Compensation Cafe

Cafe Classic: Encouraging and Rewarding Teamness

Editor's Note: As we embrace and incorporate, analytics, AI and machine learning into more parts of managing the human work experience, have we given sufficient attention and emphasis to the important of teamness?  A good time to revisit a Classic question.

Should "making teams better" be our target performance analytics?

Fresh from the annual MIT Sloan Sports Analytics Conference, HBR blogger and MIT Research Fellow Michael Schrage notes that one of the top themes of the event was how to move beyond the Moneyball-like era of predicting and assessing individual performance and focusing on teamness.

More quantitative attention is being paid to how well players improve the in-game performances of their teammates. Are there particular game situations where their positive—or negative—influence is statistically pronounced? Can that impact be meaningfully correlated with psychological attributes or other behavioral characteristics? Indeed, how can the coaches improve the TQ—Teamness Quotient—of their players’ performances?

Or, as former Chicago Bulls coach Phil Jackson puts it: “The next step in analytics will be how to build chemistry.”

Not surprisingly, MoneyBall author Michael Lewis already had a bead on this teamness phenomenon back in 2010, when he wrote The No-Stats All-Star for the New York Times.  The article featured NBA player Shane Battier of the Houston Rockets, who presented (as Lewis pointed out) an intriguing statistical anomaly.  "His greatness is not marked in box scores or at slam-dunk contests, but on the court Shane Battier makes his team better, often much better, and his opponents worse, often much worse."

From the article:

It was, and is, far easier to spot what Battier doesn’t do than what he does. His conventional statistics are unremarkable: he doesn’t score many points, snag many rebounds, block many shots, steal many balls or dish out many assists.  ...

He may not grab huge numbers of rebounds, but he has an uncanny ability to improve his teammates’ rebounding. He doesn’t shoot much, but when he does, he takes only the most efficient shots. He also has a knack for getting the ball to teammates who are in a position to do the same, and he commits few turnovers.

When it came out, the article prompted some interesting conversation around our dinner table.  My husband Keith worked with Lewis during his Liar's Poker days at Salomon Brothers and also coached youth hockey for nearly two decades.  The Battier story had a parallel in Keith's coaching career, where he realized early on that the key statistics for his players were not "goals" or "assists" but rather their "plus-minus."  Individual players' plus-minus stats get increased by one every time their team scores an even-strength or shorthanded goal while they are on the ice and decreased by one every time their team allows an even-strength or shorthanded goal while they are on the ice.  As Keith will point out, it was the best metric for how an individual player really contributes to the success of the overall team.

As data and analytics bring increasing sophistication to our understanding of employee and organizational performance, will we be able to identify the plus-minus statistics for our teams?  Will we discover metrics that capture the essence of successful team chemistry and provide insights into which individuals and efforts (while seemingly unremarkable when measured alone) help make the team and the organization better by their mere presence in the game?

And - perhaps most important of all - having quantified it, will we be able to encourage and reward teamness without undermining and ultimately destroying it?

Creative Commons image "2013 01 18 McFarland youth Hockey at UW game (3)" by Elliott Connor Photography

Focus Group Check In

Historically, Human Resources have had an on-again, off-again relationship with focus groups. We haul the methodology out for diverse reasons--to test a new incentive idea, find out what employees mean by competitive pay, learn why employees feel they are being paid unfairly and so on. In most organizations, there is no regular schedule and no one who quality checks the way we go about them.

But this informal situation may no longer suit practitioners who live in the presence of HR and employee analytics. We are leaning on analytics more and more in our operations. If the methodologies are understood, funded and staffed well, we are producing statistical reports on correlation and causation. Answering questions in detail that we often speculate about like: "How do we measure pay equity?" "What factors influence decisions to resign?" "Has the new product rollout affected the number of promotions?"

These research practices are far more disciplined and professional than the focus groups we have leaned on.

While focus groups are a type of research, they do not have the power of analytics. Focus groups are considered descriptive research. They can be designed to provide systematic information gathering, but HR rarely works on that scale. Typically we do as few focus groups as possible. Random selection is translated into: whoever is available at the chosen time. As a result, our findings are interesting but rarely reliably representative of our employee population.

I think it's time to clean up our act. Focus groups, run well, can have amazing impact on the participants. I've also seen the results -- employee quotes and emotions -- have far greater impact than data on executive groups. And focus group findings are especially helpful in crafting new plan design and employee communications. Let's not run the risk of having them phased out, because we would lose a valuable source of listening, gaining insight and building employee goodwill.

We can improve our techniques to better align with the discipline of analytics. Start by making sure that we have a statistically representative selection of participants. (If you're not sure how to do this, Google can help -- so can the new employee you hired for analytics!) This will typically involve larger numbers of focus groups than in the past, but it will make our practices more rigorous. And, yes, we will hear the same comments repeated, but that will just strengthen our findings.

Once we have decided how many employees we need, select the participants randomly. Does the sample align with the demographics of your employee population? If not, randomly select replacements to round out the sample.

Make sure the findings can be compared across groups by organizing the implementation to emphasize consistency (so the results can be credibly grouped and compared). That means using the same introduction, the same discussion questions and the same conversation prompts in every group.

SOME data comes in handy but GOOD data can be used to make decisions. The era of data-based insights into the impact of HR practices is upon us. But this doesn't mean that in-person listening doesn't have a continuing role to play. And who knows, if you improve your focus group practices, you might earn a bigger role in HR and employee analytics conversations.

Margaret O'Hanlon 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 everythingiscommunication.com.

What's That in US Dollars?

It's human nature to look for simple solutions when faced with perplexing problems.  Simple answers avoid confusion, keep you “on message” and help (you think) create greater employee awareness and appreciation of programs and policies.   It used to be called “pushing the EASY button,” but now we call that effort “transparency.” However, when you're dealing with the diversity and complexity of international compensation it's just not going to be 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 is no cookie cutter out there.

Perhaps because of its long history of isolationist tendencies, or perhaps it's due to 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.

“Why can’t we do it our way?”

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. Plus, you’ll be caught in a crossfire between uncontrolled over/under spending and wasting money.

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

"We pay $60,000 for the job; what's that in Euros"?  Or worse . . ..

"When we convert our UK employee 's pay to U.S. dollars their pay 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 still reported in only 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, the Company is 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 could not (should not) attempt to 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, to remind decision-makers that apples are not oranges.  That there is no universal fruit.

That there is no series of formulae to cover every country on the planet. Because a formula used for the U.K./U.S. would not be appropriate anywhere else.  And legislative, competitive, and financial issues are always evolving in countries in all directions. What happens in the U.S. stays in the U.S.

To operate successfully on a global basis management needs to understand, to genuinely 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 overspend or under spend your reward dollars.  Either result should be avoided.

So, when the question comes up, and it will, “What’s that in USD?” do not go there.

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 "Decisions, decisions," by torbakhopper

Cafe Classic: Strategic Job Descriptions Anyone?

Editor's Note: Can job descriptions and other tools be refined to signal key behaviors for improving organizational health?  In this Classic post, Margaret O'Hanlon shares interesting research with intriguing potential for HR leaders and professionals.

What if we could help managers focus on select leadership behaviors singled out to improve our organization's health? That's right. Instead of roaming through the lengthy list of things that "effective" leaders do, we could tell our managers which practices would produce the best outcomes, given our organization's challenges. Wouldn't you use that information to define job expectations, craft MBOs and so on, so your HR practices metamorphosize into the strategic business practices with predictable outcomes that we all want to deliver?

It turns out that McKinsey & Company has research findings that can lead us to that level of effectiveness. While manager responsibilities are wildly complex, it turns out that analyzing their importance in relation to an organization's health provides much more practical insight. 

Consider the broad categories of organizational health used in the analysis. Is your company digging out of a serious difficulty? Or, on the opposite end of the continuum, does your organization belong in the elite class of business performers that far exceed their competitors' results? Then consider the performance level in the middle of the continuum, where more organizations' performance would be classified -- moving up, but not performing at full potential.

McKinsey has isolated the manager behaviors that can transition your company from its present state to the next stronger, more effective level.

This clarity is especially valuable because organizational health shifts over time and we are constantly asking managers to adapt. As the authors point out, "Effective situational leadership adapts to these changes [in organizational circumstances] by identifying and marshaling the kinds of behavior needed to transition a company from its present state to a stronger, healthier one."

You need to read the article, study the research and so on -- nothing this important is as simple as this looks. Nonetheless, I hope the graphic gets your attention the way it got mine.

In overview, there are baseline manager behaviors that are essential in any circumstance. (Even this insight is valuable, by the way, since we typically don't recruit managers for these behaviors, but for more operational ones.) Then, there are a "staircase" of behaviors that will lift an organization from one level of organizational health to the next. "For people seeking to lead companies effectively and for organizations seeking to develop managers who can deploy different kinds of leadership behavior when appropriate, recognizing and responding to a company's health is far more important than following scripts written by or about great leaders."

Notice the insights that HR can use to help line managers deploy to achieve results. Managers who are working in an organization that is digging out of a difficult situation are going to help move things along if they streamline their priorities to focus on problem solving, fact-based decisions and the ability to roll with the punches (and learn along the way). Managers whose organizations have moved to a better, but still less than optimal performance level, will have impact when they balance a results-focus with team collaboration, speed and agility. Managers in "elite" organizations that have achieved reliably outstanding operations can impact organizational performance the most by motivating and coaching their team members.

Odds are, we in HR can have real impact on business performance by looking more deeply into these findings and using them to educate managers and executives. Alert and caution! Don't use guesswork to decide your organization's current functional level. " . . . we find that leading executives typically have more favorable views of its [the organization's] health that do its line workers -- who are, after all, much closer to the true center of gravity."

Now there's a topic that HR already has a world of data on!

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 everythingiscommunication.com.

SPAC Attack – 5 Critical Equity Compensation Issues

SPACs are going to be here for a while. I guess that means it’s time for all of us to learn what that means to compensation professionals. In a recent post I explained the basics of a SPAC, or Blank Check transaction, and emphasized why this recent phenomenon has received so much press (hint, it’s the money.) In my next few posts, I want to drill into some key considerations for compensation and HR professionals. Since I started my career working with equity compensation plans, it seems right that it's where I will also start this series of posts.

Let’s start with a basic fact. When it comes to equity compensation, nearly everything will change. Your company will literally become a new company! This means everything related to your equity compensation will need to be converted or grandfathered, and it’s almost always the former. So, let’s dig in a bit

1. Your general approach to equity compensation will need to change
   Equity compensation for publicly traded companies requires a new frame of mind. Legacy outstanding equity will magically become tradeable. Grants that you viewed as motivating and retentive may become big-ticket ATMs. You will find that there is a new expectation for new grants on an annual basis. Plans that focused on the long-term holding of shares will need to address the easy ability to sell shares. The list goes on and can be overwhelming. Many companies work more on equity in the several months of a SPAC transaction than they did in the prior several years. And this all will happen while you are working on other, possibly more critical, projects!
2. How you use equity for executive compensation will need to change
   Your equity compensation plan practices and history will be disclosed to the world. Weird secret grants become hard to hide. Your peers are suddenly other publicly traded companies. Your grants will be scrutinized by people you have never met. You will learn who Glass Lewis and ISS are. It’s a lot.
3. It’s probably time to get an Employee Stock Purchase Plan (ESPP) into the mix
   ESPPs are like magic candy for compensation professionals. They provide a unique blend of attraction, motivation, retention, and engagement in a single package that your employees will love. But they are also the equity compensation with the most bells and whistles. This means learning a bunch of new things, then quickly teaching them to your staff. Most important? You really want your new ESPP to launch simultaneously with the SPAC. This requires a sprint to get things right.
4. You need to select and implement new vendors…fast
   Your pre-public stock administration system may, or may not, be able to work in a publicly-traded world (assume it won’t work great.) You will need to engage with a stockbroker or two and arrange to have them support executive and employee transactions. Your stock transactions will be managed by an external transfer agent. All of this requires demos, contracts, and the establishment and documentation of entirely new processes.
5. The data clean-up!
   This can be a doozy. I will cover just one of the many critical tasks. Your company’s stock will go through a conversion to bring your stock price in line with the SPAC’s stock price. SPACs normally start at $10, so you will need to do a forward or reverse split on all of your equity before the transaction occurs. The better stock administration systems handle this fairly well (but don’t assume yours is a “better” system). Even when the math is done perfectly, the communications can be a bear.
   If your stock price is $2 before the deal, you need to get the price to $10. To do this, you need to reduce the number of shares outstanding by 500%. This means a grant of 1000 shares will become a grant of 200 shares, and a grant price of $0.84 per share will become $4.20. Fewer shares, higher price. You can imagine how confused people will be. Woohoo! If you are lucky, your current stock price will be higher than $10. In this case, the math goes the other direction. Most people are excited about more shares at a lower strike price!

This list is by no means exhaustive. In fact, it barely scratches the surface of equity compensation in a transaction. Over the new few posts, I will try and cover other “big ticket” topics for compensation professionals. Of course, you can always contact me directly if you have questions. Good luck on the wild ride!

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.

THE SPAC ATTACK

Those of you working at “pre-IPO” companies need to learn more about Special Purpose Acquisition Companies (SPACs). SPAC s are also known as “Blank Check” or “Reverse Merger” companies and provide a rapid path to becoming a publicly-traded company. This can create amazing opportunities, but not without the cost of significant effort for those involved.

What the heck is a SPAC transaction? Basically, some investors form a company (Company A) with the express purpose of collecting funds that will be used to acquire another company (Company B). The team of Company A is made up of people with the experience and expertise to find and acquire companies with significant untapped potential. After forming Company A they sell shares in a public offering and raise funds for a future merger or acquisition.

Company A then puts the money from their own IPO in a trust to find, woo, and pay for the acquisition of Company B. Normally, they must get all of this done in 18-24 months. Company A also does a separate funding round, selling warrants or units, to raise additional funds to cover the cost of their IPO and other costs like those related to finding a target company.

Finally, Company A finds Company B and works to acquire it. Once acquired Company B typically becomes the “main” company under the shell left by the already publicly-traded Company A. Presto Magic, Company B is now a publicly-traded company with all of the benefits and challenges that entails!

It sounds easy and elegant, but for finance, legal, HR, and compensation professionals the process can be overwhelming. Traditionally, I advise companies to begin preparing for an IPO at least 18 months in advance of the expected event and begin executing on their project plan 12 months in advance. With a SPAC you may have only 30 days to prepare and 3 months to execute. Yes, your to-do list is basically the same in both cases!

In a best-case scenario, you may have 6 months to build everything you need to be a successful publicly-traded company. This includes pay philosophies, reporting capabilities, transactional support, and market data to survive the scrutiny of investors in the public market. Your finance and legal teams will also have their own daunting list.

Your peers will magically transform from companies that may be known only to you, to those whose names are daily headlines. Your compensation philosophy must change to keep you competitive in this new market. Your broad-based market data will change from pre-IPO and private company data sets to more expensive and expansive survey data for public companies. Your executive compensation must be benchmarked against publicly-disclosed SEC or SEDAR filings. Your equity compensation programs must fundamentally change to allow for transactions on the open market. You will likely want to consider rolling out an Employee Stock Purchase Plan (ESPP) in coordination with your first trading day. The list goes on (and on=, and on). Luckily for you, this article must be kept short. You can always contact me directly for additional information, or just to chat about your transaction. I am sure I will also be writing follow-up articles over the next few months.

Why, you may ask, is this such an important topic now when you have heard so little of it in the past? Well, in 2016 there were 4 SPAC IBCs (Initial Business Combinations). In 2019 there were 28. In 2020 there were 64, and 2021 is looking like it will be an even bigger year. There were more than 240 SPAC IPOs in 2020. Each of these “blank check” companies is on the hunt for their own “Company B” to bring to the public market before the end of 2022! Three years from now this wild phase may have fizzled, but for the next year or two it’s looking like SPACs must be top of mind for pre-IPO companies.

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.

Change is Power

ERI recently published the results from a survey on the impact of COVID-19 on compensation. It was the first report I have seen that showed some actual pay movement as a result of the ongoing pandemic. More telling were the more than 65% of companies who were either progressing with the plans they made at the beginning of 2020 or had not yet made any decision on what to do.

We have entered the second week of November 2020. If you throw out the two-weeks of holidays for Thanksgiving and Christmas/New Year, we have about 5 weeks to prepare for 2021. Not having a plan, is a great way to lose in the battle for talent and success. You seldom watch movies or read stories about the times people did absolutely nothing and somehow met their goals. This is because it almost never happens.

Change is your competitive advantage when others are paralyzed by indecision. Action is your secret sauce for success when those around you are simply too lazy to do something different. Whether we like it or not, the world is a much different place than it was just a year ago. We will never fully return to those heady, coronavirus-free, yesterdays.

Remote work is here to stay. What that means for your company is probably unique, but change is a must. Pay will change. Work-life balance will adjust. Ignoring this will not make it go away.

Unemployment will remain higher than it has been for several years. This tends to put downward pressure on pay.  It may also mean a greater talent pool for some industries. Staying ahead of the market may be easier and allow you to hire materially better talent without spending a fortune.

Now is the time to fix your worst incentive plans, or adjust pay structures that have crumbled under the weight of furloughs, lay-offs, remote work, shrinkage, growth, or any other of the myriad of issues that are being faced in business. Yes, you are tired. But so are your competitors. The best time to win is when they can’t respond. In a world where increases have been in low single digits for a decade, it doesn’t take too much to set your company above the crowd.

Change will happen. The question is whether it will happen TO you, or BECAUSE of you. The former isn’t much fun and the latter puts you in control. As you move into finalizing things for 2021, consider one or two big things that will allow you and your company to set yourselves apart. When everyone else is paralyzed, it won’t take much to do something that makes difference.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He has convinced himself he is a “Compensation Futurist” and 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.

Essential Workers, Higher Wages, Value Creation and Work Design

The path to value creation, according to a number of private equity executives (like the one who wrote this Harvard Business Review article), is through return on invested capital (ROIC).  Indeed, the best way to create real value in a business -- this author says -- is by making smart capital investment decisions.  And yet, at least according to his data, few CEOs are skilled at capital allocation.

This should interest us, as HR and reward professionals, for a few reasons.  First of all, the obvious one: that the biggest category of investment for most organizations is employee compensation.  Secondly, because proactively managing that investment to maximize return -- and create real value -- ought to be top of mind for any of us who fancy ourselves true "business partners."  Thirdly, because it bears directly on a category of compensation topics that has captured a lot of attention over the last several years and renewed interests more recently as a result of the COVID pandemic. In this topical category I would include the ideas of fair and just wages, living wages, the attention to minimum wage laws and (last but by no means least) the renewed appreciation for essential workers we all gained through the past many months.  As organizations and particularly essential service providers struggled to stay open during the early months of the pandemic, the criticality and vulnerability of front-line (often hourly) workers became obvious.  This prompted many immediate measures, including hazard and premium pay implementation.  It also raised longer term/bigger picture questions about the distribution of reward dollars and greater capital investment in this vital segment of the workforce.

Some perspective.  A number of organizations made press in the past 5 years or so for the decision to voluntarily raise the minimum wages of their employees.  In addition to Starbucks, Walmart and Gap, Aetna drew attention for the distinction among this group of being a financial services firm rather than a retail enterprise.  While there are a lot of things to like about these initiatives, one of the biggest positives from my point of view is that because these decisions were self-imposed and (presumably) a product of internal analysis and consideration they are more likely be sustainable over the longer term.  That isn't to say that there will be no unintended consequences to offset the positives, as these actions like these ripple through the labor market.  Our economic system is way too complex and has too many levers being jiggled to assume otherwise.  There seems a greater likelihood, though, that they can be successfully absorbed, managed and even turned to advantage by the "host" organizations.  Because ultimately, a move to disrupt the cost structure of an organization is more likely to succeed if it is to the advantage (or at minimum, not to the disadvantage) of all stakeholders.  This includes but is not limited to all members of the workforce, owners/investors and customers.  All these are seeking their own returns, intangible as well as tangible, and their expectations cannot easily be ignored.

Many will reference the efficiency wage theory -- the notion that simply paying workers a higher wage should lead to increased productivity -- as the rationale for these wage-boosting decisions.  Perhaps this can be banked on, but I would submit that the astute among this vanguard (and I suspect they are all astute) have actively considered and are pursuing steps to maximize the positive return of these enormous investments.  One of these is likely work design.

And that's where we come in.  (I know. You were beginning to wonder...)

Work and job design has long been an orphan, a second-class citizen largely ignored by the HR and reward professions.  As a discipline and especially in the cases of essential/hourly workers, it has been pursued with seriousness primarily by industrial engineers and their like.  There may be lessons to draw from their work but few of today's jobs -- even those at the very front lines of retail, financial and manufacturing/distribution industries -- are purely mechanical in their execution.

As those with responsibility for managing our organization's compensation spend and doing so to maximize the return on that investment, and given the disruptions to work and rewards that are reverberating through the world, we should be looking at this as a prime opportunity to embrace work design. And for us to provide leadership and expertise to initiatives like these.  Who better?

A number of organizations, many prompted by the pandemic, are already involved in work and job redesign efforts, particularly at the lower wage end of their organizations.  The redesigned jobs will pay more -- significantly so in some cases.  You won't see their names splashed across the pages of the Wall Street Journal.  They aren't doing it for the PR benefit but because it makes good business sense.  And I'll bet HR and the Rewards function have a leadership role in the effort.

If proactively lifting the wage floor is going to be a thing for enlightened organizations, it would be great to see us driving the train ... or at least sitting near the engine.

Your thoughts?

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 "Dollar Growth" courtesy of hywards/FreeDigitalPhotos.net

A Finger on the Scales of Remote Work and Work-Life Balance

We all knew it was bound to happen. Science fiction movies have been showing scenes of people working from anywhere for years. At the same time, futurists have been predicting that increased technological productivity will reduce the need for humans to work as many hours. Well, we are finally working remotely and work-life balance is 100% fixed. (right?)…. 2020 has been a big, fat, finger on the scales of remote work, and a bit of a heel grinding down on the scale of work-life balance.

So what does this have to do with compensation? As we have already discussed here in the recent past, paying remote workers in our new environment will require some new thought. A bigger issue may be figuring out to properly pay and reward the most highly productive when you no longer have the ease of patting them on the back or giving them public recognition. There is no doubt that the biggest issue is work-life balance. Solutions to that issue will require new thoughts on compensation succession planning and workforce tools.

Paying remote workers, when remote isn’t a “privilege”, but instead is a rule, requires some soul-searching by HR and Compensation professionals. Do our traditional job descriptions accurately portray a job being performed from someone’s sofa or basement? Are Geo Differentials a reasonable (and competitive) method for determining pay levels for our newly mobile workforce? In this case, we probably have 90% of the information we need, but we have not yet reorganized that information into something that is truly useful.

Paying our most productive workers has always been a challenge. It is likely that the remote world will expose the laggards and stars in ways that were harder to see when people worked in a group. I am predicting that pay ranges will widen as we tamp down on the pay of the slowpokes and ramp up pay for the fastest. The most productive workers are often those we ask the most from. This means, that without coaching on how to manage virtual workforces, we will likely overwork our productive people in our efforts to keep things stable and moving forward.

Work-life balance will be a doozy. Some companies will bring everyone back into the office before the end of 2021. Some companies will keep people working remotely perhaps forever. If you have been working from home, you know it isn’t always wine and roses. Your computer is too close to your living room or backyard. Your days can stretch from long before you are ready to be awake, to long after your kids have gone to sleep. Your life and work have merged into a blob of working, cooking, Zooming, cleaning, teaching, rinsing and repeating. None of this is healthy or sustainable and money can only fix some of it.

As we engage in our annual compensation planning exercises, it is a good time to start discussing some of these issues with the stakeholders on your team. Our final approaches will probably take a few years to fully work out. Broadly enacted remote work will change the competitive talent landscape forever. Those who fall behind may never get an opportunity to catch-up. Let’s change compensation and make it better. We can either take advantage of the thumb on the scales of remote work or be ground under the heel of work-life balance. Either we fix this, or no one will.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He has convinced himself he is a “Compensation Futurist” and 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.

COVID, Mission Critical Skills, the Haves and the Have Nots

It can be, in my experience, a tough-to-swallow fact that not all skill sets are equal in the eyes of the labor market.

It may not be a happy reality, it may not seem "fair" to some, but it's a reality we have to acknowledge and navigate through in defining and executing on our reward strategies.  Organizational success in our fast moving, knowledge based, technology driven and disruptive world will require and become more dependent on certain types of human talent and competencies.  Those who invest in attaining and developing those capabilities will command a premium price for their skills.

Related to this is a concept that is pushing to the forefront of base salary management.  It is the idea that base salary decisions can no longer hang simply on the traditional merit matrix variables of individual performance and position in range, but must increasingly reflect the need to invest in talent that is critical to the success of the organization's mission.

My discussions on the concept of mission critical skill in presentations and client meetings usually generate a lot of questions.  Some of these focus on the approach and process for figuring out which skills are critical for a particular organization; others reflect concern about the impact of this delineation on the workforce.  What about the "have nots" who still do important work for the organization?  Won't they be demotivated to learn they've been excluded from a category defined as "mission critical"?

I think this is an important talent management question going forward, particularly in the wake of our collective COVID experience.  The market is going to keep doing what the market does: acting as our arena of exchange where supply and demand work to drive up the price of skills and competencies that are the most critical to the most organizations.  We must figure out how best to respond to this from the standpoint of our organizations' talent needs, but we must do so in a truthful, forward-thinking and compassionate manner.

I believe we owe our employees an education in how the talent marketplace works, and the impact it has on compensation practices and opportunities.  Employees need this information and understanding to make the best possible decisions about their own careers and livelihoods. 

But more than that - wouldn't it be in everyone's best interest if we took it a step further?

What if we not only identified and tracked the skills and competencies critical to our organizations - today and into the future, but also communicated this regularly to our employees?  What if we regularly shared specific information on the kinds of education and certification steps it would take for employees to retool in these areas?  What if we tailored our tuition reimbursement and even flexible work options to support an employee's pursuit of these credentials?  Offered internal apprenticeship or mentoring connections to help them along that path? And made this a part of every performance management discussion?

This so that every employee who complains about the unfairness of not having and being paid for mission critical skills could be pointed to a coordinated set of resources to help them make the necessary investment in themselves to get there.

Wouldn't that, in fact, be a very smart investment for the employer as well?

I'm certain that there are forward-thinking organizations out there already on the cutting edge of this practice.  We'd all love to hear from and about them!

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.