Compensation Today

Employers and the National Labor Relations Act

Dr. Al Lee, PhD — 2009-11-25T15:10:44-08:00

Does the National Labor Relations Act Impact Non-Union Employers?

How are employers affected by the NLRA? For most non-union employers, the National Labor Relations Act (NLRA or Act) is probably not the federal statute that has been at the top of their watch list in recent years. With union membership at a historical low point, employers in the US concern themselves with other state and federal laws that impact their HR policies and HR practices more so than the NLRA.

What Is the NLRA and What Would Violate the NLRA?

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Passed in 1935 and subsequently amended in 1947, the National Labor Relations Act is the federal law that governs labor relations in United States-based private companies that meet certain revenue standards. If an employer is covered by the Act, its employees will have the right to organize a union; to bargain collectively over wages, hours and working conditions through a representative of the employees’ choosing; and to engage in strikes, picketing, and other “concerted activities for mutual aid and protection.” Further, an employer cannot interfere with those rights or retaliate against employees for exercising them.

In other words, the NLRA covers only unionized companies, right? Well, if you agree with that statement I am sorry to tell you but you’re incorrect. The NLRA was intended to protect associational rights of “non-union” employees as well as “union” employees. In other words, NLRA rights for non-union employees are protected under the Act, as well, and may engage in protected, concerted activity in situations other than traditional union organizing and collective bargaining.
This blog post serves as a reminder that it is very much possible to commit NLRA violations without a union presence in the workplace.

What Types of Non-Traditional Employee Actions Are Protected by The National Labor Relations Act?

The National Labor Relations Act vests all employees, regardless of whether they are represented by a union, with the right to engage in “protected, concerted activity.” Specifically, Section 7 of the Act provides:

“Employees shall have the right to self-organization, to form, join, or assist labor organization, to bargain collectively through representatives of their own choosing, and to engage in other concerted activity for purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities….”

Two points therefore to keep in mind:

1. The National Labor Relations Act section 7 rulings give covered employees the right to engage in concerted activities even though no union activity is involved and even though no collective bargaining is being contemplated by the employees involved; and,
2. The definition of “protected, concerted activity” has been construed by the National Labor Relations Board (the federal agency vested with the authority to enforce the Act) quite broadly.

What Is “Concerted Activity?”

Essentially, “concerted activity” is any activity by individual employees who are united in furtherance of a common concern regarding any term or condition of employment. For an employee’s activity to be “concerted,” the action must be engaged in with or on the authority of other employees, and not solely by and on behalf of the employee himself/herself. An employee’s conduct is not “concerted” unless it is engaged in with or on authority of other employees.

What Is “Protected, Concerted Activity?”

We all know that it is unlawful to discharge or otherwise discriminate against employees because of their union activities. But, the law also protects employees from discharge or discrimination because of their participation in protected, concerted activities unrelated to union organizing or collective bargaining.

Some examples of unfair labor practices that violate non-union employee’s Section 7 rights include:

• An employer terminated a sales employee for being an “outspoken critic” when his employer required him and others to attend special two-hour meetings before store hours without compensation. The sales employee was awarded reinstatement with full back pay.
• An employer terminated two employees who wrote a letter protesting a change in their method of compensation. Both employees were awarded reinstatement with full back pay.
• A restaurant owner discharged an employee who complained about the employer’s tip pool system. The employee was awarded reinstatement with full back pay.

Can You Stop Employees from Discussing Their Wages?

Can non-union employers, by policy, prohibit employees from discussing their wages or other terms of employment?

It is not uncommon for employers to attempt to prohibit employees from discussing their wages or other terms of employment with their co-workers. The question or issue raised is whether or not such a policy and practice by a non-union employer can lead to allegations of unfair labor practices against them.

Because of the NLRB’s broad interpretation of what is “protected, concerted activity,” it has determined that such a policy in fact interferes with employees attempting to exercise their Section 7 rights under the Act. In a case involving the Main Street Terrace Care Center, an NLRB Administrative Law Judge found that when Main Street rolled out a policy prohibiting employees from discussing their wages, it had violated its employees’ rights under the NLRA. The Administrative Law Judge wrote that “the mere existence of the rule inhibiting protected conduct, even if not enforced, constitutes an unlawful interference in violation of the Act.” The NLRB affirmed the Administrative Law Judge’s ruling and its petition for enforcement was supported by the Sixth Circuit Court of Appeals.

In a 2005 case involving Cintas Corporation, the NLRB reaffirmed its position previously issued in Main Street.

Is the Paycheck Fairness Act Far Behind?

Although not likely to be acted on by the Senate at the soonest, spring of next year, another disparate pay bill, the Paycheck Fairness Act (H.R. 12) may be on the horizon. Passed by the House on June 9, 2009 by a vote of 256-163, employers would be prohibited from retaliating against employees who have “inquired, discussed or disclosed the wages of the employee or another employee.” The retaliation provision, however, does not apply to instances where an employee who has “access to the wage information of other employees as a part of that employee’s essential job functions” discloses those wages to individuals who do not otherwise have access to such information, i.e. HR professionals.

Conclusion

The unsuspecting employer need not be caught off guard by unfair labor practice charges in the context other than traditional union organizing attempts or during collective bargaining. Because employees are ever more enlightened today of their legal rights and privileges, it is critical for all employers to exercise care when their employees engage in conduct that could be perceived as “concerted activity.”

Regards,

Steve J. Cibull
Principal
The Cibull Group
www.CibullGroup.com
Steve@CibullGroup.com

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Compensation Analytics with Market Ratios

Dr. Al Lee, PhD — 2009-11-22T05:19:00-08:00

Compensation Analytics: Alignment of Incumbents within Pay Grades

Once you completed some initial compensation analyses, like looking at how your salary ranges compare to the market and, if applicable, ensuring that your company follows through and creates a history of pay for performance, you can then move on to doing an analysis of how your employees align within their pay grades. This information can highlight unusually high or low base salaries and give you the opportunity to correct them or adjust your ranges.

Alignment of Employees within a Pay Grade

In this analysis, we’ll seek to answer the question, “What is the alignment of incumbents within their pay grades?” There are three analyses that need to be completed to answer this question.

1. Analysis of all positions in the organization compared to the market midpoint.
2. Analysis of positions within each pay grade compared to the market midpoint.
3. Analysis of incumbents within each pay grade compared to the market midpoint.

By completing these three reviews, you’re taking a big picture, a smaller picture and then an even smaller picture to see how your compensation plan is working at your company.

An Example of Studying Market Ratios

As a way of explaining these market ratio analyses, I will use the example of a company PayScale worked with. We helped them look at what their benchmarking project had told them about their company, beyond just setting salary ranges.

Analysis 1: External Compensation Review of Market Ratios

The company found that they had 19 incumbents (employees) at a 0.8 percent market ratio for their position. So, these people were under what the company thought they ought to be paid according to the market. Next, there were 29 incumbents at market ratios of 0.8 and 1.0, so still under market. There were 43 positions with 1.0-1.2 market ratios which meant they were over the market. Finally, the number of positions with a market ratio over 1.2 was 59. That meant than 68 percent of the employees at this company earned base salaries above the 50th percentile of the market.

Before the company could come to any conclusions about this information, there were some questions to ask:

1. Have we defined the positions correctly, such that the market rate – and, therefore, the market ratio – is accurate?

2. Where, relative to the market, does this company aim to pay? Do they want to be the market leader in their industry? If so, they are achieving that goal. If not, then there’s a problem.

3. Would it make sense for the company to consider different target pay rates, relative to the market, for different positions?

Analysis 2: Market Ratio Assessment by Grade

The company in this example had seven pay grades. This next analysis looked at the how the grades’ market ratio’s compared. Not surprisingly, considering the number of employees with base salaries with over a 1.0 market ratio, there were some entire pay grades that were predominately over the market. Grade three had 96 percent of its members over a market ratio of 1.0 and grade seven had 88 percent.

The results of this analysis don’t give the reason why certain pay grades showed dramatically high market ratios. But, the information does give us questions to ask. In the case of this company, it turned out that the high salaries in grade three were there for a reason. They were able to answer the questions raised after further research.

Analysis 3: Internal Compensation Review with Compa–Ratios

Finally, PayScale helped this company drill down to look at the incumbents within a pay grade to see how their market ratios compared individually. In pay grade 7, it was discovered that six of the eight individuals in that pay grade earned more than the maximum allowed for their salary range. Also, four people at pay grade 1, the entry level grade, earn more than the maximum for their salary range. Once again, some questions were brought up, like:

1. Has the company properly defined ranges for all positions?

2. Should a red circle policy be instituted for the individuals who earn more than the maximum for their range? (Red circling means that you freeze an individual’s salary from any future increases until the market catches up to their salary rate. See a blog post on implementing a red circle policy.)

3. Does the compensation for specific grade levels warrant further scrutiny?

Overall, these three analyses paint a picture and allow you to see what you are accomplishing with your compensation plan. By comparison, only looking at an individual case wouldn’t give you the same perspective about what’s going on.

Regards,

Stacey Carroll
Director of Customer Service and Education
PayScale, Inc.

Do you have a topic you would like Compensation Today to cover? Write us at comptoday@payscale.com.

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Voluntary Benefits Plan

Dr. Al Lee, PhD — 2009-11-18T14:07:47-08:00

The Advantages of Offering More Voluntary Benefits

It doesn’t seem that long ago that the extent of voluntary benefits plans for employees was limited to “buying up” extra insurance on the company’s group plan, or increasing short-term (STD) or long-term disability (LTD) benefit coverage from 50 to 66 percent. In 2009, it seems like every organization is looking for ways to reduce benefits costs and voluntary benefits plans are, often, the only way to expand offerings for employees.

The easy conclusion to be made of this situation is that employers are simply unwilling to add any additional costs to their budgets. While this is certainly true, it does not make this deal automatically negative for employees.

How can this be? Well, do you feel busier than ever? I know I do. Do you feel, for example, that you need long-term care insurance or additional life insurance coverage but have not done anything about it? This is where a happy outcome can happen as a result of the trend towards voluntary benefit plans. There are companies who have contracted with local dry cleaners, for example, where employees just drop clothes in a box and one of life’s tasks is conveniently taken care of. This convenience is no different from a choice for STD, LTD, Accidental Death and Dismemberment (AD&D), life insurance, long-term care insurance, or other benefits.

The Employer Must Choose Wisely What Voluntary Benefits to Offer

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At the same time, this win-win scenario places an onus on HR practitioners to be diligent in selecting benefits providers who are worthy of exclusive access to employee dollars. In other words, it is tremendously convenient, as an employee, to have a simple payroll deduction take care of an identified protection need. The employee, however, expects the company to select only high-quality providers.

What should you look for in a benefits provider? I would advise referrals from other organizations, company credit ratings, and to look for ease of administration. Is the provider, or provider representative, willing and able to help present the benefit to employees? I found at a previous employer that the 401(k) provider would promise to come visit and help with employee meetings, up until the moment when the meetings were actually scheduled. At that point, they were much more excited to send over a PowerPoint presentation.

What Voluntary Benefits Do Employers Offer?

What kind of voluntary benefits do employers offer that you could offer to employees at your company? Among the more popular are the following:

Short-Term Disability. This insurance covers pay losses due to extended time away from work, typically up to three or six months. The elimination (or waiting) period for a claim to pay is usually seven to 14 days. Normally, this covers 50 to 60 percent of pay and the timing of the maximum leave usually aligns with the beginning of long-term disability coverage. A key point: pay close attention to the different definitions of “disability” given by different carriers. The difference in the definitions will tell you how good the benefit is for employees. Remember, if employees have a hard time with claims from the insurance company, those in HR will hear all about how bad the insurance is and will be blamed for the struggles.

Long-Term Disability. This insurance is somewhat more common than short-term disability and, arguably, more important. If someone falls off a ladder at home and breaks their back, the person may be affected for years and the coverage will mostly come from LTD. As with short-term disability, it is important to know the different definitions of disability.

Long-Term Care Insurance. Many Americans think their care as they age will be provided by Medicare or Medicaid, but it normally isn’t. Long-term care insurance covers the care people need when they have lost the ability to perform at least two “activities of daily living.” In addition to this, if someone has cognitive impairment (dementia, Alzheimer’s disease, etc.), the person is immediately qualified for a claim. Some companies offer this benefit in a group package where employees have only the choice to sign up for the offering or not. Other offerings are a series of individually customized plans that are also paid through payroll deductions. These plans normally allow employees to also buy the benefit plan for other family members, including parents and grandparents.

Life Insurance. Have you ever wondered why companies often offer $50,000 as a flat life-insurance benefit? This number allows the employer to deduct the full amount of the insurance premium and it is an untaxed benefit to the employee. That having been said, most adults find that they need more than this amount of protection. Many group life insurance plans allow for an employee to buy up an amount that is a multiple of their annual (or annualized, if hourly) pay for a very reasonable price. These benefit plans are always term insurance plans and may or may not be portable when the employee leaves the company.

Some companies allow payroll deductions of individual, whole life (permanent) policies that are then portable and owned by the individual employee for the rest of their life. One suggestion, if your company offers group life insurance that is not portable, you may want to advise your employees to consider purchasing individual insurance outside the company benefit plan. The reason for this is the concept of insurability. If an employee is treated for cancer, for example, and then leaves the company a couple of years after (even successful) treatment, they will not be able to purchase life insurance outside of a new employer’s group life insurance plan. This amount may not be sufficient for their family’s needs.

Accidental Death & Dismemberment (AD&D). This is an amazingly inexpensive policy that usually covers a relatively small amount of coverage (under $100,000) for employees if they die in an accident or if they lose a limb and/or the sight in one or both eyes. This coverage is often through the same insurance carrier as the group life plan. Losing a limb during work hours is such a rarity that it makes the policy inexpensive.

Group Legal Plans. An increasing number of vendors offer subscription legal plans as a voluntary benefit. The concept, in my opinion, is an intriguing one and it appears to be growing in popularity. My advice is to research the vendors thoroughly, as it is a relatively new type of benefit and, as stated above, you don’t want to clean up the mess of a sub-par provider. As an aside, I understand that a certain software company based in Redmond, Washington, is implementing this benefit for 2010.

This is just a sampling of the more popular voluntary benefit offerings for you to consider. There is nothing wrong with employers placing the financial burden for a growing variety of benefits on their employees. The lower pricing through group plans and the sheer convenience of simply selecting a payroll deduction is a big benefit to employees. Just make sure the quality of the benefit is of the caliber that you are willing to back up since employees will still see this as a product provided by you.

Regards,

Andrew Shelton

Do you have a topic you would like Compensation Today to cover? Write us at comptoday@payscale.com.

Are you paying your best employees enough to retain them after the economy picks back up? Get up-to-date and make sure your external salary market data is specific enough to the education, skills set and experience of employees you want to keep. Give a PayScale demo a try.

Request a demo of PayScale’s compensation solutions.
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Common Issues in Internal Pay Equity

Dr. Al Lee, PhD — 2009-11-15T04:00:00-08:00

Roadblocks to Internal Pay Equity: Two Key Issues

Most of you in HR have seen some common problems with internal pay equity. Perhaps the most common is pay compression, often resulting when the pay market requires you to hire someone new at a higher rate than your longtime employees in the same job are getting paid.

Much has been written about the most common issues in internal pay equity. So, in this blog post, I’m going to take on some of the most common issues I’ve dealt with that don’t receive attention. The hope is that the information will help you tackle these common issues in internal pay equity.

Internal Pay Equity Issue 1: Everyone Unconsciously Thinks They Should Be Paid at the Salary Midpoint or Above

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In every organization I’ve come across, dealing with groups of people who think they should be paid at least at the salary midpoint is the number one challenge for communicating to employees regarding where they are in the pay range.

Every single employee – and manager – with whom I’ve spoken on the subject assumes that, if the employee is doing an acceptable, decent job, they ought to be at the salary midpoint.

Ask yourself: “Do I agree?”

The flaw in that assumption has profound implications on your compensation structure. But it takes some wading through the issues to make it clear.

Let’s go, sleuths. Let’s find that profound flaw. The following are the steps:

Question #1: What does the salary midpoint in most salary ranges represent?

Reply: In my experience, the salary midpoint is often a close approximation of the median market pay rate for that job.

Question #2: What, then, does “market pay median” represent?

Reply: Fifty percent of the people surveyed in the job earn more than the median, and 50 percent earn less.

Question #3: If 50 percent earn less than the median, they must be poor performers, no?

Reply: This is the key, profound, statistical point. The 50 percent of those surveyed who earn less than the median had to be competent enough to do their jobs that they still had their job at the time of the survey.

Conclusion: As many competent people in the market earn less than the median as earn more than the median.

Resulting Flawed Assumption: If everyone who was competent is to be paid at least at the salary range midpoint (roughly at the market median), the market median would be way higher than it is.

Implication for Your Pay Program: If you have employees within the normal range of competency that you’d find elsewhere in the market, you would expect to pay as many people less than midpoint as are paid more than the salary midpoint. And you’d see that as a healthy result.

Key Question: Do you, dear reader, actually feel that to be a healthy result, in your gut? Is half of your competent workforce being paid less than the midpoint, while the other half is paid more than the midpoint?

In the analysis above, many extenuating circumstances can apply. The “theory” of half below-half above doesn’t apply where you have a very small department or where you have an atypically junior or seasoned group, etc.

The point here is that we need to be able to wrap our arms unabashedly around what the salary midpoint (roughly market median) most often means. Statistically, you’d expect as many people to be paid under midpoint in your company, as over midpoint.

And that would be a healthy result. That would be a result you could take public to an employee group, and defend as an ethical outcome.

If that idea takes your breath away (sheer terror?) it is only corroboration that most employees don’t get what “market median” really means in terms of their salary expectations.

Internal Pay Equity Issue 2: The One Manager in Every Organization Who Drives Hard to Get Large Pay Raises for Everyone Who Reports to Them … for a Different Reason

I’ve never seen this issue addressed in print but, again, I’ve run into it in nearly every organization in which I’ve worked. So, I thought it would be timely to address here.

Maybe you’ve felt pressure from this manager through statements like the following:

1. “Your market compensation data is inaccurate. I know what you have to pay in this market and its way more than your market data says.”
2. “My people have been way underpaid for years, and now that I’m here, I’m going to correct that so they don’t walk, and because they deserve it.”
3. “This particular job has a micro-pay-market all its own that isn’t captured in the more broadly assessed job titles that are surveyed in market data surveys.”

These can all be entirely legitimate issues. But when they’re coming from the one manager in every organization to which I’m referring, there’s a certain red-herring aroma that accompanies their drive for pay increases.

That’s what I’m calling out here. The rare (thankfully) manager who is pushing for their people to get raises, as a way to compress pay underneath them, to justify their own future large pay push. This rare bird isn’t fighting for their employees. They’re fighting for their own pay, and using their employees’ pay as a negotiating tool.

They are trying to create internal “inequity” that supports their own eventual pay raise.

Again, this person is fortunately rare, but every organization seems to have at least one manager who applies this pressure.

I’m calling it out here to help you see it, so you can decide consciously whether a manager’s pressure is valid, or just a bargaining chip in ultimately raising their own pay.

Regards,

Stuart Jennings

Related Posts:

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Create a History of Pay for Performance

Dr. Al Lee, PhD — 2009-11-12T17:25:12-08:00

Compensation Analysis: Create a History of Pay for Performance

In our previous discussions on compensation analytics, we discussed why taking the time to review the effects of your compensation plan is valuable to a company and, also, how to perform an analysis of your salary ranges. In this next post on compensation analytics, let’s consider the company that has made a commitment to paying for performance and see how that company can assess whether it is really doing so. Do you really have a history of pay for performance at your organization?

Compensating Your Top Performers

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I think that ensuring that you pay for performance is one of the most critical areas in compensation analysis because if you find and hire top talent, and promise them you’ll pay them well, you need to do so. Otherwise, you’ll quickly lose those innovative folks to competitors.

Here is a common way that pay-for-performance gets watered down. Perhaps you are using the common pay formula of making standard cost-of-living adjustments and then adding merit increases on top of that. But, your budget for doing so is only 4-5 percent and the market is moving an average of 3 percent. How can you move top performers through their range? You don’t have a lot of room to reward them.

If this is the case for you, it may be time to consider challenging the status quo by eliminating across-the-board increases if you want to stand out as a true pay-for-performance company. Keep in mind, this approach isn’t appropriate for every organization. But, if your organization says it rewards, pays for and relies upon top performers, then your actions should back that up. And, your compensation analyses should back that up, too.

Using Compa-Ratios as Guideposts

One way to check on the health of your pay-for-performance practices, and create a documented history of pay for performance, is to look at compa-ratios. Your top performers’ pay should stand out when compared with their peers’. I recommend that you create a system that seamlessly integrates performance and compa-ratios if you want to have that balance. For more information on this process, see our blog post The Salary Review Process.

Below is an example analysis of performance ratings and potential ratings matched to compa-ratios. Performance ratings show how the employee is rated for their current performance. Potential ratings tell you how much that employee is expected to contribute in the following year. A compa-ratio lets you know how that employee’s base salary compares to the midpoint of their assigned salary range. For example, a compa-ratio of 1.2 means that a person is at 120 percent of the midpoint of their range.

You can see that the compa-ratios in red are for employees who have low performance but are already high in their salary range. In contrast, the compa-ratios in green are for employees who are performing well but have not arrived at the midpoint for their pay range.

Job Title	Performance Rating	Potential Rating	Compa-Ratio
Controller	2	Low	1.2
Account Manager	2	Medium	0.691
Director of Marketing	3	Medium	1.661
Product Manager	4	High	0.908
Account Executive	5	Hign	1.286

Ask Questions First

You may want to assume that the employees with compa-ratios in red do not deserve merit increases and the employees in green do. But, don’t jump too soon. There may be a history to the situation that you don’t know.

It is important to use your compensation analysis as a reason to ask questions, not make declarations. Before you take action based on these numbers, talk to these employees’ managers and other people in leadership positions at your organization. You can ask, “Why is this person at a low performance rating but has a high compa-ratio? And, if there is a proposed increase for this person, why is there?”

Compensation Analysis Helps You Walk Your Talk

Hopefully, if you are a pay-for-performance organization, once you get in the habit of looking at your compensation patterns for high versus low performers you’ll better ensure that you are walking your talk. Plus, you’ll have a documented history of pay for performance to prove that you practice it.

In our next discussions of compensation analytics, we’ll look at how to use it to ensure external and internal pay equity.

Regards,

Stacey Carroll
Director of Customer Service and Education
PayScale, Inc.

Related Posts:

Compensation Budgeting: Determining Merit Pay Increases
Writing an Employee Compensation Policy
How to Conduct a Compensation Analysis

Do you have a topic you would like Compensation Today to cover? Write us at comptoday@payscale.com.

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Definitions of Employee Classifications

Dr. Al Lee, PhD — 2009-11-09T16:58:02-08:00

Understanding Employee Classification Issues

How do you determine whether an employee is classified as full-time, part-time, or temporary? It is really up to you.

Since federal and state laws generally do not define these terms, employers usually have a lot of flexibility when categorizing employees. Employee classifications are often based on the number of hours worked and job duties performed and typically determine eligibility for benefits.

The following outlines issues you need to consider in classifying employees.

Definitions of Employee Classifications

Employees usually are classified according to the hours worked and the expected duration of the job. Accordingly, they generally fall into three major categories: full-time, part-time, and temporary employees. When designing definitions of employee classification, many employers use the eligibility requirements under their insurance benefit plans. For example, many health care plans exclude part-time employees who work less than a specific number of hours a week.

Even so, the employee definition you choose will not affect employee eligibility for legally mandated benefits. Federal and state laws require certain employment benefits, such as workers’ compensation, unemployment compensation, unpaid family and medical leave, and military leave. In addition, they set their own criteria for eligibility. Note, too, the Fair Labor Standards Act (FLSA) further classifies employees as eligible or ineligible for overtime pay and refers to them as either being exempt or nonexempt from the Act’s provisions.

Definition of a Full-Time Employee

A full-time employee generally is defined as one who works a normal workweek for an indefinite period of time. Since the FLSA sets 40 hours as the maximum number of hours worked before employers must pay overtime to nonexempt employees, many organizations use that number as their normal workweek. Others use 37 1/2 hours or even 35 hours, depending on their workday and meal schedules. Some employers define full-time employment according to their part-time employment hours. For example, if part-time employment is defined as 30 hours or less a week, employees who work more than 30 hours are then considered full-time. Full-time employees generally are eligible for all the benefits the employer offers.

Definition of a Part-Time Employee

Part-time employees also are employed on an ongoing basis and typically receive some benefits, but work fewer hours than the normal full-time schedule. Part-time employment may mean working irregular hours, regularly scheduled hours every workday, or full workdays but fewer than five per week. A common definition of part-time employment is work of 30 hours or less per week.

Many employers provide part-time employees with a pro rata share of benefits, such as vacation, sick leave, and other paid absences, based on the number of hours worked.

Definition of a Temporary Employee

Temporary employees may work part-time or full-time hours and may be hired through an agency or directly by the employer. What makes their status “temporary” is that the worker is hired for a particular project or for a finite period of time. As a result of the short-term nature of their employment, temporary employees generally do not receive any benefits, other than those required by temporary employee laws.

Since some employers use temporary workers as an entry pool to screen full-time candidates, these employees may have increased expectations of advancing to regular employment and eligibility for benefits. Therefore, you should make clear to temporary workers that they are being hired for a limited period of time only and are not eligible for benefits. Many employers explain the temporary nature of the job in a letter or other written memorandum. The letter should state an approximate limit for the period that the worker is expected to be employed, such as “approximately 90 days,” and give management the option to extend it if needed.

In addition, you should monitor the status of temporary employees so that if the limited duration of their employment changes, you can reclassify them correctly and offer benefits if they are eligible. Otherwise, you may end up with misunderstandings and legal claims.

What About Independent Contractors and Volunteers?

The independent contractor, or freelancer, classification is used for nonemployee workers who typically perform specialized work that your employees do not do and are retained for a specific period of time. Since they are not considered employees of the organization, these workers are not covered by the laws for minimum wage and overtime, payroll taxes, workers’ compensation, unemployment compensation, or employment discrimination and are not eligible for any benefits. But meeting criteria for independent contractor status is tricky because the Internal Revenue Service, the Department of Labor, states, and the courts all impose separate standards for employers to satisfy. As a general rule, though, as long as you do not exercise substantial control and direction over their work, these workers are not considered employees.

Using volunteers is even trickier. Many employers mistakenly believe that they can supplement their workforce by using unpaid volunteers, including current employees who volunteer their services to help fill in during a worker shortage. However, the Department of Labor restricts the definition of nonemployee volunteers. According to the DOL, individuals may volunteer their services without receiving pay only in limited circumstances, typically involving the performance of charitable activities for non-profit groups such as public service, religious, or humanitarian organizations.

Be Consistent with Your Employee Criteria

The main importance of employee classifications is their effect on eligibility for benefits, such as health insurance and paid time off. While not many laws regulate the definitions (with the exception of the nonemployee independent contractor), you still must apply your definitions consistently.

Microsoft found this out the hard way. It was forced to pay over $96 million to settle lawsuits alleging misclassification of its workers as temporary employees or independent contractors and, thus, improperly excluding them from participation in its benefits plans. Accordingly, you should pay close attention to how you classify your workers and review your classifications regularly to ensure that they properly match your benefits eligibility requirements.

Regards,

Robin Thomas, J.D.
Personnel Policy Service, Inc.

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How to Conduct a Compensation Analysis

Dr. Al Lee, PhD — 2009-11-06T15:00:37-08:00

How to Conduct a Compensation Analysis and Move Salary Ranges

In a previous post we reviewed why performing compensation analytics can provide value to an organization. In this next post on compensation analytics, we’ll look at how it is used to review salary ranges.

At many companies, the assumed answer to the question, “Do our compensation ranges need adjustment?” is usually, “Yes.” Compensation ranges are often adjusted every year to match industry trends and economic ups and downs. But, is it really smart planning to assume that you need to adjust your salary ranges every year – no matter what? I suggest that a key to long-term success is stepping back and having a conversation as a company about, “Do we need to move our salary ranges this year?”

Challenge the Status Quo

Working on next year's comp plan? Get it done fast in 5 easy steps. Download our Compensation Planning Guide.

Typically, moving salary ranges occurs in response to changes in the external market and doesn’t always take into account internal goals, like improving employee longevity or performance. Many companies will simply move their ranges if the market moves.

What if the market hasn’t moved? Or, even if the market has shifted, it doesn’t always do so at exactly two to three percent a year, as compensation changes often do. PayScale’s salary data collection shows that, in a year with a lot of market volatility, some positions’ base salaries will decline, others will stay flat, and, meanwhile, other positions may increase dramatically. For example, PayScale has seen pay for many jobs in the healthcare sector grow at a rate of eight to 12 percent increases year over year, even in our recent recession.

One of the dangers of doing the same thing every year, namely handing out two to three percent salary increases across the board, is that it sends a message that that is how we think the market is moving. But, in reality, the market salary ranges may be moving more or less than that across positions.

How Often Do You Move Salary Ranges?

If you’re taking the time to pay attention to market activity and customize your ranges to it, how do you know when it is a good time to take action? Markets change daily, even hourly. When is it smart to actually adjust your salary ranges in response to these shifts?

I recommend that you look for trends that are long-lasting. Most any HR professional has, at one time or another, responded too quickly to market trends when adjusting whole salary ranges, not just an individual’s compensation. And, they’ve seen that the effects were ultimately negative. Think about how quickly everyone responded to dramatic increases in software developer salaries immediately prior to Y2K. Just a few short years later, the dot.com bust had many companies overpaying for developers because they responded strongly to the market in late 1999.

Also, you have to consider the message you’re sending employees when you move a range, particularly in a pay-for-performance culture. If you have employees at the bottom of the salary range and you move the range up, you’re going to need to raise the pay for workers at the bottom of that pay band. What does that say to those low performing workers and your top performers about how you reward your employees? Giving a raise to poor performers may not be in line with the compensation philosophy you’ve set out of rewarding top performers to encourage them to stay at your company. Top performers won’t want you spending precious funds to move low-performers up to the minimum. This situation is just one example of why it’s important to move carefully, and analyze compensation data when adjusting ranges.

Another factor to keep in mind is that moving salary ranges is completely different from moving individual pay. One of the hardest things to watch during the recent recession was institutions enacting across-the-board salary freezes to save funds. The problem with making any compensation changes over an entire department or company is that you’re almost certainly not staying up-to-date with the market. Even though times have been tough over the last year or so, the positions PayScale watched grow over the last year would not have been wise to freeze pay on. You’d risk losing the talent you have and that talent is going to be the hardest to replace because it’s, by definition, in high demand.

Do You Have Positions in the Right Pay Grade?

As you analyze your salary ranges and consider changing them, you also must decide how you want to balance internal pay equity and external pay equity.

The central questions regarding equity break down to the following:

Should you move to a straight market pricing model (external equity)?
Should you create a wider pay range and keep everyone in the same pay grade (internal equity)?
Should you use a market premium on top of the pay range (combo)?

When it comes to aligning with the market or aligning within a group of employees, such as managers or line workers, there’s no right or wrong answer. You may value keeping your marketing manager and your IT manager in the same pay grade, though the market dictates that their base salaries have a wide gap between them. See the example salaries below.

Managers in Same Pay Grade	Base Salaries
Account Manager	$80,467
Human Resource Manager	$82,549
IT Manager	$109,832
Marketing Manger	$71,670

Factors affecting this decision can include where you are in your organization’s life cycle, your location, the health of your industry and many other influences.

Each year, as you analyze compensation data and adjust your ranges, think about the message you’re sending to current and potential employees and what the data about your compensation plan is telling you. Are you aligning enough with your stated compensation philosophy? Would it be smarter to move people’s salaries within a range rather than moving the entire range?

Regards and best wishes,

Stacey Carroll
Director of Customer Service and Education
PayScale, Inc.

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The Value of Compensation Analytics

Dr. Al Lee, PhD — 2009-11-04T11:02:43-08:00

The Value of Compensation Analytics for Top HR Professionals

Is your compensation program really doing what you want it to? You have to make time to look at the data your compensation practices are producing to find out.

There are many to-dos when an HR professional or business owner is deciding on compensation at their company. You need to set up formal ranges, put people into the ranges, complete performance reviews and much more. But, an essential area that may not receive enough attention is to step back once all of that nuts and bolts work is completed and say, “How’s it working?” That is compensation analytics and the following post provides advice on how to perform it efficiently and effectively.

Strategic Advantage from Compensation Analytics

Regularly performing compensation analytics can pay big dividends for your career as an HR professional. Through these analyses, you take all of the activities around compensation at your company to the next level. Being knowledgeable about compensation analytics gives HR professionals the opportunity to show themselves as a strategic business partner to company leaedership. You’re expected to perform salary benchmarking, but looking strategically at the big picture is another task you want to be relied upon for.

The following are some ways that compensation analytics provides strategic advantages for your company:

Supports business intelligence. Compensation analytics is one facet of a larger effort at healthy companies called business intelligence. PayScale is seeing more and more salary information for positions related to this work appear in its database. It’s a growing “must have.”

Business intelligence looks at what you’re doing as a business from a statistical prospective. Namely, “This is what we say we’re going to do. This is what we’re doing. Are we accomplishing what we set out to achieve?”

Business intelligence provides information that is very specific and carefully analyzes the results of every aspect of your organization – marketing, business development, recruiting, compensation and more. It is an area of business strategy that HR can and should be involved in. Maybe you’ve done analyses of the ROI generated from programs you’re leading or run some statistics on the cost of employee turnover. Business intelligence would dig even deeper to measure the effects of those activities.

Provides quantifiable data. Compensation analytics gives detailed information about the compensation costs within your organization. In most any company, paying your talent is the most expensive budget item. That’s why it is very important to make sure you’re compensating your employees in the most efficient way possible and have the numbers to show that your compensation dollars are being spent to support organizational goals.

Works as a scorecard. Compensation analytics is an evaluation tool for understanding if your compensation program is meeting the goals you set for it. By analyzing trends in compensation, you can find out (1) if you are following your stated goals for compensation at your organization and (2) if those compensation-related goals are actually supporting your overall organizational goals. In this way, compensation analytics serves as a scorecard for your company’s compensation program.

How Do You Explain Value of Compensation Analytics to Leadership?

You may already understand the value of performing compensation analytics, but it’s possible that your colleagues do not. Because compensation analytics requires extra time, money and resources beyond what your company leadership may expect, you’ll likely need to convince them of its monetary value before you can get resources for it. The following are some suggested reasons you can share:

Ensure goals met. Compensation analytics helps to make sure your compensation programs are achieving the goals as defined in the compensation philosophy. And, if not, it can tell you where to make necessary adjustments. In any organization, it’s easiest to stick with status quo when it comes to compensating employees because it’s tough to change course on a system that has been established for years and years. But, as the economy transforms around us and the world market continues to evolve, we need to respond to those shifts and keep our policies and practices up-to-date.

Find problem spots. By analyzing your compensation program, you’re more likely to discover irregularities in your pay practices that create unjustified costs to your organization. Too often, there are inappropriate compensation decisions made either for a newly hired individual or someone who has been in the organization for a number of years. Every one of those decisions costs the organization money.

Company time is often spent implementing programs that save a few hundred dollars here or there. Compensation costs, by comparison, are larger and keeping them closely monitored can easily save thousands. A five percent error across the entire organization, or just in one department, or even with one individual, is extremely costly to the organization. It’s important that you’re analyzing your compensation decisions so you can find these issues.

Avoid legal troubles. There has been media attention paid recently to many irregular, unfair or careless compensation errors, including President Obama’s first act he signed into law, the Lilly Ledbetter Fair Pay Act. As an HR practitioner, you must be aware of any weak points in your organization’s compensation practices so you can help the company avoid trouble and reduce legal risks. Through compensation analytics you can see irregularities that could create risk for the organization.

What Is Compensation Analytics’ Value to the Organization?

Beyond saving money, compensation analytics is simply smart business. Performing it now and every year from now on can produce a stronger organization on more than just the balance sheet. Here are some reason, as an HR practitioner, that you can take pride in your work on compensation analystics.

Takes a traditional HR activity and links it to the organization’s mission. Compensation analytics provides the data to show that your philosophy on talent links to your philosophy on growing the business. When you have numbers from your analyses, it shows that you’re actively working to make your HR efforts support business goals.

Provides a set of measurements that you can monitor over time to see trends and show progress toward stated goals. You’ll have a history of successes and failures that you can use to make better decisions in the future. You can see trends.

Can expose risk in the organization in time to take action. You can take action before a lawsuit is filed instead of after. Everyone at the company will be grateful to you for this preventative work.

Can be used with other performance measures to identify the health of the talent management programs of the company or organization. Talent management is a huge piece of making an organization successful. Compensation analytics tells you exactly how your talent management practices are working for you.

Hopefully, you are now more clear about what compensation analytics is and how it can be used to promote success for a company. In a follow-up post on compensation analytics, we’ll present information about how compensation analytics is actually performed. You will learn how to determine whether your salary ranges need adjusting, whether you’re compensating your top talent according to your company’s compensation philosophy and how to differentiate between positions in one pay range versus another.

Regards,

Stacey Carroll
Director of Customer Service and Education
PayScale, Inc.

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HR Advice for the Lilly Ledbetter Fair Pay Act

Dr. Al Lee, PhD — 2009-10-31T06:00:00-07:00

Expert Advice on Responding to the Lilly Ledbetter Fair Pay Act of 2009

Back on January 29, 2009, President Barack Obama signed into law the “Lilly Ledbetter Fair Pay Act of 2009 (“Act”). Although signed in early 2009, its effective date was May 28, 2007. The significance of the President’s signing was that he carried through on a campaign promise and that it represented one of his first official acts after taking office.

The significance for HR professionals and business owners is that there is some work to do now to protect yourself from claims of pay discrimination. Below you will find my legal advice for getting your pay practices and documentation up to date.

The Background on the Lilly Ledbetter Fair Pay Act

Essentially, the Lilly Ledbetter Fair Pay Act rejected the U.S. Supreme Court’s prior decision in Lilly Ledbetter v. Goodyear Tire & Rubber Company, holding that the charge-filing deadline on Title VII compensation discrimination claims begins to run on the date of the first allegedly discriminatory pay decision.

You may already know the facts behind Lilly Ledbetter’s discrimination claim. Briefly, Lilly Ledbetter worked as a manager in Goodyear’s Gadsden, Alabama plant from 1979 until accepting an early retirement package in 1998. During most of her career with Goodyear, her salary was determined annually and based upon supervisor rankings of her performance. Typically placed near the bottom of rankings compared to her male co-workers, she received small salary increases. During her last two years with Goodyear, she was placed in a position targeted for layoff, and consistent with Goodyear policy, did not receive any raises. When she retired, the compensation gap between her and her male co-workers was significant.

In July 1998, Ledbetter filed a charge with the EEOC alleging that she was unlawfully discriminated against under Title VII of the Civil Rights Act of 1964 on the basis of her sex as she received lower pay increases than her male counterparts. At trial, a jury awarded Ledbetter compensatory damages plus punitives to punish Goodyear. The case made its way to the U.S. Supreme Court via numerous appeals by both parties.

The U.S. Supreme Court affirmed an appeals court decision and opined that a “pay-setting” decision, like a termination or demotion, is “a discrete act” forming the basis of a Title VII claim thus triggering the 180-day period to file a charge. The high court rejected Ledbetter’s position that the issuance of each paycheck based on an allegedly discriminatory pay decision made outside of the statutory charging period resulted in a continuing violation of Title VII. Justice Ginsburg dissenting opinion prompted Congress to correct the Court’s interpretation of Title VII.

What Is the Impact of the Lilly Ledbetter Fair Pay Act Of 2009?

The Lilly Ledbetter Fair Pay Act accomplishes the following:

It extends the time period in which employees can pursue disparate pay claims under four anti-discrimination laws: Title VII; the Age Discrimination in Employment Act (ADEA); the American’s with Disabilities Act (ADA); and the Rehabilitation Act (Rehab Act); and,
It amends the Equal Pay Act (EPA) by providing for uncapped compensatory and punitive damages for violators; preventing employers from retaliating against employees who share salary information with co-workers; and requiring employers who make legitimate employment decisions based on factors other than sex to prove these factors are “job related” and consistent with business necessity.
In addition, any discriminatory pay decision restarts the 180/300- day period to file an EEOC charge. That is, each time a discriminatory paycheck is issued should:
A discriminatory compensation decision or other practice be adopted;
An individual becomes subject to the decision or practice; or
An individual is affected by an application of a discriminatory compensation decision or practice – including each time wages, benefits or other compensation is paid, then the statute of limitations on pay discrimination claims restarts.

Thus, the Act restores the pre-Ledbetter position held by the EEOC regarding the manner in which the statute of limitations is to be applied.
What Steps Should Employers Take to Ensure Their Pay Practices Are Nondiscriminatory?

2009 was a challenging year for business. In many cases, companies impacted by the economic downturn froze salaries. Other companies went further and reduced headcount. By broadening the statute of limitations for wage disparity claim, the time is ripe for impacted employees to challenge their employer’s actions.

Having a fiduciary responsibility to our organizations is implied, but we also should be driven by doing “what is right.” The following steps, at a minimum, should be taken.

1. Audit Your Current Pay Documentation Practices. Audit compensation practices to determine whether there is sufficient documentation supporting compensation decisions since performance-based specifics underlying such decisions will be essential to defending a wage disparity claim.

2. Develop Criteria for Compensation Decisions. Develop objective, measurable guidelines for compensation decisions that are applied consistently and uniformly by job classification, work group, department and/or business unit.

3. Set Up a Process to Review Your Compensation Decisions. Set up a process to ensure that managers and supervisors do not have unregulated discretion when making compensation decisions. Rather, consider implementing a review system so that compensation decisions are subject to the same scrutiny that terminations or other adverse actions receive.

4. Revise Your Document Retention Practices. Post Ledbetter, employers likely will need to retain certain information concerning compensation decisions longer than before; therefore, a review of your document retention policy might be in order.

5. Train Your Key Employees. Supervisors and managers should understand any policy modifications and be able to objectively consider and support all compensation decisions they make.

6. Analyze Your Compensation Practices. Analyze compensation data to determine if any statistical disparities exist across gender, race and ethnic lines and make any appropriate adjustments that eliminate unexplained disparities.

Civil rights legislation is designed, not to expose violators, but rather to correct a “wrong” and make it “right.” Better for HR professionals to internally address inequities before victims of pay discrimination seek external recourse. That too is right.

Regards,

Steve J. Cibull
Principal
The Cibull Group
Steve@CibullGroup.com
www.CibullGroup.com

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* Lilly Ledbetter image used with permission under a Creative Common License from the House Committee on Education and Labor at Flickr.

HR Guide to Leadership Training and Coaching

Dr. Al Lee, PhD — 2009-10-29T17:32:47-07:00

Leadership Training for Senior Management

It’s a new week at the office. You just found out that corporate is kicking off a new leadership training and coaching program and you will be participating. You know that it never hurts to receive leadership training on how to be a better manager. But, you’re skeptical.

You’ve been through leadership training exercises before. You’ve had high hopes that the training would help you to be a better manager. But, upon returning from the training, you settled back into your usual ways. Your boss has given you specific feedback on how you need to be a better manager. And your employees would really like it if you managed them better. You really do have the desire to be a better leader but how do you make what you learn “stick” this time?

As a leadership trainer, I too have high hopes for those participants in my leadership training programs. I want them to have an “A-ha!” moment and use the leadership training exercises as a catalyst to take them to a new level of effective leadership. The reality is that the ultimate decision to change rests with the individual, the manager in this case, who participates in the training and then returns to the daily routine. Somewhere in-between the training and returning to their jobs, they will hopefully spend some time reflecting on what they learned and make a decision about what they will or will not do differently.

A Conviction to Change

Changing employee behavior requires conviction. Conviction is a strong word that carries with it the idea that we need to do something important that is deep and fundamental to what we believe. Admittedly, most of us want to improve our effectiveness as leaders, and if we are deeply honest with ourselves, we don’t really have a good excuse as to why we haven’t taken more steps to improve our leadership skills.

But, we still lean on those excuses. Do any of the following ones sound familiar?

I do a pretty good job. I communicate what I want and let people know when they are not getting me what I need.
It’s true that sometimes I get a little too picky about what I want. But that is because I am concerned about whether my employees will get the project done the way I want them to. I worry about them doing it right.
Even if my employees have come through for me in the past, I still worry about whether they will come through this time. I know that my employees want me to have more faith in them, but I can’t help myself. Sometimes I have to micro-manage them.
Sometimes I get agitated and blow my top. I wish that I would do a better job of staying calm, but I get upset and I can’t help myself. I have been told on several occasions that there is no reason to get so upset, but that doesn’t seem to affect my ability to control my angry outbursts.
Sometimes when I say things, I can tell that I have really upset my employees. I can see their responses, their body language, but I act like I don’t notice.

What does it take to transform a mediocre manager into a great manager? How can we change behavior that is so ingrained in us? Even though there has been a lot of research done in human behavior, many aspects of how we make significant and lifelong change remain a mystery.

Deciding to Change as a Leader – and Really Changing

A few years ago, we had some family pictures taken. I remember looking at the photos, seeing myself and not liking what I saw. I had put on a lot of weight. So I decided to go on a diet. I knew that in making this commitment of losing weight, not only was I bound and determined to lose the weight, but to keep it off as well.

Eleven months later, I had reached my weight loss goal. And more importantly, three years later, I am still practicing the same behaviors to keep it off. I learned that it is a lifelong process that requires a sustained change of behavior. So as a result of making this lifestyle change, I can apply these same principals to help others who need to make behavioral changes, including becoming a better leader.

If you are a manager who has the desire to change your behavior and improve your effectiveness as a leader, here are some things that I learned during my weight loss process that you can keep in mind as you consider making changes to improve your leadership skills.

Overcoming the Fear of Change

Change can be scary and daunting. Many people have a difficult time getting past the first scary thought about what it means to change. People who make significant changes in their lives must overcome the alleged fear that exists with the change. It is good to ask, “What it is that I am so afraid of?” It may be just the fear of doing something different that may be the barrier to your improvement. But remember, once you get going, it won’t seem as hard as it did when you first got started.

What Is Your Incentive?

An important reason must exist for you to be motivated to make a change. The more substantial the reason, the more likely the change in behavior. When it comes to being a better manager and improving your effectiveness as a leader, think about the benefits you will receive when you have improved. Think about what it will look like when you are a more effective leader. Will you have more career success? Will you be seen as a top performer? What will it be like when you take your team of high performers to new heights of competency within your organization? Great leaders are motivated to improve based on their desire to define success in this way.

Take Small and Realistic Steps

Don’t try to change too much in one fell swoop. You’ll get discouraged and give up. Start by focusing on one aspect of your leadership effectiveness, such as how you communicate with your employees in meetings. Determine simple goals, such as ways in which you can strengthen and encourage your employees. And make sure that you are realistic. Be patient and don’t expect employees to respond favorably to your changes overnight. It will take time as they rebuild trust with you.

Use Structure to Sustain Behavior

Put a plan together for how you are going to lead differently. Write it down, set goals for yourself with realistic time frames. Measure your accomplishments. Structure and accountability can be a key component to changing behavior. Ask someone to help keep you on track and accountable for what you want to change.

Commit To Your Goals Long-Term

Changing behavior requires a lifelong commitment and is not a quick fix. Just as in the example of a diet, it is the long term sustaining change in eating habits that takes weight off and keeps it off. The same is true with effective leadership. You cannot make temporary change and then go back to your old ways three months later. You must commit that you will sustain the new and improved leadership behavior and keep moving forward.

Becoming a Better Leader Pays Off

Well, there you have it. It sounds so simple you wonder why you haven’t started already. Seriously, there are very few things that you can do for your career, for your profession, and for your organization that will be more important and have an impact on your professional success than your willingness and commitment to improve your leadership effectiveness.

In order to sustain the changes you make, you must understand that it will be a lifelong commitment. It is important to understand this so that you are realistic about what you are going to do. Now you are ready for that upcoming leadership training and coaching program. Best wishes to you as you strive for leadership excellence.

Regards,

John Sporleder
Sporleder Human Capital
john@sporconsulting.com

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Employer Benefits for Hiring Veterans

Dr. Al Lee, PhD — 2009-10-28T02:00:00-07:00

The Employer Benefits of Hiring Veterans and Ex-Military

During the period of time when I was preparing to exit the military and re-enter the civilian workforce, I read countless articles on what to expect while entering the workforce. Resumes tips, tricks on how to put a strong spin on military skills, so forth and so on. Unfortunately, I had a sinking feeling that potential employers weren’t reading similar articles about what to expect from job candidates that have a previous background in the military.

The majority of civilians, both employers and coworkers alike, have had very little exposure to the military. Most of what they have seen is usually based on television. This is no surprise as less than 1% of the US population serves in the military – about 1.5 million of out 300 million*.

The fact is, ex-military have quite a lot of skills, training and abilities to bring to the table – many of which aren’t found as easily in civilian populations. Here is a list of just a few of the employer benefits of hiring veterans and ex-military.

Discipline

This is usually the first concept that most anyone thinks of when they think of the military. And, there is more to discipline than just the stereotypical yelling that most people think about. Military personnel are trained to have mental discipline in the form of meeting deadlines, making hard choices, and pushing their limits as far as they will go. This also applies to physical discipline, such as being in peak physical fitness, representing the military uniform in an appropriate light and, again, pushing their physical limits as far as they will go. Ex-military personnel are used to working under strict policies and accomplishing tasks in conditions that are often less than optimal.

Early Responsibility

The majority of the military is made up of enlisted military. These are people that entered the military after graduating high school and started in specialty jobs, such as equipment maintenance, logistics, or even combat functions. These folks, generally, are entering into the military at the age of 18. This could also mean they end up in a warzone at the same age. For most college age people, they’re in their first year of college and might still be struggling with balancing homework with partying at the same time.

The military places individuals into positions very early on that require them to accept large amounts of responsibility, ranging anywhere from complex weapons systems to maintaining millions of dollars in government equipment. Officers (those entering the military after college) are almost always immediately put into leadership positions in charge of dozens of soldiers. Personal responsibility is a fundamental part of military service that soldiers have engrained in to them. They have a strong sense of duty.

Durability

Being able to withstand large amounts of stress is something the military spends an extraordinary amount of time and money training soldiers how to do. The stress of military life is something that requires a multi-pronged approach to ensure that soldiers remain safe, healthy, and most importantly, combat effective. Ex-military entering the civilian workforce will be somewhat shocked to see how drastically their work environment will change. Soldiers rarely shy away from early mornings or even long days. Working long days and putting in work hours when needed is something ex-military are used to. Mission accomplishment (or for civilians, completing business goals) is something that military learn to put above anything else, including their own lives. So supervisors shouldn’t have to worry about ex-military when it comes to the department needing to put in extra hours.

Timeliness

The saying “if you’re on time, you’re late” is a motto I have no idea how many times I’ve heard during my time in the military. However, now I understand it better. In the military, everything operates around time tables. Daily duties, short- and long-term planning, everything operates on a schedule. This is why workers with a military background will usually be the first to a meeting, sometimes unusually early. Timeliness is not always about being on time, but sometimes is to show respect. In the military, it’s considered very disrespectful to arrive late to a meeting being held by a superior officer. It was shocking for me to see, after I’d left the military, workers entering a meeting while their company president was speaking. Even more shocking was when vendors of products or services that my company was maybe going to buy were late. For some reason, these sales people were rarely early. Ex-military understand the importance of timeliness and scheduling.

Leader-Less Functioning

Ex-military leave the service with an understanding that there will be times when they will be thrust into leadership, perhaps unexpectedly. For this reason, a concept known as “commander’s guidance” is used and passed down to all soldiers so they understand what to do in the absence of higher guidance. Commander’s guidance is very similar to a company’s mission, only it is generated from the senior officer and operates as a philosophy and an end result for subordinates to reflect on. Should, for any reason, a person be faced with ambiguity in decision making as it applies to mission accomplishment, they will already understand what their superior wants from the overall unit. This translates easily into a business environment as supervisors aren’t always present for work, either through sickness, vacation, etc. Whereas many people might be hesitant to make a decision and be more likely to put it off for a day, ex-military have already been trained and have experience in how to deal with similar situations.

Overall, individuals leaving the military are experienced in handling deadlines, operating under stressful conditions, and doing whatever it takes to accomplish the task put before them. Workers that have military experience make strong, trustworthy, dependable workers. But, if this isn’t enough to convince some HR professionals of the benefits of hiring ex-military, I might also want to mention that under certain circumstances (and thanks to the American Recovery and Reinvestment Act of 2009), organizations may be eligible to additional tax breaks for hiring veterans*.

Regards,

Donald Nickels

*http://www.hiremilitary.com/2009/03/an-update-on-tax-credits-for-hiring-military-veterans/

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Changing Role of HR Technology

Dr. Al Lee, PhD — 2009-10-25T06:00:00-07:00

Talent Management Software: Why Free Trials Are a Smart Choice

Having been in the HR technology field now for 14 years, it’s refreshing to see more free trials for talent management software offered than ever before. This option gives organizations an opportunity to try before they buy. Yet, despite its value, many companies don’t take advantage of the offer or, when they do, they don’t involve those who will be directly impacted by the talent management technology. Maybe it seems like too much work upfront.

Based upon my experience, organizations need to look at the upfront work done to review a new HR technology system at their company as a smart investment. For many companies today, the investment in HR technology review by a variety of employees doesn’t seem worthwhile. Yet, the process can improve employee engagement in the software over time and lay the foundation for a widely adopted talent management strategy.

Talent Management Technology Can Boost Employee Engagement

One aspect of a talent management strategy is employee engagement – which includes both the managers who manage your talent and the employees being managed. Including employees at all levels in the process of trying out new HR technology can improve the likelihood that this technology is used and integrated into the team’s routine. For example, improving your performance management strategy through software is an effort where employee engagement can make a difference. Performance management ensures that your employee goals stay aligned with your overall business strategy.So, why not get your managers and employees involved during the free trial of the software that is meant to support this exact initiative?

Engaging your managers and employees during a software trial could be as simple as assigning goals that are directly related to the trial itself. It should be easy enough to create an organizational goal such as, “Implement a performance management solution.” Then, assign that goal to your managers who then cascade those goals to their employees on the project team.

Employees who have been involved in a HR technology software trial are going to be much more likely to take ownership for its success. Identify enthusiastic team leads and involve them in deployment and training - make them champions for your new talent management solution. Consider the concept of Employee Ambassadors who are going to help you build a strong sense of community and positively impact user adoption.

Give Straightforward Education and Training

During trial periods, it’s no surprise that the question most often asked by companies is, “How will we train all of our employees on this new HR technology?”

Out of the gate, you need to figure out how much training employees will need to get started. This will depend heavily on how you have configured the solution. You should have specific objectives for the trial period and avoid being distracted by all the bells and whistles a solution has to offer. Maybe that means removing sections or fields from an employee talent profile, or limiting the trial to requesting the employees to update their goals as a starting point. A system that makes this self configuration easy is good for your organization.

Involve Employee Ambassadors

Next, engage with Employee Ambassadors to help provide training and education sessions to other end users. Don’t be afraid to embrace social media, wikis and blogs to facilitate these peer-to-peer interactions, further deepening your sense of community.

It’s also important to understand what HR technology vendors have to offer. A vendor focused on user adoption will not only provide training tools and documentation that can be distributed to your employees during deployment, but also make resources readily accessible on an ongoing basis.

According to a study done by the Sand Hill Group and Neochange, the most critical factor (70 percent listed it as number 1) for software success and return-on-investment is effective user adoption.

Create More Community

The word “community” makes me think of two things - communication and unity. Any HR software you invest in must address the needs of everyone in your workplace to create a greater sense of community. When employees feel valued and are involved in business decisions there is a strong sense of unity within the organization. This unity then leads to strong internal communication.

Evaluating talent management technology software as a work community provides organizations additional insight into how all the pieces - recruiting, onboarding, performance management, goals and compensation - work together. It makes sense to find vendors that have this “unity” inherent in their design, commonly referred to as a “Unified Platform.”

Try the HR Technology Software Before You Buy

In the end, your free software trial is more than just a project; it’s an invitation for employee innovation and an opportunity for engagement. Software trials can be a useful, low-cost tool in the decision making process for improving your talent management strategy. Take advantage of the offer. If a vendor doesn’t offer a trial option, don’t be afraid to ask why. The answer might be both interesting and informative.

Regards,

Maureen McGuiness
Taleo

Guest Blogger Bio: Maureen McGinness is a Senior Product Manager at Taleo, a talent management software company. Her primary responsibility is managing the Taleo business edition performance and compensation products. Maureen has over 14 years of experience in software technology holding positions such as VP of Customer and Professional Services as well as her most recent position as product manager for a healthcare focused performance management software company.

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HR Guide to Social Networking Policy

Dr. Al Lee, PhD — 2009-10-22T12:17:52-07:00

The Facebook Policy You Never Knew You Needed

Right now, someone at your office is posting a message on their Facebook wall or sending out a Twitter tweet. You may write off these internet-based social networking tools as innocuous but they can pose serious legal risks if left untamed without an iron-clad employee social networking policy. Don’t believe me? Sit down and I will tell you a tale of a restaurant chain.

Why Does Your Company Need a Social Networking Policy?

Houston’s, a nationwide restaurant chain, found itself in hot water after accessing a private MySpace page created by employees to vent about management. The venting sessions came to an abrupt close when an employee showed the MySpace page to a manager who then terminated the responsible employees. The employees sued the restaurant chain and it was the jury that aired the final gripe finding that the employer had violated the employees’ privacy and the federal Stored Communications Act. The price tag for this indiscretion: Over $9,000 to the employees and a pending claim for $120,000 to cover the plaintiffs’ attorney fees.

Proprietary Secrets Shared Through Social Networking

If you think those court costs are expensive, consider the woes of internet giant, Google. A mere two weeks after hiring an employee, Google learned that its new-hire was publicly divulging proprietary tidbits on his personal blog. In his blog, which was geared toward the employee’s friends and family, the employee gushed over Google’s employee training programs, confidential planned product offerings, and its financial situation. To make matters worse, Google then garnered national media attention when it fired the aspiring blogger.

These stories are a wake-up call to human resources professionals the world-over that corporate policies regarding Facebook and other social networking sites are a must. If your company wants to avoid its firing practices being splashed across the pages of USA Today, or your company would prefer to minimize potential legal exposure (and pricey legal fees), then read on.

Internet Gab Fests: Keep Your Company Safe with a Social Networking Policy

The meteoric rise in popularity of online social networking tools like Facebook and MySpace has left human resources professionals in unchartered territory. According to a 2005 survey by the Society of Corporate Compliance and Ethics and the Health Care Compliance Association, nearly 25 percent of employers have disciplined employees for improper use of online social networking tools but only 50 percent of employers have an employer policy for use of social networking sites. Simply put, employers are ignoring this internet revolution to their peril.

Have no fear. Here is a road map to help you navigate the evolving landscape of online social networking and begin to craft an appropriate social networking policy for your company. Consideration of the following six questions is an excellent first step to protect your company from committing a potentially embarrassing and expensive Facebook faux paus.

1. Are we re-inventing the wheel? Before launching into policy-drafting mode, dust off your existing HR policies related to employee internet usage. You may be surprised to find that your existing policies will give you a solid foundation upon which you can build your online social networking policy.

2. What’s our track record? Determine whether your company has disciplined or made an employment decision about an employee based on inappropriate internet-based social networking activity. This will enable you to determine whether your company has already been applying a consistent approach in handling renegade bloggers or MySpace mischief. Also, dwelling on the past will help you learn from any previous mistakes and build a finely-tuned policy to apply in the future.

3. What do our internal experts think? Early into this process, it is advisable to invite input from the people in your company who will actually be affected by this social networking policy. Consider convening a working group of “stakeholders,” e.g. human resources, employees, information technology, supervisors, etc., to bring their particular point of view to the table.

4. Does this make sense for us? Creating an employer policy addressing the use of online social networking is certainly not a “one-size-fits-all” endeavor. Your online social networking policy should reflect the unique needs and values of your company. It may be instructive to revisit your company’s mission statement or the introduction to your employee handbook. These statements tend to set the tone for the employer-employee relationship and your online social networking policy should echo these ideals.br>

5. How will we tell employees about the policy? Once you have finished crafting your online social networking policy, don’t just put it on the shelf. Ensure that employees and supervisors are educated about the new policy and provide training, if needed.

6. Should we talk to a lawyer? Yes. The parameters of your online social networking policy may also be subject to several legal constraints. For example, a state employer will need to be wary of infringing its employees’ First Amendment rights. An employer with a unionized workforce, however, will need to consider whether such a policy would violate its collective bargaining agreement. With the help of your able attorney, you can avoid these litigation landmines.

Regards,

Merisa Heu-Weller, Davis Wright Tremaine LLP

Related Posts:

HR Guide to the Fair Labor Act
How to Draft an Employee Manual
Employer's Guide to Worker's Compensation
Strategic HR Planning

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The Impact of Compensation Methods and Decisions

Dr. Al Lee, PhD — 2009-10-19T18:00:55-07:00

The Impact of Compensation Methods on Employees and Organizations

It’s time to think about the many, sometimes subtle, choices behind determining appropriate compensation of your employees. The success of your organization can ride on these compensation decisions.

From the mom and pop shop that needs workers to restock shelves to large corporations whose employees manage million dollar funds, your organization’s compensation decisions can either boost your bottom line or leave it in the gutter. The key is to make realistic, budget-friendly compensation decisions at each step.

A Simple Example of the Impact of Compensation Methods on Organization-Wide Success

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We’ll use an example to cover questions you should ask as you go through hiring, managing and paying employees. An organization’s compensation system has been shown to have an impact on its overall success, and you don’t have to look at a big company to see these effects.

In our example, let’s say you own a small store that sells souvenirs in a tourist area. Tasks that must be done at the store everyday include sell items, run the sales floor, schedule staff and keep the books and records

Let’s say that your store is now big enough that you need help to do all of these tasks. This limited example brings up questions that will help you think about your compensation strategy, both short and long-term.

Your Employee Pay Rates vs. Market Pay Rates

Do you pay at or below the market? It depends on how competitive the job market is in your area. Can you afford to pay minimum wage for help in your store and still attract a good staff? For example, minimum wage is $8.55 per hour in Washington State, which is high compared to many other states. Although there can be exceptions for very young workers, let’s say you will pay all your employees at least your state’s minimum wage.

Part Time vs. Full Time Compensation

You need to have the sales floor covered at all times, such as when employees go on breaks or eat. You will work full time, but you need a couple of part-time staff to cover breaks and to back each other up when they take breaks. Maybe there’s no need for another full-time employee, yet.

Benefits vs. No Benefits

Another reason, perhaps, that you hire part-timers is because you cannot afford to pay employee benefits. You know that employee benefits will cost at least 35% of an employee’s wages. You want to be realistic about this decision because you know that when you hire people, you must do all you can to pay everyone on time, every time.

Hiring Contract Help for Your Organization

You can save payroll expenses by contracting out keeping up the books and records to a certain extent. But, you have to ask yourself if contracting out any of this work is feasible? You will not have the control over the contractor that you do over an employee and you cannot direct a contractor on their priorities or work methods. Can you live with that, or will it make you too nervous that they might forget something?

The Cost of Training Employees

Does your preferred contractor charge a premium that more than pays the cost of benefits if you hired an employee to do the same work? Would you rather have a specialist (contractor) doing the work than an employee who may need a few years of training to reach the same level of expertise? Is expertise from the get-go important enough to warrant the higher premium?

Varied Demand

Are there times of day or months of the year you know you are likely to have more customers in your store? If so, does that time correspond with an increased number of people looking for work? In a tourist area, there may be more customer traffic in the summer and mid-winter because schools are out and families have time to travel. These busier times in the shop are also times when there are people looking for minimum wage jobs, such as college students home for the summer or for winter break. That extra workforce may make it easier for you to hire during busy times.

Hiring a Full-Time Manager

Should you hire a full-time assistant manager to help you? It is very hard for one person to find time to keep raw sales data for the contractor to compile, respond to complex customer requests, and do all the other things that a person in charge has to do. If you choose not to hire an assistant, is there a time after the store has closed that you can feasibly do that work, since you probably cannot do it during store hours? Or is your store open 12 hours per day, seven days per week? If you have to work on your books or whatever in hours 13-16 every day, what kind of quality will they be in? What kind of life will you and your family have, with you working that much?

Competing for Employee Talent

Capable, reliable assistant managers can be hard to find. What wage are you willing to pay your assistant? What wage do your competitors pay? Here, your competitors are other potential employers of the assistant manager. Remember that is typically a larger group than other small stores that sell souvenirs in a tourist area, the group you normally think of as competitors.

Now let’s consider your other employees. Let’s say you find out that other shop owners in the same area pay their employees who work on the sales floor, cashier, and do shipping and receiving between $8.55 and $11 per hour. We’ll call that the salary range. You will probably want to pay somewhere in that range to be competitive with the other stores for employees. Should you pay initially at the top of that range or at the bottom? That choice typically depends on factors such as seniority, experience of the employee, how hard the job is to do, and how hard it is to get capable, reliable people to take the job and stay in it.

Let’s assume you are new to having employees, and most of what I said in the paragraph above sounds a like another language. In that case, you may prefer to get more experience with employees before you start paying them more than minimum wage.

Controlling HR Spending by Being Flexible

Compensation choices do not always cost a lot. In fact, some can be free.

For instance, you may want to only start with two part-time employees to cover breaks and meal times. They may only be able to work three hours per day for you five days per week. It’s awfully tough for anyone to make any kind of money on that.

Minimum wage jobs are not held only by teenagers who are only earning spending money. They can be held by anyone - people saving for college and people trying to do whatever they can to support their families. They may have more jobs than the one they have with you. They may be attending classes.

You can help them, and build their loyalty to you, by working around their schedules. If they have a second or third job, your willingness to do that will mean a lot to them because it helps them bring in much more money than if you were not that flexible.

Other free or low-cost tips like this are available in previous blog posts, such as “Non-Monetary Compensation” and “Employee Rewards.” And don’t forget the intrinsic benefits of working with a pleasant and knowledgeable staff. Word gets around quick about who is great to work for and who is not. This benefit can help you attract and retain workers.

Regards,

Joe Gross
HR & Policy Solutions, PLLC

Note: Even though I have worked with employment laws for over 20 years, I am not a lawyer. Nothing in this blog should be taken as legal advice or interpretation of laws.

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Compensation Budgeting: Determining Merit Pay Increases

Dr. Al Lee, PhD — 2009-10-16T23:50:32-07:00

Perform Efficient Compensation Planning for Merit Pay Increases

We are in the post-season for HR. It’s open enrollment time, flu season and, for a lot of organizations it’s also the time of the year for performance management and merit pay increases. Basically, there’s so much to do and so little time to do it. Welcome to human resources. Did anyone tell you it was going to be like this? Probably not.

They also probably forgot to tell you that you would do this event-based activity on top of all of your normal day-to-day hr tasks including employee relations issues and recruiting. But, you are a superstar who can manage an employee relations issue in between phone calls with your benefits broker while drafting a revised sick leave policy to account for the swine flu epidemic.

Now, if you could just get some help from your managers. But, here’s the toughest part – your managers need help from you.

How to Involve Managers in Performance Evaluations and Merit Pay Increases

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Your managers know that your organization has formal salary ranges. They know they have to write and conduct performance evaluations and they know they have the task of handing out the 2009 pay raises. But, bringing all of these elements together may be harder than you think for them.

With so many variables at play for how to give out raises, your managers may be tempted to ignore all of the guidelines and advice you’ve given them on determining pay increases for employees and instead hand out increases based on what’s easiest. What do I mean by that?

What’s easiest could be giving out pay increases “evenly” or, worse yet, according to how well they like a person. It’s our job as HR practitioners to make sure that we give our managers the tools to quickly and easily follow the guidelines we set out.

In a previous post we talked about how to give out increases by using the information about your employee’s placement within the range (called compa-ratio) with a score from their performance evaluation. These two factors in combination should equate to an appropriate increase based on your organization’s human resources budgeting.

How to Collect and Manage Performance Evaluation Information

Being able to quickly organize employee salary and performance data can help a lot with assessing and handing out increases. There are various ways to do so, from an Excel spreadsheet to special software. Below is a screen shot of a PayScale tool which helps managers and HR practitioners view their employee’s salaries, compa-ratios and performance rating all at once.

This type of information, complied in this way can make it 1) easier for your managers to determine pay increases based on your guidelines, and 2) make it quicker and easier for you to audit the pay increase decisions of your managers. Tools like this can help you take one more to-do list off your list.

This is a case where technology, when leveraged appropriately, can be HR’s new best friend. Unlike when one of your employees is complaining about their job on Facebook. That may be something else to consider come merit increase time.

Regards,

Stacey Carroll, MBA, SPHR
Director of Customer Service and Education at PayScale, Inc.

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Employee Compensation Policy

Dr. Al Lee, PhD — 2009-10-13T15:42:51-07:00

Writing an Employee Compensation Policy

For legal protection and good business sense, every company should have an up-to-date employee compensation policy. What is the status on yours?

An organization should not wait for dire circumstances, such as a pay inequity lawsuit, to write down or update their employee compensation policy. All organization leaders should create a written policy document or refresh their existing one for legal protection, and as a guideline or framework for the company’s compensation program.

Below is a list of helpful tips and tools for creating an effective employee compensation policy that is specific to your organization.

Research and Prep for the Compensation Policy – Define Your Compensation Philosophy

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First, each organization should develop a compensation philosophy. Information on how to do so is covered in detail in a separate blog post but, in brief, your compensation philosophy states how the organization’s guiding principles influence the employee compensation plan.

After you develop your philosophy, you can move on to creating your employee compensation policy. The following are some key points on how to prepare for writing your policy:

Determine your place in the market. Know where your organization’s compensation sits relative to the market where you compete for your talent. This may include factors like your industry, geography or size of organization, to name a few. Our post on how to set salary ranges can help with that process.
Select the types of compensation. Beyond base salary, what other forms of compensation does your company offer, when and why? These can include bonuses, such as individual commission and incentives, team incentives, company-wide incentives, benefits, fringe benefits, stock/ownership and others. Review each type and determine if one or a combination of these options work for your organization and who in the organization will be eligible for each type of compensation.
Review your process. Think about the process you’ll use for balancing internal pay equity against market competitiveness. This will include some research about using a straight market-pricing philosophy versus a job evaluation tool to put similar jobs within pay grades. There are advantages and disadvantages to each approach.

Writing Your Employee Compensation Policy

Once you’ve done your research on where your current compensation stands relative to the market versus where you would like it to be, it’s time to write your compensation policy document. Here are some guidelines on how to write a clean and clear policy:

Watch the details. Be specific, but not so specific that you limit your ability to manage the program. For example, you may want to state that the organization will review market data on a regular interval, rather than state the specific timeframe. This will give the organization the ability to do it more or less frequently than in the past depending on business necessity.
Communicate your company’s commitment. Your compensation policy should outline the organization’s commitment to equitable and fair pay practices and reference your organization’s intent to comply with all applicable laws and acts.
Gain approval. Generally, it is the board of directors that approves the final policy, but these aren’t the only people involved in developing your policy. The top executives such as the CEO, COO, and CFO have input to the overall goals and objectives of the compensation program. The human resources professional serves as the expert regarding items to be included in the policy. Your organization may also choose to create a compensation committee consisting of individual stakeholders from different departments including some managers and employees as an internal control measure, as well as an employee engagement strategy.
Make it real. Your company policies should be reviewed and approved by the executive team and/or board of directors. Meeting minutes or signatures to prove acceptance of the policy are a good idea.

Administration After the Policy is Done

It is important to maintain your compensation program after your compensation policy is written so that it stays equitable, relevant, and timely. Here are answers to common questions regarding this process:

Who will be responsible for the administrative work of reviewing job evaluations and market data? The HR department will most likely maintain the compensation program. But many times, in lieu of an HR department, the administrative staff or accounting department may be in charge of the task.
What will be the process and timing for submitting new job evaluations? Generally, this is done as needed, but some organizations require these be submitted within certain timeframes to maximize efficiency.
What will be the process and timing for obtaining and reviewing market data? Most companies analyze market data on an annual basis. However, your organization may need to look at market data more frequently, especially if you are in a high growth mode or if you are in an industry or market where salaries are rising faster than the national average.
What will be the process and timing for adjusting positions or employees based on market data? This should tie in closely with the review of the market data. However, some employers would be wise to look for trends rather than respond too quickly to market fluctuations.
What will be the process and timing for adjusting employees pay based on performance or longevity? This should be directly tied to the performance evaluation process. Many organizations do the performance and/or longevity increase at a separate interval than market adjustments so the differences between the two types of increases are easier to communicate with employees.

Regards,

Stacey Carroll, MBA, SPHR
Director of Customer Service and Education at PayScale, Inc.

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What Does the Employee Free Choice Act Mean for Employers?

Dr. Al Lee, PhD — 2009-10-10T05:00:00-07:00

Fast Politics: Latest News on the Employee Free Choice Act

Labor union membership numbers have changed in the last few decades and so have the union’s political efforts. As an HR professional, it’s important that you stay up-to-date on union activities since these politics can affect your company’s bottom line.

The two different, but linked, pieces of legislation to learn about and prepare for are the Employee Free Choice Act (EFCA) and the Re-Employment of Skilled and Professional Employees and Construction Tradeworkers Act (RESPECT Act).

The Latest Union Statistics

Union membership in the private sector has dropped below 8 percent – a historic low. However, unions won 66.8 percent of representation elections conducted by the National Labor Relations Board in 2008, which, according to the NLRB, is the highest win rate since 1955 when unions won 67.6 percent of the elections. This statistic is inconvenient, perhaps, for proponents of the Employee Free Choice Act, who argue the new law is necessary because unions cannot win elections due to employer interference. The union win rate in 2007 was a mere 60.4 percent in 2007.

Despite organized labor’s recent win rates, they have invested both political and economic capital in calling for labor law reform. At the top of their list are the two proposed pieces of federal legislation mentioned above: the EFCA and the RESPECT Act.

Arguably, labor’s skillful approach to labor law reform is demonstrative of politics and bargaining at their best. You have to pay attention to keep up with all of the political efforts happening lately. Let’s get up to speed.

What Is the Employee Free Choice Act (EFCA)?

At the top of labor’s wish list is the EFCA, a bill that would drastically alter seven decades of statutory federal labor law governing the representation rights of employees in the work place.

A bipartisan piece of legislation, the EFCA was originally introduced by Senator Edward Kennedy (D-Mass.) and Reps. George Miller (D-CA) and Peter King (R-N.Y.). On March 1, 2007, the EFCA passed the U. S. House of Representatives, by a vote of 241-185. The EFCA gained majority support in the U.S. Senate but was blocked by a Republican filibuster.
In its original format, the EFCA, also known as the “card check” bill, would have changed three fundamental sections of the National Labor Relations Act (NLRA), accomplishing the following:

Provide for the elimination of NLRB-supervised secret ballot elections in favor of card checks.
Change the rules of collective bargaining and impose mandatory “interest arbitration” on parties that fail to reach a first time agreement.
Strengthen penalties against employers who commit unfair labor practices.

What Is the Re-Employment of Skilled and Professional Employees and Construction Tradeworkers Act (RESPECT Act)?

The RESPECT Act is an effort to more narrowly define the scope of individuals who would be classified as “supervisors” under the NLRA. If passed, this legislation would substantially reduce the number of employees considered supervisory, thereby increasing the number of employees eligible for union representation.

What Is the Very Latest News on the Employee Free Choice Act?

The big news coming out of Capitol Hill these days is that the “card check” provision has been dropped. Seen as a major stumbling block for passage, but also viewed as a bargaining chip to be used by organized labor to assure eventual reform, the “card check” segment was eliminated in favor of the following:

Quick elections in 5 to 10 days after 30 percent of workers sign cards indicating their support for a union.
Union access to employers’ property.
The elimination of “captive audience” speeches.

Mandatory arbitration remains, and seemingly is, the legislation’s most important component. Why? Because it mandates an initial labor agreement and changes the landscape and education piece of union campaigns.

At greatest risk from this legislation are employers with multiple facilities. Unions could organize one facility, obtain a first labor agreement though the arbitration process and use that contract as an organizing tool at other locations.

It has been my opinion that organized labor has always measured success by attaining reform that includes the following:

The creation of a fair and direct path for workers to form and join unions.
The imposition of real penalties to those employers who violate the law.
Guaranteed first time labor agreements in a reasonable period of time.

Clearly, the revised version of EFCA meets those three metrics.

What Does the Employee Free Choice Act Mean for Employers?

Given the current economic downturn, most employers are under financial strain and feel increased pressure to avoid wasting time and money. Those employers that take a wait-and-see approach before this legislation passes could find that they’re acting too late. In the meantime, unions are advancing their organizing efforts and anticipating the passage of both bills.

What should employers be doing if they haven’t done so already?

Educate senior leadership about the consequences of EFCA and RESPECT Act passage.
Build and communicate a pro-employee track record.
Review your key policies.
Conduct vulnerability assessments.
Review your pay and benefits programs to ensure you are competitive.
Conduct third party avoidance training with your supervisors.
Address the RESPECT Act by reviewing job descriptions for your supervisors and compare those desciptions to the work they actually perform.

Following these recommendations will benefit you regardless of the outcome of the proposed legislation. In other words, by developing plans to address these issues you will improve upon your employee relations, position yourselves to avoid card-signing regardless, and eliminate the disruption that leads to costly litigation, morale problems, and poor productivity.

Regards,

Steve Cibull

The Cibull Group
www.CibullGroup.com

Guest Blogger Bio: Steve Cibull is the Principal of the Cibull Group, an HR consulting firm based in southern California. Mr. Cibull has over 27 years of HR experience in talent acquisition, human capital enhancement programs and labor and employee relations. His corporate experience includes working with many leading companies, including Lucas Aerospace/TRW, Republic Services, Inc., Coca Cola Enterprises. Mr. Cibull earned his Bachelor of Arts degree in Economics from Indiana University’s Bloomington campus and a J.D. from the Widener University School of Law, located in Wilmington, Delaware.

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Effective Employee Communication

Dr. Al Lee, PhD — 2009-10-08T15:41:18-07:00

Effective Employee Communication Part 2: How to Avoid Trouble

Clear and effective employee communication is an element of everyday work operations and is absolutely vital to all aspects of business interaction. And, keeping it both accurate and efficient can be tricky.

Most of us were taught about the challenges to accurate communication as kids. You likely played the game at some type of youth camp where everyone sits in a circle and the game begins with a whisper. The first person whispers a word or phrase into the next person’s ear and can only whisper it once. Each person subsequently whispers into the next person’s ear until the very end. Usually, a phrase like, “I have two cats,” ends up being something akin to, “I live boo rats.”

The following is my advice on how to avoid an “I live boo rats” outcome at work.

Tips for Accurate and Effective Employee Communication

The following points are tips I’ve picked up on my career path to be a more efficient and more effective communicator at work.

Sum it up. It’s just that simple. Usually, when we encounter workplace problems, whoever has been charged with identifying and figuring the problem out will end up digging a bit too deep. Accordingly, when that employee is asked to summarize the problem they tend to agonize over details.

For example, if I’m a supervisor and an employee calls in sick and says, “I can’t come in because I’ve got a hairline fracture of the medial aspect of my greater trochanter,” they could just as easily have said, “I can’t come in because my hip’s broke.” If you are reporting an issue, be able to sum it up as succinctly and clearly as possible. This will not only save you time having to re-explain it should it not be understood, it also allows a decision maker to choose a course of action quicker.

Bring a solution. The saying “two of the same trade never agree” is a saying I’ve seen confirmed throughout many organizations, and it’s absolutely a healthy thing. Subordinates who question processes are usually the people that have a vested interest in making processes more efficient and logical. However, it’s easy to just point out flaws in things; it’s harder to identify a course of action to correct them.

It’s important that if you’re pointing out flaws in a process or program that you set aside at least two different solutions or suggestions on how this may be fixed. The adage “if you’re not a part of the solution, you’re part of the problem” is born of this. If you’re the employee, this will make you appear to be invested in both the process and the organization. Additionally, you won’t appear to be an employee who consistently complains about everything.

Why? I agree with this statement: “Disagreement isn’t necessarily dissent.” In going with the ideas above, many supervisors don’t usually like to be questioned. This is something that is even more frowned upon in the military.

But, in my leadership roles, I’ve always encouraged both employees and soldiers to ask why I’m giving a directive. The reasoning in this is that if I’m telling you to do something, but I can’t tell you why, then why would I be telling you to do it? Now, of course, there are always those instances where you’re only executing a directive given to you by your boss and those items you simply need to carry out. But subordinates should have the ability to ask why. This does two things: (1) allows them to understand the necessity of the order, and (2) instills in them a greater feeling of trust between supervisor and employee.

Make it your own. If you’ve ever worked in management role, there have most likely been times that you’ve been required to announce an employee policy that was passed by your supervisor that you weren’t particularly thrilled about. Even more so, it was more likely a policy you knew that your subordinates wouldn’t be thrilled about. The important thing to remember here is that any decision that your supervisor makes, it becomes yours. If you express any type of disagreement publicly with your subordinates about your supervisor’s decision, it not only degrades your supervisor’s authority, it creates an undertone of dissent in your organization, which can be outright poisonous to a workforces’ loyalty.

Group meetings. I don’t believe I’ve ever worked with anyone that was excited to go to a large group meeting to complete work-related tasks. Without looking at any empirical research as to why we don’t like meetings, my gut will tell me this. The majority of our time we spend in group meetings, we’re usually in receive mode. A large portion of any information that is presented at group meetings can usually be disseminated in an email or bulletin.

Now don’t get me wrong. Meetings are important because they can become large, informative quorums for dialogue between teams that perhaps don’t have much interaction. Meetings do become counterproductive when an individual has an issue that needs to be discussed with only one other individual. This often happens, for example, at the portion towards the end of any meeting where the questions and comments come up. Usually, there will be one employee who will talk openly to or have a question for only one other employee. This should never be allowed to transpire because it’s wasting group time and could easily be solved outside the meeting. Group meetings should be used primarily to either disseminate information or conduct fact finding as it concerns the flow of work in an organization.

Effective Employee Communications: Take the Time to Get Them Right

Communication in the execution of daily work duties is important to get right. The best element to remember is that effective employee communication should be short, to the point and should be supported by additional information, if needed.

Regards,

Donald Nickels

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The HR Role in 401(k) Participation

Dr. Al Lee, PhD — 2009-10-05T15:54:28-07:00

How to Increase Participation in a 401(k) Plan Among a Young Workforce

Here’s a known issue, at least in my experience: Most 27-year-olds can’t be bothered to save in their 401(k), unless you bribe them with a 401(k) match. “No match, don’t bother me.”

Rather than give up on 401(k) participation among 27-year-olds, let’s think through what would make it “inevitable” that they save. The first step to increasing participation in a 401(k) plan involves analyzing this as a sales problem.

Sales Obstacle #1: We insist on selling 401(k)’s to 27-year-olds as a retirement vehicle.

If they retire at 70, they’ll retire in the year …. 2052. For most 27-year-olds I’ve worked with, “2052” is just not relevant – yet. 2052 as the focus? No sale.

Solution: Sell the 401(k) plan as a savings vehicle to 27-year-olds in a way that is compelling to them.

HR Role in 401(k) Participation – Selling the 401(k) Plan

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How do you make a retirement tool appeal to young folks? Okay, this may sound like sacrilege, but don’t sell a 401(k) plan as a retirement savings vehicle. It clearly doesn’t work for most.

What’s the alternative? Get the 27-year-old interested in the 401(k) as a vehicle to save for when they’ll need it most: when their paycheck stops.

Here’s an approach I use with a young audience:

“Use the 401(k) as insurance against the time when your paycheck stops. Sometimes it stops for a good reason, like you’re going back to grad school or moving to Albuquerque to start your own business. And even, truth stranger than fiction, retirement in 2052. And also, sometimes your paycheck stops for a not so good reason, like you’re laid off due to the economy or a merger or disability, etc. The point is, you’ll have savings – that you will not have spent – for the times when you need them most. Right now, where else are you doing that saving?”

Sales obstacle #2: We insist on selling 401(k)’s to 27-year-olds by trying to sell “features.”

You may remember from a sales class or seminar, features describe what a product is or does. Benefits describe how a product’s features will make your life better. Here’s a golden rule of sales: benefits sell, features don’t.

The problem is that it’s grimy work translating features into benefits. It’s much easier to describe features and be done with it. It just doesn’t lead to an “inevitable” increase in 401(k) participation by our target audience of 27-year-olds.

Review the 401(k) brochures available to you. Are they trying to sell features or benefits? Let’s take a look. Which of the following statements describe features, and which benefits?

1. Save with pre-tax dollars!
2. Enjoy the convenience of payroll deduction!
3. Your earnings grow tax-free!
4. Get the advantage of mutual funds, with no buy-in or surrender fees!
5. Put the principal of compound earnings to work for you!

Hint: In my view, these are all “features.”

How to Increase Participation in a 401(k) Plan by Promoting Benefits

To translate these into benefit statements, you have to answer this question: how will each of those five “features” make your life better. I told you it’s grimy work, so let’s try our hand at translating:

1. “Save for your 401(k) and still be able to afford movie night on the weekends!”
2. “Through payroll deduction, you’ll actually get used to the budget hit. Many like you find that, as a result, they actually save successfully for the first time in their lives. Savings success feels really, really good.”
3. Find yourself actually, successfully funding your future life goals. You’ll be in that new house, getting your grad degree, or again, truth stranger than fiction, enjoying a great retirement life on the beach in Hawaii …”
4. “You’re savings will grow significantly and competently without you having to be sole expert – and voila, you find yourself maybe in 5-10 years (remember, 27-year-olds!) with $25-50,000 saved up, painlessly, and find that that security means you sleep really well at night, even in an economy like this one.”

These aren’t perfect sales statements – if we were working on these together, we could make them better – so the point isn’t perfection, it’s illustration. Each of these statements is an attempt to activate the underlying benefit of 401(k) participation for a 27-year-old.

Another Advantage of Non-Traditional 401(k) Education

One more advantage to selling “life-funding”: It opens the door to better investment education.

This education includes selling 401(k)’s to 27-year-olds as “life-funding,” including retirement, rather than only retirement funding. This idea not only sells more effectively; it allows you to educate them so that they get – at a core, central nervous system level – a concept that is critical for their investment decisions:

It’s not “how old you are” or “how long before you retire,” it’s “how long before you’re going to spend the money.”

Example #1: Roberta is 63 years old, will retire from her UW teaching job in 2 years, but won’t spend any of her retirement money until probably 85 at the earliest. Roberta’s uncle left her a fortune! What’s her investment time horizon?

Example #2: Tommy is 29 and already has saved $15,000 in his 401(k), but plans on using his 401(k) to fund his grad school in 3 years; what’s his investment time horizon? Even given his age, with his plans is he a high risk investor?

Hopefully, you can see how selling 401(k)’s as “life funding” is a concept that you can use to make investment time horizons a compelling guiding issue for even a 27-year-old.

Final Thoughts on HR’s Role in 401(k) Education

The goal of this post is to provide you with food for thought. The real point is that in typical 401(k) participant education, we to follow some steps even when they aren’t fully effective. Isn’t that the joke definition of insanity? Do something over and over and, this time, expect a different result. Hopefully, this post provides you with some ideas – or at least stirs up some new ones within you – on how to get better results.

And if you want to share any of those ideas that may have been freshly stirred, please do. Our blog operators are standing by.

Regards,

Stuart Jennings

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What Is a Workforce Planning System?

Dr. Al Lee, PhD — 2009-10-01T17:54:29-07:00

Workforce Planning: You Don't Have to Be a Planner

I am a planner by nature and the choice I made of what business to go into - human resources and policy analysis - reflects this preference. The title of this blog is meant to appeal to the many business owners and managers who hear “workforce planning” and, unlike me, would rather not plan but just jump right in and “get ‘er done.” I’d like you to realize that you’re already doing workforce planning everyday and give you some tips on how to do it better.

What is a Workforce Planning System?

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What is a workforce planning system? Workforce planning spans a wide range of activities that you’re probably already doing. Have you thought about how you can sell more of your products to customers? Have you thought about how to make your customers’ shopping experience nice at your store or website so they will come back? Have you scheduled workers? Then you know workforce planning.

I like to call this most essential level of workforce planning the implementation level - and congratulations for getting it done.

The Strategic Level of Workforce Planning

Why are you in business? You’re in business to make money, right? Think about this question in just a little more detail, but still answer off the top of your head. The answer is probably more like, “I sell the best computer accessories in the area. Mine work the first time without confusing my customers!” Ta-da! That’s your mission statement.

With this mission statement, suddenly, you are now at another level of workforce planning. This level is also essential. I call this the strategic level of workforce planning. You will soon see how it will help you form a business strategy.

Creating a Vision Statement – And a Business Strategy

“How you gonna do it?” This is a line from a NickleBack song in which the main guy in the song is about decide he wants to be a rock star. And, it also works to create your vision statement. It’s not too brainy to develop your mission and vision statements. You can still be a doer and do this. And, once you’re done, you are ready to develop your workforce planning system.

Let me give you an example of a vision statement for the sales of computer accessories: “Work with suppliers of high-quality computer components to provide my customers with superb accessories that give them the confidence to take their computer use to the next level.”

If this is your business, you know that as customers gain confidence you will sell them more components, based on your reputation for selling stuff that works right out of the box. And then customers will keep ramping up what they want to do, as their confidence grows. Due to the niche you have carved out in their minds, you’ll be going on their journey with them, selling them more complex components to enhance their experience.

Excited? That’s what well-done mission and vision statements do – inspire people. They also help form your business strategy.

With this mission statement and vision statement, now we’ve got a business strategy. You may have always wanted one of those, but were too busy selling to sit down and work one out.

Base Your Workforce Planning System on Your Strategy

This business strategy tells you your next steps to make your business better.

Continuing with our previous example, the following steps may flow out of this newly established business strategy:

Staffing
We know we want our customers to have a positive shopping experience, and we plan to build our business on return customers, so we need to recruit knowledgeable sales and technical staff and we need to keep their training updated. We need to have enough staff on the sales floor to help customers without feeling distracted by the work they need to do elsewhere. But, the sales staff need to get back to the inventory and restocking tasks as soon as they can. So we also need to recruit sales staff that is strong on follow-through.

Management
We need managers who will understand if their work on the sales floor keeps staff from completing the restocking or inventory tasks they were also assigned. But our mission and vision statements affirm that customer satisfaction is our primary focus, so the restocking and inventory may need to be carried over to the next shift. So, we need a way to document store tasks so the manager of next shift can know what tasks are on-going from the previous shift. We’ll need to recruit managers who understand the importance of good documentation and follow-through.

Products and Pricing
We will buy computer components that are high quality, and they will cost a little more than others. But our service will be better, so when we charge higher prices to cover our higher costs it will make sense to the customer. Everyone knows the mantra - you get what you pay for, in service and in products. Since everyone knows it, use that knowledge as your friend. If anyone says anything about it, repeat it to them. They will probably continue to shop, confident that you will back up your higher prices with quality instead of apologizing for them.

Our business strategy is now influencing hiring of staff and managers, the kinds of suppliers we want to buy from, and how to approach customers.

Now Weave Together Workforce Strategy and Implementation

The business strategy will not only help you lay out a workforce planning system, but also provide guidance when you run into bumps in the road.

For example, if we cannot seem to get the inventory and restocking tasks done, we need to schedule them for shifts where sales are typically slow so the necessary staff will not be on the sales floor. To do that, we need to know when slow sales times are, so we need to keep records on customer traffic and sales hour by hour, day by day.

Your managers, sales staff, or cashiers can keep these records on a formal or informal basis. They can make tally marks on a form on a clipboard, click a hand-held counter, or just let you know when they see a lot of people in the store. Remember that recollections can be misleading, but the low cost of collecting that data may be worth not doing something more accurate but expensive.

Remember to Start Slow and Congratulate Yourself at Every Step in Workforce Planning
You can see how some strategic workforce planning can give you a lot of information quickly. It can also tell you what additional information you could collect and use to better define your customers, their needs, and how to serve them to fill your chosen market niche.

Do not let the effort needed discourage you from at least getting started. I showed you how easy it is to put together your mission and vision statements. Everything flows from them and, when they are well done, they can energize you and your staff. Much else will fall into place simply by taking these two fairly easy steps. Keep the process as simple as you can and celebrate your progress because it will all contribute to your business success.

Regard,

Joe Gross

HR & Policy Solutions, PLLC
http://www.hrandpolicysolutions.com/

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Employer's Guide to Worker's Compensation

Dr. Al Lee, PhD — 2009-09-29T19:48:39-07:00

Top 5 Myths About Workers’ Compensation

If you want to give a human resources professional a migraine, just whisper two words in their ear: workers’ compensation. This system of government-regulated insurance for work-related illnesses and injuries is as complicated as it is vast. In most states, workers’ compensation is a “three-way” system: an employer can be self-insured, participate in the state-funded program, or obtain third party insurance. But fear not. The following pointers will dispel the top five myths about workers’ compensation.

1) Self-insured employers pay more than employers insured through the government. False. Employers who self-insure (i.e. do not pay quarterly payroll taxes to their state government) pay less on average for workers’ compensation than employers who participate in a state-run system. Self-insured employers are able to closely manage their claims beginning with the question of whether they will cover an employee’s claimed injury or illness. The employer may also take a more aggressive stance in managing the claim right down to determining the most cost-effective treatment strategy for the injured employee.

2) Work-related stress is a compensable occupational illness. Not true. Unless an employee works in a uniquely high-stress environment or their stress was induced by an objectively traumatic event, general work-related stress is not a compensable factor or condition. In other words, an employee who claims the tension with a supervisor is causing the employee immense stress and led the employee to seek medical treatment is not covered by the workers’ compensation system.

3) Injuries occurring beyond the walls of the office are not covered by workers’ compensation. Guess again. Under the right circumstances, the company picnic can become an extension of the office, subjecting the employer to a workers’ compensation claim. Compensable injuries may arise in non-traditional settings depending upon the time, place, and manner of the injury. Did the injury occur during work hours? Was the employee compelled to be present at the site of the injury? Did the employer provide transportation to the site of the injury? To put these questions in context, consider the case of a software engineer who died in a car accident while driving in the company car to a required team-building exercise away from the office. Because his accident or “injury” occurred during work hours - he was required to participate in the exercise - and the company provided the transportation, his death is likely a compensable event.

4) Longer recuperation periods for injured workers will expedite the employee’s full return to work. Nope. In 2003, the Rehabilitation Counseling Bulletin reported that of the half-million injured workers who were disabled for at least five months, only half of those workers ever returned to work. There are many factors that play into the successful return of an injured worker. One of those factors is the amount of time the injured worker is out of the workforce. The longer an employee is away from the office due to their work-related injury or disease, the less likely they were to return to work. The longer the employee is unable to return to work, the higher the employer’s costs climb related to workers’ compensation and business productivity. Because it is in the best interests of the employer and the employee to facilitate a successful re-entry to work, if possible, many state governments provide “return-to-work” programs. Through these programs, the government will contract with a legion of vocational counselors who can coach the employer, the employee, and ideally, the medical provider through the re-entry process.

5) Workers’ compensation is complicated and expensive. Ok, this one is true. But consider the alternative. Although workers’ compensation can be challenging to navigate, it offers significant advantages for both employees and employers.

For employees, workers’ compensation provides a safety net for every worker in the United States who is injured while on the job. It makes it possible for an injured worker to take the time to recover from an injury or illness without forfeiting their livelihood. In addition, as discussed above, most states’ workers’ compensation systems also provide services to assist employees in the recovery process for a successful and timely return-to-work.

For employers, the worker’s compensation system injects an element of predictability and cost-control with respect to paying for claims filed by injured workers. It is a progressive system where employers in high-risk industries (e.g. construction, coal mining) are required to set aside more money than employers engaged in relatively tame pursuits (e.g. horticulture, web blogging). Indeed, in some industries, workers’ compensation imposes a heavy financial burden. This cost, however, must be weighed against the employer’s nearly unlimited liability if every workers’ compensation claim was determined by a jury. In an era where the size of jury verdicts frequently makes headlines, employers can look to workers’ compensation as a financial shield that is a reality, not a myth.

Regards,

Merisa Heu-Weller, Davis Wright Tremaine LLP

* Special assistance from Charley Bush, Vandeberg Johnson & Gandara LLP, and Mike Killeen, Davis Wright Tremaine LLP.

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Strategies for Difficult Employee Communications

Dr. Al Lee, PhD — 2009-09-25T16:35:37-07:00

How Do Companies Communicate with Employees in Difficult Times?

In my experience, there are two main schools of thought on how companies should communicate with employees during a recession.

1) It is better to wait to communicate with employees until you have all the information you can gather. Otherwise, employees may ask questions you cannot answer and you may look bad from their perspective.
2) We all live in a world of uncertainty and waiting before presenting information will only stimulate the rumor mill and employee anxiety.

This blog post will summarize why I prefer the latter approach. I will use as an example the situation I wrote about recently, of having to layoff or terminate employees as a last resort to get through a recession.

When Employees Smell Smoke, They Look for the Fire

Even if your organization keeps its employees during a recession, the employees know friends who are getting laid off or terminated. Consumer sales are probably down and the organization has cut out spending wherever it can. On its face, doesn’t this sound a little mysterious? How can this be? Does the owner have a goose laying golden eggs?

When Employees Cannot Find the Fire, They May Create Their Own

So let’s say your employees cannot figure out the apparent mystery of their good fortune with so much misfortune around them. After all, those other places probably did good budgeting and cut costs, too. Nature does not like vacuums and tends to fill them as soon as possible - especially if you don’t have an effective workplace communication strategy in place, you may be implicitly asking your employees to spin up the grapevine to fill in what you have not been telling them.

Like Ancient Times, People Still Create Myths to Explain Things They Do Not Understand

“Everyone is going through bad times, except for us. There must be a day of reckoning in our future. The company cannot afford to be this good to us, unless it is going to be sold to a deep-pockets mega-company. So that’s how the organization will get compensated for the risk they are taking keeping us. I’m glad I figured it out- and I better warn everyone else!” This can actually be the thought occurring at 2 a.m., when an employee cannot sleep due to their anxiety. Who doesn’t love a conspiracy theory?

The Irony of It All

You have done your best for your employees when they most need it. Your efforts may have taken away capital you intended to use other ways so you could cover payroll. You may have paid overtime to your accounting staff to budget and re-budget to keep expenses ultra-low so you could keep employees working. And now you have disgruntled employees anyway. What’s that about? When the dust settles, your employees will probably realize and appreciate what you have done for them. Let’s start settling the dust.

Pros and Cons of Communicating with Employees

There’s no question in my mind that the decision to communicate with employees about difficult and sensitive information must be carefully weighed. In this situation, I would have recommended that employees be informed about the budgeting and re-budgeting and expenses that were required to save their jobs. I also would have recommended that the employer tell the employees why this direction was chosen - to help them avoid, as long as possible, their entry into a tough job market. That would have filled the vacuum created by not giving them this information.

Why Not Communicate with Employees in These Difficult Situations?

I have known employers to be reluctant to communicate with employees for multiple reasons, primarily these:

Employers think they must be able to answer all questions employees might ask or they should not communicate with them.
Employers may be too timid to say publicly that their organization is in a difficult financial spot.
Employers are afraid of confrontation. They do not want to implicitly or explicitly encourage employees to second-guess them by meeting with them.
Employers sometimes forget that choosing to do nothing is a choice and it has repercussions, as does a more active choice.

When deciding if you should meet with employees, consider getting advice from a broad range of people. Take into account many of the perspectives that exist in your organization. For instance, you might ask opinions from trusted employees, supervisors, and consultants in addition to senior management.

Consider including these points in your discussions with your advisors:

Pros and cons of having open communication with employees.
Pros and cons of how much and in what way information is given to employees.
Whether any of information considered for communication with employees discloses trade secrets or proprietary information that may be damaging to the organization if it becomes general knowledge.
How the information might be received or construed by employees.
Whether supervisors or managers should be made available for individual employee questions, or whether all responses to the questions should come from one source?
If the organization ultimately has to layoff or terminate employees, will the employees be able to understand the reasons if you do/do not communicate with them beforehand?
Would you want employees to know how hard you fought to keep them on payroll?
Will communicating with employees help blunt possible bitter feelings toward the organization?

Regards,

Joe Gross
HR Policy Solutions, LLC

Note: Even though I have worked with employment laws for over 20 years, I am not a lawyer. Nothing in this blog should be taken as legal advice or interpretation of laws.

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Tips on Employee Communications

Dr. Al Lee, PhD — 2009-09-22T22:50:41-07:00

Employee Communications Part 1: Some Do’s and Don’ts

A key influencer of the bottom line in any workplace is communication. Be it with customers, internally or even with the media, communication can and does affect any business model at every level. Even the military views a unit’s ability to operate efficiently as having the ability to “shoot, move, and communicate.”

In my time in the workforce, both military and civilian, and I have seen some methods of communication – particularly employee communications internally from management - that are indeed either powerfully efficient, or dreadfully ineffective.

Some Do’s of Employee Communications

Email is your friend. Despite what a lot of articles and professionals recommend, I believe that email is the best way to capture information in a very quick and easy way. A lot of people tend to downplay email, usually stating that it’s too impersonal or doesn’t convey emotion. But that shouldn’t be the function of email. If emotion or a personal touch needs to be conveyed, it shouldn’t be emailed. What should be emailed is anything pertaining to the accomplishment of a task as it applies to an organization. Email serves not only as a way of initiating work, but it also serves as a running record of your daily tasks and what you did or did not do. If it’s on email, no one can say otherwise.

Mix it up a bit. An important part of employee communications is to get up and move around the office and see co-workers that you know and just do a bit of talking. Even small talk can bring up information that might be used later down the road on projects or day-to-day work. This doesn’t mean go chat up everyone all the time, but if there is someone that you work near, just ask them what they’re working on. This tends to lead to passive brainstorming and could have some positive outcomes.

Situational Awareness. If you are a leader of any size of team, employee communications are vital for your team’s success. This is true not only to the completion of tasks that your team is designed to do, but also to how your team operates. A lot of leaders tend to not share knowledge from their higher sources, leave out key information about deadlines, withhold guidance, etc. If you share your entirety of knowledge with your team, this will not only help them in envisioning what you want, but it will likely make them feel as though they are vital to you. An informed employee is not only a smarter employee, but a loyal employee.

Some Don’ts of Employee Communications

No one wants this sandwich. Commonly called the “compliment sandwich,” usually when people want to criticize something, they tend to lead in with a good, deliver the bad, then end with a good. Not only is this a dreadfully inefficient use of time, but I’ve seen it backfire many times. I’ve even personally been a victim of misinterpretation on this one. If the good points of the “sandwich” are overpoweringly good, then usually a person just sees the criticism as something that needs to be worked on with no deadline or possible ramifications if left unfixed. The best thing to do when addressing a negative is just identify it directly and be clear about what you want done. In employee communications, this not only ensures that there is no mystery about what is wrong, but it also ensures that it is important enough to directly address.

Bad news is not fine wine. Bad news certainly does not get better with age. Another faux pas of employee communications that I’ve seen both in the military and civilian worlds is that supervisors tend to wait until the last minute to communicate bad news. This can have devastating effects because employees will look at how long the supervisor has known this and, if word gets out before the bad news is communicated (and it usually does), this only leads to rumor and speculation on the part of the employees. The speculation can have serious effects on morale and people’s ability to do work. That being said, it is understandable that information should be 100% confirmed before it is communicated. But, again, employees will never fault their supervisor for being too informative. As long as employees are kept in the news feed, you can tell them literally almost anything as long as you’re consistent about keeping it updated. Information is rarely a bad thing.

Volume does nothing. Yelling at work is not an effective form of employee communication. This practice, to me, is the mark of a true non-professional in terms of the ability to emphasize the importance of a failure, usually. The problem with raising your voice above a concerned tone is that it doesn’t have a consistent impact over time. Given that the first few loud rants are usually effective in getting people going, it’s a slippery slope that very quickly erodes a person’s character. Supervisors or employees that yell tend to be quickly labeled hotheads or people whose feathers are easily ruffled. Supervisors that yell are often dismissed quickly because scream sessions lose their effectiveness very quickly. Regular yelling usually causes employees to lose loyalty, not work as hard, and sometimes even see if they can push their supervisors into a fit. If it’s a fellow employee who tends to become too passionate about stuff, then fellow employees tend to dismiss most of what the angry individual has to say, or just ignore them completely. The most effective leader I’ve ever seen never yelled. He could stink eye you into the ground but his leadership style never included yelling and that’s what gave him the reputation of being very level-headed, stalwart and completely unflappable.

Regards,

Donald Nickels

Strategic HR Planning
The Effects of Training on Employee Performance
How to Draft an Employee Manual
HR Leadership Questions

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The Growing Interest on Corporate Responsibility

Dr. Al Lee, PhD — 2009-09-17T18:19:00-07:00

Layoffs, Terminations, and Corporate Responsibility

There’s no doubt about it. What’s going on now in the economy is tough. Everyone is stressed to meet payroll and to drum up whatever revenue may still be out there.

I commend for the foresight and humanitarianism of organizations that hold onto their workers in spite of declining revenues. The growing emphasis on corporate responsibility is possibly inspiring their noble choices. But they also know that, if possible in times like these, it is a good investment to retain talented employees who have proven their value and to wait out the downturn with them. They also realize few other employers are hiring and, if they let employees go, the employees and their families will have serious difficulty.

What if Layoff or Termination Cannot Be Put Off Any Longer?

When recessions drag on, even well-meaning employers often find themselves having to use this last resort. This blog post will help guide non-union employers in making perhaps the most difficult choices they must make: choosing among employees to let go. Union employers are often restricted in these choices by terms of the collective bargaining agreement that they have negotiated with their employees.

Some people say that recessions are like disasters such as hurricanes and forest fires. They correct excesses that have been allowed to accumulate, such as carelessness about regularly maintaining good practices. Maybe keep this bright side in mind and consider the following factors when confronted with needing to make layoffs or terminations:

1. Focus on skills. Start by thinking about skills of the employees, just like you do when you hire job applicants. Base your decisions on skills in order to have a strong organization after the recession. Basing your decisions on skills may well also help you if claims are made later of discrimination during the process of letting employees go. This is another way that the process we’re talking about here is like the hiring process, but in reverse.

2. Notice what is out of date. During the good times, were there employees you hired for special projects or for particular purposes that were popular during the good times but may not become popular in the post-recession environment? For instance, did you make hires to work with consumer purchases they made with excess disposable income they may not have for a while yet? If so, they may now be candidates for transfer to other parts of your organization or for layoff or termination without great impact on the organization in the immediate post-recession period.

3. Move talent around. Are portions of your organization now a little “skill-heavy?” By this phrase, I do not mean to imply that I suspect you have portions of your organization that are over-staffed. Most organizations I know of are seldom over-staffed.

By “skill-heavy” I refer to a situation that often occurs after a prolonged period of not hiring staff. Because existing staff normally leave employers for a variety of reasons, I suggest you scrutinize your entire workforce. Employees who remain may now have overlapping skills in some areas in which you now do not need as many employees. In other areas, employees may have insufficient skills because the “stars” left for whatever reason. Now might be a good time to see if some of the employees with redundant skills would consider moving into other areas to fill gaps.

4. Review skill history. When making the step I suggested above, before asking employees if they wish to move to other areas of the organization, review their personnel files. Look for hints that the employees have skills in the areas you plan to ask them to move into. Check their employment application and their training record for skills that you did not hire them for initially or that they have added to their skills toolbox while in your employ. Now is your chance to make sure any training classes they missed work to attend, or that you plan to pay for, really give back to you.

Ask employees to update their training record before you ask them to move into a new area. That way you will have more information on which to base your request. The transfer process should be oriented toward making the organization stronger in the post-recession period; not in finding an outlet for bored employees who want to try something new but for which they show no propensity.

It’s better to transfer talented employees and keep their talents than to let those employees leave-- especially if you paid to cultivate those skills through training or classes.

5. Make recommendations. This next suggestion takes corporate responsibility to another level. If you have to layoff or terminate employees maybe you can help them find another job. Do you know other employers who may be able to use the employees’ skills? You know how great it is to get a referral of a good client. Help out employers in your network by referring to them great employees.

6. Stay in touch. It’s always a good idea to keep track of former employees you would hire again. Why? Things change. Sometimes the new job does not always turn out as well as they expected when they left your organization. If your revenue comes back to where you can start hiring, consider calling people you were compelled to lay off or terminate due to pressures of the recession but they were outstanding performers. They will appreciate your effort to bring them back, and even if they do not return, you may have made a loyal customer out of someone who may have been unhappy that you had to let them go.

Regards,

Joe Gross

Related Posts:
HR Cost-Cutting Measure – A Guide for HR Managers
How to Forecast Your Workforce
Leadership in the Workplace: The Importance of Integrity
Strategic HR Planning
Compensation Strategies for a Bad Economy

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Developing a Compensation Philosophy

Dr. Al Lee, PhD — 2009-09-14T20:01:01-07:00

Why You Need a Compensation Philosophy

By Staff Writer

In a recent PayScale webinar, Stacey Carroll, MBA, SPHR, touched on a key HR process that can get skipped when life at the office becomes too hectic. Once you’re done sorting out a new hire’s training schedule or making sure current employees understand their medical benefits, it’s important to set aside time to review or create your company’s compensation philosophy. This philosophy will then inform your compensation policy. And, that policy acts as the foundation of smart compensation program.

How do you get started in this HR process and what is the difference between a compensation philosophy and a compensation policy?

Developing a Compensation Philosophy

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A compensation philosophy lays out the guiding principles for your compensation policy. It serves as a mission statement for your policy. Some important questions to ask as you develop it include:

How does our current compensation strategy support the goals of our organization?
Whe do we sit regarding compensation in our industry and market?
Do we demonstrate fair, equitable, and competitive pay practices?
Hodo each employee’s talents link to the organizations goals?

These questions should be answered in a way that considers every person in the organization, from the janitor to the CEO. While employees’ compensation packages may look completely different, the compensation philosophy makes sure that the compensation packages are derived from the same set of core values.

How to Write a Compensation Philosophy

Once you’ve reviewed your company’s mission statement, founding principles and goals for the future, it’s time to start writing. The following are tips for creating a lasting compensation philosophy:

Be as concise as possible. Your philosophy should be about two paragraphs in length.
Maintain an optimistic yet realistic tone.
Keep in mind that the organization has and will go through changes. Policy can change, but remember, your compensation philosophy should weather these changes with few adjustments.
Ensure that your philosophy reflects some of the values already listed in your company’s mission statement.
Consider using general language such as “attractive, flexible, and market based pay”, “competitive in recruiting and retaining employees through high-quality compensation plans”, or “compensation program aligned with shareholder interest.”

Using Your Philosophy to Develop a Compensation Policy

Once you have your philosophy prepped, you are ready to continue in the process by developing a compensation policy. Ms. Carroll recommends that you complete the full process before you try to start any major benchmarking or market study project. As she pointed out in the webinar, having a solid compensation policy is the beginning of a well-constructed, defensible compensation program. As a matter of fact, if you find the organization has to defend against a claim of pay discrimination, your defense attorney will ask first if you have a compensation policy.

The compensation policy provides the frame work for your compensation program. Here are some tips for making yours comprehensive and useful:

Keep your compensation policy in the format in which your other policies are written. This way it is consistent with other company policies.
Include language reflecting the company’s intent to create equitable and fair pay practices free from discrimination.
Before a legal review, you may want to consider asking key stakeholders and the board to review your policy’s language.
Request sign off on the policy by an executive such as the CEO or president.

Your compensation policy should include:

Defining the market you will use for external market comparison or your “competitive set.”
A definition of the process used to determine internal equity (job evaluation).
The different types or elements of compensation.
Clearly defined management responsibilities.
A guide for the administration of the compensation program.

Be Specific and Stay Up to Date

As you go through this process, remember that compensation is not created equal amongst organizations. One organization’s values may differ from another or their compensation strategy may be completely different. A manufacturer may have many salaried employees as opposed to a car dealership which may have mostly commission employees. Both organizations’ compensation philosophies and policy statements may be different, but one thing that these two organizations will have in common is that their compensation policies are up-to-date and written down. That’s where you want to be.

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Creating a Compensation Policy and Philosophy

Dr. Al Lee, PhD — 2009-09-11T16:18:16-07:00

Q&A Session – The Essentials of Developing a Total Compensation Policy

The following is a transcript of the question and answer session that followed PayScale’s webinar, Developing Your Compensation Philosophy & Policy. The topics covered in these questions include vacation time, salary comparisons and sharing salary range information with employees. The main focus is developing a compensation plan philosophy and creating a compensation policy that’s competitive. Answers are provided by PayScale director of customer service and education, Stacey Carroll, MBA, SPHR.

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Q: What is your opinion about sharing salary range information with employees?

A: I absolutely believe in sharing salary ranges with employees. It’s just a fundamental part of who I am as an HR professional. I don’t support withholding that information. I’m a big proponent of communication, and I feel that if you feel the need to hide that then maybe you don’t feel very confident at how you arrived at those salary ranges. If you’ve arrived at them in a very systematic and objective policy procedure that you feel good about then I believe absolutely in sharing that information with employees and letting the employees know the amount of care the company takes to create fair and equitable salary ranges. I understand the complexity in communicating salary ranges to employees and if you’ve attended one of my other webinars you know that I say that I very rarely run across employees that think they make enough money and I hardly ever in my life run into employees that think they make too much. It’s a sensitive subject, I understand that, but I absolutely believe in sharing that information.

Q: When pricing jobs, an apple to apple salary comparison may not be accurate in terms of total compensation. Is the market evaluation mainly for base compensation? How much do you allow additional pieces to influence your compensation policy?

A: Most of the organizations that we work with build salary ranges off of a base salary number. That’s very, very true. But, in terms of what your target is for that number, your target may be influenced by your total compensation program. I used to work in government and I will tell you that base salaries in government are not necessarily targeted at the 50th percentile, but as many people know, with a government job you get a certain amount of security and they happen to be very rich in benefits. So, the target for those jobs may be the 40th or even the 25th percentile. You consider that information to build salary ranges.

Now, that being said, some organizations do use a total cash compensation model. It gets a little more complex, though, when you start thinking about incentives, bonuses, and commissions because generally speaking, the more pay you’re going to put at risk for an individual, the more competitive you need to be. So, there are lots of things to consider, lots of complexities, but I absolutely agree with your opinion that you need to make an apples to apples comparison and it’s usually easiest to do so on a base salary amount. Although you can account for the fact that these other elements are more strongly influencing compensation at your organization by targeting a different percentile.

Q: It has not been mentioned, but do you include vacation as compensation?

A: Normally it’s a consideration, but it’s not usually viewed in a direct compensation type of way. It’s more often viewed as a benefit or fringe benefit. I will tell you from my own observations, when they talk about all of these generational differences and things like that, I’ve noticed in a lot of organizations that I’ve been a part of that vacation time is becoming more and more the element that folks are more interested in negotiating on. People are willing to take less money when the vacation time is right, and I think it comes back to the whole concept of a balanced work life. It’s certainly something that you have to consider just like every other element, but whether you’re going to actually be able to drill down to what’s the financial benefit of that, and how does it affect compensation, I think that’s going to be a little more difficult.

Q: If you’re just starting a compensation policy, what do you recommend doing first if you can’t do all of steps at the same time?

A: I recommend that a first step would be benchmarking your organization against external market data. The reason for that is that if you don’t yet know what your philosophy is and if you don’t yet know what your compensation policy’s going to be, at least seeing where you sit against the market can help to give you some insight into where you might sit as an organization. It also has the potential to identify some real tough hot spots where you may be behind the market a little bit and potentially you maybe have some high performers. That’s what I would recommend as a first step. Understanding that you’re probably going to have to do a lot of adjustment once you get to that point in developing both a compensation plan philosophy and a policy, that could be a really good initial read as to where you are as an organization.

Q: You mentioned applying a market premium to a higher priced job in the market. Can you explain how this concept can be applied?

A: In the IT manager job, you’ll notice that the salary midpoint was $80,000, but the market data showed $100,000. So in that particular example you have a difference of $20,000. With that $20,000, you can try and account for it with your internal range by just placing that person at the very, very top of the salary range. Or what you can do is place them at an appropriate salary, based on the salary range and then have a special market premium that is tied to the market data that gives them another $20,000 dollars in pay that’s really recognized as a market premium. The reason for this is, should the market go down then this premium would be taken away.

Many of you who work in manufacturing environments or unionized environments may have recognized this in terms of how unions like to use specific shift differentials or market premium rates where there’s a certain dollar amount that’s added to the base pay. As an organization, you can adopt this same philosophy. The whole concept is to help the employee understand the difference between the pay that’s based on the value of the job to the organization and how the market is driving the pay. And so, it allows you to reward for how the market is doing, but also to recognize that, should the market change, the market premium could be taken away. Although it’s never easy to take money away from an employee, it’s at least more understandable based on an objective set of criteria rather than just saying that you’ve decided to take it away with no explanation.

Do you have any salary range topics you would like to see covered here on Compensation Today? Write us at comptoday@payscale.com.

Explore more HR expert advice on setting salary ranges and compensation planning:

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The Future Labor Shortage

Dr. Al Lee, PhD — 2009-09-09T19:35:51-07:00

What Happened to the Future Labor Shortage?

Whatever happened to all that talk about the looming labor shortage? You remember the experts telling us that we were going to see a labor shortage in the not too distant future? More open positions with not enough people to fill them. This effect would occur as the aging Baby Boomers start retiring and there would not be enough workers from the younger generations to replace them. Attention on this issue has not surfaced much these days probably due to our economic recession and high unemployment. It is difficult to think about labor shortages when there is currently a labor glut.

But let’s rewind back a few years to the late 1990’s and early 2000’s. Do you remember what it was like to fill positions when the unemployment rate was below 4% and the growth of your organization fueled an aggressive recruiting plan to fill all of those critical open positions?

Experts may disagree on how serious the future labor shortage will be. But, despite the debate and disagreement, one fact remains. There are approximately 78 million Baby Boomers (born between 1945 and 1960) and they are aging. How will you replace not only the workers who leave when they retire, but the expertise and skill they provided to you? Many of you may already be experiencing this since the oldest of the Baby Boomer generation, those born in the late 1940’s, have already reached retirement age.

So, let’s take a break from the doldrums of our current economic recession and consider the potential effect a mass exodus of workers may have on your organization and how the relationship between employer and worker will be different in the case of a future labor shortage. Then, you will be able to know what you need to do plan and prepare for the future labor shortage ahead.

Increasing Labor Costs

Remember your economics 101 class? If you have a low supply and a high demand, labor costs will increase. Fewer people to fill positions will drive salary costs up. Base pay and other forms of compensation will have to be redesigned. More compensation will be tied to company performance and driven by the fact that workers will want to see the direct alignment of their performance with the success of the business and expect to be paid for their contribution.

How to Avoid Labor Shortage at Your Company - Tapping Into Alternative Labor Pools

The difficulty in finding people will drive the need to tap into alternative labor pools. There will be more job opportunities for non-conventional types of workers such as part-timers and temporary workers, “stay at home” moms, prison labor, etc. There will be more alternative ways of working such as telecommuting, piecemeal or project-based assignments, virtual office buildings, and consulting and labor outsourcing. Also, there will be more opportunities for the retired. You Baby Boomers don’t start planning that retirement just yet! In the case of a future labor shortage, your employer may offer you a sweet deal to stay on another 5 years. You just might get an offer you can’t refuse. This, coincidentally, works out well for those who have seen their retirement portfolios recently erode; an effect that may work to an employer’s advantage in the future because older workers may be willing to stay on and retire later than previously planned.

Labor Outsourcing

Since it will be more difficult to find highly skilled people, it will be increasingly necessary to find alternative methods of acquiring the employee talent. Look for more people with specialized skills to trade-in their jobs as captured employees and starting their own consulting firms and offering their services to organizations.

Farm Clubs

Organizations will need to ensure they have well planned-out strategies for effective college and trade school recruiting programs. Not only will there be more opportunities for college and trade school students, employers may seek out students for internships while they are still in high school or maybe even younger.

More Older Workers

Healthier and longer life spans mean more older workers remaining in the workplace well past their 70’s and 80’s. Think of the positive affects a business will receive when their younger workers will have the opportunity to work side-by-side and be mentored by older workers and all that wisdom is being transferred.

Employee Recruiting Will Be An Integral Business Development Strategy

The more competitive the labor market, the more valuable the recruiter. An organization with a competency to successfully hunt and mine the labor pool for the best job candidates will be extremely valuable. The ability to find people will become one of the organization’s most critical corporate objectives. The people who do this well will be nicely compensated.

Avoiding Labor Shortage - It’s the Culture

Let’s say that I am a “hot” job candidate and you offer me a position to come work for your organization. You really want me but I also have three other job offers – a likely scenario in a labor shortage. What will be the deciding factor for me taking your job over the other job offers?

From your organization’s perspective, what will it take for the candidate you really need to pick your job over the others? Will it be salary? You won’t be able to buy them. Remember, labor costs are already going to be very high and other companies who want the candidate just as badly as you do will certainly be willing to at least match your offer. Benefits? They’ll be competitive too. The physical work environment? A great facility might be attractive to a job candidate but probably not the most important factor. Commute distance, job title, work schedule flexibility will also be factors. But, in and of themselves, they may not be the single most important decision maker.

Your company culture will be the greatest selling feature your organization will have to fill jobs with the best candidates. It will be your dynamic and high-performing work environment that will be attractive to the best candidates. It will draw them to your organization even before you have an opening. Most importantly, it will be your hiring managers who are known for instilling exciting and high-performing work environments that inspire people. In the future labor shortage, organizations with the best cultures will win the battle for the best talent.

It makes you want to start right now to generate the improvements your company will need to be the employer of choice, doesn’t it? It may not be the best time right now to be thinking about it with unemployment rates high, a labor shortage seems so far off. But it may be too late to start your cultural improvements when the labor shortage hits. Even if the looming labor shortage of the future is not as serious as some believe, it still makes good business sense to create a culture that attracts workers. Remember, there will always be a labor shortage for the most highly skilled and sought after people. No matter what type of economy we’re in, a high-performing culture with a dynamic leadership team will always be the employer of choice for the very best and brightest workers.

Regards,

John Sporleder

Founder and President, Sporleder Human Capital
john@sporconsulting.com

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The Effects of Training on Employee Performance

Dr. Al Lee, PhD — 2009-09-07T15:24:29-07:00

Why Employee Development Is Important

Employee development is something that most people imagine as intrusive all-day group training sessions. Unfortunately, this dreaded approach to employee development is just the opposite of how employee development should occur and feel to employees. Employee development can manifest itself in many forms of training, evaluations, educational programs, and even feedback. If executed correctly, the effects of training on employee performance can often encourage growth within the worker and the organization itself.

Employee Development’s “Self-Fulfilling Prophecy”

One of the larger aspects of developing employee's skills and abilities is the actual organizational focus on the employee to become better, either as a person or as a contributor to the organization. The attention by the organization coupled with increased expectations following the opportunity can lead to a self-fulling prophecy of enhanced output by the employee. According to Organizational Behavior by Robert Kreitner and Angelo Kiniki, it’s been shown that employees that receive regular, scheduled feedback, including training, along with an increase in expectations, actually have a higher level of worker output. Kreitner and Kiniki refer to this as the “Pygmalion Effect.”

Employee Development Equals Decreased Operational Costs

The hope is that employees who receive training in line with their individual or organizational goals will become more efficient in what they do. Organizations should look at the positive effects of training on employee performance, and consider employee development as a targeted investment into making the front line worker stronger. More importantly, development plans that include “train-the-trainer” (training that trains employees to become trainers of a skill) can provide exponential benefits to the organization. This training can be anything from how employees can do their own jobs better to these employees being groomed to replace their supervisor. In addition, employees who are invested as a trainer might be further inclined to stay with the organization, and possibly reduce employee turnover.

Perceived Benefits of Employee Development

Along with supporting the organization, employees might recognize that most types of employee development provide them benefits. Employee development programs that range from certifications to education reimbursement, to even basic job skills training, have a certain cost to the organization that can easily be considered a benefit to the employee. Such awareness on the part of the employee can also lead to greater loyalty to the organization as well as enhanced job satisfaction. Training and education that can be added to the employees resume are big ticket items in terms of compensation plans, and should be treated as such.

Employee Development Limits Organization Liability

Most HR professional would agree that limiting organizational liability when training employees is a very important aspect of employee development. Certain jobs require training and certifications in order for an employee to successfully execute the minimum job requirements related to their position. The proper documentation of employee development before or during the employee’s completion of their job can not only help follow and develop training, but also limit liability in the case of human error on the part of these employees.

An example of how documented employee training could be helpful would be if a stockroom employee were assigned the position of forklift operator. Obviously, the organization would be expected to put this employee through all necessary training to ensure the employee can both operate the equipment and do so in accordance with any applicable policies and regulations. (Also, to the previous point about benefits, this forklift operation knowledge would then be a skill that this employee would benefit from listing on their resume.) In a worse case scenario, if the employee is involved in an accident that damages objects and/or other employees and this unfortunate event subsequently leads to a lawsuit, development records are absolutely vital in showing that the employer provided everything needed for employee success. Although employee training documentation will almost never completely protect an employer from legal liabilities, training and certifications can hopefully reduce legal costs and reputation damage for the organization.

Changing Goals and Objectives

Beyond employee training and certification courses, evaluations and counseling sessions are another form of employee development. They provide performance feedback and allow employees to be apprised of changes to both their work goals and the overall objectives of the organization. Employees who do not receive feedback on a regular basis usually end up feeling as though they might be forgotten by their supervisor, and this pattern may even lead to feelings of dissent among the workforce. Going back to the Pygmalion Effect, employees who have consistent knowledge of their levels of performance, and who feel that their supervisors are placing expectations on them, generally perform better on an individual basis. Another positive effect of consistent employee feedback is that is help limit organizational liability in case that the employee needs to be discharged.

Be Specific and Consistent with Employee Development

Employee development should be tailored to the individual employee and address all aspects of their job position. Training should be focused on developing current and future skill sets as they apply to the individual's basic job requirements. The training should also allow for the widening of the skill set to include the possibility of cross functional training.

As a follow up, employee reviews should be scheduled and done as needed. Documentation and clear communication are vital when providing professional feedback to employees. Performance appraisals should include both assessments of the employee's abilities, as well as plans for the employee to increase their performance if it is found lacking. Employee development plans, when tailored correctly and executed in accordance with the individual and organizational needs, can significantly increase the efficiency of the worker, and dramatically decrease any associated costs that may be generated by the employee.

Regards,

Donald Nickels, M.A.

Related Posts:

The Salary Review Process: How It Relates to Performance Reviews
Workforce Alignment: Employees Working Together

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Ideas for Executive Compensation

Dr. Al Lee, PhD — 2009-09-03T15:34:40-07:00

Q&A Session – Expert Ideas for Executive Compensation

The following is a transcript of the question and answer session that followed PayScale’s webinar, How to Develop Your Executive Pay Strategy. The topics covered in these questions include adjusting to a down economy, finding salary data for a unique industry and total cash compensation. Answers are provided by author Sharon Koss, SPHR, CCP, president of Koss Management Consulting

Q: Why don’t executive pay plans reflect the ups and downs of company results more than traditional compensation plans since they have been so specific to the individual and situation? What role do the contract guarantees play?

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A: Well, I think the good contracts do reflect the ups and downs and I think where we want to make sure that we have the base pay, which is a smaller portion than certainly for other employees, is fairly guaranteed. Although, as I’ve said before, executives are the one group that you could actually do a pay cut for because they do share the wealth so much at other times. I do not believe that employee pay cuts for anyone below the executive staff are a good idea. Also, you may have a lot of long term and short term incentive plans that do not pay out, so for some of these executives that could mean that you’re working on about half your salary when times aren’t good.

Q: What if the economy, like today, really declines? How can and should executive pay be adjusted before choosing an employee salary freeze?

A: I think you have to decide where you spend your money within the organization and I think there is a point where you may need to cut facilities or lay people off before you cut salaries or have one year in a row without doing pay increases. So this is something that I’m going to be recommending and hopefully will be doing an HR white paper on soon. I believe for those companies who did not do an increase in 2009, you must do one in 2010.

Q: I want to do a salary survey for a unique industry. Do you have any suggestions?

A: Like the one I gave you for this prescription drug card company, maybe look at whether your industry is a combination of industries. If you’re still stuck then you can get on my website and send me an email: Sharon@kosshrexpert.com and I would be more than happy to try to help you.

Q: What does TCC stand for?

A: Total cash compensation. That does not mean stock options or money that goes into the deferred retirement plan. It is something that has the good old label of “cash,” which is easy to compare to other executive salaries. What are harder to compare are benefits because those aren’t “apples to apples”.

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Do you have any salary range topics you would like to see covered here on Compensation Today? Write us at comptoday@payscale.com.

Explore more HR articles from Compensation Today:

HR Leadership Questions
Why is HR Important?
Is Executive Compensation Excessive or Appropriate?

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Establishing Competitive Pay Rates

Dr. Al Lee, PhD — 2009-09-01T12:53:09-07:00

How to Target Pay Rates for a Job Position

Here at PayScale, the HR professionals that we work with often ask us, “What method should we use for targeting pay rates for a position?” While the compensation planning tool that we offer our customers gives them plenty of numbers and calculations, it does not provide a pay strategy for a particular job position. That's up to you to develop based on company goals.

So, how do you narrow down all of your salary data strategically?

4 Tips for Targeting Pay Rates

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To help simplify the process of establishing pay rates for positions in your organization, the following lists some the many factors to consider when determining what your target pay is going to be:

1. Define your competitive set. We previously wrote a blog post on correctly defining your competitive set and I suggest you check it out. Defining your critical set is critical to targeting pay rates that are appropriate for where you will draw your talent from.

2. Pick your approach. You’ll want to think about how competitive you want to be relative to the typical salary ranges for today’s market. When targeting pay rates you need to decide if you want to be meeting the market, lagging the marketing or leading the market. Each choice can be an appropriate strategy depending on your company’s goals and objectives. A critical step in targeting pay rates is understanding what percentile you want to use for comparison. It may be the 50th percentile, but it doesn’t have to be.

3. Look ahead. Take time to think about the changes that your organization may be facing over the next few years, and forecast your workforce appropriately. In addition to pricing according to who you are now, you may want to think about defining how your organization may change over the next 2-5 years. This information could help determine how you define your competitive set or what competitive strategy you choose when targeting your pay rates.

4. Understand the job. If you haven’t yet, correctly define the job for market pricing. When you are targeting pay rates for positions, you’ll want to correctly define the full proficient employee who has average performance. This centers your market data at the midpoint on the typical employees. Those that are new to the position or have less than acceptable performance will be below your target pay rates, and those with more experience, education or certifications than required, or those with outstanding performance, should be above your target pay rates.

It is important when you establish a compensation program that you appropriately target pay rates that can accomplish the stated goals of your compensation program. This goal can best be achieved by creating a compensation philosophy, correctly defining your competitive set, and appropriately pricing your jobs against the market.

Best of luck,

Stacey Carroll

Director of Customer Service and Education, PayScale, Inc.

Related Posts:

What Are the Components for a Compensation Plan?
How to Write a Compensation Plan
Typical Salary Ranges for Today’s Market

Do you have any salary range topics you would like to see covered here on Compensation Today? Write us a comptoday@payscale.com.

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How to Design an Executive Compensation Policy

Dr. Al Lee, PhD — 2009-08-28T17:44:36-07:00

How to Design an Executive Compensation Policy

By Staff Writer

If your company is looking to bounce back from a drop in profits or handle a growth spurt, you may be in the market for fresh talent at your executive level. What’s the best way to approach salary negotiations during the executive hiring process?

In a recent Webinar for Payscale.com, HR expert Sharon Koss, SPHR, CCP shared valuable ideas for executive compensation planning, and information regarding the search for top level executives. The following is a summary of her advice.'

Executive Compensation - Earnings

Ms. Koss began with some interesting facts found in HR consultant Bruce Ellig’s book, “The Complete Guide to Executive Compensation”:

Executives are the top five to seven positions within a company and usually encompass two to three percent of the total workforce.
Ihe United States executives earn 250 times more compensation than the average employee within a given company. That is not the norm at non-profit organizations, which historically pay their executives 50 times the average employee.
In anada and internationally, for-profit companies are much closer to the American non-profit model when deciding executive compensation levels.

Aligning Your Executive Compensation Policy and Hiring Strategy

Unlike most employee salaries, which are determined largely by knowledge, skills and experience, executive compensation requires consideration of more factors, such as current standard of living, time away (or sabbatical), and relocation concerns.

Ms. Koss recommends the following steps to HR professionals when developing an executive compensation policy:

Research pay. Use salary surveys to find out what other companies in your region and industry pay their executives.
Share your findings. Before you begin the hiring process, present the results of your research to the board of your company and seek recommendations regarding future growth projections, expectations, and short- and long-term incentive plans.
Write a job description. After hearing the recommendations from the board, write a job description based on the needs of the organization. This document can provide you a basis with which to begin your search.

Finding the Right Executive

While most executive level folks have track records of success, it’s important that you find the person who will suit your company culture and goals best. Ms. Koss points out that there are some common traits amongst executives. Ninety-seven percent of them have bachelor’s degrees and/or further education and a large number of them stay with one organization for 15 or more years. Lastly, the majority of executives come from the operations side of the business as opposed to the marketing, finance, or sales side.

Ms. Koss reminds you to keep your search for a new hire broad because the right candidate may not currently work in your industry. Some executives cross over industries depending on the needs of the company. She points out that executives with finance or human resources backgrounds are more likely to cross over industries because of the general nature of their expertise. As for marketing, organization, and sales executives, their work requires a more intense focus on their product and industry and they are less likely to cross over.

Types of Executive Compensation

Through your research you might find that companies compensate differently according to their needs or their industry. After researching typical approaches to executive compensation, as well as your own company and industry, you can then put together an executive compensation policy based upon a combination of the categories below:

Base salary. The base salary should reward the day-to-day activity of your executive. Some call this “merit pay” or payment for knowledge, skills and abilities. A question Ms. Koss recommends you ask yourself is, “Is the base pay fair?” What she means is that, generally, executive pay is most influenced by the number of employees in an organization. But, not only the current employees but future employees, too. She stressed considering organizational scoping factors to project how many employees your executive will be responsible for leading many years down the line. This means including the board’s projections of future growth or downsizing when determining base pay.
Executive bonuses. Ms. Koss points out that bonuses are commonly given annually and are 40 – 50 percent of the base salary. There are also companies that pay out quarterly bonuses of up to 20 – 25 percent of base salary. This means that some executives can get up to 100 – 150 percent of their base salary in bonuses.
Long term incentives. Long term incentives may come in the form of stock options or cash rewards. They encourage executives to stay at the company and pursue long-term objectives.
Supplemental executive retirement plans (SERPs). Supplemental executive retirement plans provide ways for executives to manage their income long-term, beyond typical 401k or IRA plans offered to most employees. They often are a combination of 401k or IRA plans, stock options given out over a number of years, and profit sharing in matching funds or just a strict predetermined payout.
Change in control (CIC). CIC agreements are designed to give peace of mind to the executive in the event of a separation. They secure bonuses and severance and give a payout timeline.
Deferred compensation. Deferred compensation is compensation (bonus or salary) that is given at a later date, after the actual bonus and salary is earned. This delay minimizes tax burden.
Extra benefits/perquisites. In addition to cash, executive compensation can include added perks, such as special parking spaces or club memberships.
Work environment. Quality of life factors are a relatively new form of compensation for executives. These can include shortening the executive’s commute by creating a separate office location for them or creating a work-from-home agreement. For example, Ms. Koss mentioned an executive compensation package she had worked on which stated that the CFO had to show up at the CEO’s home at 8:30 am every Saturday morning for a meeting regardless of holidays.

Executive Compensation Case Study - Using Organizational Scoping Factors

At the end of her executive pay webinar Ms. Koss, along with Stacey Carroll, director of customer service and education for PayScale, Inc., shared the story of a company that Ms. Koss was currently working with to hire a new executive. Ms. Koss wanted to demonstrate how to include organizational scoping factors when determining compensation policy.

Using PayScale Insight, Ms. Koss and Ms. Carroll compared the difference in compensation for the current company’s situation and the compensation of an executive in their projected, future situation.

Current status. The company is based in Tacoma, Wa., a mid-range market with a population of under a million people. The company is a manufacturing firm with 98 employees and 2009 revenue of $20 million.
New opportunity. The company needs a new CFO. They recently won a large contract from the United States Air Force. This contract would expand their employee base to a projected 276 employees and revenue of $95 million in 2010 and $150 million in 2011.
Special challenge. The current CEO and president are both founders and engineers, not finance experts. The new executive would not only serve as CFO through an exponential growth period, but would also advise the founders through the period and act as treasurer to a board with more than 20 members. Another challenge is that the members of the board have no experience with executive hiring or compensation.
Compensation research. Ms. Koss was brought in to aid the founders and board in determining their executive compensation for this new CFO position. Using PayScale Insight, Ms. Koss was able to pinpoint what a CFO in the manufacturing industry makes in Tacoma and the pay range in which they fall.
Final solution. During the webinar, Ms. Koss and Ms. Carroll focused on the total cash compensation (TCC) - without stock options or fringe benefits – for this position. PayScale Insight showed that the average CFO in an engineering firm in Tacoma, Wa. with 98 employees received TCC of $126,000 per year. When the search was changed to 276 employees, the annual salary increased to $196,000. A $70,000 annual difference is significant in both the executive’s life and the growing company’s books.

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Hiring a Compensation Consultant

Dr. Al Lee, PhD — 2009-08-26T17:28:08-07:00

When Should You Hire a Compensation Consultant?

Keeping great employees around can make or break a company’s success. Would you like some personalized help with your compensation planning to attract and retain top talent?

Especially at larger companies without in-house compensation departments, it’s not uncommon for HR folks to bring in a compensation consultant to help them get the best pay packages to their top employees. Consultants can help gather salary data that is up-to-date, put together a proposal and explain their reasoning to management.

But, some smaller companies do not have to money to pay a consultant. Do you feel like you need a compensation consultant to be competitive in your industry but don’t have the funds to afford one?

In this post we’ll explore when it may be necessary to hire a compensation consultant and also some low cost alternatives when you don’t have the money to do so.

Frugal Alternatives to Hiring Compensation Consultant

Having real-time, accurate, market salary data sets you apart as an employer. Try a demo of PayScale MarketRate and see the benefits of access to salary data on over 7,000 different job titles.

Before you hire out the task of setting ranges, maybe explore some of the other options available to you.

Some providers of salary data may offer assitance in processing it. For example, PayScale is one of the many online resources for pay data. But, PayScale is unique because we not only provide compensation data to companies, but we also help them optimize their use of it. PayScale MarketRate and PayScale Insight both help you keep your compensation information organized, plus PayScale offers an account management and customer service team that is available to help with specific planning needs.

While these services do not replace a compensation consultant, they may provide enough assistance for you to do your company's compensation planning on your own. And, these products and services often cost a fraction of hiring a consultant.

Other low-cost resources can be books or whitepapers on the topic of compensation planning. One excellent resource I would recommend is a book by Sharon Koss, SPHR, CCP, titled “Solving the Compensation Puzzle.”

How to Decide If You Need a Consultant

To help you decide whether you want to hire an expert or not, here a list of situations in which a consultant might be most helpful:

Limited know-how. Despite your best intentions, you may not have the knowledge needed to do your company’s compensation planning, or the time to learn it. You can solve this problem a couple of ways. First, you could use an online service or HR software to help you. For example, PayScale and other companies offer products that are specially designed to help people create a compensation program for the first time. But, that approach takes time and there will be some learning involved. To get past gaps in knowledge more quickly, you may be wise to hire a consultant who knows your industry.
Need a heavy-hitter. When you hire a consultant, you get more than their knowledge. You get their influence as an outside expert. For example, a consultant may be able to say things to your executive team that you feel uncomfortable saying. After all, who wants to tell the CFO that they are over paid? This is a touchy topic for an internal person to address, but easier for an external person to say. Sometimes you know exactly what needs to be done, but it can be easier to have an outside party deliver the message.
Cost savings. In some instances, it may be cost-effective to hire a consultant – especially in the short term. Smaller companies may find that it’s cheaper to hire a consultant than to purchase multiple salary sources. If the consultant already has access to market data, then this might be the less expensive way to go for immediate needs. But, companies need to be careful to look at both short-term costs and long-term costs. After all, once the compensation project is done in year one, you’ll need some sort of schedule in place to keep the plan updated year after year. It could get expensive in the long-run to hire the consultant every year.

If you review your situation and decide that hiring an external compensation consultant is the right direction for your company, here are a few tips to make the process go smoothly:

Stay involved. As the HR leader at your organization, you will want to partner closely with your compensation consultant. Help them get up to speed with the history of the organization, your current compensation plan, and the key players in the organization. You’ll want to provide an orientation for your consultant in a similar way to training a new hire but with a very targeted objective.
Help out. Find out if there is some legwork that you can do. There may be parts of the project that you can assist with that will be easier for you to do than the consultant. This might include utilizing the job evaluation tool to slot jobs in pay grades or matching jobs to survey data. If the consultant is willing to let you do some of work, you may be able to save money.
Plan ahead. Create a proposal and a plan for maintaining the program in-house or with more limited consultant involvement in the years to follow the initial launch. The last thing you want is to create a program that you can’t maintain year after year.

Regards,

Stacey Carroll
Director of Customer Service and Education, PayScale, Inc.

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How to Draft an Employee Manual

Dr. Al Lee, PhD — 2009-08-21T14:25:41-07:00

How to Draft an Employee Manual or Policy Manual

When it comes to drafting an employee manual and a policy manual, many of you may ask, “Do I really need either of these documents?” Even more, there’s often confusion about what the difference is between the two types of manuals.
While reading and understanding your organization’s mission statement is a good way for applicants and employees to learn what the organization is all about, it doesn’t go far enough. Employee and policy manuals add detail to that picture. Consider the employee manual and policy manual important tools for helping the people you hire become part of your employee team. By thinking about how you will lead employees through this training process will help you discover whether your organization needs both a policy manual and an employee manual.

The Different Focus of a Policy Manual vs. an Employee Manual

When you review a policy manual, it often lacks the detail of an employee manual. For that reason, some people may find a policy manual vague or less informative than an employee manual. Really, this lack of detail in the policy manual is intentional and occurs because policy manuals are not meant to provide exact instructions.

A policy manual provides your employees with the broad principles that your organization follows. By contrast, a company employee manual provides implementation parameters for company policies, a basic orientation to your organization, and how to process work there. This day-to-day, step-by-step instruction requires a much greater level of detail.

Your company’s parameters and processes explained in the employee manual may be fairly standard across the field in which you work, or they may be unique to each organization in the field. Often, there is a mix of both standard and specific employee policies – such as how employee performance reviews are done and how often, or your company’s safety standards that go beyond normal industry standard.

Sometimes that mix of industry-wide and specific qualities is what gives your organization its identity. This identity is helpful to define because it can help in recruitment and retention of employees. It can help your company be known as “the” place to work or to do business.

So … Should You Draft an Employee Manual or Policy Manual?

Sometimes, people may intend to draft an employee manual and a policy manual both, but partway through writing they realize their two manuals differ very little. Instead of providing unique information the two documents may convey very similar information. By nature, the two manuals should supplement each other. In cases where the two types of manuals are so similar, they can be folded together.

For example, your organization may be small enough that all the policy-level information may be adequately covered in the employee manual, and it is not necessary to have a separate policy manual. Generally, larger workforces experience a wider variation in implementation of employee policies and employee manuals are often a must to address a wide range of implementation techniques.

Some companies may be so large and diversified in their operations, and spread through so many locations, that each division may need their own sections in the company manual. Or the division could write one that addresses its unique operations and reprint the portions from the other manuals that apply to them as well. An example may be the pension program that is the same throughout the whole company and covered in a manual addressing the unique needs of the European or Asian operations in a company.

The goal in creating each of these manuals is getting information to your employees that they need to become part of a productive team. Both manuals are means to achieve that goal, and there is no need to be redundant.

I’m going to make a stretch here to describe this relationship further. A policy manual has essentially the same relationship to an employee manual as state law has to administrative regulations. One provides the principle and the other provides the implementation guidelines.

Why You May or May Not Need Both Manuals

Policy statements are a little murky sometimes, which can cause different interpretations depending on the type of organization at which they are implemented. So, simply providing the policy statement to employees without the translation provided by the employee manual, you run the risk that employees will not understand what the organization wants from them.

The following is a list of possible scenarios within an organization that can help you determine if you need both types of manuals or if you can combine them into one. For instance:

A group of employees familiar with language of laws or with bureaucracy may understand what they are to do when they see a policy and a “translation” in the next paragraph.

This group may not need two manuals. You may just give the employee policy in the paragraph above the implementation and they will understand. They read policy language all the time and are familiar with it. Reading it will not turn them away before they get to the translation.

A group of employees who are not as experienced in reading “legalese” or “bureaucratese” may not even pay attention after the first couple of words of the policy and may simply put down the manual and intend to “wing it” in case they ever need to know what was in it. Trouble!

An employee with this frustrated attitude can later cause a major issue. For instance, if the employee had read the first paragraph fully, he or she would have known the company will not tolerate any employee altering or modifying equipment in any way. The implementation part in second paragraph, which could also go into the employee manual, would have told him or her they will be dismissed immediately if seen modifying equipment. The second paragraph would have probably gone on to say that operating modified equipment may be unsafe and lead to injury. This is the part of the paragraph that might keep them out of the hospital.

Know your employees. When making the choice of splitting information between a policy manual and employee manual or combining the information into one manual, consider the likely effects of your decision on the employees. Weigh the pros and cons of getting some information to your employees but not all the information. In other words, it might be best not to ask your employees to read the policy behind something, and to instead stress the implementation steps in the employee manual.

Sample of an Employee Manual Entry

As a parting point, I thought it might be helpful to include a sample of an employee manual entry.
A good way to learn how to draft an employee manual can be to work from a sample document. For my example, I will use a Washington state law which states that there can be no smoking in public buildings or within several feet of doorways or air intakes leading into the building. An organization may simply put the actual text from the Revised Code of Washington (RCW) in the policy manual. This copy would perhaps be confusing to your average reader and have a lot of legal jargon.

In the employee manual, though, the organization could try simpler language to convey the law to its employees. This language could state, “Employee cannot smoke in the building, or within 25 feet of doorways or air intakes.” That’s a very direct, short and easily understood statement. In general, I prefer to use this kind of straightforward wording when I draft employee manuals so there is a better chance employees will read them and know what they mean.

Best wishes deciding which manual is best for your organization. Feel free to write me with your questions.

Regards,

Joe Gross

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Executive Compensation – Free HR Questions and Answers

Dr. Al Lee, PhD — 2009-08-18T14:54:01-07:00

Executive Compensation: Qualifying and Compensating the Top Levels of Your Organization

The following is a transcript of the question and answer session that followed PayScale’s webinar, Executive Pay 101: What You Need to Know. The topics covered include qualification and generalized methods of compensating top level executives, vice president and above. Answers are provided by Sharon Koss, SPHR, CCP, president of Koss Management Consulting.

Q: Are you aware of any executive positions that pay on a quarterly basis rather than an annual basis? And, if so, what circumstances would warrant this approach?

A: The quarterly approach to executive compensation has to do with a greater emphasis on executive bonuses and getting paid more often. One of the things that we’re seeing in the younger generation who are now taking management and executive jobs is that pay frequency is a big deal. To wait for a year for a bonus that might be up to 150% of your salary really takes a little bit of planning. So, what’s happening is, by having a little bit of hold-back, meaning you don’t pay out everything that’s earned in the quarter, because sometimes you have some ups and downs, that payment is more frequent. It might start out twice a year and then maybe you can go to quarterly. You’re going to have to have good records and a good system, but the more you can pay out right after the [good] behavior the better off you will be.

Q: Does it make more sense and have more credibility if you have an outside compensation specialist do this executive pay work?

A: Number one, I would say as a caution here is that this is your bosses’ pay and the people you report to. Number two, there’s a lot of scrutiny of this particular resource. Also, your board of directors may have a compensation committee and what may be important is to talk to that group with another boss and find out what their experiences have been. Because, if you aren’t somebody who is familiar in this area you want to make sure that you don’t get in over your head.

Q: How can you benchmark the benefits other than base pay and bonus, for example, SERPs, executive agreements, etc.?

A: You have to look at what’s typical for an executive in your industry. I work in a lot of family-owned businesses and there’s a benefit of being in a family business because they’re privately owned, they don’t need a bunch of layers of commission and they’re not on the stock exchange. Look at what a normal benefit package might be at an executive level at your peer companies. Where you can find this information often is at the organizations that your company belongs to, like a hospital association or high tech association. They will have a lot of information of what a typical package looks like.

Q: What is a reasonable pay differential between the highest paid employee (such as the CEO) and the lowest paid employee in your organization?

A: Well, in my personal organization it’s just my husband and me, so I want to stay married. (laugh) In the United States there are huge differentials between what a CEO makes and what the average employee makes. I think that fact in the future may change some. Skill sets are changing, we’re no longer relying on huge investments in equipment or manufacturing processes. Our people are our revenue and that moves us more into the knowledge revolution making the differential factor go down and I think it should.

Q: Are you seeing an increase or decrease in long-term incentive plans for executives?

A: It depends if you have stock options or not, and if you do have stock options what’s happening to your stock. One of the things in the Towers Perrin Survey was a question, “Have you dealt with your underwater options yet?” which means you now have to buy them at a higher price than the public can get them. This of course doesn’t make any sense. The answer was “No.” I think people are sitting back wondering what is going to happen and we don’t have a long-term prediction right now. I think we’re all looking at next week, next month, next year, but going out too much further I think is making people pretty nervous.

Q: Do you think people should get a bonus if the company is losing money?

A: I think that if the person has done what ever has been asked of them and there’s money attached to that, such as if you opened a facility in another city on budget and on time and you had a written plan that said what you got for that, I think you need to follow whatever you had in writing. But what you have to think about when you design these things is what the worst possible, scariest scenario is. If you open this business on time and on budget, but the whole rest of the company doesn’t make money, is it okay that this persons gets paid for that? Sometimes you need to pay the bonus to get things restarted and reseeded. I think the big money should come when a company is profitable.

Q: When it comes to using salary survey tools for executives, which of the revenue scopes (organization size, revenue, industry, or geography) make the most sense when evaluating an executive job?

A: The more information you can do on a customized basis the better. Using PayScale’s salary tools (industry, region, job description) helps, because we are past being able to look at “CFO” on a survey and think that it fits all CFOs.

Q: I like your equation of “Talent + Competence = Pay.” Do you have tools to measure executive talent?

A: You know, if I did I could probably retire right now. I think a lot of that is based on performance appraisals and value. I think all of us are being taxed to prove your value as to whether you have the tools that are certainly decided by your executive staff and your owners as to what is valuable to them. Sort of like, “What have you done for me today?”

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Variable Pay Compensation

Dr. Al Lee, PhD — 2009-08-17T12:10:57-07:00

Implementing a Variable Pay Compensation Strategy: What to Beware Of

How do you reward top performers and keep employees loyal during tighter times? In a previous post I suggested a variable pay program as a way to incentivize your employees to stay with the company and help it reach its goals. From profit-sharing to discretionary bonuses, there are a variety of options.
But, as with any approach to pay, you need to think through the outcomes you want and design your compensation strategy so that it supports them. Below I list some tips for success and common pitfalls to avoid when you utilize a variable pay compensation strategy.

Variable Pay - Don’t Forget the Law of Unintended Behaviors

As you seek to grow your business and keep your top performers engaged and loyal, here are some things to be aware of:

Acknowledge performance. Keep in mind that giving out bonuses to employees who are not performing will be and should be hard to stomach, and will not go over well with your executives. Good variable pay programs ensure that there is a strong performance component to how the money gets allocated. It is also important to make sure that managers are adequately managing any employee performance issues. If you leave any employees out, you must have a defensible reason to do so including non-discriminatory practices.
Communicate with your employees. In order for an employee rewards program to have high success, company performance measures must be achievable and realized by all employees. Each employee must be able to see the targets and understand how they can impact them.
Provide updates. You must have a good communication plan. Employees are going to want to know how things are going on a regular basis. At least quarterly.
Be fair. Acting with integrity from the top to the bottom of the organization. Make sure that checks and balances are in place so that appropriate records are kept and there is good oversight.
Refresh your approach. Don’t forget to change it up every two to three years to avoid the “entitlement” effect that can occur with long-standing bonus programs.

Using a variable pay compensation strategy to recognize organization and employee performance not only can have a positive effect on your employees, but it will also be well received by your executives and shareholders. In my first post, I mentioned a CEO who is burnt out on trying to keep budgets balanced and margins wide. What if you could assure your CEO that the cost of the variable pay is covered since it requires that the organization achieves its stated financial and business goals first? Now that’s a much easier “sell” and your CEO is happy that you are thinking of fresh, cost-concious ways to recognize and reward your high-performing employees. Maybe he or she is thinking that you should get one of those discretionary bonuses.

Regards,

John Sporleder
Sporleder Human Capital
john@sporconsulting.com

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Innovative Salary Programs

Dr. Al Lee, PhD — 2009-08-13T16:05:34-07:00

Using Variable Pay - A Compensation Strategy in this Current Economy

So there you are in the CEO’s office presenting your recommendations for next year’s salary budget. You have done the analysis, you have all of your facts lined up and your market data to support it. “The costs,” you say, “for next year’s salary increase budget will be … a gazillion dollars.” Well that’s not what you said, but that’s what the CEO heard! In fact, this is probably the fourth meeting that day going over all of the expenses that are needed to run the business and all that person sees is spending more money and an eroding margin. They ‘d probably rather hear about some low-cost salary programs.

Giving Employee Rewards on a Budget

As an HR professional, I know how challenging it is these days for organizations when they try to balance the cost of a salary increase program with their need to recognize employees’ skills and performance. Like many of you, I have faced the challenge of getting caught in the middle and feeling like the two sides of the issue are mutually exclusive. The fact is they are not.

Executives and shareholders want great workers who are high performing, but they also realize, and so should we HR professionals, that if labor costs are too high, it will impede on your organization’s financial health. The rising costs of labor, especially in the U.S. is a major concern to organizations that find it more and more difficult to earn the margins that were achieved in prior years – not to mention the fact that customers are looking for deals and that means lower prices. As HR professionals, it’s our job to come up with innovative salary programs that serve the interests of both parties.

Can a company in this current economy afford to keep increasing their base salaries and remain financially healthy and competitive? Can HR professionals help develop ways in which the organization can afford to pay out what is needed in salary in order to attract and retain employees? I believe that the answer to both of these questions is “yes,” but it does require innovative salary programs, and can be helped with a specific emphasis on variable pay.

The Benefits of a Variable Pay Program

Many organizations already have or have used some type of variable pay program such as employee profit sharing, business unit bonuses (gain-sharing), stock options, performance or retention bonuses, or other varieties of discretionary bonuses. These are a necessary component of pay and always will be. But in this economy, they can be an even more important tool for accomplishing retention and recognition than ever. With base salary increase budgets at their lowest point in 30 years (that’s as far back as I go), variable pay programs can be incorporated into very effective low-cost salary programs.

The added benefit of variable pay programs is that they can be more directly tied to corporate performance objectives and only be paid out if corporate goals are achieved. I have watched organizations struggle with how to provide base salary increases to employees in a way that can be directly correlated to business performance. But, things get in the way. Factors such as inflation, crucial importance of skills, or compression from new hires can all impede a performance-based salary increase program.

Variable pay programs, on the other hand, can be more directly tied to some aspect of corporate performance such as profit, revenue, or labor efficiencies. Variable pay programs can also offset the negative response that your top performers may have after receiving a “small” salary increase. Yes, it is true that an increase is only the means that is used to achieve the appropriate base pay for the individual – emphasis on pay, not the increase. But employees may still perceive a lower salary increase more negatively than it is intended.

Using a Variable Pay Program to Recognize Employee Performance

Even though you probably already have a base salary increase program that is based on pay-for-performance, you can still effectively use a variable pay program to strengthen your ability to recognize and reward individual performance. Here are some things you can do:

Employee profit sharing. If you have an employee profit sharing plan, allocate payouts that include individual performance factors. This not only recognizes employees’ contribution to the organization’s success, it also provides an opportunity to pay even more to those employees who are your highest performers.
Discretionary bonuses. Special recognitions are a great way to acknowledge employees. There is something about getting something when you didn’t expect it that has a sustaining and motivating effect on people. Set up a discretionary bonus plan that pays employees when you observe certain behaviors such as: 1) exceptional performance, 2) the accomplishment of a significant project, 3) the development of a new and innovative process, or 4) excellent customer services.
Performance goals. Develop corporate or organizational quarterly performance goals. These can be integrated into your employee profit sharing plan, or they could be separate and dependent upon what your organization wants to accomplish as an overall objective. You can develop goals in areas such as target operating expenses, top line revenue, positive customer responses, quality, or safety measures.

Keep in mind that variable pay programs do require the discipline to not only establish goals ahead of time, but also to manage them if unexpected issues come up that impede on the organization’s ability to accomplish the established goals. Judgment calls will have to be made.

In my next post on the topic of using variable pay as part of your compensation strategy, I will offer advice on how to get the most out of a variable pay programs and what pitfalls to watch out for.

Regards,

John Sporleder

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Determining Supervisor Pay Grades

Dr. Al Lee, PhD — 2009-08-10T17:04:15-07:00

What Is Fair? Supervisor vs. Employee Pay Grades

In my time both in the military and civilian workforces, I’ve always been curious to know more about what weighs on my supervisors from day to day. Such things as scope of supervisor responsibilities, everyday demands, and supervisory skills required for them do their job. Sometimes I’ve wanted to know this information so that I can better support my supervisors. Other times, I’ve been in the mind frame that, “Heck, I could do their job.” And it comes down to, “Well, how much money do they make?”

Do Supervisors Really Earn Their Higher Salaries?

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A common misconception is that the higher up you climb, the more you make and the less you do. Many ground level employees suspect this and it can hurt their productivity. It may even cause some skepticism about the supervisor themselves.

A common example of this situation is a construction site where the average worker has a specific skill that entails heavy labor, say riveting. These workers tend to look with skepticism on a recent college graduate who enters into the organization as a supervisor because of his education. The subordinate(s) may wonder why someone would immediately receive more compensation who has just entered the organization versus a skilled riveter that has been with the same company for years.

I’ve Been That Higher Paid Supervisor

This judgment was something I was “privileged” to experience entering the Army. After completing college and receiving my commission as a 2nd Lieutenant, I entered the Army and immediately outranked soldiers that had boot laces that had served more years than me. Because of the way pay grades in the military are set-up, upon entering, I (O-1) was making more per month then a Sergeant (E-5) with 12 years of experience. What made this more confusing was that the Sergeant obviously knew more about the military than me. However, all of that aside, I was the Sergeant’s superior officer. (Military Pay Chart)

How Can the Supervisor Pay Grade Be Determined?

Coming back to the question at hand, what elements control how much more a supervisor should get over a subordinate or group of subordinates? The simple answer is responsibility. A supervisor’s pay grade, in comparison to the team they lead, should be determined in accordance not only with the traditional compensation measurements, e.g. skills, education, experience, etc., but also for their contribution as someone who coordinates a team.

Most human resources professionals would agree that organizations, when possible, should establish a pay structure with carefully determined steps within the pay grade. Most organizations, including the military, have established pay grade structures that dictate pay increases and differentials based on time in position, and level of position. This is ideal in that these pay grade charts are usually designed to prevent overcompensation of employees and supervisors alike.

For those organizations that do not have a pre-established pay grade chart, there is a method for determining the compensation of the supervisors and their teams. The base pay of a supervisor should be based on their responsibility and how much impact they and their team have on the overall organization. For example, in a company such as Microsoft, a supervisor and his/her team of computer programmers should likely make more on an individual basis over the team that works for the company cafeteria. In addition, keeping this in mind, the supervisors’ compensation should be closely linked to their team.

Be Careful to Not Overpay Your Supervisors

Leaving the theory and getting to the answers, should a supervisor make more then anyone in their team? At face value, yes, excluding situations where a mid level manager may have operational control of a consultant’s or specialist’s, i.e. doctors, specialized engineers, etc.

Are supervisors sometimes overcompensated in comparison to their teams? Absolutely. If a team of 10 computer programmers each make $30k per year, it wouldn’t make sense for their supervisor to make $250k per year. Without even knowing the supervisors KSA’s and scope of responsibility, at face value, it doesn’t seem fluid to expect a supervisor to make that much.

Human resource professionals, when examining pay grades as they apply to supervisors, should absolutely take into consideration the pay that the subordinates receive. If the supervisor, based alone on their KSA, commands a heavy difference in compensation, the role itself should be reconsidered and possibly reassigned a new pay grade.

Additionally, non-monetary benefits, such as stock options and other perks, should be considered in the supervisors’ compensation plan. A supervisor may even make the same as his/her most highly compensated subordinate, but with the inclusion of additional benefits. This approach may be perceived by subordinates as being more fair than a flat increase in pay alone.

Supervisor Pay Must Be Reasonable and Suit Their Situation

Bottom line, there is no equation that can be used across organizations to decide what is the acceptable pay difference between subordinate and supervisor. Pay grades for organizations, ideally, should be built from the ground up. If workers know and do x, their supervisor should know and do x+1, with +1 being supervision and coordination of x.

Another important recommendation is that any employee’s annual compensation should not be shared with other employees. This control of information prevents feelings of discouragement should other employees find out what their peers are making. However, that being said, all compensation plans should be treated as though they will be made privy to public scrutiny. Supervisor compensation should be commensurate with KSA’s as well as their supervisory responsibility of those individuals below them, and should not grossly exceed this.

Regards,

Donald Nickels

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How to Get a Job in Human Resources

Dr. Al Lee, PhD — 2009-08-07T14:01:31-07:00

How to Get a Job in Human Resources

Finding a new job in human resources is easy!

Now that I’ve lured you into reading my latest blog, I can confidently state that I’m only kidding. If you have experienced the same HR job market as I did over the past year, you may even demand that I see my EAP for substance abuse testing. In my 15 years within human resources (with various job moves interspersed), I have never, ever seen anything like the current human resources job market and am amazed at how quickly and fundamentally I observed a change in the landscape.

How Did the Human Resources Job Market Change?

If you think all the way back to 2006, there was no Linked In, no Facebook, The Ladders represented things leaning against the wall of your garage and there was little discussion of social networking as a method of getting a new job. Now, you wouldn’t think about a job search without engaging in the tools mentioned above. There have been way too many articles about each of those methods for me to address them head-on, but I can reflect on how I used them now that I am in a new HR position. More importantly, I will discuss what I would have done differently in my own search for a new job in human resources.

Effective Strategies for Landing a Job in Human Resources

Networking. Whether you are currently employed or presently between positions, social networking is the most important method for increasing awareness of you. You never know who may wind up in a position to help you in the future. Develop relationships in a sincere way and you will find ready proponents for your cause. Are you giving first or taking first? Over the course of my career, I have spoken to college classes, volunteered in various capacities, and remained active in alumni groups, among other activities. As I began my search, these past actions allowed me direct access to people who were very willing to help me.

LinkedIn. LinkedIn, in my opinion, is a powerful job hunting tool as long as you use it thoughtfully. The person who was your best manager and promoted you four times is a great person to have as a connection and, more importantly, to provide recommendations. The person you worked with but barely knew is ok to have as a connection but you can’t really count on them to provide too much assistance. And the people on LinkedIn who are “open networkers?” Don’t bother. At one point I thought that would simply multiply my network connections. What a waste of time!

Indeed.com. Aggregator sites such as Indeed.com are great efficiency tools for your search. One key to success (and keeping your sanity during a search) is to be as productive with your time as possible. That strategy includes limiting the number of websites to search.

SHRM. Join SHRM and participate in your local chapter(s). This falls under the category of networking but also the concept of staying aware of current HR issues. If you are in a specialty area of HR or in a different field altogether, find the appropriate group. Many of the local chapters have special interest groups that help job seekers specifically and I found this support to be very beneficial for my HR job search and my psyche.

Ineffective Strategies for Landing a Job in Human Resources

Facebook and Twitter. While new, fun, and interesting developments, I think Facebook and Twitter’s value for job seekers is highly overblown. Sure, it makes sense to communicate through Facebook with your friends and family that you are looking (see “Networking” above), but employers finding HR employees through Facebook seems far-fetched. Really, Facebook is only a method of screening candidates out. As long as you keep your public profile clean, at least you won’t lose a job opportunity through the site.

Twitter as a job tool? Please. How many great employers are going to search for you or be posted on your phone in an environment where posted positions are producing huge responses already?

The Ladders. Paying for anything is a bad idea. I admit, I paid for two years of access to The Ladders and thought it would bring great things. After all of that time, I had 12 employers search my credentials and a grand total of one who reached out to me. Granted, the site does screen out jobs in human resources that pay under $100,000 – a nice feature – but the results in this job market didn’t justify the cost. There are many, many companies offering resume-writing services or personal marketing services that, I believe, are often preying on the desperation of job seekers in order to make money. Maybe you have had a positive experience with a service like this, but my advice is buyer beware. Money gets very scarce in a long job search so spend wisely.

My Best Advice for Finding a Job in Human Resources

My search took seven months from the time of my layoff to the beginning of my new job in human resources. In retrospect, I could have been much, much more productive with my time. For example, if I had dedicated two hours in the morning and two hours in the afternoon to job search activities, I could have dedicated a couple of hours a day to cleaning out the garage or learning a new language or painting a room or two. Instead, I began looking online at 8 a.m. and stopped about 11 p.m. What a waste of time. The only thing I did wisely in this area was committing to exercising every day. It helped me get in better shape and provided a mental boost when the human resources job market was doing just the opposite.

These are a few thoughts. What do you think?

Regards,
Andrew Shelton

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Non-Monetary Compensation

Dr. Al Lee, PhD — 2009-08-04T17:03:37-07:00

Non-Monetary Compensation and the Essentials of Developing a Total Compensation Policy

They say cash is king, but in today’s economy employees know that there is more to the story than cash alone. Today’s job seekers and your employees have become more savvy about non-monetary compensation. And there is a good reason they are paying attention to it.

Good health insurance and a generous retirement plan benefits are becoming more and more elusive. Employers who offer these non-cash rewards stand out among their peers.

The Value of Non-Monetary Compensation

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Non-monetary compensation can equal 20-60% of the value of the cash compensation that an employee receives. For the current job seeker, starting salaries have barely increased, frozen or actually dropped. So, finding non-monetary benefits in an offer can be essential when an employee evaluates it. These added perks can sweeten (and seal) the deal.

Types of Non-Monetary Compensation

Non-monetary compensation can include many different elements – from free coffee to a company picnic or discounted parking. Most frequently, though, it refers to the value of more traditional benefits. These benefits can include the mandatory benefits such as Social Security and Medicare, unemployment and worker’s compensation. These are the items that 95% of employers in the United States must provide. However, it also can include the voluntary benefits such as health, dental and vision insurance. And, it usually includes some type of retirement plan, as well.

One reason employees place a high value on the non-cash compensation parts of a total compensation package is because they can greatly reduce household expenses. For example, getting an employer’s help with health insurance premiums can save a family many hundreds of dollars a month, not to mention savings from the better medical coverage likely provided by a group plan.

Beyond the employee getting material value from their benefits, there are non-material perks, as well. Companies who offer benefits, such as a rich retirement plan, send a message that they value their employees and want to promote long-term relationships with their employees. These employers are becoming more and more sought after. Workers are looking for those organizations that invest in their employees and want to provide a fair wage, and a fair benefits package. Savvy workers will wait to work for a company that offers a total compensation package rather than work for a one that provides high pay with little in the way of benefits.

The Benefits of a Non-Monetary Compensation Plan for Employers

As an employer, there are many different reasons to look at increasing the value of the non-monetary elements of your total compensation package. First, more employees are asking companies to provide good benefits. Second, the government offers companies many tax incentives for certain types of benefits offered to employees. For example, when employers offer tax-deferred benefits, such as retirement accounts or Section 125 flexible benefit plans, the employees and the employers save taxes on the amount that the employee defers. Often times the tax savings to the organization can offset or greatly reduce the cost of administering the plan.

Finally, offering benefits can help to increase retention among your employees. When you give employees more cash per paycheck the reward is immediate but short-lived. When you give employees a match in their retirement plan with a vesting schedule which only gives employees the full value of that contribution after a few years, you increase the likelihood that employees will stay with you. This investment can mean savings for you, as an employer, because of lower employee turnover and a more experienced, committed workforce.

Non-Monetary Compensation Attracts Top Talent

Taking this one step further, many top performers are looking for an organization that goes even further than just cash compensation and basic benefits. They’re looking for flexible work schedule, employee training or education benefits, and well-trained managers to work for. These elements are often even more important than the traditional “what do I get when I work for you” benefits. The value of a well-trained manager who has an excellent reputation for helping individuals reach their full potential and increase their likelihood for promotion can be invaluable to employees. Often employees will stay with an organization or take less money to work for the right people at the right place.

If you’re looking to stay at the top of your industry by nabbing top talent, it’s important to think about non-monetary compensation in the context of what you offer to your employees in all areas of their career and quality of life. In these tough economic times - where it’s hard to give more money or richer benefits – you can win the war for talent by playing up the strengths that you have as an organization or figuring out what you can offer that will be unique and valued in the market.

Consider All of Your Non-Monetary Compensation Options

There are a host of benefits that companies can offer to attract and retain top talent. Here is a list of a few for you to consider.

Flex-time schedules
On-site childcare
Free or discounted parking
Free or discounted food and drinks
Gym membership discounts
In-office massage or yoga
Casual Fridays
Mentoring programs for career advancement
Free or discounted educational and training opportunities
Work opportunities in multiple locations
Cross-training in other areas of the business
Annual or quarterly company parties

Regards,

Stacey Carroll

Director of Customer Service and Education, PayScale, Inc.

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Employee Rewards

Cost Cutting Examples of Compensation Plans

Employee Rewards

Dr. Al Lee, PhD — 2009-07-31T12:57:21-07:00

The Benefits of a Rewards and Compensation Strategy

There are not many second chances in running an organization. A misstep can cost thousands of dollars to correct. For instance, not setting up your compensation strategy correctly can mean you’re not able to attract the talent you need. By contrast, your overall rewards and compensation strategy is one area where you get a second chance.
The following is my perspective on and suggestions for how to set up an employee rewards and compensation strategy, as well as strategies for each of those two systems.

Optimize the Benefits of a Rewards and Compensation Strategy

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Many organizations set up an employee rewards systems after they set up a wage or salary system. But, by coordinating the two into a comprehensive rewards and compensation strategy, you can boost your profits and workforce productivity. Even better, by implementing an employee rewards system you get a second chance to optimize your overall compensation package.

Keep in mind that some employee rewards systems are surprisingly cheap - even free. As organization people, we have the same motto in common: free is good.

Components of an Employee Rewards and Compensation Strategy

Components of an overall compensation and rewards strategy often include:

intrinsic rewards
monetary rewards
wages
salaries
commissions

First, you must tailor your compensation strategy to your industry, your workforce, and your organization location. After we discuss that, we’ll discuss reward strategies.

Compensation Strategies Range from Basic to Complex

A compensation strategy ought to reinforce your organization’s needs and values and can strengthen workforce alignment. A sound compensation plan will position your organization in its market, contribute to its reputation, and help you attract and keep employees.

Compensation plans often include a range of components such as

wages
salaries
commissions
bonuses

Much of a successful compensation strategy, especially in a competitive market, depends on what your competitors’ compensation systems include. Here are some of the most common components to consider when developing a compensation strategy.

Employee Wages and Salaries

I use “wage” to mean hourly pay and “salary” to mean annualized pay. No matter how you pay your employees, it’s important to perform regular salary benchmarking and to use up-to-date, specific data for your positions. PayScale has great information and resources, as well as helpful tools for you to use to make the most of the information.

Another source to check data through is the Department of Labor. The Washington Employment Security Department is another potential data source. The data will likely be a couple of years old, so it may need to be “aged” to bring it up to current levels. I use the Bureau of Labor Statistics’ inflation calculator to help me age data. The calculator lets you plug in the amount and year of the data and will show you a result corrected for inflation. This is generalized, and if you can find better inflation data for your area, use that instead.

Compensation Strategy

What’s your strategy for paying your employees? You may choose to set your wage or salary levels at the mid-range of your market. If you choose to pay lower than the market rate, you may not attract the “star” employees. If you do not need to attract “star” employees, do not pay the extra amount that will attract them to work for you.

On the other hand, if you do need stars and you get too zealous about attracting them by being at the top of the market you may find yourself in a pickle when they want a raise. Then you’ll need to exceed the market, or risk the employees going to a competitor.

Wages or salaries are often referred to as the “base,” meaning they form the basis of employee compensation, even if they are the entire employee compensation. This definition will be important later on.

Commissions

Commissions can be used several different ways:

Replace a salary after an employee gets seasoned in the field.
Take the place of ever paying salary and wages.
Be blended with salary and wages the whole time

Consider using commissions to supplement salaries (often called “base plus commission”) up to a certain percentage. You could also use different percentages to emphasize particular needed results. You could tie commissions to performance and sales to induce employees to achieve higher levels. Some successful companies give high salaries and low commissions, and some do the opposite. They choose depending on the industry expectations and the workforce development strategy.

Bonuses. Wages, salaries, and commissions can all create a “bow wave”. That is, future wages, salaries, and commissions must exceed the current levels to seem to the employees like improvements. This can be true even if the economy is bad and revenue is down.

In my experience, bonuses are best used as rewards. I know some industries have long considered them as employee entitlements. However, if they become part of the base this way, they make the “bow wave” taller and harder for you as the employer to “top” in the next compensation negotiation. Another possible outcome is your employees will expect bonuses regularly even if their performance does not warrant them.

A Lesson Learned from AIG

AIG is to me an example of what can go wrong with bonuses that become part of base pay. Regardless of what you hear about AIG’s “performance bonuses,” I have a hard time accepting the concept that employees who supposedly performed so well had to have the government essentially buy 80% of the company. Not only was it hard to choke down the first time we heard about it as taxpayers and employers initially, now we find out they are given quarterly! If you think of this as an employer, it may aggravate you to lose one of the tools you can use to legitimately encourage higher employee performance levels.

Employee Reward Strategies Range from Basic to Complex

Developing an employee rewards strategy is really the place to play, have fun and be creative.

Reward strategies can be uniquely yours, and distinguish your company as “the” place to work. This is an excellent opportunity for reinforcing your organization’s brand. Giving gift certificates or cards in a down economy is great.

Several organizations may join together to promote each other’s organization by giving gift certificates to each other’s companies as a reward for good performance. Employees meeting a performance goal or working together to meet an extremely tight timeframe may be good cause to treat them to a party or picnic. Some organizations even give away trips as rewards to their top sales producers.

Workplace Environment

Don’t forget that your workplace environment can also be a huge benefit to employees. That is why I consider it part of an employee rewards system. Here is a list of ways you can make your work environment more positive for your employees

Support your high achievers. High achievers want to work with other high achievers. They know that even a few low achievers will consume most of the attention of an organization and suck the life out of it. Set up performance improvement programs for your low achievers, and hold them accountable for following-through. If performance does not improve, help them transition out of your organization.

Give respect. Empower your employees who have proven to you that they have good judgment by allowing them to make recommendations on how to handle difficult situations.

Be kid-friendly. Pair up with an area day-care provider to make day-care available to your employees at a discount. Having children close by is not only a great comfort to parents but saves the enormous “late-fees” they have to pay if they get caught in traffic or have to work late to make or answer that last phone call before leaving for the day.

Make transportation green and cheap. Transit passes offered in your organization are a great way to participate in making your organization environmentally sensitive. Who knows? There may be governmental inducements available to you for doing that.

Promote healthy choices. You can also pair up with a neighborhood athletic club or gym, either for gift certificates or reduced membership for your employees.

How to Evaluate a Reward and Compensation Strategy

How long have you tried to make your reward and compensation strategy work? If there are cycles involved in your organization, you might want to wait to get all the way through a cycle so you can evaluate the benefits of your rewards and compensation strategy or system under the full range of common circumstances.

Did your employee rewards and compensation strategy or system, especially the rewards, achieve the results you intended? If not, try something else. Keep trying and be sure to have fun with it!

Regards,

Joe Gross

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Creating an Effective Compensation Plan for Sales Representatives

Dr. Al Lee, PhD — 2009-07-28T12:52:28-07:00

Creating an Effective Compensation Plan for Sales Representatives

An effective sales compensation plan for sales representatives is critical to the success of any go-to-market strategy. Yet the design and management of a compensation plan for sales teams is rarely easy. After all, determining how people are paid is a sensitive matter which can become increasingly complicated when reconciling the disparate needs of key stakeholders in sales, finance, HR, and marketing.

To better manage this complexity and to keep the discussions constructive, consider the four cornerstones of an effective sales compensation plan.

1. Align your compensation plan with corporate objectives

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Sales compensation is an output of the business planning process. It is defined within the context of business strategy, and directly supports the achievement of corporate objectives. However, in order to best align compensation with strategy, care must be taken to distinguish between simply being “directionally consistent” with corporate objectives, and being in “lockstep”.

To illustrate, consider a sales compensation plan that supports an aggressive growth strategy. One option in these circumstances is to use a flat commission rate; salespeople earn more if they sell more. A second option is a plan which pays higher commission rates for new customers than for repeat business, and which offers attractive bonuses for exceeding quota. While one could argue that both plans are aligned with a growth strategy, the second demonstrates this alignment to a much higher degree.

Good alignment means that each component of the sales compensation plan maps directly to a corporate objective and significantly increases the probability that it will be achieved.

2. A compensation plan is not a substitute for sales management

A well-designed sales compensation plan articulates corporate priorities for salespeople. It defines the context within which all decisions should be made, as well as the rewards for contributing to the achievement of corporate objectives.

As a result, there is a temptation to let sales compensation play a larger role in the day-to-day management of salespeople. Usually, this is in the form of rewards for good sales behaviour, such as booking appointments or passing leads, in place of actual sales results like revenue or margin.

While the judicious use of behavioural measures may be appropriate in some selling environments, relying significantly or solely on sales compensation to manage salespeople is risky at best. Sales compensation is a very compelling tool when the challenge is to focus personnel on specific goals. However, it is just that—a tool. It should never be considered as a substitute for sales management.

3. An effective compensation plan relies on careful execution

Even the most well designed compensation plan will fail if poorly executed. Good execution is achieved by first setting clear expectations and then delivering on them.

In order to set and maintain expectations, rely on comprehensive documentation that is written in layman’s terms and easily accessed. It should describe payment calculations, all related administrative policies and practices, and most importantly, the process for resolving payment errors.

To consistently deliver on these expectations, all related processes should be automated. With an abundance of feature-rich, reasonably-priced software solutions on the market, it is becoming increasingly difficult to defend the use of error-prone manual calculations or spreadsheet farms. Automation improves the overall integrity of the program and provides opportunities to re-deploy staff in value-add activities such as reporting and analysis.

Effective execution is good for sales productivity. It gives salespeople the confidence to fully engage in the selling process instead of wasting valuable time wandering through administrative back alleys.

4. Actively manage your sales compensation plan

Active management refers to the regular, ongoing analysis of a sales compensation program.

The program’s objectives, such as acquiring new customers or increasing the sale of higher-margin products, will dictate what reporting and analysis is undertaken. The focus should be on whether the plan designs are delivering the specific results that were intended.

Other analyses may include topics such as the correlation between pay and performance, the number and type of payment errors, the performance of new hires, the effectiveness of draw/guarantee programs, or a search for unintended seasonal or regional trends.

Active management of sales compensation provides a statistical, factual basis for evaluating the effectiveness of the program and for considering possible changes. Knowing whether, when, and how to implement a change will minimize contention and keep salespeople focused on overachieving.

Regards,

Greg Blysniuk

Guest Blogger Bio: Greg Blysniuk has spent his entire career in sales compensation. With experience dating back to 1991, he offers deep insights into the operational and strategic issues that are integral to effective sales compensation. A former sales compensation consultant, he has worked in a broad range of industries and is now responsible for the design and delivery of sales compensation programs at Bell Mobility, a leading wireless provider to residential and business customers across Canada.

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Managing Employee Skill Sets

Dr. Al Lee, PhD — 2009-07-24T17:26:57-07:00

Workforce Alignment Part 2: Managing Employee Skill Sets

In my last post on workforce alignment, I suggested that each part of your company should be well-informed about all aspects of the business so they can provide excellent service at any time. Perhaps you agree with this idea but aren’t sure how make it happen.
In this second post on workforce alignment, I will review the next steps for creating workforce alignment where it is lacking by many tactics, like managing employee skill sets. We’ll look at the topics of recruitment, retention, employee cross-training and company culture, and discuss how they can be changed to make your workforce more cohesive, productive and customer-friendly.

Removing Silos in the Workplace

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In my previous post, I mentioned that, due to rapid growth, some companies can develop tunnel-vision. Once the initial rush of expansion slows down, certain parts of the company may feel deeply divided from one other because no efforts towards regular collaboration have been made. This is the point where the organization has to take stock of itself and make smart decisions to maintain a cohesive group.

If there are workplace silos and neglected areas of knowledge or customer service, those weak points should be addressed. Without addressing them quickly, long-term success is jeopardized.

Review Your Employee Recruitment Tactics

As you seek out and hire new employees, focus your attention on talent that can help create the collaboration and shared ethic you seek.

The following is a list of suggestions for making your employee recruiting process a part of creating workforce alignment in your company:

Identify neglected areas. Be sure to get a cross-sectional view on this because, if it is only a top-down view, blind-spots will occur. Customer service will not be seamless. Prioritize the neglected areas.
Identify the employee skill sets that are most important for improving the neglected areas. Again, get a cross-sectional view on this to eliminate blind-spots. Prioritize the skill sets.
Assess how best to supply the needed employee skill sets. It may be from transfer within the organization, or by recruiting more workers. Perform an inventory of which employee skill sets you currently have on staff to help you make these choices.

I have an extra suggestion for discovering areas of customer service that require more attention: pretend you are a customer.

I am not suggesting that you become a “secret shopper” at your organization to find out where your service breaks down. Take a “20 question” approach. Start by asking someone who should know the answers. Ask how a type of common question would be addressed. Ask where the question would likely go first, and follow it on its hypothetical path through your organization. Assume a common level of patience on the part of the customer then consider the following issues:

How many steps does it take before the customer gets an answer, or before a sale is made?
How can we decrease those steps?
Does it mean transferring or hiring people?

Consider Employee Retention

Now that the initial headlong rush that gave birth to the organization is over, are there too many employees on staff who do the same thing (for which demand has now lessened)? If so, would the employees be open to employee training development or being coached to expand their skill sets?

If so, these folks with repetitive employee skill sets may be your workforce for the neglected skill areas discussed above. You must decide if the organization will be able to carry them through a downturn in demand, in the expectation that demand will again pick up. This may be cheaper in the long- run than recruiting later. If the employees are redundant and not coachable to move into other areas, there may be in-house alternatives or it may be time to have a discussion with them about leaving the organization.

Employee Training Development and Cross-Training

Cross-training employees can be simple and inexpensive. In our case study in an earlier post, the owner of the company had a passion for the widget the company made. Employees were recruited to that part of the organization who were effective at selling the widgets, even if they didn’t have a passion for the widgets.

In that post I suggested that, in a situation such as this, the employees who answer the phone could help with sales if they were cross-trained. The phone team could be given a price list or a brochure by the sales staff to guide them in telling customers what the widget does and how much it costs. And that these folks on the phone should also have an order form so they can take orders after they sell the widgets they just told the customer about.

Likewise, the production end of the widget business needs to know if the sales end makes a commitment for getting a certain number of widgets to a customer by a set date, especially if the sale is extremely large. Preferably this happens before the sales commitment is made, but we all know when a customer is ready to buy, the deal is made first and we worry about the details later. But if sales had an idea of what is involved in production, they may have a more accurate picture of what is required to ramp up production to fill an unusually large order. Don’t tick off the people who can place large orders by over-promising and under-delivering.

Workplace Alignment in Your Employee Culture

Once you’re hiring smarter and cross-training your employees, you need to ask some other key questions about your company culture:

Does our organization have an identity?
Does it have a niche in the market?
Is this identity or niche broad enough to keep it responsive to the market if the market changes?
Does it have a way of doing things that does not change, no matter what the customers want?

One of the most poignant examples of failing to develop a company culture based upon being responsive is a company that used the phrase, “We don’t have to care. We’re (name of company).” They were so notorious for this attitude that some customers once put that on bumper-stickers and customarily put them on cars and trucks owned by that company. The end of that government-protected monopoly created entirely new industries, not just new competitors.

Another famous quote that came from a poor organizational culture was, “Customers can have any color they want, as long as it is black.” That one opened a lot of doors to a new company called General Motors. Some say General Motors closed those doors when they insisted the market really wanted SUVs and big trucks instead of fuel efficiency.

Workplace Mission Statements Must Reach All of Your Employees

Assessing organizational culture is often considered substantial in gauging the amount of change an organization can tolerate before it starts to resist change efforts. Employee recruitment, retention, and cross-training efforts can affect workplace culture, and workplace culture can affect recruitment, retention, and cross- training efforts. Alignment is more effectively reached when organizational efforts are made in all these areas.

There may be other areas I haven’t mentioned that are also important for you to consider in your organization. If certain parts of the organization do not support other parts, find out why and work to change that dynamic by altering the way they operate or perceive the customer.

If the organization’s mission is not clear to all employees, create a mission statement. Again, do this in a cross-sectional way so that all of the organization can see the logic in it from multiple perspectives. For our case study organization, a mission statement in its simplest form might be, “Sell widgets.”

Vision Statements Must Explain How

A vision statement will guide employees in how they fulfill the mission. For our case study, the organization’s mission might be to, “Facilitate the selling of widgets by acting as each customer’s account representative or concierge who escorts them through the sales process.” Clearly, the way these corporate mission statements are written will likely impact staffing and other organizational choices. That is how the statements facilitate workforce alignment. They are not necessary if all staff know what the company mission and vision are without having anything in writing.

Remind Your Employees: The Rewards of Workforce Alignment

I know I have posed many questions in this article without answering them all. My hope is that in answering them for your organization you will uncover the answers for how to align your own workforce. Since each organization is different, there are no cookie-cutter answers to solve each company’s unique needs. Instead, I have attempted to provide you with possible ideas or solutions to help.

In your struggles to achieve workforce alignment, remind your employees that the pay-off to them will be higher profits - assuming you pass along the higher profits to them in some way, of course. If you do not reward your employees in this or a similar fashion, I will certainly address that in a future blog!

Regards,

Joe Gross

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FLSA - Exempt Employee Guidelines

Dr. Al Lee, PhD — 2009-07-23T09:25:52-07:00

Guidelines for Managing Exempt-Status Employees

In the world of HR, one area that has produced a significant quantity of writing, thought, and opinion is that of employee exemptions within the Fair Labor Standards Act (FLSA). This area, however, is not particularly flashy or trendy. In fact, it is the boring material that HR professionals must learn and internalize in order to add value to their organizations. But, while not flashy, this knowledge area is one where millions of dollars can be saved by sound HR practices.
There are different types of employee exemptions that we should recognize before we dive into the more useful real-life examples. Those employee exemptions include executive, professional, and administrative (among others). Since you can Google “FLSA exemptions” and find clinical definitions, we won’t address them much here. To me, it is more critical to know how to properly judge who should be exempt and non-exempt from overtime and how to manage their work.

Exempt Employee Guidelines: Review and Update Job Descriptions

While I am not the biggest fan of job descriptions as they can serve to limit the flexibility of a given position, a thoughtful examination of each position and whether the duties are exempt or non-exempt should be a requirement of every employer. The question an HR professional or business leader should ask is: “What will this person actually do?” Then, it is a requirement to constantly assess: “What does this person actually do?” It is critical to understand the difference.

Real-Life Example of an Exempt vs. Non-Exempt Issue

I am familiar with a case where the employee was clearly exempt in her job duties, but she, for some reason, thought she was non-exempt. After leaving the company, the ex-employee filed a claim asking for overtime pay she felt she deserved. The details of the case could fill a book but I will focus on the HR management side of the case.

The employee enjoyed performing some of the non-exempt work elements of her job to the point of interfering with her effectiveness in her job. Interestingly, the claim she filed centered on her interpretation that these non-exempt work elements actually changed her status. In my mind, it was akin to a human resources manager who copies and files so much that they feel they are owed overtime. Could that self-direction actually re-define whether the employee was exempt or not? It seems the answer is yes.

The manager in this case was convinced that the claim was without merit because the employee was disobeying what he specifically demanded – stop all of the non-exempt work that is distracting from the higher-level work. My job, in this case, was to advise him that this viewpoint was not enough in the eyes of the Fair Labor Standards Act.

Be Sure to Prevent Non-Exempt Work

How could this be the case? Well, the Fair Labor Standards Act, and the governmental employees who administer it, only look at what the employee is actually doing. If you hire a mechanical engineer who has a bachelor’s degree in Mechanical Engineering from MIT but all they do is photocopy and make coffee, they are a non-exempt employee – even if this is in disagreement with what their manager expects from them. Getting an employee to actually comply with their assigned work duties is an issue of managing the employee.

If an employee actively disobeys the directives of their management, it is a reason for performance management, up to disciplinary action. This seems to be a difficult pill for many managers to swallow. This, however, is exactly how a company can avoid FLSA claims in this area. In the example above, the state’s response to the company claim that the employee was told to stop the non-exempt work duties revolved around the manager’s handling of the employee. In other words, if the employee was actively and continuously disobeying your directives and you did not discipline her, how serious were you about the actual job duties being performed in the first place?

In the end, the company was very fortunate to prevail because the totality of non-exempt work tasks amounted to a minority of her work time. The fact that the manager told her to stop those tasks didn’t help our case in the least.

A Smart Approach to Exempt vs. Non-Exempt Work

My advice is to classify each position carefully when it is created and then periodically audit whether each employee is actually performing assigned tasks listed on the position description. It is much more defensible, if there is need to defend, if the company shows active management of employees and their duties than if, over time, the actual duties stray dramatically from exempt work duties.

To many, this is dry subject matter. To me, however, this is where HR professionals can make a huge impact on the fortunes of their company. How much top-line revenue does it take to cover the bottom-line cost of a major FLSA claim? My advice is to never lose sight of that when providing advice to your business partners on this topic area. They will thank you for thinking that way – like a business partner.

Regards,

Andrew Shelton

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Pay and Compensation Data Case Studies

Dr. Al Lee, PhD — 2009-07-19T04:50:00-07:00

Real-Life Stories: PayScale Fills Compensation Data Gaps

By Staff Writer

Are you bumping up against stopping points in your salary benchmarking projects? You’re not alone. Everyday PayScale hears from companies that are looking to fill gaps in their pay and compensation data that traditional compensation surveys are either too costly or are simply not able to fill.

Below we’ve listed three examples where PayScale was able to help a customer out of a tricky spot. These examples were reported by the PayScale’s director of customer service and education, Stacey Carroll, M.B.A., SPHR.

Real-Life Examples of Filling Compensation Data Gaps

1. Compensation data outside of a major metropolitan area

Company Location: Upstate Maine
Company Size: Medium-sized
Issue: Collecting compensation data for a rural area

Story: Maine is a predominantly rural state. Even its biggest town, Portland, is small when compared with medium-sized cities in more populated states. A particular company in rural Maine sought compensation data from a traditional survey source and found that the data they received was weighted toward major metropolitan areas located hundreds of miles away.

PayScale helped this customer get compensation data for their location that reflected the differences in pay and not just the difference in cost of living or labor for their specific area. Because pay in more rural areas can be dramatically different from pay in major metro areas, but not for all positions, getting data specific to where the business operates is key.

2. Compensation data for a wider variety of job positions

Company Location: Ohio
Compapny Size: Large-sized, regional medical center
Issue: Matching a unique, specific, hard-to-find position

Story: PayScale helped a client find compensation data for a hospitalist – a physician who treats patients in a hospital setting. This organization was interested in learning more about PayScale products because they had purchased two to three major surveys, including an industry-specific compensation survey, but they were having trouble getting data for all of the titles they needed. The hospitalist position, in particular, was important to them because they were doing a lot of hiring in this area.

PayScale product specialists were able to produce a compensation report for this customer and they purchased on the spot. They were glad to find a tool that was able to provide data on more of their titles.

Other examples of hard-to-match positions PayScale has helped customers find data for include: a category manager for a large, national retail chain; an online campaign manager for a small technology company in Canada; and a gunsmith for a medium-sized manufacturing company based in Tennessee.

Because of the way PayScale collects data, we have a broader data set than most traditional compensation surveys. Often, traditional salary surveys cash in on titles that have the most data collected for them and may leave out the positions that don’t have as much data. Because of the way PayScale collects and reports on data we can keep less commonly reported positions available in our database and sometimes, even if it’s a national search, you can find a very specific title and get good data.

3. Compensation data matches for unique skills, education or experience

Company Location: Chicago, IL
Company Size: Small government contractor
Issue: Finding data for an engineering design manager with a Ph.D. in physics

Story: An organization needed data for an engineering design manager position. That’s a very common title. The problem was that, because of the nature of this business, they required an employee who had a Ph.D. in physics, which is not a natural combination with that type of job. So, traditional sources wouldn’t be able to account for that unique educational background.

PayScale produced a report for this job position that was able to account for both “What does the job do?” (engineering design management) and “What kind of education does the position require?” (a Ph.D. in physics). PayScale found compensation data for the position because of the depth of our database and the variety of information it offers. PayScale allows you to identify skills and education and even degrees required for your unique job position.

Do you have a position that you cannot find compensation data for? Give PayScale a call and let us help. We welcome the challenge and the opportunity to serve you.

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Compensation Strategies for a Bad Economy

Dr. Al Lee, PhD — 2009-07-16T15:43:36-07:00

Pay for Performance: Compensation Strategies for Recessionary Times

By Staff Writer

Many companies will have modified their compensation and benefit plans during this economic recession in an effort to save money. They need to minimize costs now and, hopefully, get set to recover from the recession faster than their competitors.

You may have already reduced merit increases or even enacted a pay freeze. What are the trade-offs of cutting or freezing pay? Would an across the board pay-cut make sense or would it hurt certain key performers too much?

Let’s take a look at how the economic crisis has impacted compensation, and how you can maintain a pay-for-performance culture in recessionary times.

How Has the Recession Affected Compensation and Merit Increases?

According to their 2009-2010 survey, WorldatWork, a compensation professionals’ association, found that of the 1,000 U.S. companies they surveyed, employers actually gave a lower amount for pay increases in 2009 than they expected to. Instead of their planned pay-raises of 3.9 percent, they actually gave merit increases of about 2.1 percent.

Considering that inflation was virtually zero in 2009, an average merit increase of 2.1 percent is still not insignificant, and it means that some people were given a decent bump in pay, despite the economic crisis. Hopefully, those people were the companies’ top performers. As Al Lee, Ph.D., Director of Quantitative Analysis at PayScale.com said, “Why do you give employees a raise? Because you want to keep them. It’s still important to recognize when employees’ growing abilities means they are worth more in the market, or when their high performance means they are worth more to your company.”

Is an Across-the-Board Merit Pay-Cut Wise?

Dr. Lee brought up a key point to keep in mind as you look to trim the fat on merit increases. Pay special attention to your newer hires who are learning and growing professionally at a rapid rate. It’s important to compensate them appropriately for their greater and greater contributions.

For example, a software developer will gain a tremendous amount of knowledge and new abilities in their second year on the job, compared to a veteran developer in their 20th year. This sharply increased employee value is typically rewarded with, on average, 7 percent per year merit pay increases for software developers in their first five years on the job, according to Lee.

If, instead, this young developer gets only an increase of 2.1 or even 0 percent (salary freeze) at the end of their second year, they will significantly lag the market in pay before too long. If this employee is a top performer, the company with shrinking merit pay risks losing their talented employee to another company that is still practicing a compensation strategy that rewards increased experience and knowledge.

Beware the Pay Gap

Keep in mind, merit pay increases do not address the growing compensation inequity between top performers when one was paid below their worth at the time of hire. If Employee A was hired at a position’s minimum annual salary of $60,000 and Employee B at $66,000 and they both get a 5.3 percent merit increase every year, the gross earning gap between the two will be $33,000 after five years and $77,000 after 10 years. If Employee A is truly a top performer, it’s important to compensate them at or ahead of the market if you want to hold on to them – even in an economic recession.

A Forward-Thinking Approach to Compensation Strategies

Instead of merit increases, now may be a good time for your company to adopt a target base pay structure that keeps top performers on board and motivated for the company’s ramp up once the recession eases.

The three steps for implementation of this pay for performance compensation strategy are:

1. Target the salary that is warranted by the employee’s competency, performance, and potential. "If you differentiate pay, you need to do a good job of assessing performance," says Larry Reissman, New England practice leader for The Hay Group. "That means everyone should know who's doing the job, who's outstanding and who's not doing the job. Don't micromanage shades of gray; get managers to really think about who it is in the company who deserves more--and who doesn't." Your company’s managers need to be trained on how to effectively perform employee evaluations in these areas.

2. Determine the gap between the current salary and target pay. Use solid compensation tools, such as ones found on PayScale.com, to determine the target pay for each employee based on their competency, performance and potential as assessed by their manager.

3. Make adjustments in salary based on gap analysis and budget constraints. When the target base pay system is implemented, you and the company’s senior management need to closely monitor the overall effectiveness of the compensation strategy and make salary adjustments based on the annual gap analyses and budget constraints.

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HR Leadership Questions

Dr. Al Lee, PhD — 2009-07-13T14:14:07-07:00

Q&A Session – HR Leadership in Difficult Times: Implementing RIFs, Reorganizations and Freezes

Questions and Answers from Our HR Leadership Webinar

The following is a transcript of the question and answer session that followed PayScale’s webinar, HR Leadership in Difficult Times: Implementing RIFs, Reorganizations and Freezes. The topics covered in these questions include voluntary staff reductions, pay freezes and overtime pay. Answers are provided by PayScale’s director of customer service and education, Stacey Carroll, M.B.A., SPHR.

Q: Can you ask for volunteers who want to be laid off?

A: Yes, but check with a lawyer first. Even if you ask for lay-off volunteers, if the people who volunteer disproportionately represent a protected class then you may still be in legal hot water. In addition, you must remember that if you ask for lay-off volunteers the folks who are highly marketable, e.g. high performers, may be the ones who take you up on this, and they may not be the ones that you want to lay-off. You most likely want to be more in control of who stays and who goes for legal and performance reasons.

Q: Can you talk about smart staffing?

A: One of the main reasons why HR is important to an organization is that HR takes responsibility for staffing the organization appropriately. I believe it is the most important and the most difficult task that HR does. So, when we talk about coming out of this recession and kicking off hiring again, take the opportunity to get the right person in the right spot. There are more qualified people looking for work right now. Take this opportunity to pick some of them up. And remember, don’t wait for tough economic times to lay-off poor performers. Poor performers should be managed through their performance problems. Don’t wait for layoffs to deal with these employees.

Q: Can there be wage and hour issues with hybrid positions that result from reducing staff or re-organizing?

A: Yes, definitely. Position descriptions should be the basis of decision making about who is exempt or non-exempt. If you change the essential functions of the position, it needs to be re-evaluated for eligibility for overtime. Also, be really careful with reduced schedules and thus reduced pay for exempt employees. Make sure to check with counsel.

Q: What if there is a conflict between HR policy and an employee offer letter?

A: This is a great question for a lawyer but generally if something is in writing to the employee, that’s what they are entitled to. If there is a conflict between the employee offer and the HR policy, usually the more generous offer applies. It’s a good idea to have all of your employee offer letters come from HR, or at least be reviewed by HR before they are sent.

Q: Our company has already had a reduction in force. Do you have any suggestions for keeping employee morale high? Communicating who has been RIF-ed?

A: Keep your employees focused on business objectives and how RIFS help. Many companies are very realistic about numbers and outcomes, celebrate successes and keep their workforce informed. It is difficult to decide on how to release names - some just do it by position. There’s a fine line to walk regarding how to keep employees focused and avoid gossip rooms. It is best to focus on the job position and let people figure out the exact who.

Q: How do you lower salary for over-market costs and keep employee morale high in the company?

A: If the company has a clear HR policy on this and a communication strategy then it’s easier to deal with these situations. In this situation, it’s not personal, it’s policy. People should know how pay decisions are made, and that the company has an HR policy for surveying market data to make its decisions. People are not going to be happy about losing money but if things are well documented, current data is used, and it’s not personal, you’re most likely to reduce problems.

Q: Do you have any information regarding what companies usually do: broad versus piece-meal pay freezes?

A: I don’t have any data but what we have seen more often is across-the-board pay freezes. I’m not a big fan of “across-the-board” anything, as you’ve probably heard me say in other webinars or blog posts. It’s better to make decisions about pay using market data and internal skills and employee performance evaluations. You don’t want to get top performers or underpaid employees mixed up with those that aren’t. It’s better to be strategic rather than across-the-board. But, if there is no budget allocated, then you have no choice, just make sure when there is a sliver of a budget that it’s spent where it will have the biggest impact.

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More from PayScale:
Are you interesting in learning more about reductions in force, salary freezes and red circling? You may be interested in the following posts:

Compensation Plans for Part-Time Staff

Dr. Al Lee, PhD — 2009-07-10T11:22:04-07:00

Employee Retention: Compensation Plans for Part-Time Staff

By Staff Writer

Do you find that your part-time staff and hourly workers are harder to motivate and retain? Maybe you could improve your part-time employee retention by changing how you compensate them.

Employee compensation and pay plans are often the same for part-time staff versus full-time staff. But, there is one difference in compensation planning that can add up quickly: per diem.

What is per diem income? Per diem is additional income that employees receive on a daily basis based upon some compensable factor. In the case of part-time staff, that compensable factor is lacking benefits.

It is estimated that full benefits make up from15-40% of payroll cost for a fully-benefited employee. If you could give just 10% of that amount to a part-time employee on an hourly basis, you would still save money compared to giving full benefits; but you still give them an added reward.

Why It Is Worthwhile to Reward Part-Time Employees

Part-time employees often have some extra challenges when it comes to staying motivated in their work. Barriers to success include:

not earning benefits for themselves, their spouse or dependents.
often dealing with complex, inconsistent scheduling.
less time with their colleagues and bosses than full-time workers.
a general feeling that they aren’t as much “in-the-know” about what is going on with the company and their department.

All these factors can lead to a higher turnover rate which, in turn, can cost you money. When an employee leaves, you then must spend precious resources to recruit new talent, interview several people and then train your new hire – plus, you experience slower productivity until your new employee is up to speed.

Wouldn’t it be easier to simply keep your current part-time employees loyal to your company?

An Example of Paying Part-Time Workers More per Hour

When looking at a salaried worker versus an hourly worker’s income for the same position, you will often see that the hourly rate for a fully-benefited, salaried employee is less than the hourly rate for a part-time employee without benefits. This is evidence that companies know to make up for missing benefits, at least somewhat, with increased hourly pay.

Let’s take an example from PayScale’s compensation database. We’ll research the annual median salary for a secretary with 5-9 years of experience on both an hourly and a salaried basis.

According to an hourly rate chart, a secretary would make $12.03 per hour. If you multiply that number by 2080 (the typical number of hours worked by a full time employee in a calendar year) then you get a yearly salary of $25,022.

Median Hourly Rate by Years Experience - Job: Secretary, (but not Legal, Medical, or Executive) (United States)

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If you look at a chart for a salaried secretary with the same number of years of experience, the median salary is $24,468 per year.

Median Salary by Years Experience - Job: Secretary, (but not Legal, Medical, or Executive) (United States)

Compare your salary: Get a free Salary Report

The difference between the median annual salary at an hourly rate verses a salaried rate is about $554 a year. While not a large amount, it does represent that some companies may be paying higher hourly rates for hourly or part-time workers. As previously stated, the bump in pay for an hourly, part-time worker is typically not enough to make up for the lacking benefits, just offer a bit more compensation for retention and motivation.

How to Calculate a Per Diem Increase in an Hourly Rate

To apply this information about increased hourly pay, you need to know how much you want to pay as a per diem over and above the hourly rate for part-time workers. This amount will vary on many factors. These factors can include:

the value of the companies benefits package (if the part-time employee is not eligible).
the degree of difficulty in recruiting or retaining part-time workers in this job category.

Let’s look at an example of determining per diem pay. If your part-time employees are not eligible for benefits, and your benefits package is typically 25% of your payroll costs, then a part time employee who works in a position that typically pays $15 an hour would cost your organization $18.75. So, the value of the per diem could be as high as $3.75 an hour and your company is still cost neutral. However, if your goal is to save money by hiring part-time workers, or if you typically do not have difficulty hiring for this role on a part-time basis, then you may want to consider a lower per diem.

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Find Reduction in Force Guidelines

Different Types of Motivation Theories

Dr. Al Lee, PhD — 2009-07-08T09:33:07-07:00

Employee Motivation in the Workplace: Different Types of Motivation Theories
Part 3

Does money motivate people effectively? In part 1 of this series on HR theories of motivation, we answered that question. No.

Well, if not money, how do we create an environment where people are motivated?
Check part 2. The key: create productive work relationships.

But people are different; so how do we build productive work relationships with all types of people? In this last installment on workplace motivation, we’ll cover some of the main theories for how various people motivate themselves.

Of the many different types of motivation theories, I would like to highlight three that are of particular use:

David Merrill and Roger Reid’s work on the four personal styles
David McClelland’s theory of motivation involving three basic needs: achievement, power, and affiliation
Fredrick Herzberg’s work on money as a demotivator at work

There are many more good motivation theories – Maslow, Myers-Briggs, etc. – but I’ve found these three to be most useful in managing groups.

The Power of Intrinsic Motivation

The starting point for all three different types of motivation theories is that they are built on the concept that intrinsic motivation is much stronger than extrinsic. This bedrock fundamental is perhaps the most powerful concept to apply in your work; see my post on top employee motivators for a more thorough review of incentive plans.

Briefly, it means that to get great results, you need people to be intrinsically interested in their work. Your efforts to control, set expectations, and reward people are all methods of extrinsic motivation, which helps explain why managers are often disappointed with employee results when relying on those motivation tools.

So, to help you get better results, here are three methods of intrinsic motivation that all build on that intrinsic bedrock.

Employee Motivation Theory 1: Personal Styles

In their theory on motivating different types of people, Merrill and Reid identify four personal styles:

Style	Major Drivers	Prefers to
Driver	Action Oriented: Focus is on present time frame, direct action. Minimum concern for caution in relationships. Tends to reject inaction.	Control, Tell
Expressive	Intuition Oriented: Focus is on involving others, future time frame. Minimum concern for routine. Tends to reject isolation.	Emote, Tell
Amiable	Relationship Oriented: Focus is on relating, supporting; present time frame. Minimum concern for affecting change. Tends to reject conflict.	Emote, Ask
Analytical	Thinking Oriented: Focus is on cautious action, “getting it right”, historical time frame, cautious action. Minimum concern for relationships. Tends to reject being wrong.	Control, Ask

* Information adapted from their book, Personal Styles & Effective Performance.

Application: To help people feel connected intrinsically with their work, structure their work so these personal style needs are met.

Examples:

Style	More Effective	Less Effective
Driver	• When you want to make a point, ask, as in, “What do you think of this idea?” • Get things done quickly that are going to be effective, even if they aren’t perfected.	• When you want to make a point, lecturing them, as in, “Here’s how it is." • Spending time in reflection and consideration, in an attempt to perfect.
Expressive	• Make work a party while you’re getting stuff done; breathe life into work. • Make use of their good gut instincts.	• Spend 3 hours in a room sequentially creating a step-by-step checklist. • Don’t trust them until they can “prove it.”
Amiable	• Include effectively when a group tackles a project, and not just the “amiable” coworker; they’ll feels others’ “pain” if their input is excluded. • Act trustworthy, and trust them.	• Try to get results through intimidation and application of stress. • Divide and conquer; use conflict – of ideas, of emotions – to try to get best results
Analytical	• Give them space to get grounded – to get it “right” – before they proceed to action. • Assign complex problems where you need absolute confidence in the details.	• Use conflict to try to get best results. • Push, push, push, especially if towards an outcome that favors your self-interest. • Ask them to “wing it”, to bet the company on their “hunch.”

Employee Motivation Theory 2: McClelland’s Theory of Motivation

Style	More Effective	Less Effective
Achievement nAch	Seek: To excel; may avoid both low- and high-risks as a result, in order to pursue meaningful success.	Work alone or with other high achievers
Power nPow	Seek: Either personal or institutional power. Either way they want to direct others, but the institutional power is in service to the institution’s success, so those with that focus tend to make better managers.	Direct others
Affiliation nAff	Seek: Harmonious work relationships, to accept, to be accepted, and to include others. They can be more comfortable conforming to group norms.	Work in settings with significant personal interaction

Application: To help people connect intrinsically with their work, structure their work so their major need is met. The “Power” need correlates to the “Driver” above; “Affiliation” to the “Amiable” above.

What’s new here is the “Achievement” need. It can cut across all the Merrill and Reid personal motivation styles. The key here is to surround high achievers with other high achievers. To be their best, they need to know they’re on a team capable of pulling off a worthwhile, attainable mission.

Employee Motivation Theory 3: Money as a De-Motivator

Frederick Herzberg was a clinical psychologist and pioneer of “job enrichment.” He proposed the Motivation-Hygiene Theory, also known as the two factor theory of job satisfaction. According to his theory, people are influenced by two sets of factors:

Motivator Factors	Hygiene Factors
• Work itself • Responsibility • Promotion • Growth • Achievement • Recognition	• Pay and benefits • Company policy and administration • Relationships with co-workers • Physical environment • Supervision • Status • Job security • Salary

Application: To create an environment where people motivate themselves, you must adequately take care of the hygiene factors. If you don’t, demotivated employees will likely result. The key here is that “adequate” is enough; you don’t need an outstanding physical environment because it won’t increase employee motivation noticeably. In sum, the “hygiene factors” have a downside if not done well, but not much of an upside potential impact on employees, even if they’re done very well.

Then, allow the “motivator factors” to work for you – these are the factors that have the real upside and can make a strong contribution to your results. And note, they are almost all methods of intrinsic motivation.

The one “extrinsic” item on the list, recognition, can be made intrinsic if it’s in the form of encouragement, rather than as a reward. For example, in Soul of a New Machine, Tracey Kidder writes that the “reward” for successful hi tech engineers is…the chance to tackle the next cool project! “Congratulations on the great results. I’m not at all surprised. Now let’s figure out how you can make that kind of an impact again,” is more powerful than “Atta boy/girl” in whatever form, whether bonus, plaque, employee of the month award, etc.

A Summary of Employee Motivation Theories

Employee motivation is simple.

You can’t motivate people.
You can provide an environment where people motivate themselves.
Apply what you know about people’s styles to strengthen their individual work “environment.”
And along the way, focus, focus, focus on intrinsic motivation factors.
Which means: Build strong work relationships and expand those relationships so that more is possible.

These different types of motivation theories are simple in concept. What makes it hard is that all of the above mean building a healthy, vibrant work environment, and that work is as vulnerable as building any other effective relationship in your life.

Hopefully, in these posts on employee motivation, we’ve given you some signposts to help guide the way.

As always, we’re curious about your thoughts!

Regards,

Stuart Jennings

Is there an HR management topic you would like to see covered on Compensation Today? Write us at comptoday@payscale.com.

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Read more about employee motivation and retention in this blog post on Employee Retention Tips for Managers.

Workforce Alignment: Employees Working Together

Bridget Quigg — 2009-07-04T09:57:12-07:00

Workforce Alignment Part 1: Get Employees Working Together

Have you ever wondered why people working at the same organization sometimes seem to be working against each other? For instance, the C-suite does not know the issues confronting line workers, marketing is in a different world than sales, and no one talks to the technicians. In fact, this seems to be the norm more often than not.

The process of getting everyone in communication and doing their different jobs for the good of the whole is called workforce alignment.

How Workforce Alignment Pays Dividends

Perhaps you’ve had the pleasure of being a customer of an organization that had achieved workforce alignment. This sort of company runs like a well-oiled machine. Everyone knows their job, and if another department of the company can fill your need better than the department you’re in, the clerk readily tells you — or even walks you over to a clerk in the proper department. These workers know each other’s jobs well enough that it helps them all serve customers better than if they just stick to their own world - no jealousy or selfishness. The customer is clearly king.

It is a joy to work in a place like that – even magical. Those of us who have will never forget it. Unfortunately, some of us risk never experiencing that magic. But, there are ways to make it happen.

Work Magic in Your Organization

Some of you reading this blog may be business owners, others may be managers. Some of you may be looking for ideas on how to create workforce alignment in your own workplace. By the end of this two part series on workforce alignment, I hope you will all have some new ideas or techniques to create a cohesive workforce at your company.

Silo Mentality in the Workplace: Will It Ever End?

Even in a small organization, employees may compartmentalize themselves, or the employer may do that intentionally or unintentionally. Rarely does anyone want to compartmentalize, but here is a classic example of how it can happen:

The founder or owner of a company wants to pursue what brought the organization into being. Let’s assume that is selling widgets. (What else ever gets sold in a case study, right?)
He surrounds himself with people who only concentrate on and support selling widgets and does not do administrative tasks.
Staff has to be hired to do administrative and other tasks, such as marketing, word processing and answering phones. These employees do not sell.
If this owner is successful, more people have to be hired to sell widgets.
If business is successful, more people have to be hired for administrative and other tasks.

Sounds good, right? Shouldn’t we all strive to be that growing organization?

An Organization That Competes Against Itself - Unthinkable!

While the above scenario sounds appealing because the company seems successful, the way the departments are separated can plant the seeds for real struggle down the line. And, once these patterns are established, people are often slow to acknowledge a problem exists or volunteer to change it.
In general, does anyone in management acknowledge when their organization is dysfunctional? If they do, are they effective in delivering the message that some adjustments to it need to be made? Often times it is organizational suicide to do anything but go along with the way it is.

Remember the Customer

As an organization grows, its focus on the customer can get lost. Is everything in the organization done to facilitate, or expedite, getting widgets to customers? Or has perpetuating the organization become the focus?

When considering if an organization should make an expansion, hire staff, buy or sell property, or change structure, a good question to ask first is, “What purpose does this serve in accommodating the customer?”

I suggest there should be a link to the customer in contemplating any action. That question provides a guide to growing an organization and to assessing if an organization is still on target in what it does. Take a look at the following questions and see how your organization would answer them:

If a customer calls with a billing question, can the founder or owner of the organization help them?
If a customer calls the main phone number and asks how much a widget costs, can the person who answers the call give them the basic pricing structure?

Haven’t we all been impressed by organizations where that happens? We realize they stand out from others because of this ability. And we’ve all been frustrated with the run-around we get when we, as customers, make the mistake of calling the “wrong part” of the organizations for help. I think to customers there should never be a “wrong part” of the organization.

Removing Silos in the Workplace or Tilting at Windmills?

As I ponder these troubles with separate departments, something bubbles to mind from high school literature class about Don Quixote and his hopeless and pointless obsessions. Somewhere in that memory are images of windmills and his attempts to joust (tilt) with them. Take a look at the following questions and use them as a measure of whether your organization is putting wasted effort into supporting silos in the workplace:

Have aspects of your organization taken on such a life of their own that they have become difficult to change?
Are they rigid in the protecting themselves against other parts of the organization? If so, we can consider them as silos - narrow, rigid, resisting penetration from the outside.
Do the silos communicate with each other? If they do, is it only through formal structures? They might limit their communication to that path only, if they truly do not accept or see the reason to interact.
Is it genuine communication if it has to be enforced this way? What will make them communicate better? Do I hear you say, “Focus on the customer”? I hope so.

If you know all of these things about your organization already but it feels like tilting at windmills is a more acceptable option than improving communication, working for a new company might be worth considering. Others would love to have someone like you with a true customer focus!

Recognizing and Fixing Your Workforce Alignment Weak Points

Sometimes organizations grow like Jack’s beanstalk- overnight! (That’s preschool literature, for those of you keeping score). Due to this growth, they may end up developing tunnel-vision. At some point, that headlong rush slows down. That is the point where the organization has to take stock of itself (wordplay, get it?). Let’s say that is what happened to the organization in our case study.

It now likely has rigid silos and neglected areas. The question is: Does it realize that this approach is unsustainable if the organization is to thrive long-term?

In my next post on workforce alignment, I will review the next steps for creating workforce alignment where it is lacking. We’ll cover the topics of recruitment, retention, cross- training and company culture, and discuss how they can be changed to make your workforce more cohesive, productive and customer-friendly.

Regards,

Joe Gross

Do you have a topic you would like Compensation Today to cover? Write us at comptoday@payscale.com.

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