Compensation Cafe

Regifting You Some Valuable Info

Does this title sound vaguely familiar? If so, dear reader, you've got a great memory.

In 2009, the first year of Compensation Cafe, I closed the year by passing along some great reads I had run into. I thought it might be time to recycle the idea because there's so much going on. It's a few days past gift giving, but just in time for your 2018 compensation resolutions. 

Radford Perspectives: Technology and Life Science sectors' Talent and rewards trends in 2017 and beyond. You don't need to be working in these sectors to benefit from the assessment this report provides of the future for Dodd-Frank provisions that impact executive compensation. But the thought I want you to notice from this report-- no matter what your industry-- is this, "In our 2016 Radford Perspectives Report we introduced the concept of industry convergence-- the notion that every company is becoming a technology company to some degree-- and its effect on the hiring and rewards landscape. . . technology and life sciences companies [are] beginning to compete with general industry firms for the same types of skilled jobs . . ." This has certainly been my observation over the last year. If you're in general industry facing stiff competition for talent from technology companies, why not prepare to turn the tables on them by checking out this report?

What the final tax reform bill approved by House and Senate means for compensation is a valuable synopsis for all practitioners who want to stay up to date. The impact of these changes is going to unspool over a long period, but the best place to start is by getting as good a briefing as possible.Topics covered include the expanded definition of "covered employee" and how it applies to deductible executive compensation; changes to compensation programs for tax-exempt organizations; private company equity grants; and changes to exclusions for employer-provided benefits.

There's good news from Gallup. " . . . 55% of Americans volunteer that they would have no gender preference for a boss if they were taking a new job." There's a lot more in this article to notice and think about. I'll leave you with another teaser: "Since the early 1980s, the preferences among both men and women for a male boss have each fallen by 50%." These numbers are such (suprising) great news, I read the article a few times. It's an amazing cultural shift, but has it found its way to your place of business, do you think?

Please do not imagine that this last reading suggestion is political in any way. The New York Times editorial, "What I Was Wrong About This Year," is a valuable cautionary tale for anyone who deals with communicating numbers for a living. Human beings are built to misunderstand numbers; we've got the research to prove it. The writer bemoans, "I used to believe that the best response was explanation and context . . . But now I think explanation is doomed to failure . . . People need a story that forces them to visualize . . ." Ever walk out of what seemed like a good meeting, only to find out that your numbers were misunderstood? It's worth taking a look at this essay and the research it discusses.

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. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Ignore Parity. This Ain’t NASCAR!

Organized sports work best when the teams are competitive. Rules that ensure parity exist for nearly every successful league. This is because close competition is a big part of the product. Real fans are all about commitment and passion. This is reinforced by giving every team a "chance to win." The sports that do this best makes the most money (another goal of any organized sport.) There are, of course, exceptions to this approach. Soccer/football and Formula 1 racing are examples of this. But NASCAR is one of the greatest examples of effective parity.

NASCAR makes about twice as much money as Formula 1, despite being a mainly US sport. NASCAR also produces more different winners each season. NASCAR requires all cars to be nearly identical. The requirements are incredibly precise. Just a half an inch of advantage can get you disqualified. All of this is done so fans can cheer on their driver or team and know that winning is a possibility.

In truth, the wealthiest teams have a huge advantage. They can hire the best drivers, build the best equipment, use the best testing processes, and have the most backup vehicles. If you aren’t one of them, you are just trying to get lucky and avoid a big crash.

BUSINESS AIN’T NASCAR!

If companies were told that their pay programs HAD to be just like their competitors, they would protest loudly. But, most companies treat pay like it has the rules of NASCAR. Most Compensation Philosophies could easily be converted to, "We pay almost identically to our peers, because the survey data is easiest to follow that way, and we are trying to get lucky enough to get a few great people who will either help us be slightly more competitive or avoid a big crash.”

LET’S TRY SOMETHING NEW!

I promise you if NASCAR tossed its rule book, teams would immediately build better, faster, and more incredible race cars. The best teams would become better. The most innovative teams would try new things, most of which could be proven to work elsewhere (Formula 1 aerodynamics, next generation tires, lightweight cars, etc.) Those who stick with their old cars would seldom compete at any race and would never compete for a season title.

I also guarantee that the best teams would not share their unique data. They would not explain how they won. They would not explain why they made the choices they made. They would protect their secrets as if they were the most coveted things in the world. They would only share data in surveys if they felt it would misdirect their competitors.

Instead of building cars, or pay programs, that are just like our competitors, let’s build vehicles designed to crush and out-perform our peers. We are not trying to "entertain" a crowd. We do not seek to "keep our fan base." Each of us is trying to win everything, all the time. It would be so much easier if we realized that the only rule is: Do what works for you and to heck with everyone else. I look forward to seeing you at the race track!

Dan Walter, CECP, CEP is the President and CEO of Performensation. He is passionately committed to aligning pay with company strategy and culture and considered a leading expert on equity compensation issues. Dan has written several industry resources including a recent Performance-Based Equity Compensation issue brief. 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 @Performensation.

No Statue of Entitlement

There is no statue of entitlement, nor is there any law guaranteeing a right to anything you want.  Yet.  Maybe there should be a statute of entitlement, too, because that concept seems to reflect many popular expectations.  We compensation professionals have been slow to face the implications of how entitlement attitudes affect reward management practices.

Commercial advertisers are much quicker to apply practical knowledge about behavioral economic psychology than bureaucratic stuck-in-the-mud compensation managers. Note that the entitlement mindset underlies most advertising pitches. Ubiquitous TV ads promise this law firm will get you what you deserve. Your natural right of freedom to do whatever you want is broadcast every time you look around. The United Nations has declared access to internet service is a basic human right. Your entitlement to (fill in the blanks) is loudly proclaimed by every vendor of that product or service.

My least favored commercials are the ones with the background of that large green lady on the island in the harbor behind the sardonic pitch-person(s). The presenter gives a short tale of heart-breaking loss and then expresses indignation, sneering sarcastic aspersions against any insurance company too heartless to automatically provide 100% replacement cost coverage. They literally condemn any insurer who fails to issue a policy where the buyer assumes no risk. By the time the mockumercial ends, one would think that supplying exactly what was promised somehow cheats the consumer who deliberately chose it.

Forget that insurance actuaries would place an extremely high price on original-value reimbursement policy premiums, making them so expensive that no sensible comparison-shopping customer would ever pay it. No, the decision to take out a reasonably priced insurance policy with coverage for less than full original market value is considered the fault of the company that permitted it as one of its options. Every capitalistic enterprise is happy to charge you more for its most profitable product. But the priciest option doesn't get selected that often, except by the filthy rich for whom cost is irrelevant: to them, the greater the expense, the more bragging power it provides.

Normal people don't brag about paying high insurance premiums; neither do they consider actuarial statistics nor dwell on product pricing practices.  They certainly do not live flagrantly like the excessively wealthy who spend without regard for costs. Regular folks are conservative about incurring regularly continuing expenses to pay for something they never expect to need. Rather than commit to the most expensive insurance protection plan, middle-class buyers will routinely select a more reasonable policy with an acceptable deductible and coverage only for the depreciated value of their product. Yet, after the fact, everyone wishes they could recover the original full cost of their purchase. Everyone includes employees, too.  We are all influenced by those media-presented depictions of how we are supposed to react.  Blaming the supplier for giving you a choice you later regret is a hypocritical manipulation of the ever-popular entitlement syndrome.

Perhaps a new wind is blowing. A story about a mother instructing her child how to assert his own right to stand up to peer pressure and decline to share his toys has gone viral. The implication is that entitlement has limits.

Or I could be wrong. Maybe this is just a different version of the same old same old "I have a right," drumbeat, but merely inverted into an opposition to infringement of your right to be selfish and to refuse the demands of others. Put into a compensation framework, is everyone entitled to a raise? Does the employer even have a right to deny productive workers pay increases?

One way or another, workers absorb the attitudes of their society, so employers must be prepared to deal with those cultural expectations.   Professional progress is a lot easier when moving with the current rather than fighting against it. 

How have you most successfully coped with the entitlement expectation?

E. James (Jim) Brennan, former Senior Associate of pay surveyor ERI, recently returned to consulting. Author of the Performance Management Workbook and veteran expert witness in executive compensation trials, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

"Statue of Liberty" image by Demitrios Lazos, courtesy of Creative Commons

Female Overcommitment Is Not Rewarded

Women work differently than men.  One major difference leads to much mutual frustration because neither gender fully understands the viewpoint of the other. I have always called it female overcommitment.  It is rarely observed in men but frequently occurs among the hardest working and most unappreciated women.  The closest similar male behavior comes from the founding fathers of organizations; but their dedication to the well-being of their enterprises is generally recognized, prized and rewarded.  Not so for the female victims of this widely misunderstood syndrome.

Background:  Although controversy is no stranger to me, I have always carefully refrained from openly discussing this topic and thus exposing one of my longest held theories about women and work.  While unafraid of appearing sexist to those who know my distinguished history of comparable worth pay equity activism, strangers to my lifetime body of work could easily dismiss my admittedly purely subjective comments here as the erratic musings of a misogynist.  Again, not so, although I will admit to moments of erratic behavior. 

My professional friend Suzette Haden Elgin confirmed in a personal meeting what I had long observed.  Women are socialized in a unique manner even in traditional enlightened Western cultures.  Little boys and little girls are usually raised with distinctly different behavioral expectations.  Look at what is generally taught as the standard societal roles of each sex.

Men:

• defend and protect
• obey instructions
• handle designated responsibilities
• complete assignments and achieve specific objectives
• receive praise for exercising initiative and doing more than required

Women:

• nurture and cherish
• respond to needs
• are responsible for everything
• must make everyone happy
• are criticized for acting outside the limits of their jobs

A guy completes his list of tasks, then retires to the man cave for a beer and a game on TV; but the woman is expected to continue to toil indefinitely, sacrificing her time for family welfare until absolutely nothing remains undone.  The female role -- to please everyone -- is an impossible task.  Granted, these are broad generalizations with limited examples, but hey ... this is a blog article!

Human resources professionals who deal with distributing compensation rewards come into constant contact with the many victims of self-imposed female overcommitment.  I have found them in every type of organization:  government agencies, military units, major universities, multinational conglomerates, regular corporations, private companies, neighborhood businesses, charities and foundations ... literally anywhere women work. They are typically upset with their employer, frustrated by the organization's lack of appropriate appreciation for their dedication.  Even when paid on the high side of their job's earning range, they still rage at what they see as unreasonable limits on their continual attempts to go the extra mile ... to fix those nagging low-priority problems ... to spread their arms to encompass uncompleted (or badly done) tasks dropped dismissively by others (typically men).  "He doesn't LET me do what is needed!" is the war cry of the excessively over-committed woman. It is usually a guy who blocks their constant attempts to do too much. 

Their male bosses just don't get it.  They only see workers straying beyond their boundaries of authority.  Following the male method learned from the crib and reinforced in every social situation throughout their lives, they attempt to constrain the female determined to do what is "not her job."  The bewildered women guilty of this offense have similarly absorbed the very different lesson that they are supposed to fix whatever is wrong.  THAT is their self-perceived real job description. 

Overcommited women find it virtually impossible to accept my usual advice:  Just do your job.  You care more than they do, so take pride and comfort in your superior occupational dedication that goes far beyond the required or even appreciated work output standards.  He doesn't WANT you to do so much, work so hard or care so deeply.  The intensity of your concern about the welfare of your employer is unhealthy for you exactly because it is unappreciated.  Don't expect to be rewarded for doing what they don't want done.  In fact, anticipate correction, criticism or punishment for exceeding your boss's expectations.

Female managers who respond in the "male" manner are exceptions.  They will prosper in the workplace.  Am I right or not?

E. James (Jim) Brennan is a total rewards advisor with extensive multi-industry corporate HR and consulting experience.  Past Compensation Editor of the Personnel Journal and last Senior Associate of pay surveyor ERI, he is consulting again. Author of the Performance Management Workbook, and frequent expert witness in executive compensation trials, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

"Frustrated Woman at Computer With Stack of Paper" image by Goldi Bajpai, courtesy of Creative Commons

Compensation Conundrums and Commas

You may have been warned to, "Watch your commas, Ps and Qs to be safe from compensation disaster." Or perhaps it was a warning to, "Watch your commas, Ps, and Qs to be safe from compensation disaster."  Did you spot the subtle difference?  A mistake about grammatical meaning, as simple as an extra comma, could cost you, big time.  Those Ps and Qs might also be pennies and quarters, Benjamins or megabucks.

A state overtime exemption language interpretation by an appeals court may cost a dairy over ten million dollars in back pay. The compensation issue came from confusion over a series of exempt categories.  Ambiguity led to conflict over the identity of the exact gerunds referenced in a state law that said overtime rules do not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:

(1) Agricultural produce;

(2) Meat and fish products; and

(3) Perishable foods.

The NYT article continued, summarizing the difficult grammatical issue.

Does the law intend to exempt the distribution of the three categories that follow, or does it mean to exempt packing for the shipping or distribution of them?

Delivery drivers distribute perishable foods, but they don’t pack the boxes themselves. Whether the drivers were subject to a law that had denied them thousands of dollars a year depended entirely on how the sentence was read.

The Maine Legislative Drafting Manual that applies to this legal provision discourages use of the Oxford (extra) comma when defining a series but also warns about the risk of ambiguity. Well, that ambiguity sure created a pileup crash of dairy and truck drivers here. Gee, what exactly did I mean by "dairy and truck drivers" there? Did a dairy collide with its drivers? Did drivers run into the dairy?  Did dairy drivers and truck drivers have an accident? That might illustrate the problem.

Which groups are referenced remains unclear in many normal communications. A lack of clarity that is acceptable in everyday conversation becomes a land mine when encountered in a law.   Misinterpretation of a regulation can (and inevitably will) produce chaos which results in litigation. Preventive measures should be simple. A list separated by semicolons, a reference in the law to the number of exempt categories, inserting an example, adding a citation or a footnote can clarify the intent. Sounds easy, because nothing is impossible for someone who doesn't have to do it.

Pay must be precise. The rules governing compensation should be clear. Whenever regulations are vague, confusion will ensue. The moment any party to an economic transaction feels shortchanged, they will usually protest. When a labor union represents employees, push-back is likely if not guaranteed. I was going to say, "push-back is likely and even guaranteed", but I worried that I would be misunderstood, criticized and embarrassed or humiliated. Now I'm unsure if I feared three possible negative reinforcements or four ... or some other number.

Remember, this is a bad place to be, when a compensation professional doesn't know for sure what number applies!

E. James (Jim) Brennan is a total rewards advisor with extensive multi-industry corporate HR and consulting experience.  Past Compensation Editor of the Personnel Journal and last Senior Associate of pay surveyor ERI, he recently returned to consulting. Author of the Performance Management Workbook, popular speaker and frequent expert witness in executive compensation trials, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

WorldatWork Joins the National Debate on Pay Equity -- How About You?

On March 7, 2017, WorldatWork published a position statement on pay equity. After 12 formative years in Catholic school I am not fond of people talking for me, but WorldatWork's overall position addresses a reality that our profession faces. It " . . . acknowledges the leadership role that WorldatWork and its members must take on this critical issue." And it doesn't shirk on the details.

In other words, the position statement has been created to influence the way we act professionally and to " . . . outline the role that compensation and rewards professionals have in reducing and eliminating pay equities in the U.S. workforce." I urge you all to take a close look.

Here are a few of the highlights until you can sit down and carefully read the statement:

"WorldatWork fully expects [pay equity] to continue to be a key business priority." I think most Compensation Cafe readers would agree.

" . . . rewards and compensation practitioners and the organizations they serve also have a responsibility to reduce or eliminate pay inequities through innovative private-sector workplace programs and policies."

"WorldatWork supports pay transparency . . . [and] opposes policies that prohibit employers from requesting a job candidate's total rewards history during their consideration and interview process."

Also, "WorldatWork endorses regular, organization-wide pay analyses to aid in reducing any unconscious biases or structural barriers in hiring practices, performance reviews, promotional guidelines and leadership opportunities that may contribute to pay inequities."

There's a lot more in there, so be sure to read the statement a few times. After that, decide for yourself where you stand on the issues and solutions being promoted. Finally, discuss it with your team AND your boss(es). The statement calls out a number of areas where all of us can and should up our game. For instance, "WorldatWork strongly believes that equal work must be measurable." How many of us actually deliver valid insightful measurement protocols, yet we're clearly going to need to accomplish this as data expectations become more sophisticated in the digital world.

I have looked forward to the day when our profession would finally share a conversation about Compensation's future. I'm marking March 7, 2017 on my calendar as the day the conversation began in earnest.

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. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Prevailing Wage Determinations Are Good for Us

Don't worry that the foreign worker who works legally in the United States will displace you. If the sponsoring employer follows the law, imported talent is a lot more valuable than you are. The Prevailing Wage Determination rules typically require proof that a higher wage than normal will be paid to any non-citizen qualified for a job where local native viable alternative candidates do not exist.

Concern about foreigners being imported at cut-rate pay levels to displace citizens of the United States lies at the heart of the rules for Permanent, H-1B, H-2A, H-2B, or D-1 visas. Politicians pass laws to discourage employment practices that harm voters. In fact, elected officials are swiftly voted out of office by their constituents if they do not guard and protect local jobs in their communities. Keeping American work for Americans is a foundation bedrock principle for every American politician, reflected in the Davis-Bacon Act, Fair Labor Standards Act, the Immigration and Nationality Act and other protective legislative regulations.

"The Immigration and Nationality Act (INA) requires that the hiring of a foreign worker will not adversely affect the wages and working conditions of U.S. workers comparably employed."

Rather than going into long and boring details about how these government constraints on employers (both public and private) operate to choke a horse ... to enrich immigration attorneys .. I mean ... to curtail unconscionable abuses of economic power, I will summarize. The Prevailing Wage Determination regulations are carefully crafted to tilt the playing field in favor of citizen voters. For example, I always felt it is quite difficult (and always expensive) to come up with good current competitive pay figures that can overrule the deliberately high government threshold hurtle figures that are skewed to the high side. My professional opinion on that was confirmed in a private conversation with a former INS Commissioner. 

Consciously forcing American employers to pay a premium rate to import foreign laborers actually seems to be a quite sensible punitive step in a deterrent policy. The more you pump up the hiring specifications to support your claim that local talent is absent, the higher the wage target for imported talent becomes.  Unless the employing organization pledges to pay at or above the prevailing wage set by the government's interpretation of the duties specified in the justification documentation, no legal permission will be granted to permit someone not a USA citizen to work here. Those federal rate enforcement rules are adjudicated by a local State Workforce Agency (SWA) for many visa types. Such state employment departments are quick to offer candidates registered with them for unemployment insurance as alternatives to an expensive foreign hire. Thus, citizens seeking work in the community get first shot at a high-paying position before the SWA is forced by lack of available local talent (one of the usual INA requirements) to approve the employment visa application of any outsider. The number of foreign work visas are also strictly limited and get snapped up very swiftly, which is a related but different story similarly fraught with controversy. Conflicts are inevitable between protective government agencies charged with maximizing citizen employment and talent-hungry prospective employers indifferent to the nationality of their workers.

The bottom line is that many obstacles are placed in the way of enterprises that seek to give domestic work to foreigners. The United States is not as bad in this regard as many other nations, but our barriers are already strong enough to discomfit both public and private organizations desperately seeking competent candidates here, especially for certain STEM positions. American human resources, employment and compensation people still need to warn their management that a long, complex and expensive gauntlet of paperwork must be endured to successfully import human talent. That's probably good for us, too.

E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries.  After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review. 

"Liberty" image by Russ Allison Loar, courtesy of Creative Commons

Outing Outsourcing and the Gig Economy

Why get excited about CEO pay piggery when outsourcing and giggery is much more likely to cost you your job? The accelerating trend towards reducing payrolls by replacing employees with outside contractors threatens our livelihoods.    

Compensation people and the objects of our efforts might not survive outsourcing where work is delegated to other outfits or the gig economy in which consultants are given short focused assignments. Even handling employee remuneration and administering pay programs can be outsourced. Total reward professionals need not be involved when independent contractors are controlled by purchasing agents and cost accountants rather than human resource people. Meanwhile, employees from virtually every occupational category stand to lose what little security still comes from a regular job with an organization if they are displaced and then must seek day to day survival by continually negotiating temporary project deals as independent outside suppliers.

Don't be surprised when enterprises are quick to shed employees. Avoiding employment relationships by shipping out work to contractors certainly simplifies business. It reduces management to contract planning. Monitoring the results produced by outside vendors for whom you have absolutely no responsibility means no more "people problems", because you no longer have subordinate employees. Instead, you receive the contracted services of other entities operating at an arm's length distance and required to deliver specified results. No performance evaluations, stressful personal dealings or contentious emotional expectations.

Employee pay is replaced by a clear cost expense item without any burden rate, no taxes to deduct and no imprecision for overtime, commissions, bonus, or variable cash awards. No complicated benefit selections, no individualized payroll deductions. No long-term employment relationship commitment at all. Rather than stockpile people with wide varieties of knowledge, skills and abilities, instead buy totally fungible specialized talent as needed by immediate circumstances from easily replaceable output modules. Like today's electronic equipment -- don't fix it ... just replace the entire unit. Similarly, it is easier to drop a supplier than to fire any regular employee, no matter how problematic their performance may be.

A regressive devolution back to the exploitative practices of dark past years looms. Despite brave attempts by some organizations to introduce more enlightened environments over the last century, too many enterprises consciously accept the old sweat-shop indifference to the humanity of their workers. Instead of valuing and cultivating worker talents, they concentrate on finding the lowest cost highest quality output bidders for their product or service. They don't care who does it as long as it is produced within the proper tolerances of quality, quantity, time and cost for the highest profit possible. That is the typical mandate delivered to top executives of every organization by their owners. It is not a phenomenon restricted to commercial private businesses, either, because the same dynamics operate in the public sector. Taxpayers insist on optimum services at minimum personal cost. Even union pension funds seek high returns on their investments. None of those expectations depend on employee welfare at the enterprises that serve the customers. Whether all these demands create a workplace of robot automatons or one of collaborative independent agents, neither environment requires much HR management.

I'm struggling to articulate an uneasy gut feeling about the potential implications of negative attitudes towards the employment role of organizations. Purchasing production units is easier than hiring and managing troublesome people. Lean vendors can be deployed to supply the same output results as team members, but at the cost of accepting a different relationship ... like, hardly any, beyond that of buyer and seller. The purchase of a product can easily be callously disengaged from the lives, souls and welfare of the producers. But is this the desired future of work?

Unsure if the slide towards this scary dispassionate dystopia can be stopped. Perhaps more of us should speak out. Maybe "outing outsourcers" can become a new rite of public employer shaming that will discourage this ominous trend.

Perhaps that fat cat overpaid CEO truly deserves an imperial reward package if he or she supplies good steady jobs with living wages to regular people.

E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries.  After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review. 

"Cheap Labor to Go" image by PT courtesy of Creative Commons (magnify by clicking on it)

"Outsourcing" illustration by Frits Ahlefeldt, courtesy of Creative Commons

The Consultant Dilemma: Make Your Own or Go with Store-bought?

Much of what we do in compensation is logical and systematic. Once you know the steps for a process or a report, why would you spend money on a consultant? Just get the work done and move on. After all, isn't this stuff in your job description?

Odds are, it is. Whether we're talking job pricings, salary structures, gender/minority analysis or you name it, it's all in our job description somewhere. And yet, in my experience, hiring a consultant doesn't mean you're shirking your job. In fact, if you do it well, working with a consultant often demonstrates your ability to lead by making an investment that will provide returns for many years without having to reopen your wallet.

Here's the case for investing in consulting assistance that I made to a colleague recently:

Become as sophisticated as the consultant's best clients. You may have worked for two or three companies. Your consultant will have worked for dozens. Each one had a problem to solve that you do, too. Work on a new or vexing project on your own, and you might as well be unfolding a paper map and uncapping a highlighter. Invest in a consultant and you get a GPS that shows you the two or three best routes, and enables you to avoid dead ends and accidents.

Meet hard deadlines. Most of our work is very time consuming. Especially if you are a small shop, odds are you will get interrupted by a zillion other things and probably should. Consultants not only have more experience than you do in creating realistic project plans, they also contract with you to meet specific deadlines.

Learn a lot. Consider this. Even if you know how to cook, the Barefoot Contessa offers tested techniques and recipes that you may never discover on your own. In compensation, the best consultants consider themselves teachers, showing you how everything is done and prepping you to do it yourself, so you can build on the results of your current project without further help from them.

Make your attorney happier. Can you even imagine that? Here are a couple of reasons. When employee legal challenges occur and work becomes discoverable by a court, consultants' work tends to be far more documented than in-house work. When it comes to questions of equity, guidance by a third party (who has no skin in the game) often has more street cred than your company's self-assessment. From an experience standpoint, consultants have typically worked with attorneys on these issues in the past, so they know how to address formal requirements. In addition, some consultants provide expert testimony. Having been on the "hot seat," they can help you avoid practices or documentation that can be easily challenged.

Unsubscribe when you're ready. Most consulting work is once and done. You decide if you want to invite them back.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career paths and communications at the Café. Her firm, re:Think Consulting, provides services that include market pay information, base salary structures, incentive plan design, career paths and new plan implementation. Margaret is a Board member of the Bay Area Compensation Association (BACA). Earlier, she was a Principal at Willis Towers Watson. Margaret coauthored the popular ebook, Everything You Do (in Compensation) Is Communications, which can be found @ https://gumroad.com/l/everythingiscommunication.

Merit Deserves More than Mere Money

Money is not the only reward available to serve your compensation program.

You can't rely on cash alone, anyway, in these times. During this current long period of relatively flat or tiny incremental salary increases, human resources people have already squeezed as much as possible out of very small discretionary annual increase opportunities. Margaret O'Hanlon wrote eloquently earlier about the current weaknesses in annual pay increase programs.  This is an excellent time to expand your thinking beyond the limited boundaries of payroll budgets.

When pay increase guidelines limit good workers to 3% and outstanding performers to 4%, the difference is hardly worth the lifestyle cost penalties accepted for an extra 1%. Why bother killing yourself for a hardly noticeable pittance delivered long after the performance that earned it and trickled out in each future paycheck? You can get a much bigger boost in earnings by switching jobs.

If other jobs exist with higher salaries, why don't people quit to take those higher-paying positions more often? The answer to that simple question is also the answer to the motivational dilemma. Money is not the only reward prized by workers. Consider some of the other elements of total reward systems that are in greater supply than cash. Some of them are also easier to apply and can win much more appreciation than a few extra dollars disappearing into a bank account.

It does seem impossible to achieve a credible pay for performance (merit) system with lean payroll budgets constrained by low increase authorizations. Merit is not properly recognized by a mere 1% differentiation. Such tiny distinctions are virtually imperceptible, below the level of notice. Let's consider some solutions.

Merit is actually being reflected in retention and movement today. If they are good, you keep them; otherwise they are shed, one way or another, with minimal muss and fuss. If they are outstanding, you prize them and should shower them with (hopefully appropriate) reinforcements. Money is frequently the least available to offer, the most expensive reward element and often the least effective.

The optimal reward is being treated as a treasure rather than as a resource to be exploited. Imaginative total reward options are always possible and sometimes vital. Let's think of some ...

• Valued talent should be encouraged to stick around by frequent positive feedback from the immediate supervisor.
• Can the employee's work schedule be adjusted for maximum ease and convenience? (THEIR ease and convenience, not yours.)
• Could this person's talents, skills and abilities be enhanced for mutual enrichment by another assignment that would please the worker while simultaneously increasing the positive leverage they can supply to organizational output results?
• Are there any training courses, professional societies, sabbatical programs or task-force memberships that would serve both parties well? What new experiences do they seek that will serve their long-term career interest?
• What goods and services does this employee purchase with after-tax income that you could provide while deducting the expense from your taxes?
• It might be informative to ask your tremendously valuable top performers what they would like as a reward. Bet it will not be the same thing from each of them, either.

Rewards can and should be personalized as much as possible, because your workers are all unique human beings with individual hopes and dreams. If compensation people are to succeed in our ambition to effectively manage and administer total reward programs, we should both recognize that fact and act accordingly.

Those who visit this site are probably the most likely to cope effectively with this challenge. What say you?

E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries.  After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

"Dreams" by Noah Coffey, courtesy of Creative Commons