Compensation Cafe

Proceed with Caution: When AI meets Pay

With great power, comes great responsibility.  The now infamous proverb popularized by the Spider-Man comic books is especially meaningful when leveraging Artificial Intelligence (“AI”) in our compensation management.

Admittedly, AI has an elegance to the way it simplifies, automates, and quickly synthesizes our analysis, pointing out all possible areas of contention. We should, however, not be fooled by its sophistication. To some extent, AI encapsulates a sense of ambiguity and therefore a forewarning to proceed with caution.

To use this technology responsibly means being educated; that is, educated in the system's functionality and its intended use.  Say, for example, you are trying to address issues around pay equity.  Are you familiar with the legislation itself and do you know what the expected analysis steps should involve? In the case of using AI’s suggestion for a possible survey job match, how well do you know the context of your internal position? is it a true manager or rather a specialist of a functional area?  With limited knowledge, you could inflate or devalue a position if matched incorrectly. 

Having users equipped with compensation and basic system fundamentals safeguards for correct data interpretation and effective use of AI’s outputs.

To best utilize the strengths of AI, we must feed it with accurate information and data around which we have the full context (consider red circling or other legacy pay scenarios).  As you import, be aware of how your information configures and aligns with the system components.  Have you matched data to the precise fields, have you interpreted the systems compensation elements correctly? Misguided inputs will only lead to “garbage in and garbage out!”  One way to avoid this is by adopting a consistent and standardized format for data uploads.  Doing so will give you the best return of AI’s analytical capabilities.

AI at the end of the day is a tool, meant to assist us to better navigate and handle the complexities of managing compensation.  Whatever it suggests - whether it be an alarming SOS, an invalid read of our data, or a more favorable acknowledgment of us meeting our salary budget – this is not the outcome.  We cannot be too quick to react nor adopt AI’s responses at face value; these outputs form the pillars of insights to guide our decision-making.  Most of us in our profession are analytical by nature, curious and inquisitive.  This is when we need to tap into our own AI tendencies and dig a bit deeper, validate, and investigate. 

Besides, you would not present a salary recommendation or re-structure to leaders, solely credited by the divine intervention of AI, would you?

Reena Paul (CCP, GRP) is a Senior Consultant with Morneau Shepell’s Compensation Consulting Team.  She is passionate for 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 rpaul@morneaushepell.com.  

Unsplash Photos for everyone by Lukas Blazek

The Rewards Partner

We are accustomed to wearing many hats in the profession of total rewards, whether it be the role of the accountant or that of a communications expert.  Today’s call to action is to play, also, the role of a marketing strategist.  As organizations look towards turning a new leaf in economic recovery efforts, employers are faced with increased pressures to attract, retain, and motivate the workforce.

It will be a tall order to ask of us, but we in the profession know that economic, social, and pandemic-related impacts are forming to be the catalysts in how we reform, re-define and re-brand the total rewards value proposition.

Functioning now as “Rewards Partners”, we must construct a workplace story that evokes emotions of career reward and fulfillment and, more importantly, delivers the realities of it to existing and prospective employees.  There are several strategies which employers can act upon to retain and compete for talent.  The following are just a few examples to facilitate your efforts towards this renewed mindset when it comes to repositioning your organization's total rewards program.

For starters, data analytics and intelligence are key in allowing us to go beyond the surface level.  Descriptive employee data that covers all factors of employee demographics such as experience, education, tenure, job type, etc. is at the heart of helping us understand our workforce makeup.  It enables us to distill the perceived versus persistent gaps that exist in our organizations. If you have not already done so, then you must document, track and extrapolate your human capitals data to outline today’s story.  Only then can the story be filled in by the informed decisions you make herein.

Equipped with data in hand, you have a stronger sense of the multi-generational workforce that exists both internally and externally.  The needs of each generation will vary and this is where the Rewards Partner must excel.  For each cohort, there is a different message and rewards element to sell.  Repackaging the total rewards offering to meet their needs is your blueprint in creating a sense of flexible benefits.  The millennial who has a growing family would much rather hear about the work-life balance and childcare services on offer versus pension plan guidelines for an impending retirement.

Finally, to compete for skilled workers, we must check whether we are prohibiting ourselves from supporting a diverse talent pool.  Diversity, equity, and Inclusion are emerging priorities in the workforce.  A key proponent to this initiative is breaking down the biases.  Providing training to conquer our individual biases is one thing, but we must address the systemic biases that our organization has.  To do so, conducting an audit on our existing HR practices, policies, and approaches towards hiring, developing, and promoting employees is an integral step.  Getting to the root of how we conduct ourselves in these scenarios will shed light as to whether we are operating in a way resulting in certain groups being advantaged and others disadvantaged or devalued.  

As Reward Partners we have the opportunity to support our organizations in carving the pathway towards being an employer of choice, it will be a journey in itself that will be as unique as the story of total rewards we tell.

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 Bernd Dittrich on Unsplash

A Primer on Job Architecture-Part Two

Job architecture is a hot topic right now, and I have to admit that I am pleased. The outcomes of the design process can make compensation administration, career development and workforce planning so much more effective. Plus, there is an opportunity for each of us to learn so much about the organization's jobs and reward philosophy during the design process, and to improve employee pay satisfaction at the same time.

In the first part of this article, we looked at the types of organizations that use job architecture and why. If you haven't had a chance to participate in a design process, part two is an overview of the project components. You'll see that there can be different approaches to job architecture.

Here are the basic project design building blocks:

A. Job families. Familiar to all of us, this is where you start--by identifying the groupings of jobs that perform similar work. Traditional examples of job families are Finance, Legal, and Human Resources. You might think that complex companies have a long, complicated list of job families, but that may not always be true. Companies that have worked a lot on workforce planning may have simplified their organizational structure to support their work.

B. Job functions. Again, a familiar step--grouping jobs within a job family with similar responsibilities and skills. Healthcare organizations, for example, may have numerous job functions within a job family. Consider all of the types of nursing specialties there might be in a teaching hospital. Simpler examples, though, would be Accounting and Accounts Receivable/Payable under the Finance job family, or Compensation and Benefits under Human Resources.

C. Focus area/philosophy. This step is where you may see variability in an organization's approach to job architecture (and a difference in project schedule).

For some, the next step is to identify job levels. The projects that work in this way often produce a job architecture that emphasizes compensation administration. Their goal for organization-wide alignment is to create shared compensation levels, either as ranges or bands, that illustrate job levels. Those levels, in turn, are used for talking about career stages within a job function.

For others, the next step is to understand and organize career paths. This starts with sorting jobs within a function by categories like executive, manager, professional, support and so on. Then career levels are defined within each category that differentiate the levels of development over a career.

The descriptions for these levels of development can be immensely helpful for communicating career paths to employees. They can also be useful from an administration standpoint, to use as standardized guidelines for transferring employees among various functions within a job family or building consensus on a promotion, for example. (Standardization also helps build a level of employee trust in these transactions.) Salary alignment across the organization is a complex step in this type of design process as it executes and supports the career path framework.

If job architecture is not in your near future, but you'd like to learn more, almost all of the consulting firms are discussing their practices on a regular basis. (It's a hot topic!) Some of them share more than others, but many will help you learn what's current in our field.

If you have the budget, it's particularly important to partner with experienced firms for this work--the projects involve so much data that they can easily get bogged down. For example, you can get all the jobs slotted and then realize you don't know how to do the next step. I once work with a client who brought me all their job levels on little strips in a shopping bag. They had tried to build their architecture on a wall as a group exercise, and had given up after trying a couple of times to make it work. It's never turnkey, but your insights are going to come faster with firms who've done a lot of this work in your industry. And some firms have far better databases than others.

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: Black Holes and Compensation Metrics

Editor's Note: Contributor Stephanie Thomas channels her inner astrophysicist to illuminate some pay metrics lessons from the phenomenon of black holes!

It's a little-known fact, but the fields of astrophysics and compensation are closely related. Similarities are particularly apparent between black holes and compensation metrics. Both fields attract theorists and experimental researchers looking for a challenge, and both require a unique combination of empirical fact coupled with imagination. We know that black holes and compensation metrics exist, but the full extent of their innermost mysteries are yet to be revealed.

Taking an interdisciplinary approach can give us new insights into old problems. With that in mind, here are five things black holes can teach us about compensation metrics.

1. Black Holes and Compensation Metrics Suck - a black hole is a region of space from which nothing can escape. Because of strong gravitational fields and magnetic winds, these collapsed stars are impossible to resist. Compensation metrics also have strong gravitational and magnetic fields - it's easy to get sucked into the promise of finding that ultimate metric that will finally give you the perfect compensation system. Like cosmic dust into a black hole, a constant stream of time and money can get pulled into developing and implementing these metrics. If those resources are focused on measuring the wrong things, all that time and money can easily disappear into the singularity, lost forever, without shedding any light on the question at hand.

2. The Information Loss Paradox - when an object falls into a black hole, all of the information about that object is evenly distributed along the event horizon and is lost to outside observers. The same is true for compensation metrics. By their very nature, metrics are designed to aggregate information across observations and distill that information down into meaningful insights. But information is lost in the aggregation process. The primary unit of observation in compensation metrics is the person; people invariably have a rich history full of details that help to explain their current characteristics. Before crossing the event horizon of information processing and aggregation, it's important to think about what secondary information and individual characteristics might be of interest, and come up with a way to preserve that information in the overall metric.

3. Lack of Direct Evidence - by their nature, black holes cannot be directly observed. Astrophysicists looking for black holes have to rely on indirect evidence - usually gravitational interactions of the supposed black hole with its surroundings. Metrics essentially show us gravitational interactions, allowing us to make inferences about the unmeasurable things we really care about. Metrics may provide indirect evidence of problems in base salaries, workload, or management, but they rarely are able to accurately capture the problem itself. Metrics are proxies, and before we draw conclusions about the underlying processes at work, we need to make sure that our metrics are really measuring what we think they're measuring.  

4. Observations Are Influenced By Position Of Observer - one of the most interesting effects associated with black holes is gravitational time dilation. To a distant observer, an object falling into a black hole appears to slow down, taking an infinite time to fall in. But an observer falling into the black hole crosses the event horizon after a finite time, although he doesn't know when (it's impossible to determine the location of the event horizon from local observations). A similar phenomenon is true for metrics - two people could look at the same metric and come to different conclusions. Assume that employee turnover has increased in the last quarter. One person could look at this metric and conclude that the wrong people were being hired in the first place. Another could look at the same metric and conclude that the micromanagement policies implemented three months ago are the problem. Neither is really wrong; the new policies had a negative effect on the incumbent employees, but if individuals preferring micromanagement were hired, turnover would likely decline... The point is, perspective matters in interpreting the metrics.

5. Gravitational Collapse - black holes are created when the celestial object's internal pressure is insufficient to resist that object's own gravity. Metrics, if left unchecked, can lead to the same kind of gravitational collapse. We're assigning more importance to metrics in all areas of our lives - from KPIs at work to tracking 3-D information about workouts at the gym and the quality of our sleep at home in our beds. We love those little graphable sound-bites of information. There's something really gravitational about metrics, and it's easy to get caught up in their pull. But when the reasons for creating the metrics in the first place takes a back seat to the "what-can-we-measure-next" mentality, it's easy to collapse into the singularity of measuring for the sake of measuring.

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. 

A Primer on Job Architecture-Part One

While the tide is turning, there are still a lot of organizations out there without job architecture. A job architecture's goal is organization-wide alignment of all jobs in a company into a structure which may be used to address: workforce planning, job levels, job titling, career movement and pay.  

Small organizations may not need job architecture because many start with one, or just a few, people in a function. Career growth comes through promotion, but the value of the position is not relative to others in as complicated a way as it would be if there were many, disparate jobs. If a function grows and there are a handful of jobs in a department, the organization might design a career ladder for those jobs as a solution.  

But let's look at some examples where job architecture fits like a glove. Small Life Science and Accounting companies, for instance, often use job architecture because most of their jobs are professional, and career movement relative to levels of increasing competency and responsibility has a rigor dictated by their professions. In another example, a company with large numbers of operational and support staff may develop a job architecture to define and communicate career ladders and lateral opportunities. And to name just one rationale for their use of job architecture, complex and global organizations may need to administer many levels of supervision and management.

How can you brush up on job architecture? The best way is to work through the design process--and I hope all of us will have this opportunity at least once in our careers. It is such a great way to learn in detail about the relative contribution that each job makes to our organization, and about the operational value of having the words to describe each job's contribution to employees.

What to do in the meantime? Well, try to sneak a peek at some other organization's job architecture or go to a professional meeting where an example is outlined. The basic components are not foreign to everyday compensation work. The distinction is that, with job architecture, you are working toward organizational alignment so that jobs from all over a company, or country, share a common structure based on standardized guidelines that are used consistently.

One sidebar on that: job architecture may be developed for different purposes and offer different outcomes. The versions that emphasize pay (and slot career growth into pay levels) look and act somewhat differently than the ones that are created specifically to align both pay and career growth. The second part of this article will go over the distinctions.

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.

Are We Resilient?

Resilience is a term that's been kicked a lot around during Covid. It's become part of the conversation since we were sideswiped in the beginning of 2020. As the strategists at McKinsey point out: "2020 was a wake up call. To thrive in the coming decade, companies must develop resilience--the ability to withstand unpredictable threat or change and then to emerge stronger."

In other words, Covid wasn't a singularity. It was an example of how change will happen going forward because of, among other things, the speed of technological evolution, especially Artificial Intelligence.

With all of us worn out from the Mr. FixIt work we did during Covid, do HR and Compensation have the energy to be resilient now? It seems like the amount of energy we have can be relied on to get us through the first six to eight months post-Covid. This period will really be a "get back to normal, whatever that means" effort. We've imagined and planned for "normal" but it will challenge us when it inevitably turns out to be at least somewhat unpredictable. (Think about the surprising current difficulties with hourly employment.)

That doesn't mean we should let ourselves off the hook. It's very rare when an organization is in unison, but look around. Your organization just may be more aligned on certain goals than ever before.  And even if it is a little hairy right now, we really do have a unique chance to focus on the long term. This is a time when many management teams will be relieved that Human Resources wants to think big. Don't let this opportunity go.

Recent research indicates that almost half (48%) of us plan to do workforce planning/modeling as a result of what we've learned during Covid, and 45% plan to improve insights into and data on pay equity. Here are a couple of thoughts for those who are launching into this work.

And for those who aren't, a suggestion. Think hard about doing a self-assessment. Covid must have exposed cracks in your "structures." This has happened everywhere, so it would be surprising if your organization were exempt. Don't let yourself be caught short-sighted after such an important transition as the one we are going through. Not matter how straightforward your Covid experience was, enough emerged that should lead you to learn and reconsider.

Workforce planning is--or should be--done hand in hand with Compensation. As we work together, we will be tempted to limit our modeling to immediately following Covid, with a wait and see what comes next. The concept of resilience tells us, though, that this approach may not be adequate. We need to be focused on "withstanding change to emerge stronger." Surely that involves planning for the coming year of 2022, creating a strategy that should be managed through the lens of change management.

In my mind, workforce planning goes hand in hand with a robust job architecture. For Life Science and Tech start ups, job architecture is a must have because of the way their jobs are administered. For companies of 300-500 and larger, isn't it time to budget for a job architecture? Workforce planning is going to become more detailed in the coming years because of increasing focus on HR Analytics, and employee transitions are going to become more frequent.

That's just looking at it from HR's point of view. From your employees' point of view, job architecture is something that improves transparency and also distinguishes your company as clearly committed to their career, a critical differentiator in this job market. While a job architecture project is expensive in terms of time and money, the investment begins to pay off immediately.

And think hard about the future of pay equity in your company. Is it enough to massage the sore points, as we usually do? Or is it time to take it on, so that your company is able to demonstrate its commitment to pay equity in public? A long-term goal for many, but certainly part of "emerging stronger." Isn't it long past due? 

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.

Where Are We Headed After Covid in 2021?

What happens now? It's the question on all our minds as the country slowly slides out of lock down. Do we stick with remote work? If so, how do we price our jobs? And what about the complications of hybrid organizations? Most of all, what's everyone else doing, and how can we learn from them?

The major consulting firms have started to offer context and even some practical insights that can be helpful for all of us. Here's a roundup of recent useful resources from the key firms.

A report on U.S. talent trends is available from Mercer. It seems that many companies have learned they need to be more flexible in this world of remote work that we are birthing, but the number (48%) is not as high as I would have expected. Nor is the number of companies reporting that they need to reskill (40%) or rethink performance data (37%) as a result of the curve ball that Covid threw our way. So it looks like we weathered the storm without catastrophe, although there are shifts in direction.

The Covid world has--not surprisingly--energized the need to understand and plan. I would have expected these recent numbers on HR analytics to do lists to be lower before Covid: 48% plan to do workforce planning/modeling; 47% plan to improve analytics of learning/skill acquisition; and 45% plan to improve their insights into and data on pay equity. Analytics will continue to grow in importance as a fundamental of Human Resource practice, so take a look at the rest of these findings.

If you are in the group that has to improve your support for remote working or a hybrid organization, Aon|Radford's resources will be helpful for you. They walk through a case study of a company deciding whether they need to change job pricing as a result of increasing remote work. One of the insights: "While the talent pool is becoming broader and more fluid, most companies still target compensation based on geographic pay zones."

And if you are in the group where remote working worked so well during Covid that you are sticking with it, or maybe even expanding on it, Willis Towers Watson has an article with a framework for work design so you can analyze, and plan for, what can be done remotely--and reward appropriately.

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. She is a member of U.S. Masters Swimming.

Timing Is Everything! Checking Your Salary Structure

With data getting better and easier to access, some of us are getting used to updating job pricings on the fly. But when to update your salary structure has always been a poser, especially for smaller organizations. Not only do we have to schedule a timeout to do the work, but we are wary about the results. For example, who knows what the results will mean in terms of (heaven forbid) salary adjustments? Why not let sleeping dogs lie?

There are rules of thumb that will give you a systematic way of dealing with this question. The annual work is painless enough that even a one-person Human Resource department can deal with it. The refresh work is harder, but actually fundamental to the professional use of salary structures. After all, they are management tools that guide our organization's salary administration decisions. They should have a data reliability that is built on working principles. If, for instance, we have two or more ranges where multiple employees have maxed out, let's face it, it's getting hard to consider the structure valid.

Here's one rule of thumb. Each year, spot check a representative sample of jobs in each salary grade. Things to look for?

• Are the midpoints still aligned with the market pay for your jobs? Since you are driving pay decisions against midpoints, their validity is key.
• Do your jobs still fit within the assigned range?
• Do you have high demand jobs with salaries that keep inching up? You may need to evaluate their placement in the structure. Check whether your job leveling indicates your high demand jobs should move up to another range or do you still have some latitude?

Here's the other rule of thumb. Don't fall in love with your salary structure! This is where the hard work comes. Salary structures should be tested about every three years. Two years, if you have many high demand jobs where the salaries are chasing the market each year, or even more often. How do you do a salary structure refresh? Here's a high-level outline.

• Competitive market benchmarking of at least two-thirds of your jobs. You'll need to do that many to test your midpoints validly.
• Adjustment of midpoints and range spreads, as necessary. If you have a lot of employees maxing out, you need a fix or you may need more grades.
• Adjustment to the number of grades in the structure. How do you know when this is needed? If your company has added a number of new jobs, or a new location, odds are you need to rework the structure. If the market rates are getting compressed between salary ranges, you may need fewer grades.
• Assessment of where current employees fall in the adjusted structure, to confirm the new structure and plan for salary management issues that you'll face at the next salary review.

In almost all industries, letting salary structures go beyond three years means that the validity of your structure is weakening. Since we are using the structure to make many critical decisions, this is not a wise leadership position to take. The salary structure is our tool as business leaders so we should be able to use it without offering excuses.

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.

We’ve Never Done It That Way

When you read the title of this post did you groan or light up? We’ve never done it that way before can either be the most depressing or most exciting phrase in the world. For many, this phrase is a defense mechanism against change. For others this phrase is the spark that leads to change. The past year has included a lot of “never before” moments. Truthfully, change, even the best change, can create chaos and stress. Your attitude about “different” can be the deciding factor in whether the upcoming year or two will result in new successes or the repeat of past frustrations.

It can take years to create the processes, spreadsheets, reports and system features that make your job predictable and efficient. Being asked to start over or simply do something differently can trigger an immediate aversion response. This can happen when a new CHRO or CEO asks the Compensation team to reevaluate just about anything. It’s understandable, but it can be truly counterproductive. Yes, change can be hard, but without it you simply cannot improve.

For those of you working at innovative, high-growth or emerging industry companies the response may be much different. “We’ve never done it that way before” can be the caffeine boost to create something new and more effective. If you think about the companies most of us look to as examples of “better”, they are also companies who do things differently. These types of change must always be tempered with realistic planning to create the capabilities and communications that will allow change to ultimately be successful.

If this past year has taught us anything, it has made it clear that we can adapt to far more change than we believed. It has also taught us that not all change is easy or even good. Working from home became a reality and for some roles it will stay forever, because it works better. For other roles, remote work was impossible or just made things harder. Where it was impossible, people, companies and governments struggled to survive. Even where it was a good thing, it wasn’t an easy thing. New processes, tools, perspectives and rules had to be created and will take months and perhaps years to perfect.

I get the aversion to even the best change. It’s hard to learn something complex the first time. It’s even more frustrating to have to learn it in an entirely new way (are any parents enjoying common core math?). The chaos created by change is unavoidable but short-lived when addressed head on. The stress related to change is almost completely avoidable. New pay data? You’ve done it before. New CHRO wants a new pay structure? You know how to do that. Your CEO wants a new incentive plan that looks like the plan at his friend’s company? Just rip the band-aid off quickly and get started.

The only constant is change. Fighting against it will only frustrate you and wear you out. If you are lucky enough to be excited by change, the phrase “we’ve never done it that way before” can be start of something amazing. If you don’t love change you may be in the wrong business. Change is coming. The upcoming year of hybrid work, returning to a new version of an old normalcy, becoming good at paying and rewarding remote workers and so much more will challenge all of us. Embracing the new may be the thing that keeps you engaged and happy in a world where it is unavoidable.

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.

Redefining, Reshaping and Reigniting Total Rewards

Agility is not a new concept; it has trended in the past and especially today has true relevance as organizations mobilize towards a redefined way of work. As companies switch gears, reimagining work performance and execution, Rewards Professionals similarly need to reassess “how we do rewards.”

A primary objective of agility is to adapt swiftly with minimal disruption.  The following are just a few integrative approaches organizations can leverage in strengthening alignment between business and rewards.

• Monitoring key developments and changes: Stay abreast on external changes that may affect your annual HR activities and related polices. For many organizations, the pandemic has placed considerable strain on salary budgets. To handle these types of external disruptors companies can seek refuge by deploying scenario-type modeling techniques.  

Stress testing against potentially adverse situations equips organisations to manage their reward programs in a more cost-effective way.  Being pragmatic allows us to seek alternative solutions in handling merit allocation, managing group health insurance, and deploying cost-sharing or renewed pension design strategies.

• Proactively engaging with employees: Enhance your existing programs, tools, and processes in ways that facilitate more meaningful employee feedback and interaction. Consider additional checkpoints beyond the standard annual engagement survey. This will provide increased access to data and lead time to synthesize the information and formulate ways to respond.

• Reward innovation:  Re-evaluate your current incentive programs and ensure recognition is rewarding behaviors that are business-aligned, are measurable (especially with remote work), and most importantly understood by all participants. Implement and re-focus rewards towards ideation, efficiency, and customer service.

• Increase investment in innovative technologies:  Rapid technology growth presents a foreseen opportunity to utilize rewards systems and platforms to derive key workforce insights. Capitalizing on human capital data can better equip HR to address issues of turnover, pay gaps, and other lingering inequities.

Thriving in today’s new normal requires an integrative and holistic approach, meaning all components of your business and total rewards model should be part of the organization’s agility plan.

Reena Paul (CCP, GRP) is a Senior Consultant with Morneau Shepell’s Compensation Consulting Team.  She is passionate for 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 rpaul@morneaushepell.com.  

Creative Commons Image "Lightbulb" courtesy of John Head

Knowledge Is Influence, Not Power

The adage that knowledge is power does not always work in the business environment.  It’s nice to have but if you’re not already a decision-maker that knowledge of yours likely supports others, not yourself.

On the other hand, compensation practitioners can use knowledge as a component in their influence skills development, in developing their persuasiveness toward advancing their own agenda.

What You Know

During my career, the colleagues I worked with seldom if ever had a strong grasp of their employee population.  Yes, they knew how many were out there, and probably kept an alphabetized list (hopefully current) for pay plan administration, but that knowledge was always more broad than deep.  Could they answer the “How many this, how many that?” question?  Likely not.  Were they able to inject relevant data points into a discussion that might be able to sway group thinking one way or another?  Not so much.  They could go and “find out,” but by then the opportunity to impact the discussion would have passed.

The point is that we as compensation practitioners may be losing an opportunity to become more impactful in our roles when we spend more time looking at the broad horizon than looking right in front of us.  The data is there, we just must make use of it.

What You Should Know

Like a discussion about dashboard metrics, the “what” of your knowledge base can vary among organizations, based on such variables as the business model, current state of business/financial operations, management biases and how effective the current plans are doing.  This last one is opinion, of course.

Even if you work in an organization where change is a bad word, where resistance to altering course can stymie you at every turn, there are some basic data points of your population that, I believe, a compensation practitioner should be conversant with. Because it can help.

• Male vs. Female: How many of each category, their average pay and comparison, and whether they are clustered in (or restricted to) certain jobs.

• Racial demographics: Again, how many in each category, their average pay and comparison, and whether they are clustered in the bottom third of job grades.

• Workforce age: Average age can warn you about generational attitudes, pending retirements and likely impact on your benefit plan costs. It makes a difference whether you have a young or senior workforce, and where pockets of these jobs are.

• Length of service: How long are your employees staying with you, and are certain jobs more likely to leave than others? Are you training certain skills, just to see the employees depart?

• Number of jobs vs. number of employees: Do you have a title inflation problem, and with that an associated upward trend in fixed payroll costs? How many titles are out there and are they all valid – or perhaps you have the same job with several different titles, repeated over and over.

• Avoidable turnover: Avoidable mean you could have done something to retain the employees. So do not count retires, trailing spouses moving out of the area, deaths and disabilities, or even those you have terminated. What jobs did they hold?  How long where they employed?  What is their story? Can you spot any trends?

• Territory coverage by sales force: You do not see this issue covered much, but if your sales turnover is leaving territories uncovered, or other territories are having to double up, there is a problem. Sales will drop in the affected area(s), and relationship building will suffer as well.

• Compa-ratio: The relationship of an employee’s annual base pay to their pay range midpoint. In other words, never mind how competitive you say your pay ranges are, what is your practice? Are you paying competitively, and if not, who is suffering? You will need to identify who is impacted, and whether you see a treatment trend.

• Promotions: Sometimes overlooked, but how many employees get promoted, and what is their average promotional increase? And of course, what groups/jobs tend to be getting promoted – and who is in the dead-end jobs that never see promotions?

Influence Can be Power

Armed with specific information about your employee population (statistics, trends, titles, even employee names) you will be in a much better position to gauge the impact of proposals or new policies/procedures. And better positioned to argue your own point of view.  Because specifics trump generalities every time.  Actual impact data will often carry the day against assumptions, vague promises or “let’s leave things alone.”

And a wonderful thing may happen as well.  Folks, even senior folks might start listening to what you have to say.  Because numbers do not lie, and whoever can use objective specifics to support their position will likely carry the day.  Not every time, but enough times to make the effort well worth your effort.

And maybe, just maybe there is a bit of power in those numbers after all.

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.

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