategic objectives is to maintain its market share. This strategic objective is translated into tactical goals, one of which is retaining current customers. Assessing managers' performance in supporting the overall strategic objective of maintaining market share can be done different ways, but let's assume that Company X focuses solely on the tactical goal of retaining current customers and evaluates managers' performance through a customer satisfaction survey. Managers will receive bonuses tied directly to their survey scores.

Will Company X's managers see through the survey scores, understanding that the overall strategic objective is maintenance of market share, and ensure all their decisions are consistent with this objective? Or will managers act exclusively to maximize survey scores and paychecks, losing sight of the overall strategic objective of the firm? 

If managers focus solely on the metric, they exhibit what is known as surrogation. Choi, Hecht and Tayler describe surrogation as the situation arising when managers "fail to fully appreciate the fact that [performance] measures are merely representations of the true constructs of interest, ultimately acting as if the imperfect measures are the constructs of interest"("Lost In Translation: The Effects of Incentive Compensation on Strategy Surrogation",The Accounting Review, Vol. 87, No 4, pp. 1135-1163). Surrogation can hinder managers' ability to make decisions and take actions that are consistent with organizational strategy. 

Unfortunately, using performance pay linked to a strategically linked performance metric increases managers' propensity to exhibit surrogation. The way in which performance pay affects performance is complex and there are a variety of mechanisms in play. However, a substantial amount of research suggests that incentive pay has attention-directing effects that influence an employee's experience with performance measures. In their paper, the authors explore these attention-directing affects and address the question of whether using multiple compensated performance metrics, rather than one compensated metric, will reduce the problem of surrogation and help keep the organizational objective clearly in managers' view.

The authors design an interesting laboratory experiment to examine these hypotheses. Graduate students at highly ranked U.S. business schools were asked to create a virtual character in the computer game Spore according to the following instructions: design a creature that can socialize with other life forms such that it will become the dominant species on the planet. 

Within the game, four "traits" influence a creature's ability to socialize: sing, dance, charm and pose. Participants were informed that all four traits were equally important in a creature's ability to socialize, and were asked to keep this in mind when designing creatures.

All participants received compensation based on a post-experimental assessment of their creature's ability to achieve global domination via socialization. The top performer received $20, the second-best performer received $18, and so on. In addition, a bonus was awarded based on specific performance metrics. One group of participants (single-measure-compensation participants) received a bonus based on the creature's ability to sing: they received an additional $2 per level of "sing ability." For example, a creature with a sing ability of 4 would generate an $8 bonus. The other group (multiple-measure-compensation participants) received a bonus based on the creature's ability to sing, dance and charm" they received an addition $1 per level of sing ability, dance ability and charm ability. For example, a creature with level 3 sing, dance and charm abilities would generate a $9 bonus.

The results of this experiment are not surprising. The single-measure-compensation participants constructed creatures with higher levels of the sing ability, at the expense of the other, equally important, socialization abilities. Their creatures were less successful in achieving the overall objective of domination via socialization. This is exactly what we would expect if the participants were engaging in surrogation. Surrogation among the multiple-measure-compensation participants was statistically significantly less than among the single-measure-compensation participants, and their creatures were more successful at achieving domination through socialization.

At the end of the day, this experiment empirically confirms what many of us already know: people do what you pay them to do. When designing performance pay systems, make sure that the attention-directing effects of incentives are directing attention to the achievement of the overall strategic objectives of the organization, not just to singing, dancing and charming.

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. 

Image courtesy of Electronic Arts

Cafe Classic: Before You Link Pay to ANYTHING...

Editor's Note: Sometimes the best advice on pay comes from outside our profession.  Today's Classic post serves as Exhibit A.

Rob Markey of Bain & Company's global Customer Strategy and Marketing practice wrote a great "series" of HBR posts awhile back on the perils of linking pay to customer feedback (The Dangers of Linking Pay to Customer Feedback and Before You Link Pay to Customer Feedback).  As any of us who've considered using customer feedback metrics in incentive design know, this can be a potential minefield.  Markey's cautionary advice on pay linkage is well written and worth our consideration beyond the boundaries of customer feedback metrics ... before we link ANYTHING to pay.

With that in mind, Iet's consider his five essentials - preconditions for trust and credibility - in the context of broader compensation design:

Essential #1: Truly reliable feedback and metrics.  If your metrics aren't trustworthy, if they vary widely from one time period or unit to another and you don't know why, your compensation system won't be trustworthy either.  This "essential" has obvious application to any metrics we might consider tying to pay.  Markey provides some great suggestions for digging into prospective metrics to assess their viability with questions like is the sample controlled and stable? and are response rates high enough to reduce responder bias?

Essential #2: A clear link to financial and strategic outcomes.  Your metrics must correlate with financial and strategic goals.  I've posted before about the importance of grounding incentive design in value creation.  Markey makes the same point here: Without a confirmed link between your selected incentive metrics and business outcomes, your incentive system won't last long.

Essential #3: Processes and tools for understanding root causes.  Markey uses the example of a company which began linking improvement in customer feedback scores to executive compensation before it had developed the discipline and processes for truly understanding those scores.  The company's managers - understandably - felt helpless and frustrated.  This is perhaps our most common mistake with incentive plan development, one that critics like Alfie Kohn and Dan Pink nail us on for good reason: throwing incentives at a problem before/without understanding or providing the tools to deal with its root causes.

Essential #4:  Organized learning.  The root cause discipline noted in #3 above must be supplemented with the means and the leadership support for learning and improvement.  Again, often an area where we are at fault where we try to implement incentives in lieu of learning and development(I've seen it tried and I'll bet you have, too).

Essential #5:  Repeated communication.  Why, Markey asks, do so many leadership teams spend countless hours devising the details of incentive systems and then under-communicate their intent?  Amen.  Although, as my Cafe colleague Margaret O'Hanlon and I have both noted in earlier posts (mine here, Margaret's there), effective communication in this age of information overload is more about creating patterns than repeating messages. 

Sometimes our best advice comes from outside the profession.

Ann Bares is the Founder and Editor of Compensation Café,  Author of Compensation Force and Partner at 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, reading and hanging out with family in any spare time. 

Image courtesy of seo.com

Speaking of Performance Reviews

These final days of the new year approaching is a metamorphosis of old and new.  It is significant as it creates that one defining moment each year when we reflect, revaluate, and re-set, or (simply put) conduct the annual performance review.  This is a typical process adopted by most organizations and, for some, seen as another administrative task, begging for a checkmark response.  Despite whatever internal performance management regimen is in place, it takes a personal and vested interest between a leader and subordinate to conduct a review that is meaningful, productive, and hopefully inspiring.

The rapid evolution of where and how work is done leaves moments of actual interactions more or less fleeting.  This year’s impending discussion is the one instance to uncover and level up on what worked, what didn’t, and how to effectively improve and settle into another renaissance year.  I prefer a simple approach, sticking to the facts, the objectives, and speaking candidly.  With that in mind, I give you my “SPEAK” acronym – five pointers to consider when having your next performance conversation:

S – Be specific.  Discuss actual examples that describe scenarios on which performance is being measured.  Having illustrative cases makes the behavior and evaluation more tangible. Specific events and situations should be relevant to the recipient, not a comparison or a conversation of others.  Document examples throughout the year, so you can easily draw upon them during next year’s review meeting.

P – Point of view.  These conversations are twofold, as colleagues you equally deserve and play a participative role in the conversation.  Allowing enough opportunity to present your perspectives will be instrumental in understanding the context and overall construct of what each participant experienced.  This cannot be more true than now when, having gone through a pandemic, our personal and work lives quite literally flipped more times than once.

E – Lead with empathy.  Empathy became somewhat of an HR “buzzword” this year.  It was a call to action by management to elevate their leadership style with an increased aptitude towards emotional intelligence.  Dissecting someone’s ability is awkward and already a sensitive topic to pick apart.  To ease the emotions, create a space (remote or in-person) that is inviting and lends itself to be engaging, comforting, and leading towards productive critique.

A – Organization alignment.  As a people leader, you have the responsibility to create a direct line of sight for your employees.  Quite often, frontline staff find themselves too far removed and or lack the understanding of corporate measures, KPI’s and objectives.  This lack of understanding affects engagement, sense of purpose and hinders the perception of what one’s contributions would be towards business success.  Alignment requires leadership to set out clear directives, which link performance to desired expectations and overall objectives.

K – Knowing the move forward.  Having the knowledge of what is to come in the days or year ahead is a means of setting one up for success.  Dispel any sense of ambiguity by taking the final moments of the conversation to debrief and establish the next steps. Whether this means setting up one-on-one reoccurring meetings, officially signing off on this year’s review, or confirming next year’s goals, knowing each's expectations of the other ensures a fair chance of starting the new year on the right foot!

Regardless of the connotation performance reviews tend to get, it's really what you make of it.  Speak with conviction, purpose, and the right intentions and one can only hope that the results too shall follow. 

What tips do you have when leading into performance reviews?

Reena Paul (CCP, GRP) works as 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 with Reena directly on  LinkedIn. 

Image source: iStock image with credit to Devrimb.

Four Compensation Predictions for 2022

This is the thirteenth year I have written a post during the last week of the year. I seldom make predictions for an upcoming year because compensation generally evolves so slowly that any real changes take several years to come to fruition. As we head into 2022, I am going to break that tradition and make a few predictions. I think we have a unique opportunity in front of us and many compensation professionals will relish the challenge.

1. Base pay increases in many industries will be far higher than we have planned.
   if you have planned a 4% budget for 2022 and use a lag, or lead/lag, strategy, please expect to lag from very early in the year. The market is unlikely to cool. Executives are being held to high standards when it comes to growth. Investors have put a ton of money into the market. All of these will factor into increases that will continue to rapidly outpace what has become the 3% norm for the past decade and beyond.
2. Survey providers will be pressured, and perhaps forced, to address the inaccuracy of LTI data in surveys.
   This is especially true in private company data, but expect to see more demand for global granularity, award details like vesting and performance criteria, and better explanations of how values were determined. This is a weak point in the world of compensation and companies are rightfully impatient to see better data.
3. Survey providers will begin categorizing positions into “onsite”, “hybrid”, and “remote”. Survey data without this level of specificity is putting every competitive company at risk. Expect to see the first “pulse” or “spot” surveys on this topic before the end of Q3. Expect this to be a normal part of survey submissions before the end of 2022.
4. Expect to see more companies visibly break the Base/STI/LTI paradigm that has dominated compensation philosophies for 15 or 20 years. At some point, you cannot differentiate your offers with just a bit more base pay. Short-term incentives will likely become shorter to address that speed with which pay is changing. LTI programs are already changing. Leading-edge companies explored more new vesting schedules and LTI plan design elements in 2021 than in any year in recent memory. This information will become more well-known and inspire hordes of other companies to move away from the lock-step adherence to stock options with a 4-year vesting schedule or RSUs that are similarly designed. If the long-time programs worked as advertised our ability to attract people would be higher and our turnover would be lower. It’s time for a change.

I am sure we will see other changes, just like I am sure at least one of the above will prove to be completely wrong. 2022 is sure to be another interesting year. In 2020 we just did our best to react to a world that became almost instantly unfamiliar. In 2021 we weathered a push for hiring unlike any year in recent memory. In 2022, we will get our feet underneath us, gather up our balance and leap forward into a new approach to pay that may provide a foundation for the next 10 years. There is no reason to wait. The future is yours to create.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is 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.

12 Days of Total Rewards Christmas Cheer!

In keeping with the holiday spirit upon us, I figured when better than now, to take on a holiday classic and put a total rewards spin to it?  Stated below is the "total rewards" rendition of the 12 days of Christmas, capturing the essentials any new employee should expect of their total rewards package offering.

On the first day of Christmas, my total rewards package gave to me, one competitive base pay to meet my essential needs.

On the second day of Christmas, my total rewards package gave to me, a double-booked greet and meet between my leader and department VP.

On the third day of Christmas, my total rewards package gave to me, incentive plan eligibility to achieve thrice targets; corporately, as a team, and individually.

On the fourth day of Christmas, my total rewards package gave to me, four alarming notifications, calling upon my enrollment to begin my retirement savings.

On the fifth day of Christmas, my total wards package gave to me, access to flexible benefits, rooted in meeting my (1) financial, (2) social, (3) physical, (4) mental, and overall (5) well-being.

On the sixth day of Christmas, my total rewards package gave to me, six laying months of foundational onboarding.

On the seventh day of Christmas, my total rewards package gave to me, seven e-learning courses helping me progress professionally.

On the eighth day of Christmas, my total rewards package gave to me, eight essential documents, requiring my review, acceptance, corporate-wide compliance, and official signing.

On the ninth day of Christmas, my total rewards package gave to me, nine-course completion opportunities to achieve my CCP (assuming this is a Canadian Total Rewards Professional!)

On the tenth day of Christmas, my total rewards package gave to me, ten leaping days, hours and, or minutes totaling all the time saved while working remotely.

On the eleventh day of Christmas, my total rewards package gave to me, eleven piping accolades for performing exceptionally.

On the twelfth day of Christmas, my total rewards package gave to me, a friendly reminder that working here equals 12 months a year to be authentically me!

Here’s hoping that we take the time to value each other’s contributions and continue to bring each other up both professionally and personally.  By creating inclusive workplaces, and fostering employee diversity and engagement we become one step closer towards building rewarding  work places and cultures. Wishing you all a very happy holiday season this year.

Reena Paul (CCP, GRP) works as 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 with Reena directly on  LinkedIn. 

Image source: iStock image with credit to Cloris Ying.