For many global companies with a direct sales force the design and administration of their compensation program is in a constant state of flux.  It always seems to need a further bit of tweaking, as dissatisfaction follows in the wake of any plan design.  Why?  Every uncomfortable participant who’s on the receiving end, from senior management to the employee pounding the street, feels that they know what’s wrong.  The verdict is that not enough money is offered for successful performance.

Of course.

Somehow though, that knee-jerk reaction seems the easy criticism.  You expected that too, right?  The issue though, goes deeper.  You can have in place the most well-designed incentive scheme for your industry (on paper), but if your quota setting process doesn’t work, you’re in trouble.   Because any corresponding reward design will miss the mark by a margin; poor quotas reflect ghosts, not reality.

Improperly designed achievement targets (recognized revenue, products sold, units shipped, etc.) present objectives that are viewed as unreasonable for one reason or another.   Stretch goals can be a useful strategy, but not when the numbers are considered as out of reach.  That perception guarantees that those involved will not try as hard as they could, because they feel the effort will not be rewarded.

This cynical “can’t be done” criticism is a short step away from employee disengagement (failing employees will start to question their skills – and morale will sink) and the inevitable departure of key sales talent for greener pastures.

Why does this happen?

Everyone complains about money, so it always seems easier to moan and snipe than to implement real change by improving the way many companies establish their sales quotas.  How do they get it wrong?

• The “last year plus X%” strategy: a simplistic approach that hits everyone with the same percentage increase in quota.  This approach rewards average performers and penalizes home run hitters (stretch performance becomes expected and a minimum standard for the future).

• Total revenue target divided by the number of sales representatives: another easy to calculate process, where you simply divide the revenue “pie” into equal portions.  Everyone is treated the same, regardless of personal or territorial distinctions.  But the selling process does differ whether you’re in India, Argentina, France or the US.

• Using a top down “here’s what we need you to do” vs. bottom up “here’s what this particular territory can generate” approach to generating targeted goals.  The management decision on gross revenue is based on what the financial analysts say is needed to protect the stock price (Earnings Per Share – EPS).  Those needs (targets) are filtered down to the territories, usually with a lame explanation of where they came from.

Territory or geographic distinctions become blurred, to the detriment of motivating the sales force.

When your quota setting process relates more to an arithmetic exercise or an illusionary “concept” figure, even generous incentive schemes won’t attract or retain talent, because seasoned sales professionals know the odds for success have been stacked against them.

Unrealistic targets can destroy morale, initiative and employee engagement like rain at a picnic – and how do you recoup from a discouraged workforce? Trust is hard to build, but easily broken.

When a workforce feels that they cannot be successful they tend to give up the effort.  They may even give you up as their employer.

Snap your fingers and fix this.

Why is changing the quota setting process so difficult that management is reluctant to even try?

• A salesperson’s natural tendency to complain breeds skepticism.  Sales people cry “wolf” a great deal, always seeking to better their chances to do well.  The easier the target the happier they are.

• In order to protect the company’s stock price from unwanted fluctuations financial analysts often require the company to commit to achieving certain goals.  When those targets are forced on sales employees, the usefulness of even a highly accurate targeting process becomes moot.

• Some managers like to “pad” targets to ensure that lower performers don’t drag down overall success.  This interference by sales management blurs the line between objective and subjective targeting.

• Acknowledging national distinctions in the selling process may be difficult for some managers to explain.  It’s easier to treat everyone the same, no matter the circumstances.

While an overhaul of your company’s quota setting process is likely to be a hard sell, ask yourself a series of questions to gauge whether your current arrangement passes the smell test.

• Are goals based solely on sales history (last year, average of last three, etc.) or are economic realities of a specific territory considered?

• Is a territory given a target without consideration of who is covering it (junior or senior rep)?

• Is sales management allowed to set goals in a way that the sum of all territories would exceed the total goal? This attempt to “make up” for individual failures by stretching everyone is resented by sales employees.

• How many representatives achieve target level performance?  The lower the number the greater the credibility gap with “targeted” incentives.

Goals for your sales force should be based on a combination of sales history, potential, economic conditions, channel shifts and any other factors that would affect the sales effort.  They shouldn’t be an arithmetic exercise that doesn’t take into account territorial realities, national or cultural distinctions and incumbent capabilities.

One of the most negative management stereotypes is the image of the corporate “yes-man,” that weak-kneed subordinate who is always quick to agree with the boss.   This is the empty suit having no other opinion than what’s expected.  Can you picture the nodding head and vacant smile?

That’s not your picture, is it?

Do you recall the old saying that goes, “see no evil, hear no evil, speak no evil”?  The modern version of this adage describes one who willfully turns a blind eye, refuses to acknowledge and even  feigns ignorance when confronted with activities that they should otherwise say or do something about.

That’s not you, is it?

Do the compensation professionals you know, including the one looking back at you from the mirror, provide objective advice and unbiased counsel to management, or do they simply offer support and justification for what management wants to do?

Do you stand up?

There are always opportunities for compensation professionals to turn a blind eye / closed mouth to improper practices taking place in their organization:

• Finance has lobbied Senior Management that the average merit increase next year should be x%, and now you have been asked for your recommendation
• The performance appraisal process (forms completion and assessment reviews) is poorly handled and rewards are often granted without legitimate justification
• A Vice President wants to create an Office Manager title for a long serving Secretary.  This would also entail a higher grade and promotional increase.

Are you one to stand up and be counted, or do you let these events wash over you without contentious intervention?

• Do you provide Senior Management with an unbiased recommendation, based on your competitive research and an understanding of compensation strategy?
• Do you question those managers who wish to grant increases / bonuses for the wrong reasons?
• Do you strive to hold the line on meaningless titles that increase costs, create employee equity issues and provide the company with little or no ROI?

What’s the worst that can happen?

Are you concerned that having an opinion out of step with senior management will damage your “team player” image?  That your career would suffer because you can’t get along with others, that you “don’t get it”?  Or do you just find it easier to get along with everyone and ride the tide wherever it takes you?

Professionals should give the best advice they are capable of providing, on the basis of their technical knowledge, experience and seasoning with business operations.  Let management make the decision.  They have a perspective that is wider than a singular compensation view, and it’s their company, budget, operations, etc.  Your responsibility is to provide the best objective advice possible, to ensure that decision-makers have their eyes open and understand the ramifications involved.

Life isn’t a tableau of  black-and-white images, but a series of swirling grays.  We should acknowledge that, that there are contingencies and alternative possibilities available.  But we should not temper our judgment and our opinions on the basis of what the boss wants to hear.

Management will generally respect straightforward analysis and honest feedback.  However they won’t respect your input if it’s been tainted by political maneuverings or a “how many ways are there to say yes?” mentality.

Repeat after me – I will add value

You don’t have to fall on your sword career-wise to make a point, to stand up for yourself, to add value to the decision-making process.  Sometimes you just know the direction management is taking, no matter the facts surrounding the issue.  While leadership may be plagued with personal biases that often trump rational analysis, that doesn’t mean that you should step away from doing your job.

One of the best ways to establish yourself as a valuable contributor is to have an opinion, and not be afraid to voice it.  Even when the management steamroller is moving and you have to get out of the way or be run over, you should always provide your professional input.   You can do this by providing options and alternatives, multiple courses of action for management to consider.  That’s where you are able to present your own recommendations alongside the favored management point-of-view.

Get them thinking; that’s your responsibility and how you add professional value.  It’s also how you build credibility and an invaluable personal awareness with Senior Management.

For those of you out there currently “in transition,” or perhaps looking  to make a change from your present employer, at some point in the search process you’re going to have to deal with the “gatekeeper,” the employer’s internal recruiter.  Did I hear a groan?  It can’t be helped, because it’s highly unlikely that you’ll reach the employment offer stage without dealing with this person.  Perhaps a few tips ‘n tricks can help you gain an advantage, one that could make all the difference.

Note to self: You can make this relationship work for you.

The Recruiter’s own performance is being measured

Your success is their success.  Picture a spreadsheet with 10, 15 or even 20 job titles – all open jobs the responsibility of your recruiter.  Every job filled, no matter how, is a sign of good performance  (call it a white mark); every job remaining open past a projected fulfillment date is a black mark.  Recruiters are constantly challenged to produce candidates; the quicker the better.

That’s what they are measured by: finding qualified candidates for open jobs.   While conducting their searches the recruiter can help you with your own efforts, but only if you can help them in turn.  Do you have what they need?  During each interview recruiters consider whether their target can gain them another white mark, and they can’t afford to waste time.  So you need to start your convincing from the first contact.

Their job is to separate the wheat from the chaff.  Which are you?

Recruiters don’t hire people.  They introduce qualified candidates to the hiring manager, who in turn makes the ultimate decision.  Thus another performance measure is how many qualified candidates are brought forward (call it the “second stage “).

If you don’t pass muster (meet their qualifications criteria) they’ll drop your resume like a hot potato and move on.  That’s how recruiters gain a reputation of being cold, unresponsive and lacking compassion for your situation.  Remember the spreadsheet?   Recruiters often lack time for the social niceties of returning phone calls and emails from those not considered qualified.  If you can’t help them you’re pushed off the radar screen.

Engage the recruiter; anything else is a strike against you

You don’t have to be friends, but a positive and polite demeanor is always helpful.   Displaying a superior attitude, especially one laced with tones of arrogance and condescension (you’re an executive candidate, right?) will do more than lose you style points; it could cost you much more.  Candidates labeled “high maintenance” or having a poor attitude tend to get lost in the resume pile.

A smooth interview process serves everyone’s interests;  this is where the candidate remains personable, professional and consistently demonstrates a strong interest in making a contribution to the company.  When you emphasize your conviction that this opportunity is more than just a job to you, the recruiter will see you as a potential white mark.

Help them to help you

The specifics of an employment offer are not developed by the recruiter; they are the messengers who deliver the offer.  However, as soon as you seek improvements (the push back) they become your spokesperson to management and to HR.   Such negotiations are handled by the recruiter acting as a go-between.  They will plead your case (provide the “why?” arguments) to the hiring manager and perhaps HR, so give them the ammunition (specific justifications) they need to help press your case.

At this point the recruiter will want you to succeed, as they have skin in the game now too.  So help yourself by providing specific examples as to how you can help the company.  This will strengthen your case for when the recruiter needs to explain what you want and why you want it.

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Bottom line?  The recruiter can be your friend, if you can help them.  If you can avoid making their job more difficult (remember those 20 open jobs?), if you  can work with them, and can stay positive, polite and professional the recruiter can be your best advocate when it comes to  getting a job offer and negotiating the best terms.

They can get you the job . . . or not.

Your company is seeking to employ a Financial Accounting Manager, and the leading candidate is currently “in transition”.  Human Resources has pegged the market value of the job at $ 75,000 (midpoint), 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.  Relocation is not an option, and he’s 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 our “A” candidate 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, right?  But, wait a minute.   Perhaps it should be a boot in the butt instead.  You make the call.

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.

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

What is the likely future for Bob?

It is always safe to presume that how an employee is treated will become known; otherwise you’ll be stuffing skeletons into a closet – and you know how that trick never ends well.  So when Bob confirms 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 will suffer, dropping from 110% to automatic pilot somewhere south of Satisfactory.  He’ll be going through the motions – not exactly the dynamo you thought you had hired.

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

• And yes, 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, in retrospect; that situation is 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, possibly poisoning other employee attitudes?

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.

It seems that everywhere you turn these days you face a bombardment of professional advice from self-proclaimed “experts”, especially in Human Resources.  These people assure you that they understand your problems and have the right solutions for you and your business.  All you need do is read a book, attend a webinar or better yet contract for their consulting services.

Sounds like a diet pill, doesn’t it?  Simple and quick.

Promises like this cover every aspect of our business and personal lives.  Pick an issue and the answer is out there.  Somebody can help us, and that somebody is our “answer man.”  We only have to listen, watch or read whatever it is they’re offering.

You can’t escape the TV infomercials, the newspaper advertisements, magazine articles or even blog and social media sites without an endless flow of experts telling you that they have the answer you need.

• “Guaranteed to quadruple sales within twelve months”

• “Maximizes HR Effectiveness and value through the use of . . .”

• “Keeping Leadership Talent Engaged”

• “Designing Employee Policies for an International Workforce”

• “The Five Causes of Low Morale – and how to avoid them”

• Etc, etc, etc

You get the point.

Now, here’s the but . . . .

If that’s the case, that the answer is out there – and for a price waiting for you – why do we continue to face the same problems over and over again?  Why are managers still making poor decisions, wasting money and creating employee morale screw-ups from dawn to dusk?  Why do the business headlines constantly bemoan reports describing litigation over wrongful or illegal management behavior, or the dubious business decisions that send companies spiraling into financial trouble?

Isn’t anyone paying attention to the answer man?  Or is the advice simply a load of crap?  Are these experts really just spouting head-game theories and viewing business problems from an academic vs. practical viewpoint?

Whichever it is, these “I have the solution” messages never stop.   Like a constant propaganda stream radio-beamed across the border – the broadcast light is always on.  The buzz phrases may change from time to time, but our desire for quick fixes doesn’t diminish.

My theory or yours?

If the “experts” do have the answers – color me skeptical – we need to ask why their message is so often ignored.  Several scenarios are possible:

• Subject matter authorities often speak over our heads, using buzz phrases and $100 words

• Reading or listening to this stuff is hard work; the text is dry, boring and not often engaging

• Too much of the advice is contradictory to what you read / heard already – so who is right?

• Academics often lack credibility in the real world; they “just don’t get it”

Whatever the reason, the drumbeat of advice is not being absorbed and acted upon – because the problems remain.

Therefore . . . .

I’m struck by the merry-go-round aspect of constant advice without real solutions.  We see a continuous need to enlighten people and businesses on how to be effective, but it’s a need that never seems to end.

Maybe the analogy to a diet holds some truth; consider how many books are out there on that subject – yet up to 30% of the population remains obese.

There’s an old saying, that if you build a better mousetrap, the world will make a path to your door.   If common sense and up-to-date technical knowledge point the way to a better tomorrow, why do so many companies and their leaders stay in the dumb zone?

If the cure is out there, why is the patient still sick?

I’m thinking that the message is wrong, the audience isn’t listening, or perhaps we’re all being scammed by re-packaged “new” thinking.

Which is it?

Have you ever used a babysitter?  This is when you have someone else assume your responsibilities while you take a break and focus on something else.  The babysitter stands in for you, is you during the period of your absence.  Someone else does your job.

Typically we think of babysitting when there’s actually a dependent child involved, but it’s not uncommon for ineffective managers in the workplace to use the same concept when dealing with their employees.  These managers seek to use the pay that their employees receive as a surrogate for leadership – for keeping those workers complacent, retained and generally “in line.”

The practice of manipulating rewards presumes that the employee will chase the money, and will be happy with their lot, while at the same time will not require much in the way of supervision, periodic direction or even meaningful conversation.  The thinking here is that, if I provide you with enough rewards you will act as desired in order to not jeopardize those rewards.  The goal is to place the employee’s attitude and performance on automatic pilot while the manager is engaged elsewhere.

So far, so good.  Not necessarily a problem, right?  The red flag goes up the pole when you ask whether these monies are warranted by either performance or business need, or are they simply bribes?

What are we talking about?

Scenarios where pay is used in lieu of actual management are easy to spot.

• The Grand Giveaway:  Where managers try to give away as much money as they can to as many as possible, not worrying overmuch with distinctions between individual performances.  The key is to build an employee’s appreciation of their manager’s largesse.

• Title inflation: The promise of bloated and meaningless titles that distort organizational structures, for the prime purpose of rewarding employees in lieu of cash.

• Over rated performance:  Play the good guy by over-rating performance during salary reviews.  Culprits are often seen rewarding activity over results.  So look busy!

• Assured compensation: Take the risk out of rewards.  Everybody receives an annual merit raise, everyone earns a bonus.  This fosters an attitude of entitlement.

• Counter-offers: “Let’s make a deal” attitude to keep resigning employees from actually leaving; a dangerous practice that increases costs and lowers morale.

What’s the cause of this behavior?   Managers typically receive inadequate training (if any) on how to use their company’s pay programs, so many use pay as a crutch instead.  Spending the company’s money effectively and efficiently isn’t on the radar screen.  They use employee pay like a club to get an employee’s attention.  And once they have that attention the manager is off doing something else – with the presumption that pay will substitute as supervision and motivation while the manager is absent – kind of like a babysitter.

Weak and ineffectual managers don’t actually manage their employees, in the sense of performance direction, leadership, setting good examples and decision-making.  Instead, they want to be liked.  They want to avoid conflict and they don’t want anyone to quit.  They want employees to get along, and to help foster a friendly team atmosphere they try to manipulate pay in support of their efforts.

It’s really kind of a bribe.

So what is “managing” to these people?  It’s not about making hard decisions.  Too often it’s trying to get the most for their employees, deserved or otherwise, whether the organization gains in the process or not.  The manager is focused on their own interests, and is using someone else’s money in the doing.

Why it doesn’t work

Relying on pay as a replacement for management has a short term effective life cycle, at best.

• Employees see arbitrary equal pay treatment as de-motivating to high performers.  Why bother extending yourself if you’re going to receive the same reward as the guy doing crossword puzzles?

• Employees resent favored-son treatment; the names of those who benefit for non-performance reasons will always become known.  There goes your morale.

• No amount of money replaces the value of honest performance direction and feedback.  Those with an interest in learning and growing appreciate the help.

• Absentee managers lose the respect of their employees, who know what’s going on.  Remember that employees leave managers, not companies.

• While employees will take any money carelessly handed out, the organization will not gain because of it.  So these “rewards” are ultimately wasted.

For managers who need a crutch to help motivate and retain their employees, to help them do their jobs, the above cautions likely won’t make a difference.  Their goal is not to manage, but to get-by, to be liked by their employees and to avoid disruptions to their routine.  This is not leadership, but administration.

But for those managers who wish to make a difference, who understand that managing employees is a challenging and rewarding role, abrogating responsibility through babysitting is not an option.  They recognize it as the opposite of management, a damaging practice that will not enhance anyone’s long term career prospects.

When it comes to paying employees for the work they perform, what do you think your workers expect?

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Does anyone in management ask themselves this question anymore?  Or is the collective attitude these days more typically either 1) “they’re lucky to have a job,” 2) “where are they going to go?”, or 3) my personal favorite, “I pay, you work.”

Where does that indifferent attitude come from?

When employees feel mistreated you will see the result through lowered morale, mental disengagement, reduced productivity and even separations.   Given the risks involved it’s discouraging that not enough of the people in charge actually consider the issue of pay from the employee’s perspective – the people doing the work.

Such an important question should generate a better response than guesswork and bias, shouldn’t it?

Any manager worth the title should anticipate employee issues, especially those with the power to make or break the business.  It’s all about knowing your employees, about being prepared.

Because isn’t payroll your largest single expense?  Depending on the industry it could represent 40% – 60% of total revenue.  Shouldn’t how you handle pay be carefully considered the same way you would the cost of raw materials, the acquisition of a new business, or the financing of more brick and mortar?  You should look at this expense from every possible angle, to better understand the underlying causes, and how you can make it work for you.  To better manage your reward dollars, without harming the business you need to understand those factors that impact employee pay.

Taking that hard look will mean trying to understand the employee perspective – the human factor behind the cost of labor.  It will mean understanding how company pay decisions are perceived by those on the receiving end.

It does help when you think of pay from the other side of the desk.  Employees provide a service and you pay them for it, right?  That shouldn’t be the end of the equation, because money doesn’t manage people – you do.

So, do you know what employees expect from managers, and from the company?  Their basic wants and needs have a direct connection to their performance, and their commitment to your organization.

What do employees expect?

While circumstances among individual companies and employee groups might vary somewhat, it is safe to say that employee expectations fall into several broad categories:

• Competitive pay – no surprise here, because that’s probably what you want too.  You don’t need to be a high payer, and should avoid the label of “law baller,” but you should ensure that the pay opportunities you provide are consistent with market practice

• Opportunity to earn more – employees should be aware that more money is available to them, through pay increases, variable compensation, even overtime as appropriate.

• Regular pay reviews – don’t let employees hang in the wind; avoid the stereotype of employees worrying over how to ask the boss for a raise.  You don’t have to grant anything, but let employees know up front that you’ll be scheduling a review.  Anniversary or focal date is less important than that the employees know to expect a review.

• Timely and accurate payroll – anything less than 100% performance is a problem, as perfection is guaranteed – especially by those lower paid employees who live paycheck to paycheck.  Payroll providers will tell you that you never hear from the 99%, but only from those with problems.  And the calls are always accusatory.  No one ever has a question about their pay; if something’s wrong, you messed up.

• Fair treatment – employees don’t like “favored sons” or special treatment cases – especially if the perception is that they are not deserved.   Recipients will become known, so don’t think of putting any skeletons in the closet.

Do you understand these expectations?  Not so earth shaking, are they?  Do they make sense; do you consider them reasonable?  Are they the expectations that you have yourself for how you want to be treated?

How you and other managers react to someone’s expectations, by either actions taken or in some cases lack of action (ignoring), will set the tone for your employees; you dismiss their concerns at your peril.  You don’t have to do anything, of course.  But your eyes should be open and your decisions should be based on knowledge of what your employees are thinking – and expecting.

Otherwise you’re making decisions in the dark, and how many gems of wisdom come from that process?

Think about whether management treats employees as “we” vs. “them.”  Are they viewed as boxes on an organization chart or as real people?  Are they considered an important asset to the business, or a cost item to be managed (dealt with)?  Whatever the answer, these attitudes will become known.

So take the time to understand where your employees are coming from.  That bit of research will provide dividends down the road – no matter how you choose to pay your people.

In recent months several of my US-based clients faced challenges overseas regarding high employee separations coupled with difficulty in recruiting qualified staff.   These companies were at a loss to understand the cause of their problems, as each felt that they were already providing a more generous reward package for employees then was normal practice in the US.

A quick study revealed that the clients’ international employees were indeed receiving a great deal more than their American counterparts.  However, in many areas they were in fact being given no more than the minimum benefit provisions mandated by statutory requirement.  They were receiving only what the company was compelled to grant.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what government regulations say you must?

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out later that common practice indicated five or more weeks were the norm.   To employees and candidates they offered no more than what they were required.  By ignoring competitive practice they were now paying the price by struggling to build and keep a quality staff.  They had earned a reputation in the local market as a “minimalist employer.”

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to dealing with at home.  Every country is a separate and unique entity, with differences in HR policies, practices, and statutory requirements, each of which must be acknowledged and addressed in order to develop and maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with differing social charges and benefit coverage.

Choosing to operate under the guidance of U.S employment law and US-based corporate practices is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.

Think how you would feel if elements of your own reward package, policies or procedures were based on European or Asian common practice.   Wouldn’t go over well, would it?

If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

When you’re trying to grab the attention of Senior Management, remember this; they like a good story, especially one with pictures.

If you’re addressing your company’s single largest expense, its employee pay programs, the pictures become charts & graphs that illustrate the points being made.

Pictures capture attention and build memories much better than text or even the spoken word.  Show a picture and the image is locked in, while reliance only on text is a risk.  The drone of dry prose can grow boring and is liable to lose the attention of all but your strongest supporters.

Attention grabbers that work: 1) speedometer style formats that graphically indicate the current situation against the target; 2) the green light, yellow light, red light approach, again to colorfully paint a picture that stays in the mind; and 3) pie charts, tables, even regressed lines that tell a story.

People remember images because they capture the imagination.  They have a harder time recalling (and taking to heart) what you said or what you wrote.  So concentrate on your supportive imagery.

Make the story a short one.  I once worked for a CEO who thought any proposal could be reduced to a single piece of paper, with plenty of white.  “If you need more than that,” he would say, “it’s not such a grand idea.”

You need a plan

However, before you settle on the visual format best suited to sell your case you should focus on the data points necessary to make that case.  Remember the old adage that a dream without a plan is only a fantasy?  If you don’t take action steps to convert ideas to reality, what you’ll be left with is smoke & mirrors – with no results to show for your efforts.

For those of you who have ever been on a diet, you treat it like a project plan, right?  Experts advise that participants write down everything they eat, have goals to strive for and milestones to gauge progress.  It helps to have a plan and to keep score – to know where you stand and where you’re headed.

To accomplish this you should create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) – and then establish baselines (current state) and targets for each performance indicator.  This key step will help you understand whether your costs are being contained and whether the ROI on employee rewards is at the level your company requires.

Commonly used HR metrics:

• Average salary / wage

• Compa-ratios (comparison of pay to a range midpoint)

• Count of employees per segment (hourly, non-exempt, professional, management)

• Average performance ratings

• Average annual pay rise for each performance rating

• Count and average promotional and “equity” increases

• Voluntary turnover (employees who decided to leave)

• Average employee age and length of service

We could go on and on, but you get the point.  Refine these and any other quantifiable factors by further segmentation – per salary grade, employee group, male / female, etc.  Make sure each metric is measurable, because accuracy counts.  A compelling argument demands precision.

To make these metrics work for you, to avoid a series of make-work arithmetic exercises that do nothing more than capture minutiae, be certain to measure what is important to your business – not simply what data you can capture.  Make sure the importance of the metric is clear to management (or can be made so).  Management needs to grasp the importance of success, to understand why the metric is important and what achievement would mean.

Once you have the right metrics established (collectively called the “dashboard”) and a baseline in place, you will readily see where the problems lie.  Then set specific targets going forward to improve these weak areas, creating periodic milestones to mark your progress.

What to look for

Every organization has different pressure points.  However, if your metrics data indicates any of the following situations, management should be informed.

• Average performance ratings that exceed how the business was rated

• A workforce where key segments are approaching retirement age

• Promotion and “equity” increase activity that overwhelms the merit budget

• Low compa-ratios that indicate you are not paying your salary ranges

• Any figure that is an unpleasant surprise

When you’re telling a story to management, make it compelling – with facts and pictures that feed off critical metrics analysis that form the pulse of your business.  Then bring home the sale by showing how to solve the challenges being faced – with practical strategies designed to end your story on a happy and successful note.

You’ve seen your company’s want ads and heard the pitch from your recruiters; you offer competitive wages to qualified candidates.  That’s got to be a strong hook for attracting talent, right?

Big deal.

Pay structures are updated based on market trends, so the opportunities offered employees support your retention and motivation strategies, right?

Not enough.

Most employees presume their company is already meeting (or aspiring to meet) the goal of competitive pay.  Companies routinely advertise the practice (“we offer competitive wages”) and candidates in return expect this of potential employers.  But what happens when your goal of offering competitive pay is finally achieved?  Are employees grateful?  Can companies rest in their efforts to attract, motivate and retain?

I’m afraid not.

What doesn’t happen when you offer competitive pay is that your recruitment problems do not magically disappear, your employees won’t be satisfied and your compensation programs have achieved little more than being average – and isn’t that a “C” grade in school?  Is that where you want to be?  As far as aspirations go, it’s only middle-of-the-road.

If your company does pay “the going rate”, that means that approx. 50% of the companies out there are paying more than you.  That’s what average gets you, with half doing more and half doing less.  Is that what your company aspires to achieve?

No one leaves your company for less money – so all you’ll hear from your employees is about how so-and-so is making more somewhere else.  And as employees only hear what supports their own notions –they won’t pay attention to the broader rewards package, just the points that confirm their opinion that your company isn’t paying enough.

The only way to avoid this scenario is being the premier paying company in your market / industry – and can you afford that cost?

Lest we forget, it’s important to differentiate between having a salary structure (grades, salary ranges and midpoints) that provides competitive rate “opportunity” and actually paying employees at those rates.  Some describe this as whether the company is “walking the talk”.  I recall a client proud of the fact that their salary ranges were continually adjusted to mirror market rates, but was later embarrassed to discover that actual pay practices fell well below their midpoints.

For their part, employees relate to what they are being paid, not the midpoint of a salary range or other such declared “opportunity”.  To them the company’s “competitiveness” is more illusion than fact; especially if they’re experienced and have been with you for awhile.  Thus the company needs to keep its focus on actual pay vs. opportunity pay.

Why don’t employers pay the “going rate”?  Typically it is not a strategy, but a series of practices that evolved over time.

• Some candidates will accept a lower rate than should normally be paid for their knowledge and experience, and managers tend to view this as a cost savings.  Though it is more like putting a skeleton into the closet and hoping it doesn’t jump out at you down the road.  One day these employees will change their minds.

• Once you’ve started down the slippery slope of paying some employees below market rates the practice is soon compounded by internal equity.  Managers don’t want to pay similarly qualified new people more than existing employees, so the new hires are offered below market pay.

• Pay-for-performance systems have a hard time keeping up with the increased marketability of employees.  A minimally qualified employee hired at the minimum rate will gain knowledge and experience (and thus marketability) faster than a company’s annual merit system can recognize.  This is compounded when you have to hire a qualified worker and discover that the market requires you to pay more than what you’re paying your more experienced employees.

So, what’s the answer?  Management won’t agree to become the premier payer in your area, so you should consider instilling flexibility into your pay practices.  Consider targeting key jobs (highly skilled, difficult to replace, etc.) and make sure those jobholders are well paid for the market.

Other positions less skilled and more easily replaceable could continue with your “competitive opportunity” strategy.  This approach is akin to ring-fencing key talent, protecting them against poaching while recognizing / rewarding those with the most potential impact on your business.

Bottom line?  Be careful when you claim how your company provides competitive wages.  You may not be correct, but if so – big deal.