Picture the scene:  your company is seeking to employ an Operations Manager, and the leading candidate is currently “in transition.”  Human Resources has pegged the market value of the job at $ 75,000, but it’s known that the preferred candidate (Bob) will accept $ 65,000.  A seasoned and experienced professional, Bob was previously paid $76,000 by his last employer, but was caught up in a restructuring staff reduction.  He’s been out of work for almost a year and is getting desperate, worried about feeding his family and paying the mortgage.

When the decision point arrives, other less qualified candidates are already making $ 70,000 and asking for $75,000.  Some hiring managers would look at this situation as a no-brainer.  “Let’s hire Bob and save $10,000 to $15,000” would be the smug decision.

That wasn’t hard, was it?   An exceptional candidate has been gained at a low ball price.  The manager deserves a pat on the back for saving the company money.   But, wait a minute.   Perhaps it should be a boot in the butt instead.

A savvy professional like Bob will have a sense of the competitive market, so he’ll be aware of having taken a significant pay cut to land this job.  So how excited will he be with the offer?  Today, he’ll be delighted and will celebrate getting a job and finally having money coming in again.  Tomorrow, not so much enthusiasm.

How long before his resentment grows, knowing that he was taken advantage of – gotten on the cheap?  What will happen to his energy level, engagement, even his morale?  What will he now think of the company, never mind his hiring manager?

What’s the likely future for Bob?

It’s always safe to presume that how a candidate is treated will be discovered later by that same new employee; otherwise you’ll be stuffing skeletons into a closet – and you know that trick never ends well.  So when Bob confirms for himself the low ball treatment, what reaction can you expect?

• Angered by a sense of being taken advantage of he could continue with his job search – looking for a better opportunity – while still working for you.

• His job performance might suffer, dropping from 110% to automatic pilot to somewhere south of Satisfactory.  He’ll be going through the motions – not exactly the dynamo you thought you had hired.

• His attitude will turn negative and he’ll morph into another disengaged employee – critical of the company and management, doing no more than he must in order to get by.

• And he’ll ultimately quit, but on his terms and timing.  His anger will have kept simmering and he’ll likely feel little concern as to how his departure affects the organization.

What you have now is a bad hire – a situation that’s unnecessary and easily avoidable if you treat candidates fairly.  Look at it from the candidate’s perspective; when your back is to the wall and you feel your “rescuer” is taking advantage, that feeling causes a pit-of-the-stomach resentment that lingers and festers.  And it costs.

Let’s tally up the cost

The manager claimed a cost savings by the hiring decision.  But when you factor in the longer term ramifications of that decision, how do the initial savings hold up?

• The hiring decision saved $10,000 to $15,000 per annum by consciously underpaying the candidate.

• What is the discounted value of a disengaged employee who doesn’t perform as expected or desired?

• What is the value of time lost when Bob quits and the job is vacant while a replacement is sought?

• What is the value of hiring a potentially more expensive replacement (plus agency costs) and perhaps relocation?

• What is the value of productive time lost while a new employee gets up to speed?

• Finally, what is the subjective value of a discontented employee in your midst, who is possibly poisoning the attitude of other employees?

So the next time a hiring manager proudly announces how to save a bunch of money on a candidate who’s in transition, take a moment to think it through.  You may want to consider a boot in the butt instead.

A lot of talented folks are unemployed, underemployed or “in transition” these days, trying desperately to land a new job that will not only pay the bills and support their family, but also offer a degree of professional respect.

When that goal is finally reached, when someone finally says, “we love you, please come to work for us,” the tendency will be to respond with “thank you, YES.”  However, that immediate, knee-jerk reaction could be a mistake, as at that point you’re a desired candidate with options, while tomorrow you’ll be one of the staff – with little leverage at all.

When the moment of decision occurs, most Human Resource professionals would advise you to give the person who extended the offer a warm thank you, but then to take a little time for reflection on the particulars – the details.  The higher up the food chain you are, the more moving parts will comprise your employment offer.   No one is going to force you to decide right away, so don’t.

Presuming that the career implications are positive, that you don’t have to move to Northern Alaska, and that you want to accept the offer, let me suggest a few tactical strategies to help you make the most of what was offered.  Because with a bit of luck you can do better.

The Recruiter

Internal recruiters can be difficult to work with at times, but you need them.  So keep a smile on your face and play nice throughout the interview process.  At some point your recruiter may be called on to negotiate with management on your behalf, so the relationship you have with this individual is critical.  Why?  As your offer was likely developed from the combined thought of the hiring Manager and Human Resources, the recruiter would play the part of the messenger.  So if you wish to negotiate revised terms (the push back) it’s the recruiter who needs to “sell” your point of view for a better deal.

Cash Is Still King

It’s a safe bet that the company has left itself some wiggle room with its base salary offer, but the trick is to gauge how much room is left.  So be cautious.  Don’t be greedy by asking for a major increase, as that will alienate the hiring manager and your new friend, the recruiter.  Also, avoid giving the impression that you think they’ve low-balled you.   You can lose you a lot deal of goodwill with that attitude.

If the gap between your desired salary and the offer is too large to bridge, an early interim performance review (six months?) can provide the time you need to prove your worth; or perhaps a sign-on bonus to improve your first year earnings.  Both are less visible within the organization than the offered base salary, and management is often amenable to such “compromises.”

The Package

I always advise clients to look past the base salary and pay attention to the rest of the package, considering the offer in its entirety.  And make sure you have that offer in writing.   All the necessary elements should be included (i.e., title, salary, incentive, vacation, relocation, stock options, retirement, etc.), as there may be a cornucopia of opportunity to negotiate improvements by expanding your line of sight beyond simply cash.

What’s Negotiable?

Once you’re past the cash part of the offer the company may prove more flexible, as the eventual transparency of cash within the organization can be a limiting factor due to possible internal equity concerns or policy restrictions.

Unless the company is prohibited by plan documents, policy or statutory regulations they may be accommodating to certain requests, especially as they are eager for your acceptance.   Remember that: they want you to say yes.  However, as verbal promises carry little weight even a signed note in the margin of the offer letter would be sufficient authorization, so consider vacation days, early eligibility for incentives and options, perquisites as well as flexibility on relocation as possible improvements.

But have a care before asking for changes to tax-advantaged programs or those where equity issues might be a concern.  You will have little success here, and could lose a bit of goodwill.

The Push Back

To open the post-offer negotiations first profess your genuine appreciation for the offer, then express an excitement at becoming part of the company team.  Only then should you mention your “disappointment” with whatever aspect of the offer package has created concern.

Note: make sure that your list of disappointments is small, and always give the impression that a deal is close.

When you ask for consideration of an improved offer remind the recruiter of your extensive background and experience, and the type and degree of contributions that you will soon be making – but be specific.   Give the recruiter enough ammunition to help represent you.  Don’t leave the impression that you simply want more, but that you deserve more.

Final Thought

Your hard work at job search will pay off, that offer of employment will come your way.   When it does make sure you finish the job by not leaving opportunities on the table.  Because you can’t go back later to pick them up.

That’s what a manager is saying to their staff when they show a reluctance to distinguish between their high performing employees and the “Joe Average” types when it comes to the granting of performance rewards.   These “leaders” make excuses to avoid tough pay increase decisions, instead manipulating the Pay-For-Performance system to ensure that, whenever possible everybody gets something.  If there isn’t enough money in the budget, well, there’s Human Resources to blame.

This is what happens when managers aren’t able, or aren’t willing to manage pay.

They want to be liked, and who can blame them?  We all want to have friends.  These managers have to control a team, have to consider the good of the entire staff, to keep spirits high, and limit any grumbling in the ranks to a minimum.  They’d like to be appreciated by their employees for those efforts, while at the same time keeping their problems to a minimum.  So in their view treating everyone the same, or as close to that as possible, would provide a leveling of the playing field – so they can proudly boast, “we treat everyone the same.”  In other words, there aren’t any “special people” here – not even performance stars.  They believe in a kind of reward redistribution that balances everything out.  Everyone deserves to get something.

And they hope to get Christmas cards from the staff at year-end.

Ah, the angst!

At the same time this type of manager is afraid as well.  They’re afraid of being criticized for making the wrong decisions – or for not making a decision at all.  Some are actually paralyzed by indecision into non-action.  Why?

• If any employee quits, that could be a mark against the manager; that they couldn’t successfully manage.  Why else would someone quit?

• Such criticism could be doubled down if it’s a valued employee who has left.

• Some managers take to heart the adage, “people don’t quit companies, they quit managers.”  So they could take it personally when one of their employees decides to abandon the  team.

And then you have the angst over the replacement process.

The losing manager will have more work on their plate, having to cover for the missing employee, then having to take the time to recruit and ultimately provide training for the replacement.  How long will it take to get everything back to normal?  How long will their life be disrupted?

So it’s worth it, the logic goes, to keep everyone as happy as possible.  Because to a manager a departing employee is bad news all around – unless of course that person is in the bottom 5% that we want to leave.  But how many managers actually point a finger at an employee and say – you’re a 5%?

For such reluctant managers you would need an employee’s taped confession to a federal crime, one that was also committed on company property, in order for them to feel justified in taking a hard line.

On the other hand, effective managers strive to be respected.  Being liked is nice, but shouldn’t be bartered or purchased at the expense of doing their jobs.  Which raises a question.

So what is a leader?

There are many answers to this question, of course, but for the purposes we’re discussing here let’s focus on the ability to make timely and thoughtful decisions for the good of the organization.  That’s why the employee with the “manager” title was promoted, wouldn’t you say?

It’s not a matter of making a decision in the purest sense, because bad decisions, even idiotic decisions would qualify.  One could also construe that a manager’s non-action, non decision is in fact a form of “decision.”  It’s decisive action in the face of challenge that sets the effective manager apart from the rest of the pack.

Is there a difference between a manager and a leader?  Both can have the same title, but their outlook on roles and responsibilities could be quite different.

Technically, a manager can be someone who simply administers an ongoing operation, keeping it running, maintaining processes and completing assigned work.  An important role to be sure, because we need Indians as well as Chiefs.  We need someone to be the mortar that holds the bricks of the business together.  But perhaps that’s more management than leadership.

For its part, leadership has coined the phrase, “follow me.”  These are the individuals who set the course, stand up for themselves and make the tough decisions.

So, yes, there is a difference between someone acting as a manager, vs. another who is driving forward as a leader.

Which one are you?  Which one do you report to?

Not every employee is capable of selling products or services to potential customers.   The selling process requires an employee to possess a particular set of interactive and persuasion skills, as well as a compatible personality profile (garrulous, self-confident, unafraid of rejection, etc.).   While some employees enjoy the challenge, most want no part of it and only a minority are neutral about the idea.  For those tasked with a selling job it’s typically a reflection of individual personality that would generate success or struggle.

For compensation practitioners having the right person involved in the selling process can be more important than the compensation program itself, because dangling potential rewards in the face of the wrong person can be a waste of money and represents lost business opportunity.

It’s All About Motivation

Success in the selling process depends upon the right motivating elements aimed at the right employee personality.  To do this correctly within a sales compensation program requires the design to take that into account, to focus financial rewards toward whatever engages, whatever motivates the employee to perform in the manner the organization wishes.

Costly mistakes can be made when an organization assumes that all employees will react in the same fashion to the same stimulus.

Have you considered what motivates your sales employees?  Chances are that not everyone would have the same answer.

• Money:  Everybody’s first response is that all you have to do is offer the opportunity for a cash bonus and the employees are off and running.  But in chasing the almighty dollar, employees could also drive your company in the wrong direction – even off a cliff – because they may take the path of least resistance (difficulty) and greatest financial reward.  If those activities fail to align with what the company needs to assure business success, money is not only wasted but used to reward behavior that could be detrimental to the company.

Do you really want to reward the sale of a money-losing or low margin product?

• Mission:  Especially prevalent with not-for-profit organizations, many employees have a “fire in the belly” belief in what the organization espouses, be it products, services or awareness.  This internal value system often provides motivation enough to ensure concerted efforts.  In such a scenario, money is deemed less important (though not dismissed) as a motivator.  Employees are already motivated by the worthiness of the organization’s mission.

Helping others or helping a cause can be reward enough for some employees.

• Brand identification:  If you identify with the organization’s offerings and have a belief in what you are selling, you’re already halfway to becoming an effective sales representative.  For these employees the ingrained belief in what they sell is already present; they just need a  bit of training.

Employees are proud to be associated with a particular product or service.  They’re always wearing the logo shirt and are the organization’s biggest fans.

• Self-motivation:  Here the employee possesses an internal reserve of self worth that helps to make excellence its own reward.  It’s a state in which success in one’s endeavors is self-fulfilling.  The reward system for these employees is often a nice addition, but isn’t necessarily the prime motivating factor.

A certain level of performance would be forthcoming, no matter what financial rewards are offered.

• Challenge:  The mindset here is the joy of climbing the hill, especially if there’s a pot of gold at the peak.  Similar to self-motivation, some personality profiles relish a good challenge, and if you provide a reward for goal attainment, so much the better.

For such employees, the game is always afoot.  They enjoy breaking down barriers, solving problems and grabbing for the brass ring.

• Competition:  The fierce desire to be better than others; where winning (which means that others lose) is critically important.  Note: such employees might not be effective team players.

Sometimes this motivational factor is less about achieving company goals than simply doing better than other employees.  Like a loose cannon, these players may have their own definition of winning, which may not be synonymous with yours.

The takeaway point here is to understand what motivates your employees and then to place your rewards in front of them in a fashion that leads and directs their behavior.

Because if you design your incentive program with the wrong assumptions about what engages your workforce, you’ll risk missing your targets, misspending your financial assets and perhaps not even achieving the required level of success – regardless of the money paid out in rewards.

Designing A Better Carrot

When putting together the elements of your incentive program it would be worth your effort to focus rewards in a manner that recognizes the type of activity and performance you’re aiming for.   That sounds like a simple and straightforward concept, yet is all too often missed by plan designers.

• Change in behavior:  Providing an incentive opportunity should hinge on performance that you would not ordinarily receive.  Don’t waste money paying extra for what you can gain for free.

• Longer term focus:  Building relationships is often just as important as making a quick sale.  Repeat and additive sales are much easier to achieve than finding a new customer.

• Worthwhile rewards:  If the reward isn’t deemed worthwhile (“why should I put myself out for so little?”) the motivational factor will be diminished – leaving you with only employee self-motivation to rely on.  In such a case your incentive plan would be viewed as worthless.

• Reasonable targets:  If the employees don’t see their performance targets as “reasonably attainable,” their effort and engagement will suffer.  They should have an expectation that they can succeed and that they can reach their target.  Without that belief no incentive plan in the world will be able to stimulate the right degree of motivation.

To motivate sales employees to achieve a win-win solution, where they deliver the right performance and achieve financial rewards, while the company achieves operational success, you have to push the right buttons.  But always be mindful that it’s not as easy as simply waving a dollar bill.

Now is the time of year that Compensation practitioners begin to receive their copies of just-published 2012 survey sources.  For many, this will be the “starting gun” event for the annual compensation review of their reward programs – to answer the question, how competitive are we?  How much are we going to need to spend next year?

Granted, the Finance folks have likely already locked in their plans for what the budgeted payroll spend will be for next year, but on or about Labor Day HR and Compensation will gear themselves up anyway in preparation to answer the question that the bean counters have already locked in an answer and ran with it.  By November the Compensation people will have their own answer.

As we begin this market pricing process of matching titles and descriptions to the survey data it’s worthwhile to mentally step back a  moment and reflect that, whatever the surveys report as the “going rate,” it’s not like Moses coming down from the Mount with the tablets.  There’s not going to be a crack of thunder and a peal of lightening to accompany the revelations gleaned from the survey source.  There will be no “Aha!” moment of, “so that’s what we need to pay.”

And anyway, it’s not like you have to do what they tell you.

Feel the pulse

How often have you heard a manager say, “I can hire for less than you show the market rate.”  Clients tell me that all the time.  I tell clients that all the time.  Of course you can.

Surveys aren’t meant to tell you what to pay, but only what others are paying.  And that figure only represents what participating companies are reporting – which of course is not exactly what everyone is doing.

But how many managers understand or acknowledge that qualifier?  How many read the small print behind the figures?  And how many have their blinders on and simply see the figure on a spreadsheet or report and run off with the number?  Think of Chicken Little being hit on the head, only instead of a portend of doom our little Compensation rascal is scrabbling about, telling anyone who would listen that they have the answer.

So have a care; don’t think to use surveys as the “answer man,” or having the “smoking gun” for your compensation issues.   Survey data shouldn’t replace either common sense or your professional judgment.  Senior management is expecting you to understand and evaluate what you gain from your information sources.  Only then, with a balanced perspective, should you recommend a particular course of action.

Anyone (almost) can read a survey.  It’s what you do next, how you interpret the data to form conclusions that lead to recommendations; that is what proves your worth as a Compensation practitioner.

Diminishing value

The question mark left from reading compensation surveys is an especially sensitive issue for those working on the international stage.  There the well-known limitations and even scarcity of robust data sources means that reported compensation figures are best used to provide only anecdotal information, with plenty of “yeah, buts” to qualify what’s being reported.

However, management doesn’t like to hear that.  They want to pin their hat to the answer, just like they prefer to do in the U.S.  It gives them a  comfort, something to point at; something to blame if criticized.  Only overseas there is even less ability to provide common usage trends and true “market” rates.  There just aren’t enough companies participating, not enough identified segments (industry, revenue, region, etc.) to have validated figures that you can point at, can try to match.  Every reported figure should therefore have a list of qualifiers behind it.  If only someone would be paying attention.

So use caution before explaining away your recommendations by saying, “but, the survey says . . . ”

It’s what you say that’s important.

Creative Commons image courtesy of Ivan Walsh

Most practitioners in Human Resources and business management tend to agree with the concept of pay for performance – that increases in pay should be linked in some manner to an employee’s performance on the job.  However, I find it valid to cast skepticism over some organization’s implementation and administration of the internal policies and practices tied to this concept.

Sometimes walking the talk can be a challenge.

When 90% or more of an employee population receives an annual salary review and corresponding increase, one has to question whether it’s job performance or tenure (“it’s been twelve months, where’s my pay raise?”) that’s the catalyst for the increases.

If you are one who advocates a pay-for-performance culture, how does your organization deal with a pay delivery system that in application may have conflicting practices?

• Narrowing the focus of reward efforts by recognizing your better performers with markedly larger increases than their lower performing colleagues, or . . . .

• Broadening reward efforts by granting increases for everyone who “did a good job” for the past 12 months.

But can you do both?  I don’t think so.  You won’t have enough money.  The “feel good, pay everyone” approach is self-limiting, because you won’t be allowed to spend more than the budget you’ve been given.  Discretionary funds are limited, so you can’t simply shrug your shoulders and complain that you need more money.  You’ll have to work with what you have.  To do that you’ll have to take a stand – by deciding the who, why and how much.   Money-laden reinforcements will not be coming to save your promises.

The Decision

Most managers want to be liked by their staff, so they want to be able to dole out rewards as broadly as possible – but perhaps for reasons that upper management wouldn’t agree with.  Some examples: to foster the team environment, to keep employees from quitting, to stifle promotional transfers, to avoid looking bad (why are employees leaving a particular manager?) and to avoid adding to their own workload (recruiting, training, time lost, picking up the slack) when someone is being replaced.

At the end of the day the manager’s agenda might really be about themselves.

Think about it; when there’s precious little money available to reward employees, does your organization still believe that it’s important to pay more for higher levels of performance?  That better performers deserve more?  To accomplish such a feat would require taking money from one employee and giving it to another.  There’s no other way.

While managers would agree with the principle that better performing employees should be paid more, when reward monies are fixed (and you can’t simply blow the budget) how do they balance their conflicting pressures?

Do they:

• Accurately and objectively assess performance?

• Recognize higher levels of performance by paying extra?

• Penalize those who haven’t performed by granting lower increases, or by passing them over?

• Give average increases for average performance?

•  Take monies saved from lower performers and give it to those who perform at higher levels?

•  Blame management that there isn’t enough money for everyone?

• Take from Peter to pay Paul?

Taking from Peter

As managers are pressured to make pay increase decisions they should focus on their higher-performing employees.  Those are the ones who are the most marketable, who will always have the option of leaving, and are the most vulnerable to competitor poaching.  And as to the rest?  Average performers are much easier to replace, and their departure would be much less disruptive to business operations.

Sound harsh?  Does it seem as though this tactic isn’t fair to everyone?   It does appear that way, but an effective manager has to discriminate rewards in favor of those who contribute more.  With only a set amount of monies available it’s their responsibility to spend the resources they have as effectively and efficiently as possible – in order to generate the greatest return for the organization.  Because if the better employees do start to leave, the organization will be in a world of hurt much more painful, more financially disruptive than if it had been the lower performers who had left.

Besides, whoever said that doing it the right way was the easy way?  Managers like the money, the title, and the status that they receive for being called a Manager, but from time to time they’re called upon to earn their position.  Sometimes they have to make decisions that aren’t easy, that won’t please everyone, but are still the right decisions for the organization.

However, managers are often reluctant to actually manage performance assessment and rewards delivery for their staff, even though that responsibility is a critical element of managing employees.  They’d rather pass the buck, blame HR or do whatever they can to avoid making hard decisions that directly impact their employees.

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The next move is yours.  Are you going to manage or will you simply play it safe and go through the motions?  Will you make a stand or pass the buck?  Will you make the decisions that a manager needs to make, or throw out some lame excuse like “I’d like to give you more money, but HR won’t let me.”

It’s time for you to manage.  Perhaps it’s time for you to take from Peter to pay Paul.

What do you do when an employee informs you that they have just achieved an academic milestone:  a college degree, an advanced degree, or even a certification from a professional association?  After offering congratulations, do you take them to lunch, perhaps tell them to take the next day off, or do you do more?

Do you provide a specific reward for that accomplishment?  Perhaps a salary increase, or a promotion?

Many employees seem to expect that, when they receive academic or professional credentials – something that comes with a piece of paper suitable for framing – that they should receive an increase in pay, a bump in title, if not an outright promotion.  “I’m more valuable to you now,” they seem to imply.

However, if you don’t need another MBA graduate, or a senior engineer, legal counsel or whatever, should you pay extra to have one?  Should you increase your labor costs to gain something that you don’t need?

Some managers feel compelled to react with salary / title increases; they want to acknowledge the employee’s personal achievement and avoid the risk of de-motivating good people.  They especially don’t want to lose someone who is ambitious and career-oriented.  Such a loss might be perceived as a mark against their own management capabilities.

But is raising the cost structure a good business decision, or a feel-good, I-want-you-to-like me emotional knee-jerk reaction?  Do these managers have the right answer to the “why more money?” question?

If you already pay for educating your employees – through some form of tuition reimbursement – should you be expected to follow up with even more expense once the company-paid courses run through to completion?  Chances are you don’t require employees to remain with you for a defined period afterward, right?  So, technically they could use your money to prepare themselves to work somewhere else.  Where is the fairness in that?

Pricing a piece of paper

Have you asked yourself, what’s the market value of an employee with a higher education or certification level?   Compensation surveys don’t differentiate on the basis of whether employees have a particular degree or other credentials.  In some cases educational requirements are mandated before one can assume certain roles (Engineer, Attorney, Nurse, etc.).  At the end of the day what the market highlights is the common pay rate for experience, for knowing the job and being competent at performing it.

Does the market say a premium should be paid?  No.

Perhaps a promotion then?   But job grades are not typically influenced by formal education levels either, and no credible job evaluation system scores on that basis – only equivalencies.  Job evaluators recognize that, while what the employee knows how to do (job knowledge) is critical, how that knowledge was attained is less important.  The professional seasoning of life experiences does count, trumping the piece of paper.  Book learning is not an evaluation factor.

If ultimately the newly certified or graduated employee returns to the same job function, their day job, then what does the company receive for granting extra money?  If the job role remains the same, where’s the ROI to balance an increase to fixed costs?

What you need vs. what you have

If you use any sort of position control process, you should know how many heads for each job the organization needs to fulfill its mission.  When you create more heads than you need, your costs will increase but likely not your effectiveness.  So why would you pay for an extra MBA, senior engineer or legal counsel – when you don’t need them?

You can acknowledge an employee’s personal achievement without increasing your fixed costs and possibly creating disruptive internal equity concerns among other employees.  Remember that fair and balanced treatment is a perceived state-of-play, and the employees are always watching.

So offer your congratulations, take the newly minted certificate holder out to lunch, and give them a day off.  Tell them that they’re now eligible for advancement when a higher position comes available – but have a care before raising your fixed labor costs without a corresponding increase in ROI.

They may be more valuable to you – but that is for tomorrow.

I don’t get it.  Can someone help me understand?  Why are some companies interested in what other organizations are planning to do next year with their midpoints?  I presume that’s the case because compensation planning surveys compile and report such data.  But who really cares?  Aside from anecdotal information (presenting multiple data points) I have never understood the importance of this reporting.

To be fair, perhaps my career experience is the exception, as I’ve never used that data in program analysis, or even reported it.  Or even been asked about it.  But somebody must be using it.  Somebody.

Say what?

I can only guess that I’ve missed something ; maybe I should have taken another WorldatWork class, because the issue has never arisen from any employer I’ve dealt with, either as  an inside Compensation practitioner or as an outside consultant.  Which leads me to wonder, do some companies actually recommend raising their midpoints on the basis of a survey that projects what other companies might do?  Is that metric as important as what is being paid for particular positions, or what the average merit spend might be next year?  How does an average projected average salary structure movement relate to any company’s particular situation?

Can you envision recommending to senior management that midpoints be raised by X% simply because a survey said that’s the projected average midpoint increase of other companies?  Surely there should be more to the decision.

For me the focal point of survey analysis has always been to determine the competitiveness of current pay practices and established midpoints.  In planning for next year we would adjust those midpoints to either remain competitive (midpoints are already there), to improve our standing (midpoints lag the market), or freeze them (midpoints already pegged above market rates), no matter what a survey reported as projected common practice.  Am I wrong here?  I’ve always thought that my company’s salary structure should move in relation to our own competitive positioning, regardless of what anyone else is doing.  Otherwise we could be making improper adjustments – either too much or too little.

And what about the expense involved?  Contrary to what some pundits have assured me from time to time, midpoint growth can create costs.  There’s no free ride.

• When an employee’s base pay drops below salary range minimum at the start of the fiscal year, do you cover that amount – or wait until the next scheduled employee review?  The fair thing to do would be to immediately raise the employee to minimum and then (or later) grant a merit increase on top of that.  There’s your extra cost.

• Higher midpoints push experienced employees further away from the internal “going rate” – creating pressure to restore the balance.  Have you ever explained to a long service employee why they weren’t being paid at least the midpoint?  Awkward.

Practitioner consideration

When are the estimates for these midpoint movements made, and how accurate are they?  They’re really only guesstimates, and many times the survey questionnaire is filled out without due consideration, just to get the form completed and submitted.  After all, most companies won’t confirm their new structure commitment until @November (senior management signoff), while the structure movement questionnaires are completed in mid-summer.  How good a guess can you make in August?

Btw, a company’s salary structure (grades and salary ranges) is usually segmented along the lines of hourly, non-exempt, exempt professional, and management employees.  To gain a clear picture of your competitive marketplace you should consider that each segment is moving at a different rate.  For example, it’s likely that management pay is growing at a different rate than that for hourly employees.   Suggesting that only a single number would reflect your entire population would distort the reality of your multiple markets.

Now I suppose there may well be organizations out there that have changes to their reward programs contractually tied to “market movement” or even structure (midpoint) growth, but do you think there are that many so governed?  And is it a process that helps the organization?

Bottom line, can someone tell me why tracking other organization’s guesstimated midpoint movement is a valuable analysis?  I’d really like to know.

When it’s a waste of time and money.

It is often viewed in the workplace that training employees is a critical requirement for upgrading skills, developing future leaders, and in general improving the competencies and abilities of those being trained.  The common format is usually internal classroom sessions, but the effort could also include attendance at seminars, workshops and even professional conferences.

The need for developing employees is a concept hard to argue with.  I fear though, that in its application those who oversee the responsible training areas often miss the mark, failing to provide behavior-based training programs that deliver as advertised.

My concern is not with technical knowledge, learning about Windows 8, SAP HR Modules, or the latest social media applications for business, but the subjective side of employee development; i.e., leadership, motivational principles, improving your career prospects, etc.

Ask yourself, can we measure the effectiveness of our training programs?  Or do you simply equate effectiveness with the number of employees trained?  And do you count “trained” as having attended a training / education session?

Therein lies the rub

Recently I attended a self-improvement workshop and during the course of that experience found that my attention continually wandered off topic.  Does this sound familiar?  Why does it happen?

• Too many buzz words and catch phrases: The presenter used several phrases that I didn’t understand (i.e., “resonant relationships”).  Such language bombs disrupted my link with the presenter as I struggled to figure out what the term(s) meant; while the flow of the presentation moved on, I’ve fallen behind.

• Conceptual overview vs. practical advice: We’re all in favor of basic principles like “Motherhood, the Flag and Apple Pie,” but how do similar generic concepts help us today?  Pontificating in broad generalities, or using vague and confusing corporate-speak language may sound like one is a credible speaker with a point to make, but that won’t benefit participants when they return to the office.  They want practical advice.

• Little direct connection to rest of your day: A personal favorite complaint, where the participant can’t make a connection as to how the presenter’s message is going to help them on a practical level.  The dialogue sounds good, but doesn’t move the practical knowledge meter very far.

Can the training event pass an effectiveness test?

If your intent is to avoid a headcount measure of training success (we trained / educated “x” employees this year – aren’t we wonderful?), ask yourself a few questions before setting up that next “opportunity.”

• Can you measure the impact?  Will you know upfront what will be gained from the experience, and what practical applications can be taken from attending?

• Is common sense a focal point? Understanding broad based concepts has its place in the employee education process, but unless the discussion of those concepts is connected to the real world you face daily, you should question the practical value of the session.

• Can you spread the learning?  Would a participant be able to explain to other employees what they learned and how practical applications might be forthcoming?

• New vs. rehash: How much of the presentation would be new information, vs. a rehash of what has been heard before?  Is there a value to repetition?

• Boring presentation: Being a subject matter expert is not the same as being able to talk to an audience about that expertise.  A read-from-the-podium lecture style, when combined with a dry topic and a monotone voice can kill audience engagement within minutes.

How to do know whether an audience is paying attention?  All it takes is watching how the participants act during the session.

• Watching the clock:  When is this session going to end?  When is lunch?  Are we having a break?

• Checking email: Everyone’s smart phone has an email feature.  Some employees try to be subtle when checking in, while others are more blatant.  None are paying attention to the speaker.

• Day dreaming: Fixing the eyes on a distant spot and letting the mind wander far afield from the topic at hand.  The eyes glaze over and the head starts to nod, indicating that a mid-day doze isn’t far off.

• Planning this article:  Or conducting other mental activities, where the mind is engaged elsewhere.

The speaker should be aware of these activities, and try to modify their presentation to keep engagement as high as possible, but too often their prime goal is dispensing the material at hand.  The room could be empty.

Btw, I confess that the key elements of this article came to me while attending that self-help presentation.  I was guilty of several of the above “activities” – instead of paying attention to the presenter.

When is Training a bad idea?

So be careful.  No one would disagree that training employees is a worthwhile investment of company time and effort.  Likewise for attendance at workshops, seminars and conferences.  Affording employees the opportunity for personal and professional growth is a valuable part of your Total Rewards program.

However, not every offering sold under the guise of training or self-development is a worthwhile effort; worth the time, effort and money.  Often times these external events are more boondoggle than learning exercise, offered more as rewards and networking exercises than actual learning experiences.  If that’s your intent, well and good.  Just don’t kid yourself that your employees are being “trained.”

As to internal training sessions, avoid the knee-jerk headcount metric of assessing the value of your training efforts by the number of employees exposed to the material.  That sort of assembly-line “training” is more about process than results.  Find a way to measure whether your training is effective, or isn’t.

Bottom line?  Fluff training is a bad idea when your time and money is wasted in the process.  Know the difference.

There are some organizations out there where Human Resources and the Compensation Department maintain control over exactly how much is offered to a candidate for employment.  HR uses a company-specific formula to decide the exact amount that can be offered to a candidate.  Front line managers are not able to override those decisions.  Appeals are judged by the original decision-makers.

“You’re authorized to pay $14.25/hr, but you can’t offer $14.50.”

In these instances a company’s employment procedure mandates that someone in Human Resources (usually a compensation analyst) assesses the value of a candidate’s background via a formula, a matrix or even a dartboard (tongue-in-cheek) to determine the amount of money that the line manager would be authorized to offer.

This assessment counts periods of time from the resume that the candidate has demonstrated certain skills or acquired particular experiences.  These “scores” are inserted into a formula or other decision-making process that in turn spits out “the rate.”  Qualitative assessment of such skills and experiences may not be a factor, but if so is not made by the hiring manager.

It’s also likely that salaried candidates are handled in a similar fashion, as would be promotions.

The rationale

What’s the reasoning behind such strict control of pay decisions?  In most cases a tight leash on managers was established due to a lack of trust between the senior leadership and those who manage the employees on a day-to-day basis.  It’s the leadership view that:

• Managers can’t be trusted to spend the company’s money effectively or efficiently

• Managers tend to make emotional vs. business decisions, therefore increasing company costs

• Tight budget control is necessary to ensure that inappropriate decisions don’t overplay available funds.

Over time, such a restrictive environment will have negative repercussions – for the manager, the candidates and ultimately for the business itself.

• Managers aren’t allowed to manage pay for their employees.  They do what they’re told.  This is where the finger pointing starts.

• Decisions about the worth of a candidate are made by “bean counters,” outsiders, and not those better able to assess the impact of a candidate’s background and experience.

• Internal equity can become distorted as policy over principle restricts managers from taking corrective action to balance pay between employee experience / performance levels.

• Managers aren’t allowed to develop professionally when missing a key element of their responsibilities.  The next generation of leaders is not being prepared.

• Managers lose faith in Human Resources.  HR becomes an adversary.

Is this a good practice?

Those who set the pay rates for the line managers run the risk of developing a “God Complex,” where the finality of their decisions is taken for granted.  Managers have little option but to comply, even at the risk of creating additional difficulties with their staff.  Over time such control can be abused (“absolute power corrupts absolutely”) by those following by rote policies, formulae or simply what they believe is appropriate pay.

Line managers are left struggling to cope with these decisions, to explain inadequate offers to candidates, to suffer through internal equity distortions that leave their staff vulnerable to external poaching, or simply to have their better employees start looking elsewhere.

Allowing managers to manage, to let them have more flexibility in the pay decision process, can be a win-win for everyone.

• Managers: greater opportunity to manage their staff and the company reward programs.  Greater opportunity to grow and develop as leaders.

• Human Resources: allow practitioners to focus on key issues, not the minutiae of everyday decision-making.  Such flexibility would increase HR credibility as advisors, not gatekeepers.

Give line managers parameters to work within (i.e., no offers above midpoint or below salary range minimum, no more than an “X” percent gain for the candidate from their last employer, no sign-on awards without approvals, etc.).  That would provide a degree of standardization without stifling creativity or the organization’s ability to attract the right caliber of employees.

Being forced to gain approval for every offer, for depending on HR to decide what the offer should be, diminishes the credibility of the manager in everyone’s eyes.

That’s never a good thing.