Compensation Cafe

Who Owns HR?

2012-01-27T09:52:05-08:00

There are problems with communications about employee performance that become most evident when pay is involved. This seems to be the most common theme in the articles posted on the Compensation Cafe in 2012. Fingers are pointed in all directions, but the blame seems to be most properly shared widely.

People want to be well compensated: being told that they are performing well is both part of their emotional compensation and a sign that their financial remuneration will continue to climb. It also contributes to unit morale and creates a more pleasant situation for the supervisor, who is rewarded for giving high ratings and punished for communicating negatives. By the way, some managers and VPs only control things or functions rather than people, so they don't meet my definition of "supervisor," which calls for very unique sets of knowledge, skills and abilities (KSAs). The reality that those KSAs are rarely taught to supervisors and managers, and even less often safely practiced and positively reinforced, only complicates the situation.

Something tells me that everyone wants to be told they are great. Even consultants prefer to be praised rather than be criticized. It is simple human nature. Nevertheless, the encouraging words that create mutual pleasure among employees and their supervisors sometimes are not true. The gaps between what was said and what is done become most painfully obvious when compensation is involved. If the reward does not meet expectations, if the pay increase seems paltry or if the reinforcement is considered substandard, unhappiness results at all levels.

Whose problem is this? HR says that supervisors should level with their subordinates. Managers confronted with grumbling workers respond that this is HR’s fault.

Pay systems should be more liberal
Compensation rules should be better defined
More training should be delivered to supervisors
Human resources specialists should create foolproof language for reviews
Manager should be given practice in the art of letting the employee down gently

At the very same time, of course, the supervisors and even the managers and executives with merely one direct report who oversee sections or functions continue to maintain their claim that their vital role as people-managers make their jobs more valuable. Most executives are convinced that their exalted ranks and impressive titles endorse their expertise as performance management experts. But when issues arise, they belong to the department called “Human Resources” or maybe the compensation section. All positive credit accrues to the line manager but all defects are the fault of the folks with a title that includes HR, compensation or “personnel” … only a few remain still alive with the IR or LR title.

Do you see where we are heading? This is a mess. It’s not a new one and it won’t go away just because we each point fingers at each other.

Whose monkey is this? Who will take the initiative to take the blame? It sure doesn’t seem that it will be the ones so quick to take the credit. Please share your ideas for mutual win-win solutions to this consistent problem.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Image courtesy of referenceforbusiness.com

Implementation: Are you the 71%?

2012-01-26T05:58:01-08:00

71% of the "World's Most Admired Companies" report that they are very effective at the implementation of their business strategy. Only 47% of the less exalted companies can claim the same accomplishment.

What does that mean to compensation and rewards? It probably means that more than half of the companies outside of the Fortune 500 often do not meet their business goals. It certainly means that they don't execute very well. Whether there is a correlation with their revenue - and their ability to fund salaries, bonuses and benefits - is another topic.

But really? Pay for performance? How can we seriously say we are pulling it off if we can't even get the company pointed in the right direction?

Look at the commitment that the Most Admired Companies have made to communicating the strategy and more importantly to our work, making sure that managers and employees understand their role in it.

from "Rewards-Program Effectiveness: What Makes the World's Most Admired Companies Great",World at Work Journal, First Quarter, 2009

Yes, research has indicated that employees are more engaged when they know how their work is connected to the business strategy. But let's look at something even more fundamental.

Can we truthfully claim our compensation programs are pay for performance when we spend more time on the numbers than we do on helping employees achieve the right business results?

I'm not saying it's easy. But I do think it's our job. So more on implementation, including communications, in my future posts.

And in the meantime, take these findings to heart. For many companies, this is only the first month of strategy implementation. What will you do throughout the year to continue to educate managers and employees about their role?

The information will help them take their objectives far more seriously -- oops, what I meant to say is that managers and employees will be more engaged!

Margaret O'Hanlon is founder and principal of re:Think Consulting. She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results. Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors of the International Association of Business Communicators (IABC), Pacific Plains Region. She earned her M.S. and Ed.S. in Instructional Technology at Indiana University. Creative writing is one of her outside passions, along with Masters Swimming.

That Comment Bubble Could Get You In Trouble

2012-01-25T03:47:54-08:00

We all know about the importance of document creation and retention. But there are times when documentation is not a good thing. Consider the following (extreme) example:

This comment bubble is age discrimination litigation waiting to happen...

While most cases are not as extreme - and outwardly discriminatory - as the example shown here, there are hundreds of examples where a written remark in interview notes, records of conversations, performance evaluations or other documentation has created significant problems for employers. A remark on new hire paperwork that a candidate "accepted initial offer - didn't negotiate" might be interpreted as gender-biased. A comment like "needs work on oral communication" could be interpreted as race-biased.

It's important to think about the comments and notes you commit to writing. There are lots of remarks that may seem innocuous when you write them, but could be interpreted multiple ways. Common examples include statements regarding:

adaptability and ability to learn new skills;
"commitment" to the job or organization and "drive" to advance to higher level positions;
potential for future advancement within the organization;
"toughness" versus "sensitivity";
compensation negotiation skills and knowledge of market rates for job in question;
personality traits and characteristics not related to the job.

Also avoid comments directly referencing protected status (age, gender, race and ethnicity, disability status and medical conditions, family composition, etc.). While references to someone's medical condition is appropriate in FMLA documentation or short term disability paperwork, it's not appropriate in documentation regarding merit increases, training opportunities, and so forth.

In a perfect world, we would never have to worry about this issue. Everyone would be basing all decisions on 100% objective criteria and no thought would be given to the personal characteristics of the people being evaluated. We would read the comments of others with 100% clarity and know the exact meaning and intent behind every remark. But we don't live in a perfect world. We do let personal characteristics and preconceived notions influence our decisions, consciously and subconsciously. Semantics can be a real problem. People twist words to make them mean what they want them to mean, not necessarily how they were spoken or written.

Before committing pen to paper and writing comments on official documentation or entering your handwritten notes into an employee's permanent record, think about whether anything you're written could be interpreted more than one way. Even though you may not have meant the comment to have a discriminatory meaning, it might be read that way. If it is, that comment bubble could get you in trouble.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer Podcast. Follow her on Twitter at ProactiveStats.

Yet Another Reason to Rethink a Bonus Culture

2012-01-24T05:19:16-08:00

Already this year I’ve written a few posts (here, here and here) on why bonuses as a primary means of recognition reward fail. Now I’ve read some research featured by Dan Pink, in which he recounts experiments done with two groups. While taking a simple survey, one group was given a visual “cue” of seashells. The other was given a visual cue of money. The result:

“Liu, Smeesters, and Vohs say that money cues can operate as threats and “produce contrarian reactions that are the opposite of the source’s intent.” Other research has shown that being reminded of money can make people more single-minded and more apt to work harder — but also less social, less cooperative, and less likely to help others.

“It’s a bit odd, they explain. ‘Money has bigger effects on people’s thoughts, feelings, and behavior than simply what it can do as an exchange medium or store of value . . . Mere reminders of it are enough to drastically change people’s preferences for work, play, and interpersonal relationships.’

“So the next time you try to raise the issue of moolah in an effort to persuade a prospect or an employee, think twice. Making it all about the coin can sometimes get you the opposite of what you want.”

Single minded and harder working are, indeed, good results – but is it worth the trade-off of employees becoming less likely to help others?

What should you do instead? Keep in mind the research showing that hearing a simple “thank you” made the recipient 100% more likely to help again in the future.

“Thank you” vs. bonus. More willing to help vs. more selfish.

The choice seems easy to me. But if you need more convincing, check out this video of real-estate mobul Barbara Corcoran, founder of the Corcoran Group and personality on ABC's Shark Tank. Corcoran speaks to recognition motivating better than money by driving people to think differently and bulding people up again and again.

Pay particular attention to the 04:22 mark where Corcoran says:

"Recognition will buy you time. Not phony recognition - 'Oh, you’re amazing,' but real recognition - 'I want to tell you what a great job you did.' Private recognition, not public. Whatever you can do to give people recognition for their uniqueness and success, people will marry you forever."

So if you don't use money to motivate, what should you do instead? Forbes offers this list of 8 ways to motivate without money.

Do you rely on cash bonuses as your primary means of recognition in your organization? Are you willing to trade willingness to help for selfishness?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Don’t Tell Me I’m Great If I’m Not!

2012-01-23T05:53:53-08:00

I have both friends and clients who have been struck by an unfortunate dilemma. I have a couple of friends who have been told one thing for months, and perhaps years, only to find out that the truth they knew wasn’t the “real” truth. I have clients who need to realign pay for people who have been told they were top performers when, in fact, they are less than adequate. In both cases it seems more like senior managers were trying to be nice, rather than sneaky.

Why have confrontation when you can have everyone like you? It’s easier to be nice to everyone. Many managers have made this their approach to leading their staff. Rather than point out flaws, they point out only the positives. Rather than prepare their staff for bumpy water in the future, they keep things on the bright side right up to the moment the boat hits the dangerous rapids. The discussion of a potential demotion, cut in pay or job-ending decision never seems to make it onto the agenda.

Employees want to be led, and generally want the truth. I also think managers generally want to tell the truth, but seldom have the skills to do so delicately. While these managers do a disservice to employees by not laying out a realistic path, those of us in the compensation community do even worse by not providing them with the tools, words and examples that will allow them to discuss both the good and bad.

We can’t expect great employees who have been promoted to be great managers to be able to talk about pay issues with any amount of expertise. We also can’t expect that they will always do this task well, even if they have been trained. We need to make it clear what needs to be said to underperformers and check back to make sure it has been communicated.

This is not about avoiding lawsuits or angry ex-employees. This is about not being jerks in the eyes of those we need to keep working hard. Once the trust on performance has eroded in a single example, you risk the chance of other employees questioning their value to the company. Rebuilding trust is far more difficult than maintaining it. Like a swimming pool, it is far easier to keep it full than it is to fill it up.

So look at what you've asked managers to communicate. Then ask yourself if you have provided them the skillset to do so with a complete level of truth. It is not only our job to make sure that pay is properly designed and set, it is also our responsibility to ensure that the discussions around pay reflect the sometimes harsh reality of underperformance.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

Should We Define Superior Performance?

2012-01-20T05:52:24-08:00

I think most of us agree on the importance of setting performance goals and clearly communicating performance expectations to employees. Without this, you're left with something like management by mental telepathy.

But here's a question that has dogged me for some time: Should managers, as part of the setting of performance expectations, give employees information on what they must do in order for their performance to be considered "superior"? What it would look like to "far exceed expectations"? Or is it better, even necessary, that we fall back to the Justice Potter Stewart position - that excellence is hard to define but we'll know it when we see it?

I hear more arguments against than in favor of pre-defining superior performance. That it would give too much - even too specific - direction to workers. That it boxes employees in and limits the possibilities of what they might accomplish. In a world as fast-moving and uncertain as ours, these are compelling points. Yet I'm left with the nagging sense that we're letting ourselves off the hook too easily here.

And here's another angle to consider. In my admittedly unscientific observations, I am left with the impression that compensation professionals favor predefining superior performance and that leadership/OD/learning professionals typically fall on the side of leaving superior performance undefined.

Are these sweeping generalizations on target? If they are - why would it be so? Is it that we who practice in the rewards field feel tend to be too black and white, too linear in our perspectives and preferences? Or, like me, have too many of us had conversations with motivated employees who want very much to do what it takes to excel (and to earn the rewards associated with excellence), but who are frustrated by a boss who refuses to provide concrete suggestions - or even hints - of what they can do to better their contribution to the organization's success. For an employees in these shoes, the response of "I can't tell you but I'll know it when I see it" can feel like a big fat cop-out.

Is it?

Where do you come down on this question? I'd love to hear the thoughts of those both in and outside of the compensation field.

Ann Bares is the Founder and Editor of the Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time. Follow her on Twitter at @annbares.

Creative Commons Image "Trophy 1" by Shorts and Longs/The Both And

Don't Use Pay As A Babysitter

2012-01-19T08:29:48-08:00

Have you ever used a babysitter? This is when you have someone else assume your responsibilities while you take a break and focus on something else. The babysitter stands in for you, is you during the period of your absence.

Typically we think of babysitting when there’s a dependent child involved, but in the workplace it’s not uncommon for ineffective managers to use the same concept when dealing with their employees. These managers seek to use the pay that their employees receive as a surrogate for leadership – for keeping those workers complacent, retained and generally “in line.”

The practice of manipulating rewards presumes that the employee will chase the money, and will be happy with their lot, while at the same time will not require much in the way of supervision, periodic direction or even meaningful conversation. The thinking here is that, if I provide you with enough reward you will act as desired in order to not jeopardize those payments. The goal is to place the employee’s attitude and performance on automatic pilot while the manager is engaged elsewhere.

So far, so good. Not necessarily a problem. The red flag goes up the pole when you consider whether these monies are warranted by either performance or business need, or are they simply bribes?

What are we talking about?

Scenarios where pay is used in lieu of actual management are easy to spot.

The Grand Giveaway: Where managers try to give away as much money as they can to as many as possible, not worrying overmuch with distinctions between individual performances. The key is to build an employee's appreciation of their manager’s largesse.

Title inflation: The promise of bloated and meaningless titles that distort organizational structures, for the prime purpose of rewarding employees in lieu of cash.

Over rated performance: Playing the good guy by over-rating performance during salary reviews. Culprits are often seen rewarding activity over results. So look busy!

Assured compensation: Take the risk out of rewards and encourage an attitude of entitlement. Everybody receives an annual merit raise, everyone earns a bonus.

Counter-offers: “Let’s make a deal” attitude to keep resigning employees from actually leaving; a dangerous practice that increases costs and lowers morale.

What’s the cause of this behavior? Managers typically receive inadequate training (if any) on how to use their company’s pay programs, so many use pay as a crutch. Spending the company’s money effectively and efficiently isn’t on the radar screen. They use pay like a club to get an employee’s attention. And once they have it the manager is off doing something else – with the presumption that pay will substitute as supervision and motivation while the manager is absent – kind of like a babysitter.

Weak and ineffectual managers don’t actually manage their employees, in the sense of performance direction, leadership, setting good examples and decision-making. Instead, they want to be liked. They want to avoid conflict and they don’t want anyone to quit. They want employees to get along, and to help foster a friendly team atmosphere they try to manipulate pay in support of their efforts.

It’s really kind of a bribe.

So what is “managing” to these people? It’s not about making hard decisions. Too often it’s trying to get the most for their employees, deserved or otherwise, whether the organization gains in the process or not. The manager is focused on their own interests, and is using someone else’s money to fund their behavior.

Why it doesn’t work

Relying on pay as a replacement for management has a short effective life cycle.

Employees see arbitrary same-same pay treatment as de-motivating to high performers. Why bother extending yourself if you’re going to receive the same reward as the guy doing crossword puzzles?

Employees resent favored-son treatment and those who benefit for non-performance reasons will always become known. There goes your morale.

No amount of money replaces the value of honest performance direction and feedback. Those with an interest in learning and growing appreciate the help.

Absentee managers lose the respect of their employees, who know what’s going on. Remember that employees leave managers, not companies.

For managers who need a crutch to help motivate and retain their employees, to help them do their jobs, the above cautions likely won’t make a difference. Their goal is not to manage, but to get-by, to be liked by their employees and to avoid disruptions to their routine. This is not leadership, but administration.

But for those managers who wish to make a difference, who understand that managing employees is a challenging and rewarding role, abrogating responsibility through babysitting is not an option. They recognize it as the opposite of management, a damaging practice that will not enhance anyone’s long term career prospects.

Chuck Csizmar CCP is 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 brood of cats.

Creative Commons image courtesy of _DarkGuru_

How Closely Are You Watching Retirement Plan Funding?

2012-01-18T05:50:02-08:00

Chances are I've already lost the attention of some Cafe readers with that blog title.

But it has become a hot topic with a series of "Wall Street Journal" exposes and a new book titled
Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers. News media such as "USA Today" and "Forbes" are now taking a serious look at the issues author Ellen Schultz has raised.

The basic premise of the exposes and the book is that many large companies are cannibalizing their corporate retirement pension plans under the falsehood that the plans are too costly and under-funded. The typical corporate rational for reducing or eliminating corporate pension plans is that pension plan shortfalls are caused by out-of-control factors such as the large number of retirees, declining stock market investment returns and competition from foreign competitors that eschew good benefits for laborers.

Yet as the author states, far from being a burden, these pension and retiree plans had contributed billions of dollars to company bottom lines over the past decade and a half, and were responsible for a chunk of the earnings that executives had taken credit for. Nor were these retirement programs bleeding the companies of cash. In fact, in the General Electric example at the beginning of the author's book, GE hadn't contributed a cent to the workers' pension plans since 1987 but still had enough money to cover all the current and future retirees.

So who in your organization is watching the store on the true financial impact of corporate pension plans? Has the HR function - which has made a lot of careers out of simply knowing how to interpret, administer and communicate complex plan details - stayed on top of pension plan design alternatives and funding? Or has that been turned over to a Finance function that views pension plans as merely a cost that needs to be minimized?

Now I'm not a person that normally chases after wild conspiracy theories about corporate greed. But I do care that HR professionals have a command of the full impact of compensation and benefits on both an organization's finances and its ability to attract/retain/motivate talent.

Guest blogger Paul Weatherhead is a Pay Program Manager for the US Postal Service. His primary pay program is their award winning Pay-For-Performance program, but he also is involved with other pay and benefit policy issues at the USPS. Paul actively participates in the WorldatWork professional association as an instructor, author, speaker, reviewer, and blogger. In his spare time he teaches human resource management courses for the University of South Carolina. He can be reached at cpaulwd@yahoo.com

Got Data?

2012-01-17T04:53:35-08:00

I recently replied to a question on Focus.com about employee engagement and was intrigued by a response that criticized HR for their heavy handed control over salaries.

The example given for why this is a problem involved a highly skilled IT professional with four children who has reached the top of his salary grade at his current company. There is apparently no possibility of increasing his salary although he has taken it upon himself to acquire marketable new skills and at least one other company has offered him more money.

No clue how this one’s gonna play out, huh?

I get it. We all get it. Salary ranges are there to promote fairness and reduce the administrative overhead created by exceptions. These are good things. But here’s this guy with hot technical skills about to walk because he has a family to support and earns less than the market is offering. Not to mention that replacing him will be expensive in terms of recruiting, training and lost productivity - possibly more expensive than just paying him more in recognition of his market value.

It sounds like I recommend paying him more to keep him but I’m actually going somewhere else with this. In fact, I’m a big fan of voluntary attrition because it feeds this Ponzi scheme we call ‘career development.’

My point is if the company is going to lose this person, lose him with intent. In other words, if your company has a hard rule about salary ranges that’s fine as long as you have:

• Analyzed which people are flight risks as a result.*
• Calculated the cost of losing these people and having to replace them.

*Warning signs include people who are already at the top of their grade, have dependents, possess critical skills, are solid or high performers, haven't had a salary increase or new opportunity in several years, have recently exercized stock options, are late submitting their self-evaluation and/or are frequently absent. There are other signs as well but these are the ones you can get at through your data.

Armed with this information you can evaluate whether it’s worth: 1) changing your policy; 2) creating a new salary grade for highly skilled people to ‘graduate’ into once they reach a certain level of expertise; or 3) doing nothing, but on purpose.

If you don’t possess this critical information about your workforce, an inflexible salary strategy is like a wall across an expressway that surprises people each time a car crashes into it.

OK, that analogy may have been too colorful. My point is that rigid policy combined with lack of information does not a business strategy make.

At least, not a very good one.

Picture courtesy of Wikipedia.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA. She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University. Her articles and interviews on HCM topics have been published in the US, Europe and Asia. She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Implementation: Action that Must Follow Ideas If You Actually Want Something to Happen

2012-01-16T05:33:40-08:00

Each year we step back to adjust to an updated business strategy that addresses new challenges. We plan alignment of objectives, behaviors and performance with that strategy. And then we try for effective implementation of the strategy so we can achieve the planned-for results . . . results that fund financial success and compensation.

This is the virtuous cycle in which you invest your hard work and the company's money.

As we all know, HR plays a critical role as facilitator of alignment and educator of effective implementation. Many of you are in the midst of the objective setting process right now, where you are responsible for training and facilitating the cascade of objectives within your organization.

Objectives that employees should be developing to link with corporate performance. Otherwise, their work will have only a glancingly positive impact on financial and operational results -- or could misguidedly create obstacles that have negative impact on those results.

There is no doubt that your employees' ability to adapt to each new strategy impacts the success of your company. Look at this result from the World's Most Admired Company research conducted by the Hay Group in partnership with Fortune Magazine. It makes it clear that "Most Admired Companies" do a far better job of implementing their strategies (and achieve significantly higher Total Shareholder Returns).

And their HR organizations do a better job of implementation, too. Implementation of new programs and existing programs like compensation that can truly play a role in the business strategy when employees see strong linkages and understand how they can impact success.

Over my next few blog postings, I'm going to cover what effective implementation means, how it can help you and what you can think about doing differently. I thought it would be a great time of year for this discussion since you'll be turning new ideas into plans over the next few months.

Turning great intentions into business results is really where the rubber meets the road. Great ideas become actual business opportunities only when people understand clearly and then are willing and able to do the tough work of changing to a new focus and new practices.

I'll be talking about communications and I'll be talking about change management, too. After all, compensation is a form of change management. Every paycheck sends the message that we expect employees to assess a changing environment and profit from changing opportunities.