During my consulting work with clients, I often take the time to explain two critical “rules” that I use when market-pricing the external market value of their jobs.

• Whatever the job description says are the roles and responsibilities, that is what I will compare against, and . . ..
• I will not rely on the title of the job description, but will instead focus on the content

I say this because in my experience organizations and employee incumbents alike often like to play fast and loose with the “correct” title of some jobs.  Let’s face it, no one will enjoy being called a “Clerk II.”  Not many bragging rights there for friends and family.  However, if the job was called an “Administrative Specialist” or a “Transport Advisor” or even an “Investigative Analyst,” now there’s something to write home to Mom about!

And let’s not forget that sometimes a “Manager “is really a Supervisor, a “Director” is really a Manager, etc.

Who Really Cares?

I get asked this “So what?” question a great deal, as in “What’s the big fuss?”  As if a job title was a small and unimportant cog in the great bureaucratic wheel.  “Don’t you guys have some real problems to worry about”?  Some compensation practitioners even opine that using a creative title is a no-cost benefit for an employee, sort of like a victimless crime.

But if you designate a Secretary as an “Office Manager” with a flip of a magic wand, what comes next?  Because there are always consequences.  That newly designated Office Manager, even though the job duties are the same as yesterday, will now expect to be placed into a higher grade.  “I’m in a more important job now.”

If you disagree, you’ll be admitting to a bogus title.  That would be an awkward admission, so the truth can become an early casualty.

Once you start down that slippery slope of title creativity it’s a short drop to, “My grade is higher, so my pay should be as well.  I shouldn’t be paid as if I was still one of those lower graded employees.  It’s not fair.”  So now the emotional lift of a creative title becomes a fixed cost lift as well.  Not so much of a no cost-benefit after all. And internal equity comparisons could be made more difficult.

Let’s Be Creative

If you scratch the surface in some organizations you might find examples where more than one designation is used for the same job, often inconsistently applied.  This can create a real challenge during an external compensation study when you’re trying to determine which employee is in which job.  What do you match a “Transport Advisor” to?

How many of these designations are used where you work?

• The Real One: – this is the actual title that accurately describes the roles and responsibilities of the job and is the title that should be used to summarize the job description. No interpretations should be necessary.

• The Business Card Title: This is the title that you place on your business card – what you show to those who are outside the business. Commonly used in Sales, sometimes (so the argument goes) you need to show an important title to gain respect, and therefore an audience, with decision-makers.  However, some organizations turn a blind eye to this self-promotion, even when used outside the Sales organization.

• The System Title: Do you have an HRIS?  Here is where a more formalized/standardized title is used for organization planning.  Here is where we use the “Clerk II” designation. The problem that develops is when your glossary of terms (what embellished title equals which real one) becomes outdated.

• The External Title: This is the title that you will see in the commercial pay surveys when you’re trying to match jobs.  Your “First Impressions Manager” will be matched to a “Receptionist.”  You can imagine the difficulty of matching job titles in a survey when your own titles are more creative and less accurately descriptive.  This is also where errors occur (wrong job match, inflated/deflated grade assignment, and ultimately pay levels).

Job titles do matter, though I recognize that employees and organizations will always try to game the system. My suggestion is to; 1) be alert to this problem, 2) try to minimize instances where you can, and 3) encourage managers to use titles that accurately reflect an employee’s roles and responsibilities.

It will likely be an uphill struggle, but worth the effort.

Are you the master of your compensation domain, or are you kidding yourself as to the real state of play?

Many a time I have consulted with clients who confidently, and even smugly, bragged that all was well with their reward programs. “Everything is working fine’” they’d say.  “We just need to update a few things from time to time.  Minor adjustments, really.”  But in truth, there was rot beneath the shiny veneer, a state of growing decay that was either escaping their attention or being ignored.

And in badly run compensation programs, the soon-to-be evident result will be increased payroll costs coupled with lower employee morale.  And a drag on your organization’s bottom line.

Someone once said that, while you can wallpaper over cracks in a wall to hide the imperfections, the underlying cracks will remain – just no longer in plain sight.  For now.

What are we talking about?

Let me ask you a few questions about your pay programs.

• Pay for performance: Everyone out there seems to think that their organization pays for performance, using a true merit-based system, yet at the same time they grant 95% or more of their employees an annual raise – for “performance.” Doesn’t make sense, does it?
• We pay competitive salaries: Is your average employee pay on par with competitive practice, or is it only your salary range midpoints that are competitive?  The market may be paying at a 100 level, but if you’re paying less than that – are you truly paying your employees at competitive levels?  Do your employee communications match your practice?

And don’t forget that the market is always moving and that paying “competitive” compensation usually means paying the average, which means that 50% of the organizations out there are paying more than you.  Competitive pay may be aspirational for many, but it is never an endgame in itself.

• Incentive plans are pay-at-risk:  Are they?  Are you prepared to reduce incentive payments when the organization has had a rough year?  Or do you rationalize your way to justify payments that are similar to past years?  The employees worked hard, the poor performance wasn’t based on effort, the objectives were too “stretch”?  The list of excuses can be endless.  But down that road lies entitlement – as in, “It’s been 12 months, so where is my check?”  Likely that’s not your plan.
• All employees are treated the same:  Do you make decisions on increasing hourly pay rates the same way you do for the management pay rates?  When restrictions are placed on compensation levels (freezes, lowered budgets or other restrictions) do management jobs suffer by the same proportion?  Or do you justify that, no matter the organization’s performance you still must pay competitive wages to management?  That’s a classic double standard.

Do your incentive payments always seem to have better rewards for management than for other groups?

Knowing the Problem

I’ve heard it said that knowing you have a problem is the first big step to solving that problem.  All I’m asking is that you keep your eyes open to the realities of your pay practices, not just to the corporate-speak communications process. Know what is actually going on, and its impact for good or ill on your organization.

But let’s be real at the same time.  You may not be able to do anything about the problems you uncover.  Maybe it’s the culture, the management bias, the fear of change, or the risk of alienating your management cadre.  Sometimes you won’t be able to get management’s attention.  Sometimes they simply don’t want to change or fear the disruption may be too great.

Sometimes they will respond with, “But we have the money,” or “We’ve always done things that way, and we’re still here.”

In order to perform your job properly, you need to understand when a compensation program isn’t working properly, and/or when the organization is paying an overly large price for their questionable behaviors.

Turn the spotlight on what you see is wrong and advocate for change in a fashion that best suits the character of your organization, which won’t be the same method for everyone.  You should tailor your criticisms and recommended solutions to what makes sense for you and (your career) and your management’s style.

But at least stop being in a state of denial.

I was recently asked by a client to sit in on a demonstration conducted for the new HRIS product that their organization had recently purchased.  The installation project was scheduled to take nine months and the client was interested in my comments regarding the Compensation module.

Strange though, that they hadn’t asked for an outside perspective before the purchase was made.

As I watched the demonstration, I couldn’t help but notice the glassy-eyed look of awe that seemed to transfix the client team.  They were mesmerized with all the bells, whistles and do-dads that the presenters were promising to deliver.  They seemed almost giddy with excitement; nirvana had been reached.

A Dose of Reality

Upon conclusion, the obvious presumption was that I was going to be as excited as they were. “So, isn’t this terrific?” one analyst gushed, while another with a broad smile said, “This is going to make all the difference in the world.”  I glanced over at the CHRO and saw a look of such smug self-satisfaction, as in “Look what I approved” that I almost cringed.  What to say?

You see, I’ve been down this road before.  I’ve been in the chair where the client project team was sitting now.  And in my experience, the promised smooth pavement we had started with soon became pitted and cracked, then curvy instead of straight, then gradually narrowed and finally, that glorious pathway to HR Transformation had transitioned from asphalt to rutted dirt and backcountry lane before tapering off into murky swamplands.  And the process had cost a fortune.

But of course, it’s possible that my experiences were a one-off, and that my client today wouldn’t face the same challenges that had troubled my former employer.

The uncomfortable situation I was in was that, while I didn’t want to rain on the client’s parade – and remember that the purchase had already been made – I needed to caution them. The tendency during these marketing presentations is for the purchaser to come away with stars in their eyes.  On the other hand, my role is to be that voice in the back of the room waving their hand and saying “Wait a minute!

Unforeseen consequences

Let’s presume for a minute that everything the HRIS presenters have said is true and that the product does, in fact, have the capabilities described.  Should you relax with a sigh of relief, or acknowledge the need to roll up your sleeves and get cracking on all the work ahead of you?  Because the more data manipulation you desire in a product, the more data you’re going to have to provide – accurately, timely and in a consistent manner.  Maintenance will become an essential requirement.  Do you have the staff and processes in place to undertake these new responsibilities?

Speaking of processes, is the new system going to automate your existing processes, alter your current methods or create entirely new processes?  Or a combination of all three?  Most users would be more comfortable automating what they’re doing today, while most HRIS systems have a new/better/different way of doing things.  What is the organization’s appetite for procedural or policy change?  Might there be unintended consequences?

A surprising development that I faced in an earlier lifetime was that line managers resented the new system, in that they felt (accurately) that some of the work HR used to perform was now the manager’s responsibility.  HR’s reputation took a hit as a perception built of “passing the buck,” and no amount of positive communication ever bridged that gap.  Managers felt that HR was helping themselves (“HR takes and never gives”) under the guise of giving managers more “control.”

And when managers are given a degree of control, what happens when they don’t want to fully exercise that new empowerment? Perhaps they’ll take short cuts, get sloppy with their data input, let deadlines slip away or otherwise fail to use the system the way HR and the product marketers had intended?  Remember the critical nature of system maintenance?

To further stir the pot, many software vendors announce quarterly software updates, which could mean that HR and managers will need to be updated on a regular basis as to the changed workings of the system. Changes could be incidental, or a big deal.  Better be ready to handle whatever comes at you.

And your training had better be ongoing, as a crop of new managers is always on the horizon.

——————-

Am I against HRIS systems?  No, of course not.  They can and do perform essential services within an organization.  But I am against becoming all dewy-eyed when listening to promises of new bells and whistles.  You need to be fully aware of what it is going to take to install and properly maintain the system you have just purchased. And you need to recognize that HR alone cannot pull it off.

If your managers don’t fall in love post-installation you’re going to be in big trouble.

When worried organizations consider methods to get their arms around (control) high payroll expenses, they typically turn a blind eye to the variable pay component, to annual bonuses or incentives.  While the pending business outlook could be getting tighter and management is looking to trim expenses, that particular pool of available cash often appears safe from being touched.

I asked one client why this was the case.  The answer I received was that the variable pay expense was already accrued.  Which is like saying, “We already have the money,” or “It’s in the budget.”  The thinking was that, if payroll needs to be trimmed, that the “cuts” should come from the merit increase pool, not the year-end lump sum payments.

What???

Yes, you heard that right.  Some organizations would prefer to trim/cut/slash their employee’s merit increase program, while at the same time leave essentially untouched the large pool of what is termed annual “variable pay.”  Thus, the amount that employees would receive may be variable, but short of bankruptcy, they’re going to receive most if not all their normal annual payments.

Are the annual bonus/incentives payments in your organization guaranteed (all or in part) in a similar fashion?

What’s apparently lost in this strategy is that for the lower ends of variable pay eligibility merit increases are still a significant element of total reward.  For those further up the food chain they’re making their money on sizable variable pay awards, not from annual pay increases that are averaging about 3%.  Management may feel that they can afford to pass on granting their usual merit increases because in their minds the big bucks come in the form of their annual lump sum reward.

That’s not exactly an “everyman” view, though.

Another area of concern is that reducing merit increases effectively reduces an employee’s ongoing disposable income.  That’s money that is supposed to pay for tonight’s groceries or the kids’ new shoes.  Annual bonus/incentive payments tend to be spent on major purchases like TVs, vacations or even a new car. Very little gets banked, and even less is put aside for groceries or the kids’ shoes.

Merit increases are typically used to reward an employee for their job performance during the recently completed performance period.  To cut that raise off at the last minute, and in a way that disproportionately impacts the lower levels of your organization is going to be a hard sell with employees. Not only have the rules changed very late in the performance game, but many will develop a bad taste in their mouth as they begin to recognize how management has taken care of themselves.

In one instance I saw Executives heroically decide to forgo their merit increases but instead pumped up their incentive payments to more than make up the difference. And don’t think that this sort of reward man manipulation is lost on your employees.  That sort of questionable behavior will become known.  And from there morale and employee engagement goes nowhere but down.

One pushback that you might hear is that cutting a raise in base pay effectively cuts fixed cuts now and down the road – while reducing annual bonus/incentive payments is only a temporary, one-time deal.  That’s true, but down cycles in company performance are usually temporary, while lowered base pay levels are permanent and never “made up,” no matter how well the company does next year.  Meanwhile, market competitiveness has moved on, whether your pay has or has not.

A Better Way

In my view, if business realities suggest that payroll needs to be cut NOW, then equity and transparency should become the foundation of your follow-up tactics.  “We’re all in this together,” should be your mantra.  Granted, a great deal depends on the seriousness of the financial strain on the organization, but I suggest that annual merit increases (the disposable income) should be the last pay component to be cut.

I would start by, a) telling the employees that hard times have arrived and that you have to make some temporary changes to pay rises, then b) consider trimming the merit increase budget by 1% or more, depending on circumstances, and c) hit the incentive payments as a true reaction to “we didn’t perform so any bonus/incentive needs to be reduced.”  Because if the organization isn’t doing well do you really want to be seen by your employees as still granting business-as-usual bonus/incentive awards?  Talk about mixed messages.

As a variant, you could reduce the merit budget and tell the executives that they won’t receive a merit increase this year.  Just be careful not to over-compensate the incentive payments to make up any loss.  Poor form, as the Brits would say.

As a final thought, ask yourself, do you have a pay-for-performance philosophy where you work?  And if you do, are you walking the talk or just kidding yourself and your employees?

Anyone who has worked in Compensation can identify with the following scene; you’ve just finished explaining your market-pricing analysis to your clients when suddenly frowning faces appear as they look down at the figures.  “This can’t be right,” someone mutters and suddenly you find yourself looking at irritated expressions.  “You’ve got it wrong.”

Been there?  Heard that?  Of course, you have.  That’s why compensation practitioners receive fewer Christmas cards than their HR generalist colleagues.  Because compensation folks are charged with conducting external analyses and presenting comparative marketplace realities. That’s called sticking your neck out.  But sometimes those realities aren’t welcome news.

Why Are Your Figures Wrong?

If management likes what they see, you’re only reporting common sense, and everyone nods their head.  The only time you’ll hear a complaint (or receive a frowny-face message) is when the market figures you report aren’t what management expected to hear.  In that case, sometimes the knee-jerk reaction is that your analysis must be wrong.  The reasoning behind their negative reaction can vary from a genuine confusion to a defensiveness that somehow, you’re criticizing their past pay decisions.

The accusations can take several forms.  Which of these is what you usually hear?

• You don’t understand my job
  • My job is special (bigger, better, more complex than similar titles)
  • The employee is a terrific performer and their efforts should be rewarded
  • The job description is out-of-date or otherwise inaccurate
  • How can HR know enough about my job(s) to properly match them against other company jobs?

• You haven’t used the right surveys: “Where did you get your data?” is an often-used retort when the market figure isn’t to their liking. Whether it’s about a specific industry, or geography, or even number or type of participants, a common go-to reaction is to challenge the data source.

• The job is really a “senior” position: “Perhaps we haven’t made the description clear,” is another rationale for further study. The job is actually more like a senior, or a lead role. “Our job is more than their job.”

• I’ve heard numbers that are much higher: Another pushback is to quote employee challenges, a newspaper article, or even comments from neighbors or relatives, to make an unsubstantiated case that the “real” market figure is higher.

• The employee(s) will quit: If we go with this so-called market figure. This statement is simply a threat, based more on emotion than objective data.  It’s an attempt to make you feel guilty for what you’ve done, or at least to plant seeds of doubt in your head.

• Have you called around to local companies? “Maybe a custom survey is what is needed.” Here the complainant is more interested in what specific, cherry-picked companies are doing than the general market.  However, the rationale for a custom survey is weakened by higher costs, longer lead times, limited participation and narrowing the scope too much.  Plus, you likely recruit from a wider competitive marketplace than that identified in a custom analysis.

• Recruiting vs. market figures: Do not confuse the two. If the market figure is 100, the recruiting figure for that position is likely to be greater than 100 – unless you’re dealing with an abundant labor market and your candidate in unemployed.  Note: The manager will always be thinking of the recruiting figure, and recruiters often have their finger on the scale, pushing up the figure they think is appropriate (and easier for them to recruit against).

What to Do

Like most other endeavors that deal with variables, the market-pricing process is not exact or formulaic and can be subject to human error as the compensation practitioner analyzes the competitive marketplace.  When that does happen, and objective data is presented to challenge your analysis, thank the manager for the new information and then promptly re-conduct your analysis.  You’ll gain credit for listening and for keeping an open mind.  Points for you.

However, in most instances, your analysis is going to be spot-on and what you’ll be hearing from disappointed managers are in the main excuses, defensiveness (they don’t want to be blamed for decisions they have made), attempts at a blame game and a lack of managerial courage.

Stand your ground. Bend when you must (political realities are always with us) but stick to your analysis and try to anticipate the nay-sayer arguments. Try to have the “gotcha” questions answered before they’re asked.

You still won’t get those Christmas cards, but you will be respected, even by those who disagree with you.

I was in a client meeting the other day when the topic of “managerial courage” came up. My client was planning to introduce a new compensation program and we were discussing appropriate training and communication requirements for the management staff. That’s when a worrisome thought was raised; would the client’s management team be able to stand up for the changes that would be necessary for the effective implementation and later sustainment of the program?

The Head of HR pondered the question of whether her managers would be willing and able to make the type of controversial decisions (somebody wins, somebody loses) that would be necessary. Or would they “pass the buck” and delay or defer those decisions to others?  Or send out mixed messages that confuse more than educate?

The fear is that, without a management cadre that shows a bit of backbone (walking the talk), any new program would find itself under serious challenge – right from the opening move.

What it Takes

If you were in this group of managers being discussed, would we have to worry about you? Would you be able to make the necessary decisions?  The tough decisions?  The decisions that others may be reluctant to make?  Are you prepared to stand up and be counted?  These sorts of issues could involve grade changes, or title changes, or changes in incentive opportunity – for some.  All negative actions affecting individual employees; because you’ll rarely hear from those who are positively affected by a change.

Think about it, and don’t be so quick to nod your head, “Of course I can.” Picture a disgruntled employee sitting in your office, pushing back at you. “That’s not right. That’s not fair.”  Most managers would find the prospect of facing such a scenario discomforting and something to be avoided – sometimes at all costs.

Or are you one who is willing to pass the buck, to let someone else make the decision?  Or to delay making a decision for so long that a default action automatically takes effect?  Plausible deniability, as the politicians say.  “It was the other guy.”

Why Others Don’t

It’s easy to pass the buck onto others, to kick the can down the road or let someone else take the risk of their convictions (or management dictate) when an individual decision is going to be difficult, or when you know that some will disagree with you.

It’s rare for someone to pound their fist on the conference room table and say “No, that’s a bad idea. I don’t support it.” Instead, program opponents and those hesitant to stick their head above the crowd tend to disguise themselves in a way that’s intended to deflect personal criticism and avoid direct opposition.  Some examples:

• Passive Resistors: These folks will not actively oppose the new program, but they will sit on the side of the road for as long as possible. When they must take action, it’s usually in a slow, ponderous fashion that shows little enthusiasm, only a required movement on their part.

• Yes-Men (or whatever the politically correct term is these days): No matter what they possess as personal opinions, these folks will nod their head in agreement with the prevailing view. Thus, their support would be brittle and could be easily turned.  They just want to be on the winning side and tend to hide their personal beliefs.  Not much in the way of core values here.

• Subversives: The honest folks in the bunch, who will actively work against you. They don’t like the program and will say so.  And then proceed to challenge various aspects of policies and procedures, seeking wherever possible to weaken or collapse the new program. This is the opponent standing toe-to-toe with you.

• Politicians: We all need to practice some basic skills with office politics, but these players revel in the process. They are all about picking the right side, of being seen with those who are currently in power. These are not the sort of folks you can rely on to make proper reward decisions, as they’ll often disappoint you.

As you advance your professional career from job to job, employer to employer, one of the judgments that will be made about you will be whether you possess “managerial courage.” That’s a powerfully positive trait that, if demonstrated consistently will position you well over the long haul.  Perhaps not everywhere, though (note the comment above regarding politicians), but lacking that courage will certainly gain you a negative reputation– one that will become like an albatross around your neck.

It’s your call.

Everywhere they turn these days Compensation practitioners are finding themselves bombarded by a repeated self-help message; you need to establish compensation metrics for your organization.  You need to do this.

If you’re collecting data for compensation metrics, congratulations.

But no one seems to have completed the recommended strategy by explaining what you should do with all this data that you’ve collected. It’s as if the answer is somehow intuitive, that everyone would just know.

Believe me, they won’t.  Capturing internal compensation metrics data is not the same as using that information.

Use of Metrics

In order to gain value from the use of compensation metrics data, you must use that data in a meaningful way.  Data collection should not an end-in-itself, but an ongoing process that can assist you in developing a storyline that not only explains what is happening with your reward programs but can help steer your organization in the right, corrective direction.

Here’s a useful foundation precept you should keep in mind when speaking with senior management; they like to hear a story. And that story becomes more powerful, more compelling when peppered with facts and figures.  Maybe even a graph or two.

Examples

What can these metrics tell you, and how do you convert raw data into a story that grabs the attention of senior management?

As you’d expect, there is no straightforward answer, no pathway to correct action other than “It depends.”  Because there are numerous subjects on which you can collect and monitor data points, and each one can present possible storylines.

Each metric is likely to have a baseline figure, your target goal, or a traffic light (green light, yellow and red), and as your data (the dashboard pointer) moves right or left of that baseline, your story is created for you.  It can be good, bad or indifferent.  You only have to tell it.

Below are three standard examples to illustrate how metrics could be used.

• Average Age: The cumulative age of each employee, divided by the number of employees.
  • Do you have a young or old workforce? Do your managers have to deal with Baby Boomers, Millennials, Generation X or a hodgepodge of attitudes and interests?
  • An older workforce likely creates more medical plan charges, more instances of retirement, and may display a different (better?) work ethic.
  • Younger employees tend to be less experienced, more likely to job hop, and less likely to appreciate your non-cash benefit offerings.
  • Do you have hiring profiles? The age of an employee can usually tell you something about their likely attitudes toward work environment, pay levels, other benefits, working conditions, and career prospects.
  • Over time, is the pointer showing a workforce that is aging, or growing younger? Consider the ramifications.  Prepare for them.
• Average Pay: The cumulative annual cash pay of all employees, divided by the number of employees.
  • You may want to mix this category with others (e.g., age, sex, and grade, among others) to gain a more precise read.
  • The external marketplace is a constantly moving target and is expected (perception) to always move upward. How does your average pay compare to that market, to assigned grade midpoints, and within key functional areas?
  • Is your average pay growing, remaining stable, or possibly declining? In either case, you need to know why.
  • Is the metrics pointer going in the direction you want? Why not?
• Sex: For the sake of simplicity let’s look at Males and Females, though this category seems to be evolving within the workplace.
  • How many of each do you have? Do you have concentrated pockets of employees (e.g., engineers, clerical workers, hourly staff, accountants) that might skew the overall results?  Perhaps the lower grades have more females while the higher grades show the opposite.  Oh-oh.
  • Combine this statistic with others to see whether an adverse impact is appearing elsewhere (males paid more, concentration (or absence) of females in certain jobs/functions.

Of course, every metric could be further refined (sorted) by grade level, functional area, length of service or any other slice of data that would provide you with meaningful information.

The takeaway here is that metrics can tell you a story if you’re reading them.  They can be a smiley face, a cautionary flag, or a skull & crossbones.  But you won’t know that unless you work with the collected data in order to your educate your senior management.

Have you ever asked yourself, how effective are the Compensation programs in your organization?  Are they still doing what they were intended for, still delivering the right bang for your bucks, the proper ROI?  Do you give them a thumb’s up?

Or don’t you know?  Have you reviewed the programs, or conducted an effectiveness audit in recent memory?  Or is your role simply to keep your reward programs afloat and running?  Kind of like an administrator.

“If it’s not broken then don’t fix it” is a commonly used phrase for a reason, especially if the house isn’t on fire.  Perhaps “letting sleeping dogs lie” is a philosophy built into your DNA – or in that of your leaders.

You may be comfortable playing the couch potato.  All is well.  But then again, how would you know when damaging storm clouds start to form on the horizon?  When they’re coming your way.  Would you know when trouble is brewing, when the death spiral has begun for those compensation programs?

Would you know what to look for?

Continuing our house analogy, I suggest that you should look for telltale signs of the rot that may be forming behind the wall or under the floor, because when it becomes visible (obvious) and the wall/floor is stained – at that point it’s much harder to fix.  It’s more painful and costly to remedy.  And by then the pealing alarm bells will have the attention of senior management – and not in a good way for you.

This looking for trouble tactic is much the same at work. You should look for warning signs that your compensation programs may be coming off the tracks.

Warning Signs

Here are some examples of what could be going wrong.

• When you catch yourself routinely saying that you “pay competitively,” but in fact, the salary range midpoints of your structure(s) are less than prevailing market rates.  When were they last updated?
• When you repeat to everyone that, yes you do pay competitively, and your midpoints do reflect the external marketplace, but what is actually paid to employees is instead much less than the market.  Sort of like not walking the talk.
• When you discover that payments from your variable pay programs (annual incentives, sales compensation, etc.) reward less for performance and more based on entitlement and administrative ease of processing. “It’s been twelve months; where’s my check?”
• When you believe the recruiting brochures that you have a Pay-For-Performance program, yet 98% of employees still receive an annual increase.
• When flexibility of decision-making often trumps established guidelines, best practices, and potentially even the application of fair and equitable treatment.  This is when managers play “Let’s make a deal” or “I am the boss.”  And if you let it happen, more skeletons will go into the closet.
• When new or revised compensation programs are rolled out lacking appropriate communication, training or even monitoring devices. “Send out the announcement memo and let’s go to lunch.  We’re done.”
• When title inflation has become such a worrisome issue for the HR database that titling anomalies have permeated the organization with confusing and inconsistent labels.  It may seem like you have as many job titles as you have employees.  Don’t believe that “special” titles are a no-cost gift.
• When you find yourself with a plethora of “senior, lead, coordinator and assistant-type” titles that confuse more than clarify the hierarchy of job roles.  Promotions become an almost automatic step, based more on the length of service or job performance than substantial differences in job descriptions.
• When you consistently defer decisions on pay increases and/or program design or administration to the outside consultants; when you use the terms “Hay” grades or “Mercer” salary ranges.  When your consultant contacts are on speed dial.

Or the problem(s) could be something else.  Check your compensation metrics to see what’s working and what isn’t.  Where you are going in the right direction, and where perhaps you’re not.

Saving the Patient

Like any other “patient” being treated for an illness, the evidence of individual symptoms – warning signs – may not be the endgame for you.  Most everything can be fixed.  But if you find multiple symptoms, that could signal a real problem for you and your organization.  Problems that affect your payroll costs, employee morale and engagement, retention and even your organization’s bottom line.

If your single largest expense, employee pay, is not working, or even working against you with counter-productive compensation programs, it is up to you to be on the front line of defense.

So, you had better be looking. And you had better be prepared to sound the alarm.  You’ll need to catch damaging policies, practices or procedures in time, before too much damage is done, before the pain incurred has reached the attention of senior management – or at least your boss.

The deeper the hole of problems you’re facing, the longer and harder may be the cure.  If you find that you’re in that sort of hole, throw away the shovel!

I attended a strange meeting the other day.  My client, a large and well-populated organization, was planning to introduce a new base pay compensation program, and as part of that program, grades and salary ranges were being introduced for the first time.  A senior manager had asked to speak with the VP HR and me, as he wanted to raise several concerns before we went “live” with the employees.

They Don’t Need to Know

Essentially this senior leader felt that employees really didn’t need to know their grade or salary range.  They didn’t need to know how their pay compared to either the market or their new grade midpoint.  He didn’t want HR to tell them.

They didn’t need to know, he said because that knowledge might create problems for management.  What if an employee is low in the salary range?  Or high?  What are we going to say?  He felt that it was better to let them remain unaware and instead let management worry about those issues.  Management would take care of them. “We know better” was the prevailing management wisdom here.

Warming to his subject he went on to say with certainty that employees only think of their pay level when they’re first hired, and then once a year when their pay level is reviewed. Other than they don’t think of their pay at all – so why should we (the company) raise a possible issue?

His rationale was that, if you give someone a nice increase, they’ll be happy. But if they knew that they were underpaid (the reason for that nice increase) they would no longer be happy (enough) with that same increase.  Therefore, they would be better off not knowing how their pay compared with the outside market or even the company’s own midpoint for their job.  Keep them in the dark, but (presumably) happy.

In my view, this manager was straight out of Central Casting, a 1950’s-style Lord of the Manor who feels that he knows better and should be able to do whatever he pleases with the employees within his fiefdom.

These managers are apparently still out there, so you’re going to have to deal with them.

Benevolent Despot

The above viewpoint represents a paternalistic attitude toward employees that I haven’t seen in decades.  It’s the “Theory X” philosophy we learned about so long ago in management training, and those who practiced this belief were considered villains.

The teaching point: don’t be a bad manager.

I would understand if the view was that “We’re not ready” for full disclosure, that “We have issues to address (correct) before we open that closet door and let the skeletons out.”  But this manager who was complaining to HR didn’t accept the premise that employees should ever be told their grade and salary range. “They don’t need to know.”

The attitude seems to be based on two factors:

• I Am the Manager: As the boss, I know what’s best for my employees, and I want to maintain as much flexibility as possible in order to take whatever action I feel is appropriate. I will take care of them, so some information about their job, their working environment and how they’re treated is information that they don’t need to know about. That knowledge would only be a distraction and disruptive to my plans.
• Fear: If the employees learn about how the company values their job (grade), and how we pay them compared to the competitive market (salary range), they might become angry, or confused and certainly curious. They might ask “why?” questions that I’m not prepared to answer.  They might blame me for the decisions I made about their pay.  I might lose their trust.

Reality Bites

Managers have been shown the assigned grades and salary ranges of their employees, but some of those managers still believe that that data won’t get out – won’t become public knowledge.  But in my experience, as soon as some employees learn that grades/salary ranges exist they will start asking for themselves.  And they will spread the word.

The tide will rise against you, and you’ll lose control of the dialogue as you start playing defense.  You do not want to have to play defense.

What is a manager to do when an employee asks questions?  Are there salary ranges or not?  If yes, presuming managers won’t deliberately lie, why won’t you tell me?  What is my salary range, and would the managers refuse to tell the employee?  How does my pay compare to the outside market?  Am I being fairly treated?

And who determines at what level the non-disclosure kicks in?  Supervisors?  Leads? How about high-paid individual contributors like Accountants or Financial Analysts?  Should they know?  Once you start down a slippery slope the rate of descent into chaos starts to move ever faster, so be careful.

In my view, it’s better to have a planned disclosure strategy, coupled with carefully thought-out management training to better manage how both employees and their leaders (you) should deal with new information.  Otherwise, chaos (mixed messages, confrontations, lowered morale and distrust of management) could become the new company culture.

If your company culture speaks of fair and equal treatment, transparency, competitive rewards, career development and all the other good things we tend to say about ourselves, keeping employees in the dark about how you’re treating them is a big step in the wrong direction.

You will get the culture you practice, not the one you aspire to.

The above may seem like an odd question, but in my experience, there are some organizations who seem comfortable in “passing the buck” to consultants and commercial compensation surveys to make their reward decisions for them.

As a consultant myself I’ve worked with organizations who routinely referred to their HAY grades or MERCER salary ranges when communicating with employees.  And when a compensation program question was posed to HR many times a call would go out to the respective consultant responsible for that area – to get a decision made.  In some circles the decision-making process could literally mirror the three blind mice, with HR seeing, hearing and saying nothing without a consultant’s input.

“I Didn’t Do It”

Compensation practitioners know that they are always subject to possible criticism over their decisions; job evaluations, market-pricing, setting salary ranges, performance management issues or even recommendations for or against management requests.  So, wouldn’t it be nice for them if they could say, “It wasn’t me. They (consultants or survey sources) made the call.”  Someone else that they could point the finger at.  Let someone else take the heat.  And it does seem more difficult for managers to change a consultant’s mind than for them to put pressure on the home-grown resource.

Good Idea?

These scenarios serve as an excellent example of the “Easy Button,” where an answer is provided without a lot of time or effort on your part.  You don’t even have to think about it!  And if the answer is challenged the consultants usually have plenty of resources to deal with justifications and counter-arguments – at a further price of course.

Having an answer-man on call relieves the political pressure that might otherwise be brought to bear. Because contentious issues can quickly become political issues, and you don’t want to get on the bad side of certain people.  Having an answer provided in the format of a prestigious letterhead can be very comforting.

And if you don’t take responsibility for program design, implementation and sustainment issues you don’t need a costly staff of employees to do that work.  I once worked with a major client who kept only two compensation people on staff – Managers – because the outside consultants did the rest of the work.

Bad Idea?

Is this concept giving you a bad taste in your mouth?  Before you dismiss this approach out of hand, as in “We’d never do that!” let’s look at some pros and cons.

Pros

• Easy button – let someone else make decisions. You’re very busy and have a lot on your plate right now. Wouldn’t it be wonderful to be able to pass off some decisions to objective professionals?  Someone who wouldn’t be influenced by emotions, personalities or internal politics?

• Less pressure – “What can I do? This is what the consultant said.” Your critics are kept at bay because you didn’t make the decision. And as long as their invoices keep being paid your consultants won’t be influenced by criticism of their answers.  In fact, they’re usually expert at dealing with critics.

• Don’t need a staff  – alleviating pressure on your FTE count.  Consultants are used as needed, so full-time staff may be an avoidable luxury.  As long as you can afford the charge, of course.

Cons

The above arguments are powerful stuff for the administratively minded, and if your goal is to keep floating along with minimal impact and have time to join the company bowling team, having an “Answer Man” available as needed can be an attractive strategy.

But there are some downsides you’d have to face.

• Loss of personal respect – by managers first but will soon include the employees themselves as they come to realize your risk-averse tactic. What’s that phrase about being an “empty suit?”  Why should anyone talk to you?

• Management loses control – of compensation programs and the message. Outsiders will become perceived as the real authority behind your programs, further weakening your position.

• Objectivity becomes rule-setting – because outsiders can never be knowledgeable enough about your employees, your culture and the human element behind many good decisions. Who knows your jobs better? Who knows where exceptions need to be made? Compensation programs need to make sense for the organization, and sometimes that isn’t black or white – but a steady stream of grey.

The takeaway here is that, in order to maintain an effective compensation program, you need to take control.  You need to be sitting at the desk where the buck stops.  Consultants should be used to feed information into your decision-making process, and to make suggestions based on their knowledge and experience.  But it is not in your best professional interest to abandon your responsibilities and let someone else make the actual decisions for you.

That would not be a career-enhancing move.