It’s human nature to look for simple solutions to perplexing problems.  Simple avoids confusion, keeps you “on message” and helps (you think) create greater employee awareness and appreciation of programs and policies.   However, when you’re dealing with the diversity and complexity of international compensation it’s just not that easy – nor should it be.   For those seeking the simple life it can be difficult to understand and accept that each country operates in a different environment from the next. 

There is no cookie cutter out there.

Perhaps because of its long history of isolationist tendencies, or perhaps it’s due to a bit of Yankee arrogance, but U.S. managers tend to struggle with the challenge of this “no, we’re not all the same” concept more than many other players on the global scene.

For the most part U.S. managers don’t want to hear that pay levels in Finland, or Argentina or Tunisia are different from the U.S. – even for identical jobs.  Instead, they would rather treat everyone the same, call it globalization and with a pat on their shoulder consider themselves a one-world player.  But those who push such an agenda of simplicity foment and spread a misleading distortion of the facts, a twisted sense of reality that they’ll find very costly to implement, and its inevitable results will more than likely irritate key talent within their workforce.

Consider the senior manager who simply wants to convert a foreign national’s salary into U.S. dollars – based on a concern with what they call “internal equity”?  The assumption is that everyone pays approximately the same for an “XYZ Manager” – or should.

“We pay $60,000 for the job; what’s that in Euros”?  Or worse . . . .

“When we convert our UK employee ‘s pay to dollars the pay is less than their U.S. counterpart.  We have to do something.”

No, no, no.

Other considerations:

• If simple conversion was a viable approach, why don’t we see such formulae prominently displayed by highly reputable salary survey providers?  Why are all figures reported in local currency?

• Local national employees will be skeptical of the simplistic approach, as in their mind too many local realities would be ignored in favor of what is perceived as Company standardization for the sake of administrative ease.  And that somehow they’re saving money at the employee’s expense.

• Lacking a strong correlation between country pay levels you will either needlessly increase your compensation costs, or under-value your employee talent and risk disengagement – or worse.

I once developed a formulaic approach that explained to a COO why he could not (should not) establish internal equity between the U.S .and the UK by simply converting GBP into USD.   I factored in a host of elements, including local taxation, competitive pay levels, incentive practices, cost of living, required social charges, benefit costs, etc. to make my case.   My point was that a simple conversion would be a distortion of the economic realities that drive pay levels in both countries.

Sad to say, but the explanation was ignored and the COO, though he acknowledged the logic of my argument, continued to prefer a simple conversion to establish relative values in his own mind.  So every time the conversion issue arose we had to rehash the myriad differences between countries, in order to remind decision-makers that apples are not oranges.  That there is no universal fruit.

To operate successfully on a global basis management needs to understand, to truly believe that each country operates like a separate and sovereign national entity, with distinct economies, taxes, competitiveness, employment laws, culture, statutory benefit requirements, etc. that make a 1:1 comparison with any other country a distortion that will cause you to either over spend or under spend your reward dollars.  Either result should be avoided.

Picture the scene;  you’ve just completed a presentation to senior management, complete with analysis and recommendations for next year’s compensation program.  Now you stand ready for the question and answer session.  Now is the time to defend your proposals.

With a carefully blank expression on his face your COO poses a single question . . . why does it cost so much?

Justification Or Excuse?

But you’re prepared.   You’ve anticipated the question.   You know that properly answering this “why” question is your once-a-year opportunity to make your mark, show off your CCP designation and help direct the reward programs for your organization.

So chances are you won’t respond with, “because that’s what everyone else is doing.”  Uttering that lame comment would suck the air right out of the room – and likely your career with it.   So you won’t say that.  However,  just between us, would that actually be the truth of it?  Are your recommendations based on the unique status of your own organization’s external competitiveness, internal equity, overriding Compensation strategy and financial affordability, or have you simply parroted what the Compensation surveys report that everyone else is supposedly doing?   Have you pushed the EASY button and followed the all-powerful lure of “common practice?”

Beneath the COO’s simple question your senior leadership is really asking whether your proposals set a course to  simply follow the pack, or do they lead toward solutions crafted for your organization’s own needs?  Follow the crowd or strike out your own path?

Are your recommendations for the company’s compensation programs a compilation of “everyone else is doing it” rationale, or are those proposals based on what you feel is necessary for your own organization – regardless of the “average?”

Are Decisions Being Made For You?

Is your view of presenting competitive programs a reaction to the behavior of others, or because certain tactics also make sense for you as well?

• Raising Salary Ranges: Surveys will report the projected average increase in salary range midpoints for next year.  But how does that figure relate to the competitiveness of your own situation?  Do your ranges need a similar adjustment?  What would you recommend if you didn’t have a survey whispering in your ear?

• The Average Spend: When survey sources report a projected average spend for next year, is that your recommendation as well?  And when responding to the why question, what else do you have to offer as justification?  Does the survey figure make sense for you?  Can you afford it?

• Pay Decisions: Are the survey sources reliable indicators (multiple?) that you can point to as the prime reason for making individual or group pay decisions, or are external sources only one aspect of your analysis, one element of your reward program strategy?

Before you make that next reward presentation ask yourself whether your decisions and your recommendations are adding value to the organization.   Or was your analysis complete once the survey data suggested a common trend?  Gave you the answer, so-to-speak.

The easy way is to point at others, to argue the common sense of common action.  However that strategy bespeaks more of a Compensation Administrator than one who is charged with overseeing the proper design, competitiveness and effectiveness of the company’s reward programs.

To be fair, sometimes what everyone else is doing is the right action for you.   Then again, the reported “average” may be no more than an arithmetic exercise that is less a strong trend than rather a convenient manipulation of data points.  Who’s to say?

So be careful before you sign on to tactics decided upon by other companies.  That nameless average of common practice is not responsible for your organization’s compensation programs.  You are.  And you’d better have a better reason for your proposals than that’s what the survey said.

Can you recall an instance at work where you made a mistake, an error in judgment, a bad decision?  An “oh cripes!” moment that you would have liked to have had back again?  Perhaps it was a rash decision, a lapse in sound thinking, or simply poor planning that caused you to take a wrong step.  And if you were unlucky, that error was noticed far and wide.

You remember how you felt then, don’t you?  You were likely embarrassed, surprised or even angry.  Certainly you felt awkward that you had messed up and that people had noticed.  To cap it off, in that memory of yours the wrong people had taken notice.

Bet you won’t do that again!

Perhaps not, but that doesn’t mean you shouldn’t stick out your neck again.  Turtles don’t make for good leaders. And neither do ostriches.

Because when we make a mistake and learn from it, when we use a negative experience to help us prepare for the next opportunity, we grow as professionals – as individuals and as leaders.  A painful lesson will be more deeply embedded in our consciousness because of the fact that we did screw up, made a bad decision or used poor judgment.  It’s human nature for us to remember our foibles, and because of that to hopefully not repeat those circumstances where we had burned our fingers.

If we were risk adverse and played it safe throughout our career, if we avoided decisions, kept our head down, didn’t stretch ourselves, we would likely never fly high.  We would also never be noticed by our senior leaders and our career might not get us where we wanted to go.

No pain, no gain?

If your strategy is to use your mistakes as a learning experience, what lessons would you take away if you never stubbed your toe?  Chances are your ego would swell with self-importance, and what had been healthy self-confidence would morph into supreme over-confidence.  You would start reading your own press releases, and that pathway leads to a steep cliff.  It’s only a matter of distance.

I remember my father always telling me, “at least try.”  That’s good advice for managers too.

So take a calculated risk.  I’m not talking about a roll of the dice, but a decision or an action plan based on your knowledge and experience.  Use your professional judgment and put a stake in the ground.  Stand up for something and you’ll learn from the experience.  If you stumble, pick yourself up and get back into the fray.  Just don’t make the same mistake twice.

While most companies talk about the advantages of risk taking, many don’t walk the talk.  Instead, some organizations simply get rid of those who had the misfortune to make a mistake.  In such an environment there’s always someone out there waiting for you to fail (passive resistors, nay-sayers, the overly critical, etc.), or to take advantage when you stumble (enter the political animal).  All of which sends a powerful message that risks are only entertained when in fact they aren’t risks at all.

On the other hand, creativity and innovation will be fostered in an environment that nurtures decision-making, that encourages measured risks as a method of stretching oneself.  Instead of killing the risk-taker when they stumble such organizations seek to stretch the capabilities of their employees by encouraging them to do more than they thought themselves capable. 

After all, it’s only a risk if there’s a chance of failure.  Managers who are not afraid of making decisions, of standing up for themselves, of taking a chance for the good of the organization – they should be valued, not criticized or otherwise penalized.

In an atmosphere free of threats and political quicksand the leader can emerge and thrive – to the betterment of the organization. 

To what extent is your compensation program transparent to employees, or on the other hand, how much is kept a big secret?

Early in my career I worked for a very successful, decades-old manufacturing company who maintained the practice of posting their salary structures on the walls next to the punch clock machines.  Every grade and salary range up to management positions was available for public viewing.

I was young and unseasoned at the time, hadn’t been around much yet, so didn’t think much of the practice at the time – either way.  It was just the way things were at that company.

Those were the days

Flash forward to today.  In your organization, if an employee asks about the salary range of a job other than their own, do you tell them?  If an employee asks the grade designation of a job not their own, do you provide it?  Or do you say that it’s none of their business?  That such information is on a need-to-know basis?

As my professional career progressed from those early days it often seemed that the disclosure practices of my employers slipped backward into the era of “we – they” management philosophies.  An era I had thought long gone.  In one company the employee wouldn’t even be told the minimum and maximum of their own salary range.  Another employer would readily tell an employee their own salary range, but not the range of a job one grade higher. 

Now of course it’s entirely possible that my own career progression of employers is a unique combination of companies not typically replicated by many of you out there.  Perhaps most of you still post your salary ranges on the break room wall, or the pay grades are simply included within the periodic employer newsletters.

But I’m betting that’s not the case.

So why is that? Why not disclose the key elements of your job evaluation and base salary structure?  What’s the harm in letting employees know where they stand, and what their career progression could look like?  What’s the harm?  What’s the big secret?

Whenever I asked that question, in all innocence and with a guileless question mark on my face, the usual answer was, “that’s the policy.  Always been that way.”  Dumb answer.  Pushing my query further never did get me a decent explanation, which left me with the obvious conclusion that management felt they would be better off if such information was hidden from their employees.

Perhaps it was some form of management discretion that they felt would be challenged by letting too many people know what was going on.  But the tactic never did make sense to me, as folks are even more curious about that which they’re told they can’t see.

Hiding the crown jewels

If a company is going to restrict information about their pay programs, it’s common to guard two key elements:

• Salary range – Communicating the minimum and maximum, or even just the midpoint.  Letting you know how much you’re paid in relation to how the company has valued your job.

• Grade – The designation of a position within the hierarchy.  If you know your grade, chances are you can figure (or guess) the grade of others – including perhaps your boss.

Then again, if the grading structure can be manipulated by management discretion (whimsy), or job evaluations slanted one way or another, perhaps there are a few skeletons in the closet after all. Perhaps there are indeed little secrets that are best kept out of sight.

If not, then why not post the salary structure on the office wall?  All the grades, all the salary ranges, and all the jobs covered by the compensation program.  For those who like to keep their confidentiality, you can cut off the disclosure at the executive level. 

But that would be heresy in many quarters, wouldn’t it?  Because if those jobs have been fairly and objectively evaluated and priced against both internal and external factors, what’s the reason for the locked drawer attitude?  If there’s nothing to hide, if you can defend or at least explain your decisions, then why not hang your laundry out in the sun?

What’s the big secret?

I think we know.

You just received an above average performance rating from your manager, which naturally put a big grin on your face.  Which was subsequently wiped away when you heard that for your annual salary adjustment you would receive what amounted to one percent (1%) more of a salary increase than “Joe Average” down the hall.  Tight budget this year, you’re told. 

You know Joe, or his type.  He’s the disengaged clock watcher whose most notable accomplishment is keeping his chair warm.  Doesn’t do enough to either get fired or stand above the crowd.  However, his level of performance is considered the standard in a bell-shaped curve, and so receives an “average” award.

One percent more than the clock watcher.  For delivering what your boss described as your terrific effort for the entire performance period.  Was it worth it?  Some studies have suggested that, if the differential between performance levels isn’t at least 2% (which sounds better than the actual dollars involved), then you’d be better off with a general adjustment.

How does this happen?

When assessing the dynamics of employees and their work ethic, it’s generally agreed that performance rewarded is often performance that is repeated.  Like the Pavlov experiments of so long ago, we tend to repeat that activity which previously gave us pleasure or reward.  We want more of it.  However, if the performer doesn’t feel rewarded, or is not pleased by the company’s reaction to their performance, does the company gain or lose when that desirable performance is no longer repeated? 

Perhaps your performance reward system is not as effective as you would like.

So the question becomes, how much of a reward differential between the best and just OK is enough to keep your better performers motivated and feeling appreciated?  A good guess is that it’s not 1%.

As a manager, can you balance the need to reward your better performers against the reality of tight budgets?  If you want to retain the high performers, you’d better find a way.  So then, what if you started by figuring out how much reward to provide?  Then whatever is left can be carved out among lesser performers.  That will protect your “stars.”

Ahh, but that won’t make you popular among the masses, will it?  And for many managers being liked is a key element of self-worth.  But how high up the priority list should popularity as a manager be marked?  Will you be assessed for popularity when your performance review is due?  I don’t think so.  Likely it won’t be in the top three of what senior leadership is expecting from you.

Your job description probably doesn’t even list this characteristic, and it is certainly not a factor in job evaluation.  So perhaps there are other criteria for a successful manager that should receive more attention.

If you’re concerned about differentials another consideration is the number of ratings you have in your performance appraisal system.  For example, with a seven scale system the need to provide percentages for at least five makes the division of reward opportunity a bit tight.  And if you try to maintain a two percentage point differential between performance levels, the numbers might become higher than what’s deemed affordable.

I don’t believe in reward for tenure, but I do believe in reward for outstanding job performance.  If the merit spend budget doesn’t have enough monies to recognize and reward everybody, each in turn for their contribution, then I’d suggest that you take care of your better performers first.

You can afford to disappoint “Joe Average,” but not “Bob the Superstar.”

We’ve all seen the cartoon where an employee gets themselves pumped up to ask the boss for a raise.  It’s often good humor, and always at the expense of the bumbling employee.  They always seem to get it wrong, and we have a good chuckle as a result.

But how often do we look at that same scenario from the manager’s perspective?  Not much humor there, I’m afraid.  An awkward conversation with an employee rarely is.

Most companies of any size have a regularly scheduled performance review for their employees, where past performance would be assessed and a pay increase considered.  Usually the two are connected.

When an employee request for a pay raise comes between the review cycles, a common response is to tell the employee to wait until the scheduled review. That’s why a review is scheduled in the first place, to make sure an assessment of performance and pay does take place.  Everyone gets treated the same.  If that wasn’t happening, everyone would be asking for the same special consideration and the company’s annual review cycle would be thrown out the window.

So much for the easy part.  The greater challenge is when such an off-cycle request comes in the form of a disgruntled employee who feels that they’re being short-changed in some way, taken for granted or otherwise being (in their minds) underpaid.

Handling the angry employee

In this case telling them to wait won’t do; you have to deal with the anger, as well as the cynicism that the company has been talking advantage of them.

You can be certain other employees will have their eyes and ears out for what’s happening – and the respect you show for the employee.

While each employee conversation can be a unique experience for both parties, consider several pointers that might help you and the unhappy worker.

• Remind the employee that there’s a process.  Start with the reminder that the company does review performance and pay levels, that there is a process.  No one is being forgotten.

• Get them to talk about their qualifications.  You still need to let the employee have their say, but steer the conversation toward the employee’s own capabilities, background and experience. 

• Don’t address emotional issues like need.  That’s a slippery slope that pulls the conversation away from business and into the grey area of personalities, home life and pressures from outside the work environment.

• Keep the conversation about only the employee.  While you’re willing to discuss how the employee facing you is being treated, you shouldn’t open the conversation as to how other employees are treated.  There are too many variables at play here, but perhaps most important is that it isn’t any of the employee’s business.

• Show an open mind.  Never give the impression that you’re only going through the motions, offering only a “courtesy” meeting.  You need to genuinely listen, ask questions and show the employee that you’re prepared to listen and consider.

• Don’t get defensive.  Avoid being trapped into defending the company’s pay programs against the employee’s “research” into market pay.   Company pay programs are typically developed by professionals and it’s likely that the employee is using biased and simplistic figures.

• Don’t get into an argument.  No one wins here, but you’ll likely lose more because the court of employee opinion likely gave you one or two strikes before you came to bat.

• Don’t make promises, especially if you’re not authorized.  Avoid using throw away phrases like “I’ll look into it” or “let me talk to HR,” unless you mean it.  Unless you’re actually going to take up the employee’s issue and run with it. 

Your prime goal should be to come away from the discussion where the employee has had an opportunity to have their say, you’ve had an opportunity to listen without pre-judgment and the points raised by both parties can be further considered.  It doesn’t mean that you have to agree, but that effective communications has taken place.  Meanwhile the employee should come away with a better understanding of the company’s pay programs, where they stand and how they can improve themselves.

At speaking engagements or during webinars I’m often asked what key takeaways, what gems of wisdom have I learned during the course of my career.  Like most of you out there I’m still at it; learning something new every day.  But I’ve gained a valuable perspective from what I’ve seen and experienced.  I’ve learned that professional wisdom comes to each of us in two ways:  1) what you learn to do (what works), and 2) what mistakes you’ve seen or made (what doesn’t work).

It’s wonderful when your career development manages to stay on the straight and narrow – with positive role models and good experiences – but all too often we learn our most valuable lessons from failures, from tactics or decisions that didn’t work.  Or from failed managers for whom we’ve worked, and those who apparently made error repetition a personal career choice.

With that practical experience in hand you’ll find yourself saying either, “yes, I should do that, when the decision is mine” or conversely, “no, I’ll never do that.”  Both experiences can offer valuable lessons and help shape your career.

One manager’s gems . . . .

Putting together an all-inclusive list can be an endless affair, given the myriad scenarios, personalities and business circumstances that could be involved.  Instead we’ll try to highlight the big mistakes.

These are provided in no particular order of relative importance, and only reflect my own experiences.  No doubt I’ve missed a few, so feel free to add your own experiences.

• General Adjustment vs. Merit:  Granting all employees the same pay raise, instead of varying increases on the basis of performance delivered.  It’s easy to administer, but rarely an effective strategy.

• Performance vs. Entitlement:  Rewarding management with a more generous hand vs. other employee segments – simply because they’re management.  Leadership is no more entitled to fair and equitable rewards than any other employee group.

• Overuse of Discretion vs. Objectivity:  Reliance on subjective measures in lieu of quantifiable results.  When assessing employees on a subjective vs. quantifiable basis management discretion can sometimes lead to abuses (favored sons, “halo” effect, or even discrimination).

• Abuse of FLSA Exemptions:  Avoiding overtime by treating non-exempt employees as if they were exempt.  Managers try this tactic all the time, for numerous reasons.  This is when you need to put on your policeman’s hat.

• Surveys says:  Using a title and a generic write-up for matching jobs against “the market.”  It’s the easy way; anyone can do it.  There’s nothing to interpret, is there?  And then there’s the matter of quality surveys vs. . . . the others.

• The Performance Distribution Curve:  Assigning employee performance assessments in a manner set to follow a bell-shaped graph.  The operative dirty word here is “assign.”  Nobody likes this tactic, except perhaps employment lawyers.

• Ignoring Internal Equity: Hiring candidates without consideration of how other like-qualified employees are paid.  There are no secrets, so pleasing the new one while angering two veterans is a dubious strategy.

• Title Inflation:  That meaningless “bone” you toss employees you can’t otherwise reward.  This tactic will raise fixed compensation costs without providing a corresponding benefit to the company.  You’ll eventually regret the decision.

• Absent Safety Valve:  It’s often said that a good compensation program should cover 85% to 90% of contingencies; for the remainder a degree of flexibility and common sense should guide the decision-maker.  For those more rigid in their thinking, for whom the policy manual is gospel, or those who avoid stick-out-your-neck decision-making, authorizing of exceptions can be a struggle.

Can you see possible rationalizations for each side of the above?  Of course, depending on a litany of possible mitigating circumstances, individuals and . . . whatever.  Just have a care that your rationalizations don’t become a pattern of excuses, and that you document.

. . . are another manager’s errors

Then there are those decisions that over the course of one’s career you continue to regret – wishing you had the time to reboot your thought processes.

• Hiring a friend / relative: If you would hesitate to sell them a used car, why would you ever think that hiring them would be an idyllic experience?  Correcting this mistake can be painful.

• Ignoring Office Politics:  “I’m not very good at politics” is a poor response to an important reality that all managers must deal with.  It’s all around us, so to pretend you’re above it all, or otherwise ignore it, is likely counter-productive.

• Performance will take care of everything:  No, it won’t.  Not anymore.  In today’s work environment image and exposure have grown in importance, to the extent that just doing a good job is no longer enough to ensure career progression, or even longevity.

• “I was too busy for networking“:  I usually hear this from people in transition, from those who failed to connect with colleagues, peers and industry insiders while they were employed.  You build a network when you don’t need it, so it’s there for you when you do.

Have I missed anything?  Are there other ill-considered practices or policies that you’ve experienced during your own career?

Of course there are.

Make sure that you learn from them.

Do you want to be admired and respected by your colleagues, recognized by senior leadership for who and what you are?  Do you want to be known throughout your universe as one who sets the standard?

Then solve a problem.  Stand up and show someone how to get things done.  Clear the pathway; support someone’s idea, save a step somewhere.  Do what it takes.

Just do it.

It’s not hard, really.  It’s a matter of thinking not of yourself first and foremost, but of a greater good that is broader than yourself – and of focusing your attention on getting the results that help the department, the team, the business.   It’s called a giving of yourself.

All too often what we see from many employees and managers, indeed at all levels of the organization, is an effort to be the star, the success story, the stuff of legend, but often at the expense of someone else.  “Look at me,” these eager A-types seem to shout, “look at what I have achieved.”  These are folks who seem to have missed reading the memo on team effort.

We all have them in our organization.  They surround us.

Here’s a thought, though.  Isn’t it better to be lifted up (reward, recognition, a simple thanks, etc.) by someone else, then to be constantly trying to push yourself up there?  Doesn’t that ego rush get a bit tiring, what with the constant pressure of looking over your shoulder to gauge the competition?  To paln your next moves?  Do you have periodic stress headaches, where the muscles at the back of your neck tighten to stone?  Are you sleeping well?

Now picture yourself receiving that award, with the accompanying recognition, spotlight, accolades etc.  Nice feeling, isn’t it?  A proud moment.

I think it does make a difference in how one gets recognized.  I suppose that there are levels of self-satisfaction, but the highest must be when you’re lifted on someone’s shoulder.   When you hear the cheer of the audience.  Self advertisement, political deal-making and a passive resistance that holds others back can’t provide the same level of genuine personal satisfaction.  Because deep down you’ll know you cheated to get there.

Think about someone whom you really admire, in whatever field of endeavor you like.   Chances are it’s a person  who has accomplished something, delivered the desired results, made something of themselves.   They stood up for something.  Likely that person you admire so much isn’t someone who took shortcuts, pushed others aside, ignored the call for help or otherwise kept their focus solely on the mirror.

So why would you want to do that yourself?

Of course you wouldn’t.  But now reflect a bit on how you practice at your relationships at work.  Do you admire yourself to the exclusion of others, or can you spruce up your act a bit and become more of a team player?

Naive?  Politically incompetent?  Perhaps I am.  But I think we need more heroes out there, more decision-makers, more team players and more people willing to make a stand for what they believe in.

More folks who aren’t in it just for themselves.

But that’s just me.  What about you?

“What is the competitive market price for a position?”

It’s a simple question.  If you work in Compensation, this is what you do.  And if you’re in the U.S., the survey sources you can call upon are numerous and well-stocked with participating companies and benchmark matches – the blessings of a large country.  In fact, it’s a common practice to segment the data (report separately) on the basis of industry, revenue size, or geographic region.  In some instances you can further refine your analysis by operating budget, staff size or even years of experience.

For those accustomed to such robust analysis it can be a real wake-up call when asked to conduct a similar analysis for operations in another country.  Suddenly your content-rich environment has disappeared, and in its place you find that the availability of good information can no longer be taken for granted. 

Your large country database is gone.  Instead, you face a limited selection of survey sources and each offers only a fraction of your normal participant count – a far cry from business as usual.

Such is the key challenge when pricing international jobs – the limited number of companies included in surveys, even by the major vendors.  For example, a major survey provider in the Netherlands has only 81 participating companies.  So it’s not unusual for a market pricing analysis to include only 4 – 5 “matches” – and is that representative of common practice?

If you’re the one on the asking end of the original question, let me share the challenges that your analyst is likely to encounter.

• Limited industry segmentation:  Reported data will likely cover multiple industries, with limited or no segmentation.  If you’re in either a high or low paying industry, surveys will provide inflated or discounted  information.

• Hard to segment by revenue size:  To the extent that larger companies pay more than smaller you lose that distinction as well.  This can be especially problematic if you’re a small company.

• Global responsibilities vs. strictly national:  The distinction is often blurred between national, regional and global responsibilities.

• Combination jobs not well represented:  You will find yourself matching against jobs “close to” your own, just to gain a “feel” for pay levels.  If your job content varies from benchmark descriptions, reported data might not capture such idiosyncrasies.

• Poor matches and / or restricted data:  Surveys tend to provide an “n/a” when they don’t have enough participants.  When you start with limited participation it’s not unusual to face unreported jobs.

• Regional variations:  While it’s often the case that certain geographic regions have higher pay levels, the reported data is usually national.  You may assume that participants are in the higher paid region, at your risk.

What to do?

While frustrating, you can’t very well throw your hands into the air, complain about poor survey quality and move on to something else.  The limitations are there and you have to play with the cards you’ve been dealt.  Management is waiting, wondering what is taking you so long.

Working with limited resources is a test.  Your challenge is to balance an understanding of the subject position, the industry and the vagaries of limited data points.  To succeed you must utilize subjectivity and your professional judgment to consider the available data and gauge which figures best reflect the job under review.  The correct answer will no longer jump off the page at you.  Compensation has become an art, not a science.

• To improve your matching, consider either the 25^th or the 75^th percentiles instead of the median or 50^th percentile to reflect your position: this can be effective with poor matches, or concerns that the reported job is either larger or smaller than your own.

• You may have to add or subtract from a benchmark job to gain a more appropriate figure for your position.  For example, if your job is a VP but the best survey matches is at the Director level  you may have to adjust up or down to create a better “guesstimate.”  Note: in such a case don’t forget that the incentive percentages will likely differ as well.

• There’s no formula in making adjustments, but changes in organizational level are usually around 15% – 20%.  Within-level description changes are usually around 5% – 15%.

• When dealing with only a few positions you might have greater success by individually pricing jobs through a vendor’s database of multiple surveys, government sources and local surveys.  Vendors like ORC, Birches Group and a few others offer this select per-job service.

• Be careful of the arithmetic exercise (averaging averages, inappropriate matches, assuming numbers, etc.) that delivers a figure you cannot validate later.  Caution: a figure is remembered, while often the qualifiers that follow are forgotten.  Make sure that you document such concerns before providing specific data.

All this subjectivity means that your judgment might suffer the challenges of greater skepticism, even criticism, as you cannot simply point to a survey page and say, “there it is.”

Does subjectivity ruin the value of your analysis?  Not as long as you inform management about how limited survey resources have impacted your analysis.  They expect an answer to their question (market value?) and you need do the best that you can with the resources you have available.

Often times that international best answer is a pricing “guide” rather than a smoking gun “market” figure.

A company’s sales incentive plan is like the Pied Piper from the childhood fable; it plays a tune and the sales force follows.  Wherever the Pied Piper leads, the sales force will go – whether it be down the straight and narrow toward a successful business, or into the rough, down the hillside and over the cliff.  Because the melody being played is about money, and when that tune catches the ear those chasing behind will follow it anywhere.

I was once contacted by a client whose sales incentive plan rewarded the sale of products that generated an actual loss on each sale.  The sales reps got paid though – even though their actions were harmful to the company.   Bad behavior was rewarded, and therefore it was guaranteed to be repeated – over and over again.

Which begs the question, why would a tactical plan for incentivizing sales employees encourage  and reward actions that don’t support the company’s own self-interest? 

What behavior does your own plan reward? 

Can you be sure that you’re not doing the same thing?

It’s up to those who design the sales incentive plans to carefully pick the right pathway.  Because as long as the money is flowing the sales rep isn’t going to raise a red flag and ask, “are you sure you want us to do this?”  Ain’t gonna happen, as most incentive plans are not self-correcting.  The lemmings will race over the cliff as long as a dollar bill is waved in front of them.

Have you looked at the details of your own plan lately?  Do they outline a plan of action that rewards the type of behavior (sales volume, revenue, margin, market share, etc.) that supports the company’s objectives – that drives the sort of behavior that helps to deliver business success?  Are you expecting a Return on Investment (ROI) for the incentive money you’ve targeted for payment?

Considerations

While there may be more variations in sales incentive schemes than snowflakes in the winter sky, certain fundamental design elements do apply as prerequisites for success.

• The company has to succeed.  Only sales objectives whose achievement advances the company’s operations (bottom line) should be used to incent employees.  Otherwise, you might be paying for busy work.

• Spell out what you want the sales force to achieve.   Employees should understand their specific objectives; what they’ll be paid to achieve.

• Provide enough reward to change behavior.  If you want to encourage certain behaviors you need to place a fat carrot out in front.  Otherwise, you might be paying for what would have happened anyway.

• Measure  performance against quantifiable milestones.   An objective you can’t measure is hard to effectively reward.  Avoid payments made on the basis of discretionary judgment.

Yes, there are other important criteria for sales plan success, but unless you start with a clear map that details what you want your sales force to focus their efforts on, you run the risk of missing the mark – which can be an expensive mistake. 

The success and continued use of a sales incentive plan should be measured by the success of the business, not by how busy employees are, or even (solely) how much revenue is generated.  Unless activities can be measured and achieved, and support the company’s business plan, you’re better off with a straight base salary plan (horrors!).  Because providing incentive rewards that don’t advantage the company is often paying for disconnected busy work.

So ask yourself, does your sales incentive plan encourage the right sort of behavior, activities that will drive business success?  Are you paying for the results you need?  Are you getting your money’s worth?

It might be time to check.