Compensation Cafe

It’s Been a Bad Hair Year

It’s been a hairy year and it’s time to get out the combs and brushes. Break out your good scissors and clippers. I hate to be the one to tell you, but your compensation plans have “COVID-hair.” We get it. It’s been six months since the last time you sat in the chair of a professional and had your ‘do done. It may have been that long since the last time you covered your roots with someone other than an off the shelf solution. It’s time to get prettied up for the holidays!

It’s time to beautify your plans. They deserve it.  They have sat quietly for months while you focused on higher priority projects. You had to put some executive pay on hold for a while. There was the whole layoff thing. Figuring out the furlough fiasco turned out to take more time and effort than you imagined. Heck, even dealing with your 401K or PTO turned out to be challenging in these odd times. But it’s now September and compensation planning season is upon us.

Let’s take care of the basics first. That annual incentive or bonus plan probably won’t work the way it was designed. You have about 60 days to figure out what you’re going to do, then it’ll be time to baste a turkey and wrap some presents. Will you have any money to share with your best performers? If not, can you quickly design something else of value, get it approved and roll it out while people are still paying attention? Getting the tangles out of your short-term incentives will make everything else just a bit easier.

When your hair is clear of knots, it’s time to get restyled. Your long-term incentives and equity compensation may have weathered the storm just fine, but it’s more likely they need some help. Are your options still in the money? If not, what are you going to do about it? Underwater options aren’t simply seen as having no value, they are active demotivators. You seldom hear stories about the options that turned into value, but you always hear about the options that stayed underwater!

And what if you have RSUs? Sure, the strike price isn’t going to be an issue, but what if you communicated RSUs as having a dollar value at the time of award? If your stock price has dropped, have you thought about how you will communicate the loss in value? And, if you have arranged for participants to sell-to-cover to meet their tax obligation, is your stock volume performing well enough to cover all the shares they may need to be sold? And, what will these awards look like next year? Are you prepared to grant wildly larger numbers of units because of a stock price collapse?

We know that it’s kind of cool or amusing to rock a vintage hairstyle from past decades, but it doesn’t work well with compensation programs. Now is the time to schedule your appointment with a professional and get things cleaned up for the new year. On the downside, it’s hard to know exactly what the cool kids are doing because you have seen them all summer and their data may not even be reflected in the market data.

A good start is something familiar with a nod toward an unpredictable future. Perhaps programs without too many bells and whistles, that incorporate a better out-performance component that you may be used to. The most important thing is to get started before you are stuck in year-end processes and unable to act at all.

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

How to Use a Message Platform for Compensation Communications

Looking for a practical example of a compensation communications strategy? You've come to the right place. We'll go over a mini case study in a minute. Wondering what a message platform is? My last article talked about the definition and application of a message platform. If you're looking for deep background, start there.

In short, there are two parts to a message platform for Compensation communications:

• Key messages are short statements designed to show that Rewards practices are linked to business practices in a way that ultimately benefits the employee.
• Proof points are the details of the compensation practices you are explaining. They act as supporting evidence for the key messages, giving them validation and credibility.

A message platform is the outcome of a strategic exercise that you work on with a select group of HR and executives. The goal is to determine how you are going to explain the connections between business transitions that you want to accomplish and your compensation practices. The explanations should be posed in a way that encourages employees to empathize with the new role that you are asking them to play.

The example that we're going to examine today is illustrative, using the case of a small engineering firm. The Sales group has sold the firm's project management services for decades in a mid-sized, somewhat "retro" market space. The company is now more than ready to grow Revenue. It wants to move to the next level, by linking Sales goals to the achievement of the company's new, aggressive three-year plan.

In the past, each Salesperson has had a lump-sum incentive guarantee for sales to target clients (in lieu of base + commission). This compensation plan design doesn't really align with the company's new, higher energy initiative to increase Revenue. Their compensation redesign strategy involves ramping up the Sales challenge while paying a foundation guarantee amount, with total compensation shifting to 50% salary and 50% incentive. Added together, these amounts will pay a market competitive rate.

Here's a selection of key messages for this case:

• We are gearing up to make the most of the opportunities for progress on our three-year plan.
• We want to challenge ourselves to "get ahead of the Artificial Intelligence wave," so we can position ourselves as experienced advisors to our clients.
  
• Increasing our Revenue as we grow in influence will put us in the best place to collaborate with our customers and build our own capabilities.
• We are introducing a base salary not only because many Salespeople asked for this change, but also because it will provide a clearer message about the competitiveness of our pay practices in each of our job markets.

These illustrations describe a company and Salespeople that are making a transition to a more "amped up" Sales culture. Notice how the messages are designed to help Salespeople understand the rationale for the change AND to "get their heads around" the changes (which affect them deeply and will require changes in their behavior).

While the examples refer to business challenges and strategies, they also use words like "experienced," "collaborate" and "clearer." This approach builds both awareness of, AND empathy for, the changes. After all, employees will need to "cross the divide" between the current culture and the new one, so they need to be encouraged -- both intellectually and emotionally -- to be willing to act in new and very different ways. Remember that they are switching from a comfortable guaranteed payment to the more challenging design of base + commission.

Here are some examples of proof points. Covering "nuts and bolts" information, they support and reinforce the key messages.

• You will now be eligible to earn a supplemental commission for Revenue growth that is higher than the previous year.
• In implementing the new commissions, we will continue the policy of chargebacks for uncollected revenue.
• Salespeople can now qualify for promotion through the achievement of a series of specified, measurable milestones.

Can you use key messages in a more typical compensation year than this case study is describing? Absolutely. Remember the Compensation Cafe watchwords, "everything you do in Compensation is communications." Since effective communications is a call to action, every communication event involves engaging employees in an active transition that is linked to company effectiveness that will ultimately benefit employees. Recognize that your business is always in transition, even if it simply involves shifting from a day-to-day focus to an annual overview of performance and reward.

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 https://gumroad.com/l/everythingiscommunication.

Cafe Classic: Baking is to Science as Cooking is to Art, Pay = Both

Editor's Note:  I hold that Dan Walter is the king of the compensation analogy, and this Classic analogy is particularly instructive. (And I'm not just saying that because I like to bake and cook.  And eat.)

Many great bakers are average cooks. Many great cooks avoid baking all but the simplest of things. Baking requires precision in measurement and actions. Even a small mistake can result in an inedible mess. Cooking requires creativity and flexibility. The best outcomes are usually a result of unique twists that match the food to the audience. Compensation requires you to be both a baker and a cook.

A client recently had a member of their board ask that a new analysis be done for a new executive in exactly the same way as performed for a prior executive a couple of years ago. The company is unique in industry, location and compensation philosophy. Its peers have continued to grow, change and even disappear over time. It is simply not possible to replicate the exact recipes and processes used to create the numbers from years ago (or even more than a few months ago.)

Executive pay is often more like cooking than baking. You are beholden to the ingredients that are fresh at the time you perform the task. Data sets, like great veggies or herbs, are often only available in small quantities at certain times of the year. Some professionals thrive in this environment, loving the swirl of possibilities and the frequent changes that must still result in predictable success.

Broad-based pay can often be more like baking than cooking. The data sets are larger and less volatile. Like flour, butter and other less perishable ingredients, you can expect some level of consistency throughout the year. You have a specific recipe that you can follow with only perhaps a replacement of the fruit that goes in the pie or muffin. Many professionals live for this organization, process and exactness.

What we seldom recognize is the precision required to create great art or the creativity required to make a recipe better.

Cooks must practice new things all the time while being flexible with both the ingredients available and their patrons’ tastes. They must learn flavors and techniques to build meals from a wide range of disparate sources. All of this practice must come together at the time of execution so that quick decisions can be made and executed without fear or hesitation. Differentiation is easy and variety allows for many different choices at every meal. Execution is often as much a matter of taste as it is technique. Incentive pay professionals are chefs.

Bakers must work and rework recipes, sometimes for years, to create something that is completely new and confidently repeatable. Differentiation is hard since the ingredients are so similar. Since there are also fewer opportunities for baked goods in any meal, the final product must have wider application and appeal. Execution is about rules and techniques first and taste will generally follow. Board-based pay professionals are bakers.

In reality, most compensation professionals do a little of each of these nearly every day. They are less likely to be as specialized as the pastry chef at a five star restaurant and more like the head chef at the local family café. In other words, you are right. Your job is probably harder than most people realize. When you do it right, most people simply get what they expected all along. When you do it wrong it is obvious to everyone.

In your current position do you identify more as a baker or cook? Which is more enjoyable for you?

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

Cafe Classic: Sales Compensation – The Perfect Compromise

Editor's Note:  Sales compensation plans, when well-designed, reflect a clear understanding of the organizations sales strategy and reality - and a careful balancing act.  Dan Walter explains that Classic challenge in today's post.

My first real lesson in negotiations was simple: “In a perfect compromise no one walks away completely happy.” Compromise, like sales compensation, requires both sides to give up something in order to get what they really want.  When done correctly, there is balance to the final resolution.

Sales compensation is both the easiest and hardest of incentive compensation. Pay must drive specific behaviors, but it needs to avoid unintentional bad behavior. It must align with success at many levels, but provide ease of alignment for each individual. It must be easy to understand, but flexible enough to adjust to critical unpredictable factors. It must be painstakingly exact, while giving everyone some wiggle room to pay as required. Everything about sales compensation design is a compromise.

But the real negotiation is the daily, monthly, quarterly and yearly negotiation between the sales person and the company. When a company is not performing as well as it should, it must pay sales more than it wishes. Great sales people have transferrable skill sets and they need to be paid (if they are doing their job) even when results aren't great. When a company is performing outstandingly, sales people will tell you they aren't paid nearly enough. The equation for sales pay is usually asymmetrical. This creates tension in most measurement periods. Tension results in uncomfortable conversations.

The difficulty is often in communication and acceptance of reality. When a company’s revenues or margin are down, it is easy to blame the people closing bad deals or not enough deals. But, sales professionals will seldom tell you they are doing less than a great job, or putting in less than full effort. And, of course, companies and their management will often chant the same mantra about their own efforts.

Every great sales person can tell you about the time they carried the entire company on their back. “If it wasn’t for me, the company wouldn’t have sold anything. Heck, they probably would have gone under!” But, they are also unwilling to admit when a product is essentially “selling itself.” On the other hand, when a company is doing really well, management will almost always say that “anyone” can sell their product. Some will even explain how the company has made its sales people look better than they actually are. Of course, there are times some of these stories are true. But, there is usually far more hyperbole and misunderstanding than there are facts and accountability.

When you create a sales compensation plan a good idea is to consider throwing away at least 10-20% of the upside and downside exaggeration. Build your plan to pay even when things are dark (but not when things are black.) Design your upside potential to consider the success of the whole company as a component of the success of the individual. And, lastly, make sure you build in an exception to these rules. Because, in a negotiation, you may not really know what it will take to close out the issue until the issue is at hand. And, in that situation you should expect a perfect compromise where everyone leaves friends, but just a little bit unhappy.

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

Cafe Classic: Are You a Pay Data Exchanging Scofflaw?

Editor's Note:  In the spirit of public service, we share this Classic reminder that the exchange of information about employee pay between organizations is governed by federal law. 

It seems innocent enough.  Just a little sharing of helpful information between trusted colleagues.  After getting pushback on engineering salary levels, you pick up the phone and call a fellow HR professional in your network whose company has similar positions and ask about their salary practices.  Naturally, in the spirit of kind reciprocity, you share back a little of what you're doing for these roles.

What could be wrong?

Can you say collusion?  Or illegal price-fixing?  How about wage theft?

Several conversations in just the past week have reminded me that few HR professionals (including, surprisingly, a number of compensation specialists) are aware that the conduct of both formal and informal (a la the phone call mentioned above) is regulated by the Sherman Anti-Trust Act of 1890.

Time out for a bit of history.  The Sherman Antitrust Act, named for its author, Senator John Sherman of Ohio, was original passed to limit monopolies and other restraints on commerce.  It is the Act's provisions on pricing and competition which impact those seeking information on compensation practices via salary surveys. 

Here's the bad news:  The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), the bodies with primary responsibility for enforcing our nation's anti-trust laws, have determined that organizations conducting their own salary surveys could be seen as practicing illegal price-fixing.  But here's the good news:  In an effort to provide guidance to HR and compensation professionals seeking to determine competitive pay levels while avoiding antitrust violations, the DOJ and the FTC have jointly published a series of Anti-Trust Safety Zone Statements, which have been interpreted  to provide a "safe harbor" for this exchange of information.

The DOJ/FTC Antitrust Safety Zone Statements are highlighted below for reference (note that these were initially developed with health care organizations and activities as their focus):

Antitrust Safety Zone: Exchanges of Price and Cost Information Among Providers That Will Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies

The Agencies will not challenge, absent extraordinary circumstances, provider participation in written surveys of (a) prices for health care services, or (b) wages, salaries, or benefits of health care personnel, if the following conditions are satisfied:

1. The survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
2. The information provided by survey participants is based on data more than 3 months old; and
3. There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider

The conditions that must be met for an information exchange among providers to fall within the antitrust safety zone are intended to ensure that an exchange of price or cost data is not used by competing providers for discussion or coordination of provider prices or costs. They represent a careful balancing of a provider's individual interest in obtaining information useful in adjusting the prices it charges or the wages it pays in response to changing market conditions against the risk that the exchange of such information may permit competing providers to communicate with each other regarding a mutually acceptable level of prices for health care services or compensation for employees.

Keeping a finger on the pulse of the pay market, particularly for hot skill jobs and in-demand talent, is an important and necessary part of managing a successful compensation program.  We simply have to make sure we're staying within the boundaries of the law when we do so.

Let's be safe out there!

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 "Woman Telling Something to Man" courtesy of ImageryMagestic/FreeDigitalPhotos.net

Compensation Communications: Should I Say How I Feel?

Many of our colleagues would say that compensation has nothing to do with feelings. The whole business has to do with facts and only facts. That's why there are certifications for practitioners in our business. There's a right and a wrong way to do our work, and a big part of it has to do with knowing the difference between good and bad data.

On the other hand, feelings have a lot to do with compensation COMMUNICATIONS. That's why I want to talk about them today. Addressing feelings through compensation communications is tricky business. If we ignore the connection, though, we can create serious misunderstandings among employees. And if we understand the connection, we are more likely to have interested listeners for our communications who will do what we've asked them to do.

Just as with compensation design, there's a right and a wrong way to deal with employee communications. An early planning step involves defining what you want your audience to "KNOW, DO AND FEEL" as a result of the communications. Then once you get your communications drafted, you test them against these goals. The words will need editing and the methods you are using will need adjustment if they don't: 1) transfer the knowledge you have prioritized, 2) prepare managers and employees to act on the knowledge, AND 3) inspire feelings that build engagement.

Let's look at an example. Responsiveness is always a favored trait because it is the foundation of effective teamwork and communication. It is especially important now, when everyone is working remotely and on multiple teams.

Say the Compensation Department thinks it's a good idea to highlight, mid-year, the traits and competencies that have emerged as priorities in our new work environment. Responsiveness is one of a group of competencies that will be communicated as reminders through a campaign that includes email, manager discussions and videos on the intranet. If you put all that work in to developing communication materials that mean well, but don't take into account that employees are feeling burnt out right now, there will be little or no interest in your campaign. Plus, employees might feel annoyed that you are ignoring their current burden.

On the other hand, what if the campaign talks about the downside of unresponsiveness and illustrates (perhaps humorously) what happens when a colleague is unresponsive? You'd be acknowledging everyone's typical experience, and they would be far more likely (engaged) to be open to acting differently (as you also illustrate in your campaign.)

Take another example -- you need to communicate the bad news that mid-year bonuses will not be paid because of business conditions. Everybody's been working full tilt. They may understand why there is no funding for bonuses, but they will still be disappointed. There will also be feelings that some money could have been found somewhere given how hard everyone is working. Communicating in that context, you can't change employees' minds, but you could influence them. Your "FEEL" goal in your "KNOW, DO AND FEEL" planning could be to design the communications to build a belief that the lack of bonus is suitable to the business situation. Explanations of product results or share behavior could be used as part of your explanation. Giving employees a context for your no-bonus decision makes it more likely that you will influence employee feelings.

Some may still disagree that feelings have anything to do with compensation communications. There are some situations where that is certainly true. I once worked with a major software company that limited its compensation communications to "KNOW" and especially "DO" with no assessment of feelings at all. They had a very cohesive culture, engaged employees and a no-frills engineering mindset, so this strategy worked well for them. "FEEL" was being treated effectively in other ways in the company. I don't know how many of us would describe our own company's culture as cheerfully cohesive these days, though.

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 https://gumroad.com/l/everythingiscommunication.

Time for a Termite Inspection!

I live in a house that is more than 100 years old. It was maintained well over the years but, like all old homes, it needs regular maintenance. My neighborhood is filled with many homes built around the same time, and a few homes built very recently. A few months ago, a house a couple of blocks away just disappeared. One day I walked by and it was sitting there, looking resplendent in its new coat of paint, with a “for sale” sign out front. The next week I walked by and there was only an empty lot. It was jarring.

If you have ever bought a home, you have probably experienced the anxiety of a termite inspection. Oddly, this is something that we seldom do when we have been living in a home for several years. It’s as if we believe that termites will respect our ownership and focus only on neighboring houses. This attitude usually prevails right up to the point where something crumbles, or the insects start crawling out of the woodwork. In the case of my neighborhood's missing house the inspection showed that the house was mainly made of paint. The termites had eaten everything important and there was no way to save the structure.

Every compensation professional who has started a position at a new company has experienced their own version of a termite inspection. You get your bearings and immediately dig into everything the prior person did or did not do. You make a list of trouble spots and determine if you can solve the issues with a little bit of targeted work or a bigger process. Sometimes all you find is a nice paint job. Maybe it's a well-written compensation philosophy or handbook, but no real foundation or structure to support the pretty documents.

There is really never a great time to do a termite inspection. But it is far better to do one before the issue becomes unfixable. Like a long-time homeowner, we seem to think that our presence alone is enough to ward off the destructive pests. In reality, the pests do not care if you or I exist. They are only focused on what they need. Our objectives do not factor into their lives. Without regular inspections, we may find we live in a house made of paint.

Luckily, we can build these inspections into our regular compensation calendar. We can even do partial inspections on different elements of pay at different times of the year. The reason for this post now, while you are swamped in COVID-19 response and recovery, is simple. If you look closely, right now, you may see the early signs of an infestation. Maybe your pay programs are not flexing well to remote work. Perhaps your legacy equity grants are no longer useful, or maybe your grant leveling methodology has been exposed as inefficient or ineffective. And, of course, there are the more obvious issues like short-term and sales incentive plans.

Now is the time to evaluate your programs like a new homeowner. The “new normal” is likely to be newer than planned and far, far less normal than desired. Getting ahead of things now may prevent having the house disappear unexpectedly in the future.

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

Mark Zuckerberg is Wrong About Remote Pay

It has always been inevitable. Remote work was always going to become a major piece of the success of many companies. The current situation has just pushed many into the future sooner than they had planned. There is a lot to unpack with a remote workforce (perhaps something for a future series of posts). For right now, let’s just talk about compensation. A couple of weeks ago Mark Zuckerberg not only announced that many employees would be able to work remotely, but they should also expect their pay to be adjusted according to their remote location. GitLab uses a formula to adjust the pay of their workers according to their remote location. A recent article says Canadian employees should expect the same. My question is: Why should this be the case?

The prevailing thought seems to be that we pay people not based on what they do, or how they do it, we instead pay people based on how much it costs for them to live. This is the only conclusion one can reach from pay adjustments because a remote worker moves from somewhere pricey to somewhere inexpensive. Based on this stream of thought someone might think you should pay those who save and scrimp less than those who spend and waste.

Do you currently pay people who live farther away from headquarters less, simply because they wanted to save a little money on housing? Companies apparently believe that people will only move to cheaper locales and therefore allow the company to save some money on pay. If they were remote, who you also adjust their pay upward if they move from Queens to Manhattan, or Gilroy to Palo Alto (please take a moment to imagine your own proximate locations with lower and higher costs.

Let’s imagine a different world. This is a world where three individuals deliver the exact same quality and work productivity. Let’s call them Avery, Blair, and Cameron. They all live on the same block, just a mile from the home office, but they work remotely. Each year they receive the highest performance rating offered by the company. Every year they hit all of their goals. In year three Blair moves 60 miles away to a rural town where the cost of living is lower, and schools are better. How would you adjust their pay?

Does Blair get a cut in pay? Do they stop getting raises at the same rate as the other two? What if Avery then moves to the most expensive nearby suburb. Their partner is the CEO of a publicly-traded company and covers all the bills. Should Avery be paid more?  Less???  No Change? Do you need to learn first if Avery is a male or female? Do you need to know if they really “need” a raise? Is there any rational way we can support this type of system? No. No, there is not.

It isn’t often that compensation professionals get to truly change the way businesses do business. This is one of those times. Some or all of your business will be challenged by this issue soon, perhaps immediately. You need to get to work documenting the pros and cons and your recommended approach to addressing all of them. We all need to get to work on defining the best path(s) forward on this issue. If we wait for some non-compensation person to “lead” and create the best practice for us, we will surely regret it in the future.

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

Compensation Air Traffic Control

In the past three months, must of our businesses have experienced an upheaval of historic proportions. During that period, you may have been challenged with an array of uncomfortable tasks. You may have been involved in laying friends off, furloughing colleagues, cutting pay for executives, putting holds on merit increases, temporarily modifying incentive plans, marketing pricing for newly remote positions, all while working from a dining room table, teaching math, and cooking more food than an average holiday season. And now, just as summer is raising its beautiful head, many of us are planning to return our staff to some version of our past practices. The swirl of tasks and requests can make a compensation professional feel more like they work in air traffic control.

Each action taken in the past three months is like an airplane that was sent into the sky. Fuel is now running low and the planes need to land. You are probably sitting at your desk (or sofa) trying to determine which thing s needs to be brought home first. You only have a few runways, and each task requires new processes, rules, and ongoing communications. You may need to choose between finding the best solution to fix executive pay and finding a smooth transition to paying people who are returning to work. There is no rule book.

Every task may not be able to get the same attention and careful corrections. Some may need to simply be allowed to land on their own, while others may need you to put foam on the runway to soften their landing. Every person at the other end of these transitions is likely to feel that their personal situation is a priority. They aren’t wrong. Some may feel like they are the most important. And in today’s world several of them may also be correct. Similar to when we sat down a few months ago and figured out a new definition for “essential employee”, we must now determine who to handle first when there are several equally important tasks.

The key to success is to schedule things to come in for a landing in a sequence. No matter how much someone insists, two planes cannot land on the same runway at the same time. Hold your ground if you see this happening. The things that are running out of fuel must be landed first. This may be adjusting pay for a job family that has become more critical during this period. It may mean waiting to communicate an important executive plan until your broad-based program has been brought back to speed. The important thing to remember is that you may be the only person at your company who has the expertise to make these decisions.

Air traffic control is not for the faint of heart. People’s lives are literally in your hands. Compensation can often seem pedestrian, but in times like this, your job may be similar. You may be the difference between your company or your staff successfully navigating this transition … or not.  It’s time to bring them in for a landing. Who else knows how to do that but you?

I have been collecting information on, and working with many, companies who are making this transition. The issues are similar, but below the surface, the solutions are often unique. Use the comment section to share your thoughts or questions. I am sure there are other professionals who are willing to provide helpful advice.

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

Cafe Classic: Following the Leader

Editor's Note:  As we work to move forward from the pandemic and its impact on our workplaces, we all seek data in an effort to understand what others are doing, what trends are for compensation actions, plans and practices.  This provides helpful context as we consider different future paths and the reward scenarios to support them.  The economic impact of COVID-19, though, has been unequal, different across industries, different even within industries as some organizations fight for survival and others see new opportunities for growth and prosperity. With that, I bring you Chuck Csizmar's Classic advice about "best practice" and following the leaders.

"What does the survey say?"

This is a common question, and one that Human Resource practitioners hear all the time.  Whatever the issue might be in the office, the boss usually comes around to ask, "what's everyone else doing?"

It could be regarding the value of your jobs, through competitive market pricing, or wondering about common practice benefit provisions or even how other organizations handle various HR policies.  But the theme remains the same; the questioner wants to know about "common practice."   What's everyone else doing? 

Why do they ask that question?  Because they want to do the same thing?  Because they want to follow what everyone else is doing?

I guess we're all too accustomed to pushing that EASY button.

Why We Want To Know

There's a natural curiosity to discover what everyone else is doing when we face an issue that's important to our business.  I get that.  Maybe you don't need to reinvent the wheel, especially if others have already completed the work for you.  So the thinking goes, let's grab the benefit of someone else's research and tag along , going with the flow.   Common practice suggests the popular answer, and it's hard to offer criticism for doing what everyone else is doing.

It can also be considered a mistake if you don't know the common practice answer.  Because how can you make a decision without knowing?  Your analysis would be incomplete.

At the same time it's a natural defensive mechanism to point fingers at the "market" or a "most companies" comment and say, "see, others with the same challenges as we have are doing the following."  The reporting of survey results doesn't require creative thinking, risk taking or even sticking your neck out by recommending an original thought.  It's a silent recommendation that you can offer without comment.

Marching To The Beat Of A Different Drummer

But have you forgotten something important in the rush to follow along?  Have you considered what may be the unique (or perhaps merely uncommon) circumstances within your organization, the nature of your own employees, your own situation?  Are you a boiler plate organization with only the same challenges and circumstances as everyone else?  Is the answer to your particular challenge(s) to be found simply by recommending what everyone else is doing?  Wouldn't that tactic really become the absence of decision-making?  The abrogation of responsibility?  Passing the buck?

Is it your intent, or just happenstance that you decide to let someone else, someone from outside your organization make key decisions for you?  And make no mistake, tagging along is a decision, in the sense that even non-judgments eventually turn into a course of action.

And if you're challenged to explain your actions?  The lament of "I'm just doing what everyone else is ," doesn't sound like an effective rationale, does it?  Probably isn't what senior management is expecting from you.

What Do You Think?

Following another's footsteps  does seem to be the safe approach, though.  It's likely the path of least criticism, at least in the short term.  At least until that common practice answer that seems to works for everyone else ultimately doesn't work quite as well for you.

It's easy to deflect criticism of your recommendations by pointing to "common practice."  You're not sticking your neck out, you're not advocating something different.  You're reporting on the activities of other organizations, ones who seem to already know the answer.

So while it's always a useful strategy to know the common practice that covers  your particular challenge, have a care to look outside the box as well.  Sometimes that survey you relied on provided only anecdotal information, while a more viable solution lies in understanding your organization's particular dynamics;  the culture, the politics, management biases, what had been tried before and whether what everyone else is doing makes common sense for you as well.

So whatever your recommended course of action might be, make sure that your rationale includes more thought than simply following the leader.  That's a child's game, and may not be a career enhancing move for you.

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, "Follow the Leader," by The Old Brit