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

To be fair, perhaps my experiences are the exception, because I’ve never used that data in program analysis, or even reported it.  But somebody must be using it.  Somebody.

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

Can you envision  recommending  to senior management that midpoints be raised by X% because that is the projected average midpoint increase of other companies?

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

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

• When an employee’s base pay drops below salary range minimum on January 1st, do you cover that amount – or wait until the next review?  Whenever that might be.  The fair thing to do would be to raise the employee to minimum and then (or later) grant a merit increase on top of that.  Extra cost though, right?

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

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

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

Now I suppose there may well be companies out there that have changes to their reward programs contractually tied to “market movement” or even structure (midpoint) growth, but do you think there are that many so governed?

So, can someone  tell me why analyzing other company’s guesstimated midpoint movement  is important?  I’d really like to know.

Everywhere you look these days companies are striving to find ways of doing more with less;  jobs are eliminated and the survivors have to work harder, employee reward budgets are trimmed to the bone or frozen, and the concept of pay-for-performance itself is coming under challenge.  Across the country you can hear the constant litany of cut, cut, cut.

Employee morale has plunged off a cliff.

However there is one reward strategy you can employ that doesn’t involve following the popular drumbeat of negative messages and takeaways.   Already other functional departments (i.e., Marketing, Engineering, Advertising) have taken a different tact from that “me too” philosophy.   Instead, creative minds set themselves apart, pushing brand identification to carve out market niches away from the beaten path.  Perhaps Human Resources could take a page from that playbook and view employee rewards in a more forward thinking fashion.

HR can stand out from the crowd.

Why not create a pay philosophy of greater rewards coupled with greater expectations?

Companies fear wasting money on those who don’t perform, so they often limit the opportunities provided by their reward programs.  They can’t afford a reward strategy that balloons payroll without an adequate ROI.  To take a different road they could increase the amount paid to key employees while restricting those who don’t perform.  That would place the high achievers in your organization at a fair or even generous pay level, but the winners here would be only those who deliver an ROI back to the company.  You can afford to reward high performers, can’t you?

Employees who produce results are worth the money.  If you’re fearful of overpaying those who aren’t performing, you hold the solution in your hands / policy manual.  All it takes is the discipline to hold employees accountable and to take action against those who aren’t performing, who aren’t worth the money you’re paying them.

Do you know what percentage of your workforce is rated at an average or lower level of performance?  50%? 60%?   If you still grant every employee an annual increase, you won’t be able to differentiate and properly recognize your key performers.  You won’t have enough money.  In that case the reward bar will be lowered to cover the most common performance level.   Instead, why not raise the performance bar and get rid of those who can’t keep up?

If a manager has $10,000 for annual increases and tries to balance rewarding both high and average performers, the increases granted won’t be enough to recognize key players.   Why?  The merit spend is calculated on average performance, but high performers need much greater increases to feel recognized and appreciated.  However, a request to grant more than $10,000 will be denied, so what do most managers do?  They trim the increases of their best performers, in an effort to spread rewards as broadly as possible and keep everyone happy.

Does that work?

Of course not.   High performers will be discouraged and may rethink their future efforts as well as their commitment to your company, but your “joe average” will be pleased.  As behavior rewarded is behavior repeated, by this make-everyone-happy tactic you will have encouraged more average performance and less high performance.  Does that sound like your reward strategy?

Okay, but if this concept is such common sense, why is the practice of holding employees accountable so seldom used?

The Management Fear Factor

• Fear that employees are somehow “owed” annual salary increases.  We have to give them something.
• Fear of not knowing how to conduct effective performance appraisals.  Do they really measure performance?
• Fear of alienating  the majority of  average employees (see bullet #1)
• Fear of exercising  the discipline necessary  to manage employees (they want to be liked)

With a process designed to monitor and weed out the lower performers, and at the same time pay the higher performers well,  over time you would retain more of those you want and rid yourself of those you don’t.  The employee performance bar would rise, fostering a dynamic work environment that will feed business performance.

You can afford to do this.  Consider the impact of increased performance levels on your bottom line.  Isn’t it worth the initial outlay of money to make that happen?

Caution:  the bean counters (Finance) are perennially afraid of spending a dollar to save two – or in this case, spending a dollar to earn three.  They believe that the dollar cost is real, while the suggested gains are “soft”; promises that can’t be guaranteed.

There is no easy way around this phobia short of direct intervention from the top.  Lacking Senior management support compensation entrepreneurs will face a wave of passive resistance, if not outright defiance by managers tying to “help” the average employee.

Providing high performing employees with greater rewards can create a win-win scenario, a greater attraction for talented outsiders, an improved  team atmosphere focused on pushing the company forward – and less inequities to drag and drain the goodwill you’ve established.

Try it.  Spend a dollar and earn three.  It’ll be worth the effort.

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.