A disgruntled employee has knocked on your door.  “Frank Martin” has always been considered a solid, dependable worker, someone his supervisor has repeatedly rated “satisfactory” on your company’s performance rating scale.  But Frank is not happy with his pay increase.  He’s here to complain – to you – now.

Does this scenario sound familiar?  Have you ever been in the HR Manager’s position?  What you’re seeing is probably the result of poor reward program communications.  It’s likely the employee doesn’t understand how individual increases are determined, and the supervisor is either similarly in the dark, or wishes to pass the problem along with a shrug of the shoulders.  He doesn’t want Frank mad at him!

Companies find themselves in this quandary whenever their efforts to explain compensation isn’t given the same thoughtful care as reaching out to customers.  Oftentimes the task is assigned to speechwriters in Corporate Communications, who tend to sound like politicians or lawyers: speak broadly but offer little substance, suggest complications that confuse the issue, point fingers of blame and then tell the audience not to worry.

A common tactic is a single shot “dear employee” memo, a sanitized communication crafted to fit the “everyman” common denominator.  This technique is often further abused by telling employees only the “what,” as in what will happen, but placing little emphasis on the “why.”  Though isn’t it the “why” that employees most often question?  What they want to understand are the reasons behind the “what,” especially if the news is bad.

Who should have the answers?  The first line of upward contact is the direct supervisor, followed by the section or department manager.  These are the folks who employees deal with on a daily basis, and hopefully already have a level of trust established.  But as is often the case when communications have been poorly considered these contact points tend to show a blank face, pass the buck out of ignorance or avoidance and send their employees to HR.

Word around the office, says Frank, is that increases this year are 3.0%.  Since his supervisor told him he’s doing “a fine job,” he had expected more than what everyone else received, but his increase was only 2.5%.  That’s not fair.   When he complained his supervisor told him there was nothing to be done; there was a formula that everyone had to use.  Anyway, HR set the rules and he couldn’t do anything about it.  The supervisor even suggested that he had wanted to do more, but his hands were tied.

Supervision should know where the 3.0% came from, and how Frank’s increase relates to it.  It should be their responsibility to know, and the company’s responsibility to tell them.  If Frank was the victim of a formula that dictated his increase, his supervisor should be aware of the rule and understand the rationale behind it.

Having these answers will provide the “why” that employees want to hear.

So Frank is coming to see you, his HR Manager.  He’s worked up a steam of righteous indignation and hasn’t been quiet about how unfairly he’s been treated.  Chances are several other employees already know what Frank wants to talk about.  They’re watching outside, waiting to see what you say.

Are you prepared to answer Frank’s questions?  Are you ready to explain how the company’s pay-for-performance system works – and how the process relates to an individual increase?  Or will you pass the buck yourself, uselessly quoting a policy document or sending the employee on their way to the Compensation folks?

The above scene occurs time and again, regardless of industry, company size or geography.  Each time an opportunity is lost for a company to build a better relationship with its employees.  Because the impact of misguided communications is usually a disengaged employee, one skeptical of the company’s intent and likely to spread a negative message to coworkers.  Left to fester, negative attitudes can easily become a wider employee relations problem as morale worsens.  Once the company is viewed as an untrustworthy partner in the working relationship, it will take a major effort to make things right again.

Does the company care about how employees think and feel?  Does senior management share a concern about morale?  Don’t they need an engaged workforce?

The unfortunate truth is that some companies treat employees as a commodity, similar to an electrical appliance they can plug and unplug at will.  This management may not even be aware they are shooting themselves in the foot through their indifferent treatment.  They may not care.

However other companies do see the direct connection between an engaged workforce and increased productivity, reduced waste and down time, better customer service and customer relations – and an improved bottom line.

Employees for their part don’t want platitudes, generalities or excuses.  What they want are straight answers, honest communications and equitable treatment.  An employee’s ability to “tough it out” in hard times is directly proportionate to their understanding that treatment is equitable and that management is sharing the load.  Woe unto the Company who is reducing its workforce while handing out generous management bonuses.

To start building and maintaining a trustworthy relationship with your employees, look at the pay issue from their perspective.  They’re asking for straight answers to the questions that concern them, honest truths that treat them as valuable and appreciated members of the employee community.  Don’t attempt to confuse, complicate or generalize your message.  No bland “corporate-speak” allowed.  Such attempts will be mistrusted and ignored.  Employees will separate the facts from the fiction, and are able to handle the truth, as long as they believe you are being honest with them.

Whether it’s a flat revenue outlook, lower earnings expectations, competitive weaknesses, challenges over affordability, the need to reward better performers over average, or a hundred other business realities, you would be better served to be honest with your employees.  And spread that message as widely as possible.  Consider the traditional memo as only one tactic in your repertoire, as effective communications is repeated communications.  If the person on the other end of your message doesn’t get it, doesn’t trust it or even doesn’t listen, then you haven’t communicated at all.

If you lack answers for your employees, get them.  Learn how the pay plans work.  Become part of the solution by ensuring you can answer the questions your employees are going to ask – or have the wherewithal to get them answers.

And once you are aware of the pay programs affecting your employees, the “why” as well as the “what,” make it your responsibility to see that your front line supervisors and managers get the same message.  No more passing the buck.

Perhaps then you will have fewer awkward meetings with the “Franks Martins” in your workforce.

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

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

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

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

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

Handling the angry employee

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

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

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

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

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

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

• Keep the conversation about the employee, no one else.  While you’re willing to discuss how the employee facing you is being treated, you should not open the conversation as to how other employees are being treated.  There are too many variables at play here, but perhaps most important is that it isn’t any of the employee’s business – as long as they themselves are treated correctly.

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

• Don’t get defensive.  Avoid being trapped into defending the company’s pay programs against the employee’s “research” into market pay.   Company pay programs are typically developed by professionals (again, in companies of any size), and it’s likely that the employees is using biased and simplistic figures.

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

• Don’t make promises, especially if you’re not authorized.  And don’t use throw away phrases like “I’ll look into it” or “let me talk to HR”, unless you mean it.  Unless you are actually going to take up the employee’s issues and run with it.  Because that will obligate you to report back to the employee, thus initiating another awkward conversation.

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

Note:  if perchance the employee has a point, and can make a case for improper treatment, don’t be a stickler for the “rules” but immediately raise the matter with higher ups and those in a position to further review and institute changes.

When it’s time to fix your Compensation program, and you’re the one in charge, what do you do?

Suppose you’ve just been promoted to the Compensation leadership role in your organization, or you’ve just been hired and inherited someone else’s legacy.   Perhaps you already have ownership, but have recently experienced an epiphany that demanded corrections and adjustments, or maybe you simply have the boss’s enraged shouts still ringing in your ears.

Whatever the catalyst, suppose you suddenly face a situation where you need to fix your compensation program; how would you go about it?  Where do you start?

What would you do?

Check your points of pain

First things first; where does it hurt?  The clarion call of action is coming from . . . somewhere, so find out and determine what those burning platform issues mean for your business.

Typical problem areas would include the following favorites:

• High turnover: have your avoidable separations (excluding deaths, retirements, relocations, etc.) reached a level that has attracted senior management attention – and concern?

• Recruiting: has the Staffing section complained that it’s become increasingly difficult to attract the right caliber of candidate?  That you aren’t paying enough?

• Payroll: is the cost of labor considered too high?  Too many FTEs?  Cumulative employee expenses are out of control?

• Morale: has your organization flunked the latest employee engagement survey – and fingers point at Comp?

Or is it something else that is poking you in the eye, causing the organization to consider its compensation programs as more a problem than a solution?

Look and learn.  It’s the first step toward a solution.

Take a health examination

Next, extend your research beyond the obvious and look under a few rocks for what you aren’t being told.

Start asking questions of key management personnel regarding their views about how healthy (effective, efficient, performing as intended, etc.) are your reward programs.  Talk with line managers (those who operate in the trenches) to gain a perspective from the other side of the desk, where employee friction points make the most noise.

Then review your compensation metrics (you are using metrics as a statistical aide, aren’t you?) to determine whether the numbers are telling you a story that you might not have noticed before.

For example:

• How competitive are your actual pay levels?   When was the last time you conducted a competitive analysis?  What did it tell you, and more importantly, what did you do about it?

• Is grade and title inflation boosting costs without adding value?  Bogus titles and inflated evaluations, often used to salve an employee for whom you can’t provide cash rewards, are not  harmless gestures.  Those backdoor tactics cost real dollars, without providing a corresponding return in performance, productivity or engagement.

• What is the average performance rating, and how does that correlate with the success of the business?  If the employees tend to be rated as above average performers, while the business is having an average year, that disconnect is costing you money.

• Do you segment your employee population?  Not everyone’s external value changes at the same rate, nor does the market move in lockstep.  Find out how different employee groups (non-exempt, exempt, professional, management, sales, executives) are being treated (pay rates and trends).  You may have problem pockets, not universal trends.

Chances are that the statistics from your metrics database will validate the concerns raised from your interviews – and focus your corrective actions.

Reinforce the existing infrastructure

Likely you already have in place a salary structure, complete with grades and salary ranges.  You may even have multiple structures, based on employee segment, specialty departments or geography.  Make sure they are up-to-date.

Consider preparing a Compensation Administration Guidelines document for your managers, as a aid in applying standards of consistent treatment for your employees.  These guidelines would lay out in a single voice the policies and procedures to be used in managing your reward programs.

When are performance reviews conducted, how large are promotional increases, how are exception requests processed?  How are jobs evaluated, who is eligible for incentives, and how do you use geographic differentials across the country?  Who has to approve what actions?

And what are doing about Management training?  How do you ensure that those empowered to spend the company’s money (hiring, promotions, performance increases, etc.) actually understand the intent of your compensation programs?  Or are they making a series of well-intentioned emotional decisions that spend the company’s money without concern for financial operating pressures?

One could argue that focused training is a minimal cost solution to the problem of managers wasting the company’s money through ill-advised pay decisions.

Get your message out

Once you have determined where the problem areas are, their magnitude (impact) and the prioritization of gaining solutions, you should consider taking the offensive to make sure that your message is the one employees are talking about.

Note: most other corrective steps are defensive in nature, like putting your finger in the dike.  Survey analysis, salary structure redesign, performance appraisal modifications etc. are all reactive in nature, fixing a problem.  They don’t by themselves attack what could be your most serious challenge – employee perceptions.

• Explain out competitive you are.  Employees will never assume that you’re paying competitively.  At best they consider you average.  If you’re doing better than that, you’d better be telling folks.  Repeatedly.  Because paying above average rates to employees who think you’re average – is a waste of money.

• Use reward statements to show how much the company does for employees.  Have you ever added up how much your organization spends for the betterment of employees, for everything – not just cash?  Consider voluntary as well as required benefits, statutory obligations like social security and workers compensation, vacations, perquisites, recognition programs, company-sponsored programs, cafeteria, employee discounts, tuition reimbursement, stock purchase plans, community involvement programs, the parking garage . . . the list can be quite extensive.

Get your arms around the issues, identify your pain and priorities, communicate with employees and get started.

Have you heard this complaint before? “The Company would rather pay more to a green outsider than give one of us insiders a decent promotion”?

How have you responded?

The reason for the gripe is that, when considering two individuals for the same job the employee on the inside oftentimes will be offered a lower salary than if the company went outside to hire a stranger.  To compound the insult, it is not unusual for managers to ask insiders to train and orient the new ‘wunderkinde” to learn how the company operates.

Aggrieved employees feel that an insider already knows the company, the people, the products / services as well as the relevant policies and procedures.  That knowledge and experience is an advantage, they say, shortening any learning curve and cultural orientation.  And the “fit” has already been established. Taking on the role and responsibilities of the new position and not being paid the “going rate” seems unfair – actually a penalty for being an insider.  It’s as if the company realizes they don’t have to pay as much for an existing employee, that the time spent in the company somehow reduces their market value and limits a willingness to pay a competitive wage.

Some insiders may feel that the technical experience they have gained in their current job could be used in the new position, so that in effect they have already prepared for the new role.

However, the prevailing practice seems to be that, when a company looks to the outside recruiters will be instructed to search for someone who already meets all the qualifications of the job; an experienced candidate who has already performed the job, whose only learning curve would be a short term acclimation to the new company’s policies and procedures.  They can hit the road running.

Outsiders are considered to be free of “baggage”: no biases, preconceived notions or internal social network, and are thus considered more able to become immediate agents for change / improvements within the company.

You should also note: if someone already has performed the subject role the chances are good they are already being paid at or about the competitive or going rate.  If that is the case then the company would be compelled to pay a premium in order to attract such a qualified person.  The offer of employment would likely have to be above the going rate (or above the midpoint in some companies).

Here’s another common office complaint: “I’d be paid more money if I quit and the Company rehired me”

Unfortunately there is some truth to this gripe.  Over time the external marketability of good performers is rarely matched by annual performance awards within the organization.

Merit increases averaging 3.0% (less for satisfactory performance) may not keep pace with competitive wage growth, especially for in-demand skills.  Thus over time a company would find the prevailing external wage greater than what they are already paying experienced people.  And if you have to hire an experienced person you would likely have to pay more than the going rate, thus potentially creating internal equity issues.

You can do the math; if market pay increases at a faster rate than annual performance rewards, employee pay will fall behind.  At some point this will become a serious problem.

The cumulative impact of annual merit increases is a difficult issue to resolve, in that all employees are likely being reviewed at the same time (focal date).  Special treatment requests might create equity or precedent challenges for managers – both of which Human Resources would have warned against.

Managers should therefore take periodic stock of their staff; assess their backgrounds, experiences and performances, with a weather eye toward whether current compensation is both competitive and internally equitable.  To do less would run the very real risk of disengagement and separation – of likely your better performers.

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

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

Bet you won’t do that again!

Perhaps not, but that doesn’t mean you shouldn’t stick out your neck again.  Turtles don’t make for good leaders.

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

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

No pain, no gain?

If you use your mistakes as a learning experience, what would you learn if you never make a mistake?  Chances are your ego would swell with self-importance and what had been healthy self-confidence would have morphed into supreme over-confidence.  You would start reading your own press releases, and on that pathway lies a steep cliff.  it’s only a matter of distance.

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

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

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

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

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

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

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

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

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

Those were the days

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

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

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

I’m betting that’s not the case.

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

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

Some sort of management discretion that would be challenged by letting too many people know what’s going on.

Hiding the crown jewels

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

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

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

Then again, if the grading structure can be manipulated, or job evaluations slanted one way or another, perhaps there are a few skeletons in the closet after all. Perhaps there are little secrets better kept hidden.

If not, then why not post the salary structure of the office wall?  All the grades, all the salary ranges, and all the jobs covered by the compenation program.  For those who like to keep their little secrets, you can cut off the disclosure at the executive level.  No personal data need slip out at all.

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

What’s the big secret?

I think we know.

I remember a childhood football game we often played, a sandlot sort of thing.  Not much organization, just the quarterback (usually the guy who owned the ball) saying to several of us, “you all go long and I’ll throw it to one of you.”

Like I said, not much organization.  What were the chances he would throw to me?  Crap shoot.  So we all ran long and waved our arms like a bunch of loons, whether we were covered or not.  It didn’t really matter what we did, because the guy with the ball would tend to heave a “Hail Mary” pass – just to get rid of it.  Completion percentages tended to be low.

Is that how your company’s annual incentive program looks to you – like a confused bevy of activity, often seeming to lack rhyme, rhythm or reason?  Less reliance on planned objectives and coordinated efforts; more a bunch of independent agents scrambling around and often bumping into themselves?  Success is often a pleasant accident?

The longer your business career the more times you’re likely to see that scenario play out.  So change the playbook.

It’s all about focus

If you want an employee to be successful, and by extension benefit the company, you need to tell them what to do (objectives).  Steer them in the right direction.  Then you need to focus their attention (the carrot).  Make it worth their effort.  You will find that the combination of knowing the target and knowing the reward is a powerful inducement for constructive action.

However, when you provide an employee with multiple objectives, have a care that something important to you may be ignored.  Anything with a weighting factor of 10% or less is throwing your money away.

Why?  Would you change your behavior and focus that new behavior for a protracted period of time for 10% of the targeted reward?  Not likely.  You’d chase the 90%.  But what if that 90% is split nine ways, each being 10% of the total reward opportunity?

Most employees would either;

1) continue about their business (read that, perform in the manner they would have anyway, before there was an incentive opportunity)

2) focus their attention on the easy-to-accomplish

3) focus on what they like to do, whether that’s important to the company or not

What has weight has attention

The natural tendency for most is to attack the problem with the highest reward and least resistance first.  They may even decide to ignore other objectives – no matter the value to the company – if the reward for other objectives makes up the difference.  So if you have an objective with a weighting greater than 50%, in some instances, for some employees that will become their only goal.  Because they’ve figured out that hammering the prime objective would pay out nicely enough, thank you.

It’s not unusual for sales employees especially to ignore small payout objectives in favor of focusing on the bigger ticket reward goals.  Do not assume that minor payout opportunities will provide sufficient motivation to change behavior.  A body at rest tends to stay at rest, unless you make their action and concerted effort worthwhile.

So you’ll need to put your money (the carrot) where it would do the most good, and that means weighting goals so employees know what’s important to the organization.  Drop anything that’s worth less than 15% to you.

Instead of creating a mad dash from scrimmage, your incentive plan(s) should coordinate the planned activities of those you’ve offered variable pay.  Lead with clear objectives and targeted reward opportunities, and they will follow.

It’s easy to waste money.  Making effective use of your reward dollars takes a bit more planning.

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

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

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

One man’s gems . . . .

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

These are provided in no particular order of importance, and only reflect my own experiences.  No doubt I’ve missed a few; thus the never ending list.

• General Adjustment vs. Merit: granting all employees the same pay raise, instead of varying increases on the basis of performance delivered.  Easy to administer is rarely an effective strategy.

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

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

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

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

• The Performance Distribution Curve: using a process that assigns individual assessments of employee performance in a manner set to adhere to a bell-shaped graph.  The operative word here is “assign”.  Nobody likes this tactic, except perhaps the lawyers.

• Ignoring Internal Equity: hiring new employees without consideration of how other like-qualified employees are paid.  There are no secrets, so pleasing one while angering two is a dubious strategy.
• Title Inflation: that meaningless “bone” you toss employees whom you can’t otherwise reward.  This tactic will raise fixed compensation costs without providing a corresponding benefit to the company.  You will eventually regret the decision.

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

To be successful over time, your program should be able to bend, but not break.  This means that sometimes exceptions have to be made, for good business, compassionate or even political reasons.  Not every circumstance will fit into your mold.

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

Another man’s errors

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

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

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

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

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

Have I missed anything?  Are there other ill-considered practices or policies that you’ve experienced during your own career?  As I said, no doubt the list(s) could be expanded.

Let me know.

It’s fairly common these days to find articles written by those who advocate increasing the eligibility of employee incentives.  Their recommendation is to push inclusion further and further down the organization’s hierarchy.  What a grand concept!  Everybody wins, right?  The argument is that all employees affect a company’s success, that each and every will chase the almighty dollar of variable pay, and that the opportunity for ever larger rewards will motivate them to do great things.  All of which would in turn deliver improved financial results for the company’s bottom line.

Maybe.

And maybe it’s not such a good idea after all, when you think on it.  Perhaps it’s a bit of a crap shoot as to whether the corresponding higher compensation costs (which would be a certainty) will result in improved financial gains (possible, but certainly not a slam-dunk).   Let’s take a look at the challenges to be faced when you consider a broader eligibility for your annual incentive program.

What’s the plan?

Start with a re-examination of the basics.  What do you consider an incentive element when designing a compensation program?  My definition is a reward for performance that goes above and beyond the norm, or beyond what is expected.  Thus it shouldn’t be a reward for performance that would have occurred as a matter of course.  The intent for offering an incentive is to prompt a change in behavior, to get employees to do something they wouldn’t ordinarily have done, and to get them to do it solely because they have been offered a financial reward to perform both their regular tasks and to accomplish stated business objectives that go beyond the norm.

That should be the plan.

And because these objectives are noteworthy, you would expect that they would differ from year to year, as the needs of the business evolve and adapt to changing business conditions.  This emphasis on annual objectives reinforces the intent that incentives should be designed to reward effort that goes above and beyond those duties listed in the job description.  They should not be repetitive, year after year.  That’s what the job description is for.

Incentive rewards should also not be provided simply because an employee performs their job well.  That particular carrot should be the role of the annual merit increase.  In fact, such an exercise would be considered “double-dipping”, or paying for the same performance twice.  You should not be using an incentive as an inducement to get employees to perform their expected duties.  Again, that’s paying twice to reinforce the same behavior.  It’s also using compensation to replace the leader’s own responsibility to manage their staff.

Some would consider this using pay as a babysitter.

There are times you win, and times you don’t

When deciding on whether to add a variable pay opportunity to an existing base salary compensation model, you need to ask yourself, “what will the company receive in return for the increased costs (variable pay) of an incentive program?”  If you are planning to increase your targeted compensation costs by 5% or 10% of the base salaries of an affected group, how will you answer the ROI question?

Hint:  You had better provide a business (financial) rationale, and not some subjective phraseology like “survey says” or “everyone else is doing it” or even “it’s the right thing to do.’  Management tends to frown on such trivial rationalizations.

It’s also worth noting that employees lower in the hierarchy have a greatly reduced line of sight between their actions and business success.  This entails having to create quantifiable objectives for performance (you are quantifying, right?) that should integrate vertically with department, functional and / or organization objectives.  If you don’t integrate what you’re telling employees to do, you may find yourself paying out incentive rewards when the company as a whole has not been successful.  Keep questioning:

“Yes, you did it, but was it important?”   Did your accomplishment support the broader organization’s objectives?

As a counterargument to the eligibility question I’m often asked about gainsharing programs.  These initiatives can be a useful method of introducing incentives to select employee groups, who have a direct line of sight to potential savings.  They can affect real change.  However, successful plans eventually kill themselves off as viable gains are achieved (low hanging fruit) and payments becomes less and less robust after the easy pickings are collected.

So, to recap, let’s review the business urgency for lowering incentive eligibility to below the management ranks.

• Is the employee line of sight (performance / business results) direct, or remote?

• Can you quantify the expected ROI?

• Can you balance the increased compensation costs against hard financial gains for the company?

• Would the variable pay become strictly an added cost, or would any portion of base salary be at risk?

If you have a reasonable doubt on any of the above points, I suggest you think long and hard before implementing such a program.  It would be very difficult to dig yourself out of that hole.

Nice guys finish last.  We’ve all heard that phrase before, right?  Which probably means that there’s something to it.

Now why is that?

Because . . . we’ve seen it happen, haven’t we? – again and again.

In the business world all too often the steady and reliable performers, those who follow the rules, who stay on the right side of ethical dilemmas and controversy, the “nice guys” that every manager would like to have on their team – they can come up short when recognition and rewards are being passed about.  They may not fall into last place as the adage goes, but they often don’t gain the credit, the respect and recognition, the rewards to the extent that the “bad boys” do.

Bad boys?  You know them.  Those who at first glance deliver results; however, there always seems to be a “but” or an asterisk accompanying their success.  Annoying little caveats that tend to be pushed aside.

You’ve seen this scene play out time and time again – where these “Golden Ones”, “Favored Sons” or “Teflon Jacks” are recognized, even admired by senior leadership, even though their pedestal may be built on a shifting pile of sand.

Life isn’t fair, the pundits say – but come on!  Are they blind out there?  How many times have you seen the following script play out?

• Personal behavior is ignored and only results are recognized.  This could be arrogance, or unprofessionalism, or even worse.  Employees in this category think of themselves first and foremost, president-for-life of their own fan club.  They are not team players.

• Management beats the drum of “results, not effort” so hard that soon few seem to care how results were achieved.  Just make the sale – or else tomorrow you’ll be history.

• Quantifiable metrics (add up the numbers) outweigh an individual’s style, leadership, ethics, and professionalism.  The focus is more on quarterly results than building for long term success.

• Those who are “connected” (who you know, not what you know) don’t receive the same scrutiny of their efforts that the rest of us do

Do employees see you turn a blind eye to how results were achieved?  They do notice, you know.

Does your management really care if an employee leaves bodies strewn across the corridor on the way to their own personal success?  What does that say about the priorities of the organization, and how they value people?  Does that culture become visible outside the company?  Does that environment become an impediment to attracting the right caliber of people?

Yes, it does – on all counts.  And over time the organization will slowly evolve in a manner that is ultimately harmful to the business.

• External recruiters may change their mind about recommending the organization to otherwise qualified candidates.  When the whispers on the street begin, recruiters take notice.

• As your bread-and-butter contributors see how the organization’s performance-blindness hampers their own career progress, engagement and productivity start to slacken.

• A natural corollary to lower engagement is higher turnover.  The first to go would be those with the most options, those whose performance record would be appreciated elsewhere.

All this is avoidable, of course.  But it takes a certain amount of courage to challenge one of the favored sons.  Especially if your plan is to instead recognize one of the less flashy, steady-eddies you may have in abundance.

So take off the blindfolds and recognize those who are day in and day out helping to move the company forward.  They are the team players.  They are the ones who say “we”.  Your employees know who these winners are.  It would help your organization if you do too.