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

The complaint is that, when considering two individuals for the same job someone 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” in how the company operates.

Aggrieved employees feel that an insider already knows the company, the people, the products / services as well as the policies / procedures.  That knowledge and experience is an advantage, they say, shortening any learning curve and cultural orientation.  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.

Prevailing practice is that when a company looks to the outside recruiters will be instructed to search for someone who already meets the qualifications of the job; an experienced candidate who has already performed the job, whose only learning curve would be a brief acclimation to new policies and procedures.  Outsiders are considered to be free of “baggage”: no biases, preconceived notions or social network, and are thus considered more reliable as agents for change within the company.

Note: if someone already has performed the subject role the chances are good they are already being paid about the competitive rate.  If that is the case then the company would be forced to pay a premium to attract such qualified talent.  They would likely have to pay above the going rate (or above the midpoint in some companies).

So, what’s an insider to do?  How can you best position yourself for the inevitable comparison with an outside candidate?

Compare yourself against the description or requirements of the new position and try to be as honest as you can with your internal assessment.  Can you do this job from Day 1, or how much of a learning curve would you need?  Are there aspects of the new responsibilities that you haven’t experienced before?  The results of this assessment will give you an opening for your talk with HR.  They in turn will push the “we’re giving you an opportunity” angle, and you both know they could always go outside for a better qualified candidate.  In fact, an advantage you have is that you are likely a cheaper choice for the Company.  So don’t push the pay issue too hard, or you risk throwing the baby out with the bathwater.

Here’s a checklist for you to remember when you’re doing your self-assessment:

1) Are you already familiar with company policies, procedures and personnel?

2) In your present role have you already demonstrated an ability with the technical side of the new position?

3) An advantage: internal promotions look and sound good to other employees, and managers know this

4) Can you develop an inside track with the manager (the all-important “fit)

5) You are likely a cheaper option than hiring from the outside.  Use that fact to your advantage.

Don’t be afraid of compromise.  Your plan should be to gain visibility for your performance and value, though it may take some time for a positive result to work its way through the bureaucracy.  No matter what you gain from your initial conversation (short of complete victory) suggest a follow-up salary review in three months.  Managers know they’d have a better chance of getting an adjustment approved after the initial hire / promotion, when it’s more likely an exception would be approved.  A manager who agrees to that review (and who will be thankful to avoid a contentious meeting) is already halfway to approving an adjustment down the road.

By being aware of the restrictions your managers are operating under you may be able to help them help you.  Do not beat yourself against the wall of bureaucracy, but plan for your next step; use your insiders knowledge to your eventual advantage.

What is the competitive market price for a particular position?

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

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

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

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

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

Impact of Reduced Participation

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

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

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

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

• Poor matches and / or no data when less than 5 respondents: surveys tend to provide an “n/a” when they do not have enough participants.  When you start with limited companies it’s not unusual to find unreported jobs.

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

What to do?

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

Working with limited resources is a test.  Your challenge is to balance an understanding of the subject position, the industry and the vagaries of limited data points in order to determine which figure best represents your position’s competitive value.

To succeed you must utilize subjectivity and your professional judgment to consider the available data and gauge which figures best reflect the job under review.  The correct answer will no longer jump off the page at you.  Compensation has become an art, not a science.

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

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

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

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

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

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

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

In our last post we introduced you to step # 6 of the Seven Step Compensation Diet – the need to create quantifiable program metrics.  Such tools are used to help understand (measure) whether costs are being contained, where the problems areas lie and whether the ROI on employee rewards is at the level you want them.

At this point in your compensation diet you’re well on your way to establishing successful cost reduction / effective spend program(s), but your struggle isn’t over yet.  All can still be lost, as most dieters will attest, if you fail to stay the course.

Step # 7:  Stay the Course

Consistency of effort is the key to long term success, whether you are trying to lose a few pounds, save money for your company’s bottom line or build a more effective and efficient organization.

Your success will not be achieved via a quick-fix cure, but through the steady application (repeat, steady) of the constructive re-design steps we’ve been discussing.  You must keep firm control of both the gas pedal (keep moving, keep moving) and the steering wheel (minimize distractions).

By carefully applying each of these steps a side benefit will develop – that of a stronger trust relationship with your employees – demonstrating that management is intent on fair and equal treatment for all its workers.  That trust will take time to grow, and it needs to be nurtured through visible and repetitive actions that continue your message.  Like a steady drumbeat, the continued application of uniform policies and procedures will pay dividends that grow with time.

Your employees should also see that their senior management team is “walking the talk”, adjusting their own behavior to match that of newly trained lower level managers.  Leadership is critical to ensure organizational success, as a shared effort among all employees will invigorate and motivate group activity into doing the right thing.  Conversely, playing with internal politics, favoring special interests and / or displaying executive arrogance (us vs. them) will doom your dietary efforts as employees will lose faith with a message that’s only talk.

It is also worth noting that not everyone will agree that the steps you’re taking are the right choices.  Those who disagree will likely employ one of several tactics in an effort to render your initiatives ineffectual; you should anticipate such reactions and plan your counter-measures.

• The Naysayers – those who whisper dark thoughts in the hallways and cubicles, shaking their heads with the knowledge that “of course it won’t work”

• Passive Resistance – offering little in the way of upfront objections, these folks will not actively assist the process but will do what they can behind the scenes to delay, discourage and otherwise weaken your efforts

• This too will pass – especially prevalent with those who have been around for a while; these folks will sit back, offer neither help nor active discouragement, but will simply wait you out.  They figure that the existing culture will overwhelm your initiatives, especially if support is minimized

Forewarned is forearmed.  Enlist senior management for visible support from above, frequently communicate your positive messages to employees, reward performance over personality, be fair and consistent in your decision-making – and keep at it.

To close out the dietary analogy remember that most weight loss efforts do not work in the long term, mainly because the dieter is unable to achieve long-lasting behavior change.  We all want that quick fix diet pill!  Similarly, if your company is unable to change its practices it will suffer the same discouraging result (cost increases, inequitable treatment and worsening employee relations) as ruinous business practices creep back into play.  You might even be worse off than before.

Or not.  Make your choice.  Get out there and shake things up.  You can do it.  We’ve just shown you how.

In our last post we introduced you to Step # 5 of the Seven Step Compensation Diet – the need to set up a pay increase budget and stick with it.  Managers make fewer questionable reward decisions when funds are limited, when they are held accountable and when Finance is double-checking and reporting on transactions.

Hand in glove with this financial tool is the need to obtain Senior Management support for your program re-design strategies.  To gain their support you need to pro-actively make your case.

Step #6: Develop a Metrics Awareness Program

You can grab the attention of your senior leaders by telling them the story of their largest single expense item – your company’s reward program.  They will want to know whether that huge expense (40% to 60% of revenue) is being properly managed.  If there are challenges ahead, or a crisis at their doorstep, you will have their attention.  You will need to tell them what has happened, and why.   They will ask about implications (liabilities, competitive picture, morale, turnover, etc.) and what would it take to resolve the issues being faced.

You had better be ready.

To tell a compelling story that describes real or potential problems with your compensation program(s), you will need to present facts and figures.  You will need to be specific.  Suppositions, theories from management magazines or best guesses based on your years of experience will not make the sale.

You will also face the passive resistance of those accustomed to the laid back philosophy of “if it ain’t broke . . .”   Unless there’s a problem staring them directly in the face, management won’t recognize that the barn is on fire, or that it soon will be.  You will need to instill a sense of urgency by presenting evidence.

Specifics are listened to

To understand the plot points of your story you should establish a series of quantifiable indicators (metrics) that record the factors and activities that impact your compensation programs.  Some examples:

• Average salary / wage

• Compa-ratios

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

• Average performance ratings

• Average 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

I could go on and on and on (we only have so much space), but you get the point.  Measure what is important to you.  The further refine these and other measures by breaking them down per salary grade, employee segment, male / female, etc.

Once you have the metrics established (collectively called the “dashboard”) and a current status baseline in place, determine where immediate problems might be festering.  I use a simple red light, yellow light, green light code to mark problems, cautions and thumbs up for each criterion.  Follow this by setting specific targets going forward to improve your weak areas, and create periodic milestones to mark your progress.

What to look for

Every organization has different pressure points.  However, if your metrics data indictaes any of the following situations, it’s likely a specific problem that your management would want to know about.

• 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 indicate you are not paying your salary ranges

• Any figure that is an unpleasant surprise

Having a series of quantifiable measures will give you a sense of direction, as well as a method to gauge your progress.  Lacking that, your activities would likely spin you around in a circle, achieving little but data collection.  You need to use the data.

Start the ball rolling.  Create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) – and then establish baselines and targets for each performance indicator.  This key step will help you understand whether your costs are being contained (your diet is working) and whether the ROI on employee rewards is at the level your company requires.

Have you ever watched and wondered how it is that some employees in your organization are recognized and moved upward, while others with more impressive credentials, experience and achievements seem to stagnate – and then eventually move out?

There’s a reason for that counter-intuitive phenomenon; you may have within your management ranks a form of “star chamber” or informal clique that anoints some employees (the chosen ones) while sidelining others.  Which explains why leadership mediocrity is sometimes overlooked, why personality trumps achievement and better qualified employees can be passed over for promotion.  For the select few, middle-of-the-road performance is not a barrier to success – like it is for the rest of us.

Not exactly what you hear in Management 101 training class is it?

What you are witnessing is an evolution of the informal pass-fail rating system that companies have used for generations to decide whether an employee is “one of us”.  Those deemed worthy receive a “get out of jail card” that boosts their career.  Those lacking sponsors are categorized as having questionable value and are liable to suffer a fall at the next organizational bump in the road.

Do you remember the “in crowd” from your high school days?  You may not have escaped them after all.

It’s all about PIE

Psychologists have identified several human factors that describe an employee’s ability to relate to their work environment.  While each may vary in importance from one organization to another, their combination has a critical impact on an employee’s likelihood for success.

Performance: your demonstrated ability to perform the job you were hired for.  How well do you handle your role?  Do you achieve results?  The rating scale is the traditional range of from wonderful to woeful.

Image: do you “fit” within the organization?  Is the image you project (personality, interests, clothing, demeanor, etc.) accepted by the rest of Management?  This rating scale ranges from “one of us” to “one of them”.

Exposure: to what extent are you known or would be recognized in the hallways by senior management?  Who are you rubbing shoulders with?  Here the rating scale ranges from “You are known” to “Who?”

The Way it Was

It wasn’t that long ago that Performance was King; that no matter what eccentricities you brought to the job, as long as you performed well no one bothered you.  Idiosyncrasies and personality quirks were overlooked; “oh, that’s just Bob”, you would be told.  “Don’t mind him.  Just deal with it.”  Your value was measured by getting the job done.

Management training classes would use a “scruffy-looking dude” as an example of a brilliant engineer buried beneath a beard, long hair and mismatched clothes.  Such employees possessed little in the way of social skills, no interest in office politics or traditional business hours, and never wore the company logo.  Their job performance, their contribution to the business was their defining identifier.  It marked them as a valuable human resource.

Image could be important, but was considered more as icing on the cake, not the critical ingredient.  Exposure was even less important, as long as you performed.  “Being seen” was more for those who lacked a strong performance record.  They were the ones who needed the help and support of others.

Btw, the classroom answer?  Treat each “dude” the same as you would anyone else.

The Way It Is

Today, good performance is not enough to ensure success.  Today you must also be a “player”.  You must be able to fit in, to blend with your other playmates, be liked as a person, adroitly play at office politics, be seen with the right people and have the same outside interests.  Your capabilities should not be a challenge to your boss.  How you dress is scrutinized for the image you present.

Of course, if you don’t perform well and you’re not in with the right group, your career with that firm will suffer.  You will shrivel on the vine, if not ultimately chopped off.  However, if you are considered to be in with the right group, that association will step in to help should your performance leave something to be desired.  This assistance can vary from softening the blow to overlooking shortcomings (accusations never stick) to shooting the messenger on your behalf.  Club mates stick together.  They circle the wagons when attacked.  They get even.

What to do?

Sound fair?  That’s the way it is when Performance is valued less than Image and Exposure.  But does that strategy have legs?  I don’t think so.  Leadership and a cadre of high performing people are critical requirements to drive your business forward.  You need such outwardly focused success drivers, not those more concerned about internal group dynamics.

Should you find yourself working for an organization where your personal interests and hobbies are valued more than performance and results, your options will be limited.

• You can try to re-invent yourself according to someone else’s value system, but how much success will you have?

• You can try to stay under the radar screen, lest you be judged – but that doesn’t seem a good career plan, does it?

• You can try to change the culture.  Good luck with that!

• Or you can leave

If you believe that your job performance is your best calling card, that employees should be measured and weighed by their contributions, you may need to reconsider the long term prospects of your current environment.

Leave the mediocrity behind.  Change can be a good thing.

In our last post we introduced you to Step # 4 of the Seven Step Compensation Diet – the need to control the headcount and type of jobs in your organization.  Reward dollars can be maximized by operating a lean organization.  Only staff those jobs required for operational success.  At the same time avoid back door cost increases by refusing to play “title games” that add expense without providing a fair performance “return.”

Success here depends on your ability to track reward dollars and measure your spend against a plan.  To do that you need to have an allowance.

Step # 5: Have a Budget and Stick to it

Have you ever played the board game Monopoly?  Players start with a given pile of money and then it’s spend, spend, spend and hope for the best.  When it’s not your own money it’s fun to see what you can do, because it’s only a game, right?

When Managers have the Keys to the Kingdom though, the authority to spend the company’s money, it’s a different matter.  Your company probably doesn’t look at management spend on employees in quite the same manner as a wheedle-dealing board game.  The costs are real; the implications long lasting.  As management considers effective methods to rein in uncontrolled spending (cutting the fat), they should set up some form of restrictions to which managers must adhere.  No more strolling past Go and Collect another $200.  Thus the budget is born.

An established annual reward budget (pool of money) can be an effective gatekeeper and measurement tool for managers, limiting their largesse and forcing better decision-making.  On a regular basis they can also track the level of spend, as well as the corresponding progress toward adherence to an annual goal.  The basic tenet here: making a series of one-off decisions over time without having a cost meter running will drain your financial resources before your annual needs are met.

Chances are, you can’t go back for more money.

When under pressure Managers are notorious for first reluctantly agreeing to trim their merit spend (note the nodding heads and muted voices of support), only to circle back later with promotions, adjustments and job re-evaluations that more than replace the initial savings.  It is this form of passive resistance and end-around tactics that a fixed budget is designed to defeat.  If you factor in that Managers will always attempt to circumvent whatever system you put in place, you might be able to stay one step ahead.

So save yourself some angst by ensuring that your budget pool includes promotions and adjustments, as well as the annual merit increases.   Some use two separate budgets to better categorize and track activities.  But whatever the case, be careful to limit and track.

By the way, those granted the authority to spend the company’s money should be held accountable as to how that money is spent.  You can measure it.  Adherence to a spending plan should become an assessment factor in a managers personal performance appraisal, an objective indicator of the demonstrated ability to actually manage.

Finally, to ensure that you achieve greater management focus, ensure that the Finance function regularly monitors and reports on those activities (management spend decisions) that impact budget targets.  Managers who know how much money they have, and how much remains, are more careful with it.

If no one is watching, no one is caring.  It is not easy to become a lean organization, and even harder to stay there.

In our last post we introduced you to Step # 3 of the Seven Step Compensation Diet – the need to establish written operating instructions for your Managers.  These policy and procedural guidelines will clarify the company’s strategy, educate those making reward decisions and help minimize aberrant behavior and damaging precedents.  Now let’s really get our arms around things.

Step # 4: Establish Position Control

When developing the business model for your company or department the number and type of positions required for successful operations was likely laid down somewhere.  “We will need three of these, five of those, a manager there, etc.”  This Table of Organization (TO) is similar to a floor plan for your business, carefully describing the human factor blueprint necessary for efficient and profitable operations.  The plan creates first critical, and then necessary positions.  You won’t find “nice to have” jobs here.

The trick though, is to stick with your plan.

And of course the problem is that most companies don’t.  For those less careful a slow job creep inevitably slinks in, whereby other titles (or additional headcount) become added that are not on the original TO.

The Chinese have a phrase, “death by a thousand cuts”, which is an apt description of how a company’s fixed costs can grow – one little action at a time.  After awhile you’ll look around and wonder how your cost structure became so bloated.   While there are many culprits, a particularly insidious practice that adds no ROI – only increased costs – is the use of inflated job titles.

Have a care to avoid this nasty virus, a subtle backdoor practice that needlessly increases only costs – not value.  These are typically additive positions with incremental titles like Senior, Lead, Assistant, etc., where the job description barely changes at all.  Or they may take the form of important-sounding titles that really mean something else. My personal favorite is the First Impressions Manager, who is really the Receptionist.

If management feels that they need to offer an employee a more expansive title, remember that job holders will soon claim that such titling deserves greater reward (higher grade, higher salary range, increased base salary).  Again, more cost with no ROI.

The process of Position Control is like an old-fashioned girdle for organizations.  It forces you into shape, to control the number and function of jobs within your organization.  Here’s what you do:

• Understand what jobs your business requires (as compared to wants), and the number of positions (employees) per job

• Allow only those approved jobs and that amount of headcount to be filled

• Establish strict procedures for recommending and approving changes to the job list

Some companies tag each position (headcount) with a unique code, to better track where employees are being placed.  For example, you may currently employ five senior engineers, but perhaps your organization only requires four.  “You are where you are,” the Brits would say, but once you know the problem you can plan remedies.

The Position Control process can help you re-establish and then maintain the organizational requirements you need for operational success.  This process will help educate managers on the difference between required and superfluous jobs.

Make sure you have complete and accurate job descriptions, and then hire / promote to those specifications.  A critical test is that you fill only required jobs, not simply because an employee has gained certification or additional experience.  If the business requires four senior engineers, paying for a fifth delivers no additional ROI – only higher costs.

Begin with the low-hanging fruit.  Start a spring cleaning campaign by first eliminating from your systems any position title without an incumbent.  Then nip the backsliding problem with procedures that tighten up the new position approval process.

Congratulations!  You’ve moved from the planning and consideration phases to actually having a cost impact.  Well done.  Now, stay the course.

Many companies with international operations are reluctant to purchase compensation surveys covering their multiple countries, on account of the cost.  To them it’s like having to survey multiple USAs, no matter the headcount involved.  As discussed in an earlier post, Shock and Awe, the cost of these international surveys can be prohibitive.

For example, if the US-based Acme Manufacturing Company has operations in Germany, India and Argentina, survey costs for these three countries would be 2-3 times the cost of comparable US surveys.  As most compensation experts recommend using multiple sources to better gauge market trends, the cost factor very quickly becomes an eye opener.  The more countries you operate in – well, you get the point.

Hence the hesitation.

However, is putting off a competitive pay analysis a good business decision?   What is gained by keeping ignorant of whether your compensation packages are competitive or not?  Of course, by happenstance you may be lucky and are already providing compliant and competitive rewards.  More likely though, the odds favor that you’re either overpaying or underpaying your employees.

Long term Impact of the Status Quo

Let’s look at the scenarios that can be playing out while you remain unaware.

Over Payments:

• Where local compensation costs are higher than the competitive market, without a corresponding ROI in productivity or performance (more pay is not a 1:1 correlation).  You are wasting money.

• Most employees will not recognize that they’re being paid above average, so any presumed positive perception is only an illusion.

If you’re overpaying, but don’t realize it because you haven’t obtained credible survey data, you will likely presume that everything is okay.  In other words, you’ll think that your pay is on par with the market, when in fact you are paying at above market rates.  How much money (the differential) will you be needlessly paying out on account of this presumption?  Chances are, the cost of finding out – of potentially identifying a key problem – would be a small fraction of the money being misspent.  Is this an efficient use of your reward dollars?  I don’t think so.

Underpayments:

• Employees feel that they are not being compensated fairly

• Your ability to attract the right caliber of employee for your operations will be weakened by low compensation rates

• Employee engagement, productivity, morale, attendance etc. will be less than what they should be, feeding off negative employee perceptions

If you’re underpaying, but don’t realize it because you failed to obtain credible survey data, you may also blindly consider that everything is okay.  After all, anyone who leaves does so for more money, right?  But doesn’t everyone?  So you may not learn much through staff defections.  Have you considered the annualized cost of losing just one experienced staff member?  And should you lose more?

Choosing instead a course of hesitation and delay will not rectify any festering issues; they don’t go away or fix themselves.  Instead, your inaction will worsen the situation and make eventual corrections more painful.

Cost of doing business

Do you remember that ad line, “you can pay me now, or pay me a lot more later”?

While squirming to avoid costs the company might try to obtain free data off the internet.  Good luck there.  Pundits will tell you that the value of free data, even if available is usually less than what you paid for it.

Instead, ask yourself if you would spend a dollar today to save three tomorrow?  That’s the question you must answer, to gauge the economic value of knowing the competitive position of your international employees.

Your financial folks might see it another way.  They might see only a finite dollar amount being spent, against a “maybe” savings estimate.  They will ask you for guarantees you cannot give.  It’s not like buying a machine that will increase productivity, lower production costs, raise profit margins and lower the cost of sales – all measurable.

Would you pay to learn how competitive are your services and product lines?

To make informed and effective business decisions, management requires knowledge of present circumstances, the challenges being faced, the import of the status quo and the implications of change.   When dealing with the single greatest cost to your organization, employee pay, it would be well worth your effort to spend what is necessary to give senior management the proper ammunition for decisions that could drive the business forward.

Yes, it would be well worth the cost.

In our last post we introduced you to Step # 2 of the Seven Step Compensation Diet – the need to lay out in your mind the general theme of how you plan to reward your employees.  Without such a governing plan or broad strategy individual manager actions will continue to push your reward costs upward at a rate greater than anticipated or desired.

At the same time, if you don’t know where you’re going (i.e., the Yellow Brick Road), any path will take you there, and odds are you’ll end up right back where you started.  So you had better set up some signposts along the way.

Step # 3: Prepare Compensation Guidelines

By “guidelines” we mean a series of written policies, procedures and how-to instructions that guide your management in dealing with compensation / reward issues.  These compensation policies, programs and procedures should reflect and support the strategies you developed in Step #2 – The Strategy.   Commit them to writing and distribute widely to managers and employees.  Have everyone get the word and don’t let ignorance become an excuse.

This primer should be the policy and procedural instructions your managers will rely on when called on to make spending decisions.  Educating your managers on the tactical application of your company’s pay programs is a critical step; one that will help modify actions and decisions in a way that will support and encourage the enduring change your organization needs.

As you would anticipate, left to their own devises Managers tend to fill an information vacuum (no guidelines) with precedent-setting decisions that will increase costs, foster inequitable treatment and over time alienate segments of the population.  Guidelines (or rules, if you’re strict) serve to rein in these ineffectual leaders by establishing parameters to their freedom of action and limits to their authority.

While aberrant behavior by rogue managers will cost you in terms of money, morale, and productivity,  giving managers policies and procedures to operate by will save you money, as well as time and trouble.

A suggested Table of Contents might look like this:

• Compensation philosophy (Role of compensation function, pay for performance, compensation strategy [as available])
• Brief description for each of your direct and indirect pay programs
• Step-by-step instructions to process every type of pay change
• Approval process for every type of pay change
• Hiring, promotion and pay adjustment procedures
• Administrative issues (pay dates, overtime, new positions, job evaluation, etc.)

You should create a greater visibility for the inevitable exceptions-to-the-rule by establishing a one-up approval process.  Such a technique will highlight remarkable performance through transparency of reward.  If you include templates and sample forms you can help ensure consistency of message while assisting managers to administer the reward programs.

When you shine a little light into those darkened, special interest corners the employees will notice – and applaud.

Having a rulebook-of-sorts will also help provide standards and structure to your reward programs, which in turn will foster greater employee engagement.  As you begin to improve how reward programs are designed, implemented and now communicated you will inevitably:

• Reduce your overall labor costs
• Increase effectiveness of money spent
• Increase ROI of reward dollars
• Improve morale, engagement and productivity

Final note: Make sure that all managers receive a copy of the compensation guidelines, and then periodically update and use them.  Refer to them constantly and let employees see that they are to be followed.

Let no dust gather on these pages.

Over the years the Human Resources Department has transitioned through any number of “latest thinking” management concepts and corresponding “buzz phrases” – from “matrix management” to “broadbanding” to “onboarding” and “headwinds”.  Each new approach seemed the brainchild of management consultants seeking to encourage what they called creative thinking and the latest strategies to improve the human factor.

Lately though a persistent theme has settled in that HR should become a “Business Partner” of the organization, in order to be taken seriously by senior management and enhance the value-added contribution of its programs.  This encouragement suggests that HR is not currently a player on the Senior Executive team – but needs to be.

So what exactly is an HR business partner?  Several key criteria have been tagged as descriptors:

• Diagnose business needs
• Develop management’s capability to address HR issues
• Provide advice and a point of view
• The primary focus is driving the business forward
• To educate, motivate and influence others

Does the above describe the HR function at your company?  Is HR considered a business partner?

Your Father’s Personnel Department

Today most would chuckle at memories of the “old” Personnel department, whose primary responsibilities seem to have been tasks like recruiting, record keeping, arranging the blood drives, the safety shoe program and running the annual picnic / Christmas party.  The head of Personnel was rarely considered a “player” at management meetings.  Some in management claimed that the department was only a necessary evil.

That Personnel was viewed as the department focused on the interests of the employees.  Its management was staffed by employee relations generalists, was sensitized by the needs of employees and left the running of the business to the “businessmen”.  Personnel dealt with people.

Today, companies expect more.   Leadership expects less transactional administration and more strategic thinking.  Being labeled a “people person” is now considered a negative, a source of humor among recruiters.

What are the signs that HR is a true business partner at your company?

• Direct report to the President / CEO and listed as a member of the Senior Team
• Able to speak with credibility and respect at the management table
• Able to advance the value of HR to those holding negative biases
• Consulted by senior management on human factor issues
• Company decisions affecting employees are initiated by the head of HR

As a newly designated business partner-wannabe, Human Resources in many companies has transitioned away from the traditional role of caring for / representing the employees.  It has focused instead on utilizing the human capital to assist management in achieving objectives and driving business success.  However, the more successful HR has become as a business partner the greater the danger that employees will lose trust and confidence in HR, exactly because the focus has moved away from employees.

As HR has developed a new stratagem, some might say a new identity, what has been the cost to the original mission?  What part of itself has been lost while chasing the role of business partner?

Danger Signs

Have a care that you don’t lose the heart and soul of HR – its caring connection about employees.  Don’t start looking at them as merely numbers on a spreadsheet or boxes on an organization chart.  There are other departments who already do that very well.

Is the HR function served or harmed by leadership that is “counting the chairs” on their way up the hierarchy?  These are typically fast-trackers who are not HR-trained, but only temporary visitors to the department for a “broadening” of their management experience.  Why is that acceptable for the HR function, but wouldn’t be tolerated in IT, Finance, Marketing, Engineering or Manufacturing?  Is the head of any of these other functions anything less than a seasoned expert in that profession?

Why is HR viewed as different?  Why are other functions already presumed to be business partners?  Only HR is being challenged, remaining a newbie, on probation at best, at worst one step away from getting the coffee.

Lip service to the people department?  Even while sitting at the Senior Management table negative biases from the old days often remain:

• Remember the safety shoe program?  It’s hard to be taken seriously after so many years focusing on administration.  Does HR deal with important issues today?
• If the head of HR has only been appointed to gain experience toward their ultimate loftier goal, how serious can we take a temporary worker who is only passing through?
• HR is still perceived of as offering restrictive advice, what can’t be done; they remain the gatekeeper of corporate policies.  Being an advocate of policy doesn’t win friends.

From the employee’s perspective it is important to consider HR as the source and advocate of fair and equitable treatment, compliance with all regulations affecting employees, and their representative among senior management.

What if senior management doesn’t feel that way?  What if they want HR to become just another “business partner” concerned more about the bottom line – to the exclusion of the human factor?

Have a care that we get what we want – Business Partner – and then our employees choke on it as we lose our way.