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Why Do We Need Grades?

Posted by Chuck Csizmar | Posted in Universal Compensation | Posted on 24-06-2014

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Questions, by Marina del CastellI heard this question the other day from a highly placed business leader who was frustrated that one of his employees wasn’t assigned the grade that he just knew offered the right pay level.  His reaction was to challenge the premise of the entire evaluation / grading system, and suggested that instead they should let the managers (i.e., himself) decide which jobs are more valuable than others.  Especially jobs from “that other department.”

Yes, I know, the question he raised sounded like it came from a Homer Simpson “Duh!” moment of bizarre ideas that have heads shaking and eyes rolling among compensation practitioners.  And I agree with you, what an idea!

The trouble is, we don’t work for ourselves.  We work for senior leaders who, sometimes like the one above,  may not have a clue about how an effective compensation program operates.  That’s what they are supposed to have us for.  But these leaders can be prone to their own inflated opinions, biases and beliefs in whatever premise is being pushed by the latest business article they’ve read.  Which in turn supports their own agenda.  And yes, they also want to have an EASY button to keep things simple.

So you’re going to get that question tossed at you at some point.  Therefore you’d better be ready with a well considered answer when it comes.  Because the questioner will be serious, and from a glance at your organization chart you’ll know not to get too snappy with your response.  This “why?” query will be considered a valid business variable, and if you flub the answer your professional life in that organization will soon become a great deal more complicated.

What to say

There are many ways to explain the importance to an organization of having a graded structure (or steps, levels or however you’ve differentiated your jobs).  But let’s avoid the confusing  technical jargon and focus on the mindset of your audience and respond in a manner that these non-compensation people can understand and get behind.  And you want them to get behind you on this.  So throw out the spreadsheets, metrics dashboards  and “the survey says” gut reactions.

  • Cost control: Start with this and you have management’s attention.  You want and need to control payroll costs.  Grades and their associated salary ranges help managers to identify lower valued employees, and to monitor their pay progression. This helps keep a reliable, long-serving file clerk from earning $70,000.
  •  Controlling the organization: Note: management likes to hear the word ‘control.” Grades are a useful tool used by management to assign higher levels to ever more important jobs. They help create the organizational ladder of progressively more valued jobs. They also provide visible comparisons with other jobs within a job family.
  • Establishing a pecking order:  We all know that the CEO’s job is bigger than the mail clerk, but differences get trickier to identify when you count in all the jobs between.  So to know not only which jobs are bigger and smaller than others jobs, but also by how much (cue in the steps or grades) provides a practical value for employees as well as for managers.
  • Transparent fairness and equity for employees:  An openly communicated grade structure improves the likelihood that employees will be  equitably treated through the use of a standardized value metric, setting up a hierarchy, or a stepping stone of jobs, from top to bottom.

I wouldn’t lead with this, though.  For the business-minded bean counters and pragmatists in your leadership this sounds a bit too “fuzzy-wuzzy.”  Senior leadership reacts better to logical argument than to “feel good” messaging.

Now of course you can step away from all this control and standardization business and let chaos reign.  One big happy, self-negotiated  conglomeration of mixed messages, inconsistencies and a “let’s make a deal”  environment. You can let individual managers decide things for themselves.  They’ve been trained, right?  They’ll know what to do.  What can go wrong?

Are you starting to see the Duh! moment again?

Do Great Minds Think Alike?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 13-06-2014

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White stone among black, by CyronI may be poking a hornet’s nest here, but I’m curious about something.

While I live in Central Florida I’ve had what might be described as an east coast business environment for my petri dish or cauldron of professional learning experiences.  But now after eight years of my consultancy, after dealing with multiple locations, industries, personalities and viewpoints, I’m wondering whether or not I’ve been brainwashed for all these years.

I ask myself, would someone from the middle of Oklahoma, or Kansas or North Dakota think and feel the same way about compensation issues as I do?  Hiring practices, equitable pay, pay-for-performance, performance management, the value proposition, etc. And what if you asked compensation practitioners from the diversity of industries, from retail to hospitals to manufacturing to financial institutions?

In other words, do all U.S. compensation professionals view the issues that surround employee rewards in a similar fashion, regardless of geography?  Regardless of industry?  Do we all tend to march to the beat of the same drum?

Of course, or of course not?

So I’m wondering, does the where or what of your organization influence your operational thinking, as in how best to manage your organization’s reward programs?  Or do we experience a universal sameness of thought?

It’s already well known that on the international stage various geographic regions, and even specific countries think differently than we do when it comes to rewards.  Have you dealt with cost-to-company (CTC) remuneration in India?  Or with the intricacies of Japan?

Close to home we often hear of east coast / west coast attitudes and perspectives regarding numerous aspects of daily life, as contrasted to the more conservative “middle America,” where supposedly traditional thinking and values of the “heartland” still predominate.  I don’t know if that commentary is spot-on, or completely off the mark, but it does beg the question that if true, what other aspects of personal and / or organization thinking might be different from what those on the two coasts consider the norm?

We accept differences in philosophy according to industry-type, and we know different countries offer a different perspective.  So too perhaps you have the small company vs. large company outlook – as well as that of the multi-national conglomerate.  Some employees are like us, practicing a “live to work” philosophy, while others out there simply “work to live” – and consider us somehow twisted in our logic.

And although we all face the same challenges with employee pay, how we consider the possible causes and solutions  – well, that might differ between us. And perhaps it differs in a predictable fashion – by geography.

This may be why some newly hired employees fail to accept, or be accepted into, their new employer’s culture.  While they may have the necessary technical background and experience, they still may not be comfortable with “that’s the way we do things here.”

Organizations tend to have a certain way of thinking, and while it’s nice to consider new hires (new blood) as adding creativity and fresh thinking into the mix, what frequently happens is that the new thinking hits a wall of ingrained habit.  With a thud.  Professional journals are full of how-to success stories, but as they say about Las Vegas, for every winner there are hundreds of losers.  For every change agent there are multitudes who get forced out of companies because they think “different;” too different to be accepted.

I realize that a person’s viewpoint is likely developed or seasoned by a progressive series of specific company experiences, along with a litany of managers, peers and colleagues who over time served as influence agents.  What happened to me in my own career might well differ from what happened with others in their respective experiences, and so our viewpoints likely evolved along alternate pathways.

What do you think?  Is there something to this geographic diversity of thought, or are we really  looking at more cookie cutter thinking?

Winning With Job Descriptions

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 06-06-2014

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Hacking Job Descriptions, by Juhan SoninIn an earlier article we talked about how managers hated job descriptions.  Now let’s take a fresh perspective and look at how writing descriptions should be handled.   Call this a beginner’s guide, a how-to procedural or simply a few tips ‘n tricks that can work wonders.

The Beginners Checklist

The process of writing descriptions doesn’t have to be a pain in the butt.  It may never be a favorite activity, but we can take away much of the sting.  A win-win strategy can take a more simple and straightforward approach.

  • A short and standardized form so that all descriptions look the same.  Two pages, no more.
  • Describe the Basic Purpose of the job – a brief summary that answers the question, “why does this job exist?”
  • Focused bullet statements that describe only critical responsibilities.  Explain what is key to the impact and import of the job. 

Extra Toppings

Unfortunately many organizations require more than these basic essentials.  They’re looking for what I call the “extra toppings,” a combination of ancillary information, feel-good statements and subjective information that often doesn’t help.

If the idea is to describe the job, do we need to talk about candidate qualifications?  And who is deciding this?  Check whether incumbent employees meet those qualifications.

Length of experience?  That’s another subjective area whose inclusion is intended to distinguish between core and senior level jobs.  This is a poor short cut to differentiating responsibilities.

More useful is a list of knowledge and skill requirements that a candidate must (or is preferred to) have.  This helps recruiters screen candidates.

Have a care before you ask for educational requirements, unless your legal staff can defend you.  Many use an “equivalency” phrase, but who understands that?

Is heavy lifting required?  Perhaps travel?  Maybe it’s an outdoor job with dusty working conditions.  Nothing wrong here, but does it need to be written down, or could it be verbalized to the recruiter / candidate – or simply assumed?

Sometimes an organization will add text in order to comply with government regulation.  When ADA was announced, companies scurried to revise descriptions that included acceptable language.  That language didn’t change the role of the job, and arguably didn’t have much of an impact on candidate selection, but the lawyers were happy.

Have a care that your additional content requirements don’t become too extreme.

How To Write A Job Description

  • Use bullet statements, not run-on sentences.  Short and sweet.  Focus on key words.   A rule of thumb is to have at least four, and no more than eight bullets.  Beyond that you’re either repeating or listing secondary responsibilities.
  • Start each bullet with a strong verb, like plan, develop, advise, etc.  Powerful action more easily identifies either a direct or support role.
  • Avoid weak verbs like assist (what does that mean?), coordinate or work with.  Here the reader isn’t exactly sure of the job’s impact or import.
  • Avoid flowery language, puffery that adds little clarity.  Drive and have a passion for x”,  Be the expert for . . “ and “serve as a thought partner” are taken from an actual client description.
  • Throw away subjective adjectives that aim at the how, not the what (excellent, strong, persuasive, etc.).
  • Write the description without being influenced by an incumbent’s background and experience.
  • Write the Basic Purpose last.  Once you’ve already prepared the bullets it’s straightforward to complete the summary.

The Manager’s Friend

Remember what you’re trying to accomplish.  On the one hand to prepare effective job descriptions, but at the same time to make the process easier for the manager – the one responsible for getting them written.  You want a win-win scenario.

So here are a few thoughts to help elevate you to hero status with your managers.

  • Short and simple; managers can get behind that.  Resist the temptation of “specialists’ who tell you all the extra toppings you need.   Short forms are completed faster – with less complaints.
  • Purchase a job description source book.  A Google search will show several quality sources.  If you send managers a generic copy of a like description, they’ll have an easier time writing the proper description.
  • Use the Manager as the “editor,” the subject matter expert who reviews the description.  They should do that anyway, but it’s a treat when you’re not expecting them to write the darn thing.
  • Offer to help.  Careful here, so you don’t get sucked in, but offering training support up front can remove some of the sting of having to do something they’d prefer to avoid.
  • If some of the “extra toppings” are generic (i.e., ADA or other compliance language), tell the manager that they don’t have to worry about that stuff.  HR will add it in later.

Good luck out there.  Now you know how to keep managers from chewing off your head.

Managers Hate Job Descriptions

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 27-05-2014

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Every employee out there, no matter what their job, has certain tasks or responsibilities as part of their role that they enjoy doing.  Likewise, there are certain other aspects to the job that they . . . enjoy quite a bit less.

Often their negative emotional reaction is strongly felt, and may be accompanied by an unprofessional facial expression.

I’ve worked in Human Resources my entire career, and personally have never liked being responsible for job evaluation.   A thankless task if ever there was one, and certain to impact the number of Christmas cards I received each year.   But that’s another story.

Line managers have their own likes and dislikes as well, but it’s a hard-and-fast certainty that they don’t like to write job descriptions.  Why?  Because they hate them, and will scowl at HR whenever they see us coming.   We’re the folks who insist on bothering them with this administrative hassle.

Yep, that’s what most of them think.  But why?  What are the friction points that cause so many managers to grind their teeth when the subject comes up?

  • Many don’t see the point:  Most view the writing of a job description as a make-work effort, when “everyone knows” the job already.  So why do we need to fill out these forms, they grumble.  Why do we have to write it down?

Or, why don’t you do it?

Many consider this onerous task as filling a need of Human Resources, not one of their own.  So it’s not perceived as a necessity, not a priority and certainly the effort doesn’t help them.  To be fair though, not everyone feels as strongly, but you’ll see this reaction often enough to sense a common behavior.

  • The formatting isn’t manager-friendly:  So-called HR “specialists” are always tinkering with the template form, seeking a better way to describe a job.  But that “better” way usually results in a description preparation process that has grown overly long, tedious and a drudgery to follow.

Hacking Job Descriptions, by Juhan SoninAfter all, how many ways are there to describe the tasks and responsibilities of a job?  Here is where HR consistently shoots itself in the foot, by making the simple more complex, the straightforward more convoluted and an easy recording job becomes a trying ordeal.  At least that’s the way it looks from the manager’s perspective.

Some Managers will take a different tactic and will hurry through the process, or will have the employees themselves do the work (a separate challenge), perhaps will ignore select sections of the form, will fail to properly complete others, etc.  A real mess can be sent to HR.  But it’s done!

  • Rumor: better writers get better deals:  Managers don’t look at themselves as writers, and they can’t seem to shake the bias that better written job descriptions result in higher job evaluation or market pricing scores.  If only I could word this right,” is a common self-criticism, as if the reader takes every turn of phrase as gospel.

So another reason for delay is because they know they’re not very good at writing descriptions, so they put off starting.  Just like a homework assignment.

  • They have better things to do:  This is the bottom-line criticism, the core reason from many a complaining manager; “I’m a manager; I have a department / business / empire to run.  I don’t have the time to waste writing job descriptions.”  In other words, you do it – and they don’t much care who the “you” is.

Not a pretty picture, is it?  But it doesn’t have to stay that way.

In my next posting we’ll take a look at how you can salvage this mess.  You might not be able to turn a frown upside down, but you can create a more accepting environment for preparing . . . appropriate descriptions with a process that everyone can live with.

Or you could go another round with your line managers.

How To Value A Piece Of Paper

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 07-05-2014

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My Certificate, by Rich MoffittWith graduation season just upon us, many of you may soon face questions about rewarding educational accomplishments.  What do you do when an employee informs you that they’ve just achieved an academic milestone:  a college degree, an advanced degree, or a certification from a professional association?  After offering congratulations, do you take them to lunch, perhaps tell them to take the next day off, or do you do more?

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

Many employees seem to expect that, when they achieve certain academic credentials that come with a piece of paper suitable for framing, they should receive an increase in pay, a bump in title, if not an outright promotion.  I am more valuable to you now,” they seem to imply.

Some will state it outright.

However, if you don’t need another MBA graduate, or a senior engineer, legal counsel or whatever, should you pay extra for one?

Dealing with expectations

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

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

If you already pay for educating your employees should you be expected to follow up with more money once the company-paid courses run through to completion?  Chances are you don’t require employees to remain with you for a defined period afterward.  So they could use your money to prepare themselves for a better job somewhere else.  Where’s the fairness in that?

Pricing a piece of paper

Have you asked yourself, what’s the market value of an employee with a higher education or certification level?   Compensation surveys don’t differentiate on the basis of whether employees have a particular degree or other credentials.  In some cases educational requirements are mandated before one can assume certain roles (Engineer, Attorney, Nurse, etc.).  At the end of the day what the market highlights is the common pay rate for experience, for knowing the job and being competent at performing it.  No matter how you gained that capability.

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

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

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

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

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

So offer your congratulations, take the newly minted certificate holder out to lunch, and give them a day off.  Tell them that their hard work has made them eligible for advancement – when a suitable position comes available.  But have a care before raising your fixed labor costs without a corresponding increase in ROI.

They may be more valuable to you – but that’s for tomorrow.  Don’t pay it forward today.

When Is Pay . . . Fair?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 30-04-2014

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Do you think that your pay is a fair reflection of your experience and job performance?  Do you think that the person in the office / cubicle / work station next to you considers their pay fair?  If you asked 100 of your fellow employees, how many would say yes?

Would you be surprised to discover that, at any given moment most employees feel that they’re deserving of more than what they’re receiving? 

So if that’s a common employee perception, are a majority of companies intentionally underpaying their employees?  Or are these employees filling their heads with deluded fantasies regarding their own self-worth and entitlement?

Perhaps we should first understand, what exactly is fair pay?  Most would agree that it’s being properly rewarded for experience and effort.  Not in relation to the employee next to you, but as a reflection of one’s own value to the organization.

You may be nodding your head at this point, but what confuses the issue every time is – what do they mean by “properly”?

Many employees have a tendency to consider themselves underpaid

·         They hear stories about what their friends and associates are paid – and the stories always speak of higher pay.

·         It seems that everyone who quit the company has left for more money.  Shocking. 

·         Employees learn of colleagues whom they consider as less valuable to the company being paid more than what they would consider “fair.”

·         They’re exposed to a steady drumbeat of outside influences (recruiters, the media, those same friends and associates, etc.) suggesting that they could do better elsewhere.

·         An employee’s natural skepticism allows that the company is offering only what it has to.

Even where the pay levels are high in relation to the competitive environment, employees may remain convinced that their pay is average at best.  Unless the company makes a serious effort to communicate the market value of their pay program(s), left to their own devices employees may not appreciate what they have.

So what’s an HR Manager to say when confronted by this most common employee gripe?

Focus on how the individual is being treated, because if you get caught up defending anyone else’s pay you’ll have lost the argument from your opening breath.  Your questioner has only one employee in mind, and they won’t be interested in listening to generalities of how the company has everyone’s interest at heart, how they strive to provide opportunities for competitive pay, blah, blah, blah.

Look at the employee’s pay, their background and experience that preceded their current job, their history of performance ratings and where they stand in their salary range – low, mid or high.  Does their pay  make sense?  Or is something out of whack?

Another factor to consider; most pay-for-performance systems have a critical flaw, in that company reward practices don’t keep pace with the increased external value of employees – thus creating a long term risk of disenchantment and disengagement.

  • Salary ranges are increased in relation to the movement of the marketplace, but individual pay is increased for different reasons, and may not be in sync with the market.  Thus employee growth within the salary range can be painfully slow.
  • Company policies often limit merit and promotional increases for budgetary purposes, restricting the pay growth of high performing employees.

In addition, companies don’t react directly to changes in the cost of living, either by midpoint or salary movement, but employees do react to the COL as a personal barometer of whether their pay is fair.  So pay expectations can be on a different track.

Also, as companies continue to “carry” some employees (continuous reward for mediocre performance) they may leave scant resources available for the reward of high performers.  But it’s these valuable employees who are at risk to leave, while the mediocre ones will remain. 

When a reward system is flawed the average level of performance tends to gradually decrease as good workers leave and other high performers realize they won’t be “properly” rewarded for their efforts.  Over time a broad performance leveling effect takes place, to the detriment of your business.

Testing whether pay is fair

·         If the salary range is known, how does current pay compare to the midpoint?  Significant job experience and consistent good performance ratings would suggest an above midpoint pay level.  Or find out why not.

·         Ask your manager a simple question; what is the competitive rate for my job? Then drop the other shoe; where am I?

·         A caution for those conducting “personal market research” : Internet sites (salary.com et al) offer an inexpensive and often simplistic view of the “market” –  and may be viewed by management as unreliable.

·         If you need someone to tell you that you’re underpaid, then you’re not. 

·         For most employees it’s an act of faith that the company is playing fair – and if they come to believe otherwise it’ll be difficult to regain their trust.

Do you consider yourself to be fairly paid?  What about your employees?  Be honest now.  There’s a line of thought that suggests there’s little to gain in saying yes.  Then the company will do nothing.  But if you said h*** no! then perhaps the company will do something.  Cynical?  Skeptical?  Yes on both counts, but that’s exactly what your employees are thinking.

Being Hit In The Face With A P.I.E

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 24-04-2014

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 I remember a time early in my career where in one particular company we had an unusual employee working in our department, a Business Analyst who was considered quite a character. He was a long way from being a stylish dresser, didn’t have much in the way of social skills (was a bit of a loner, in fact), wasn’t what anyone would call “attractive” and as a result always seemed to be the odd man out in our group.

Once when I commented about yet another display of public eccentricity my boss chided me with “Bob is brilliant, and a top performer.  Just deal with it.”  The point being made was, this is an exceptional talent that the organization values.  Ours is not a social club, so ignore the surface veneer as simply not being that important to the business .

I learned a lesson that day.

Well, that was then.  It was a while ago.  Today, eccentric Bob might find himself in a less friendly environment, and might even be pushed out the door, simply because management didn’t want to “deal with it.”

In many organizations today if Bob doesn’t fit in, he’s gone.  Focusing on performance and results just aren’t enough anymore.  Or perhaps not considered as important by elements of senior leadership.  Not as important as “fit.”

Defining what “fits”

Each employee can measure themselves, and can be measured by others, in accordance with three elements of a successful employment experience.  The Organization & Development folks call this P.I.E.

  • Performance: Doing the job.  Simple enough.  Doing what you’re paid to do and doing it as well as you can.  Bob excelled here.
  • Image: What others think of you.  When your name is mentioned, what imagery emerges in the listener’s mind?  What do they know about you, what have they heard and sometimes it’s what do they presume?  Call it a reputation index.  Bob suffered here, because his “rep” included both performance and irritating little eccentricities.

 

  • Exposure: Who do you know and who knows you.  What’s the composition of your internal network of personal connections, and how many are in leadership roles?  As a loner Bob didn’t score well here either.  He couldn’t “work a room,” and usually preferred to stay in his cubicle, working.

These elements haven’t changed over the years, and are just as much in play today as when I was told that I would have to deal with Bob.  However, the importance of each element has evolved.

Shifting landscape

In many organizations today, especially amongst the leadership, the combination of an employee’s image and exposure (network) is often more important to their future in that organization than whether or not they’re doing a good job.  That bears repeating, as at first glance it seems like the world has turned upside down.

Time and again we see that “fit” trumps performance.  Those employees who have likes, hobbies and personalities that are similar to the “group think” are increasingly viewed as more successful in their organizations  than other employees who lack a similar persona and who can only offer high performance.

Nahhhh, you say, that can’t be right.  And maybe in your experience  -  well, you’ve been more fortunate.  But what I’m describing does happens.  And it happens a lot.

For example, a colleague of mine doesn’t play golf, and doesn’t gamble.  And while he claims no value judgment about either interest neither are they his “thing.”  He has other “things.”  However, for one employer those personal preferences formed a negative combination that ultimately steered him toward the exit door.  He didn’t fit in.  Senior management loved to play golf, and they’d schedule conferences where gambling was readily available.  My colleague went to the shows.

Now if you’re thinking “there must be more to this,” one week prior to hearing that he didn’t fit in he had received a “high performer” rating on his annual performance review.   Regardless, he was encouraged to look elsewhere. 

Now some might not think that that sample experience was so bad.  Following that vein of thought,  in order to form a collaborative environment companies need people who have a degree of “simpatico” with each other.  Thus if your persona isn’t perceived as “in sync” with the leadership group your Image and Exposure will suffer to the point of damaging your career prospects – at least with this employer.

And doing a great job may not be enough to make up for your other personal failings.

What can you do?

Shoveling sand against the tide is never an effective strategy.  Nor is thinking that an individual can unilaterally change the culture of an organization.  So you either quit or you put up with your status  - just as they put up with you.

For now.

So have a care.  Think about your own working environment in terms of Performance, Image and Exposure.  If you’re comfortable being in a high performance role, perhaps you shouldn’t be quite so relaxed.  It may not be enough.  You just might get surprised with a P.I.E. in the face.

Keeping A Secret

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 18-04-2014

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Are the employees in your organization aware of their salary grade, of the minimum, midpoint and maximum values of their salary range?  Do they know where their job stands in the company’s hierarchy (mine is bigger than “x,” but smaller than “y”)?   In effect, do they know how they and their job are being valued within the company’s compensation program?

If they don’t know, why not?

Is this privileged information, tightly held by Human Resources and only doled out in small drips, when asked?  Is it on a “need to know” basis, and sometimes the employee doesn’t need to know?

The big secret

Some companies don’t tell an employee their grade or salary range; or if they do, that’s all they give out – the employee’s present status as a single, unrelated piece of information within a huge jigsaw puzzle that is the organization’s hierarchy.  In such a case the employee is unable to find out the grade or salary range of any job other than their own.  Without a frame of reference, such a restricted disclosure isn’t very helpful in planning their next career move.

As a side issue, employees also won’t know if they’re being treated fairly.

Limitations on disclosure are strictly for the benefit of the company.  No one will say that the employees don’t want to know, or that such information isn’t important.  Instead,  reluctance to disclose is inherently a management decision meant to advance tactical considerations in support of their own agenda.  In other words, it helps management freedom of action when employees are kept in the dark.

But what’s such a bad idea with informing employees about the broader compensation structure, to let them know where they stand within the organization?

Unless . . . .

  • There’s something to hide
  • Or something that the employee shouldn’t discover
  • Or a policy or practice that can’t be easily defended

Given these potential cautions, while the concept of open disclosure often gets the heads nodding as a grand idea, negative practical implications may point in the opposite direction.  Employees could face the same stonewall that their parents had to deal with;  interesting concept, but not for us.”

What could go wrong?

When the pay structure is posted on the wall for the first time, there for everyone to have a look-see, the phones will start to ring. That signals the start of the “what about me?” questions.   Let’s look at a few common scenarios that managers would dearly love to avoid dealing with.

  • After five years of good performance reviews, why am I still paid at the bottom of my salary range?  This could be the hardest question that a manager receives.
  • Why is that job (go ahead, point at anybody) in a grade higher than mine?  No manager wants to defend job evaluation results, especially as it’s an usually a subjective process.
  • Why is the job I want to bid on only a lateral move?
  • If my job is so important (manager said so), then why is “job x” in the same grade?

Management doesn’t want to get these calls, because often times they’re woefully unprepared to answer the employee’s questions.   And they want to be liked by their employees, to have someone else be blamed when employees are upset.  So wouldn’t it be easier if the employee just didn’t know?  Wouldn’t it be easier to operate the business with employees left in the dark about their grade and salary range status, rather than face potentially awkward questions out in the light?

It does make sense, but for who?

Spreading The Peanut Butter

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 02-04-2014

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This is a term used by one of my international clients to describe a general increase, the granting of an across-the-board pay rise or one-size-fits-all lump sum payment.  The simple visual of spreading a thin layer to coat a surface caught my eye as well as my ear, as I often make peanut butter sandwiches for my granddaughters – and now I stop and think whenever I’m doing it.

The concept is simple, all too simple, and therein lays the danger.  At the time of the annual performance review let’s just give everybody the same base salary increase, either as a percentage or in a pre-established amount. No fuss, no muss, no big project, and everyone is treated the same.  Sounds like a easy and uncluttered approach for being fair to the employees, right?

But “too simple” is rarely an effective solution, especially when you’re dealing with the complexities of employee engagement, morale, productivity and pay-for-performance rewards; and especially when you’re dealing with the dubious motives behind this tactic.  Yet the attractiveness of being able to simply push a button to get all these HR issues behind us (or so we think) can be compelling.

But it happens.  There are advocates out there, whispering in the ears of your senior leadership –  angling to use that EASY button.

When does it happen?

  • When the pool of available reward monies is considered too small.  In the days of 2% merit spend many companies felt a pressure to avoid “splitting hairs” – as the administrators would say.
  • When we want to grant pay or salary increases “just because.”  Perhaps in times of organizational restructuring, or to combat a perceived “brain drain”  of resignations, or when critics feel we have to “do something” to fix an employee problem.

Why do we do it?

  • It’s easy to administer.  Picture the EASY button again.  Now, let’s get back to work.
  • It saves time.  Less time needed for performance appraisal forms, employee meetings, for assessment of performance against objectives.  Less record keeping.

But consider the consequences – and there are always consequences when you choose to do things quick rather than right.

  • High performers get the same reward as “Joe Average.”  That’s probably not the sort of message you want to give your most valuable employees.
  • Recognition of performance is marginalized, as when small amounts are involved choosing and rewarding differences in performance is not considered worth the effort.
  • If you believe that rewarded behavior will be repeated behavior, diminishing rewards for high performers will likely gain you diminished performance.
  • That good performer who is low in their salary range?  They’ll stay there until they quit.  Again, not a good message.

If you’re a recipient of this peanut butter spread tactic, and you’re a high performer, what is going to be your likely reaction?  Would you feel recognized for your efforts?  Would you feel motivated to keep performing at high levels?  Would you feel that the company has taken notice of your efforts in relation to your peers and colleagues?

Nope.

But the bean counters and administrators would be happy.  They’ve already left for lunch.

On the other hand, if you were “Joe Average” and received that same peanut butter spread how different might you react to the same questions?  You might not feel as compelled to be recognized, or feel that you actually pushed yourself beyond the norm.  You might just feel that everything is fine, that “hey, this is a pretty good deal.”

Personally I like a little jam with my peanut butter sandwich, and I’d wager that your high performers would too.  Call it the pay differential for performance.  It’ll taste great.

What Looks Like A Duck And Quacks Like A Duck

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 26-03-2014

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Duck by Canal, by Ed TownendHere they come again, those who question the pay-for-performance credentials of the current executive pay process.  Every spring, like daffodils popping through the warming ground investigative articles appear to challenge the validity of how the executive suite is rewarded.  Critical commentaries by notable Compensation experts, as well as a financial analyst here and there, will question whether job performance has warranted the amount of financial rewards reported in proxy statements.

What follows is usually a series of back-and-forth sound bites and written pieces both criticizing and defending the logic of the executive reward process.  However, those who press their divergent viewpoints seem unable to reach consensus on an equitable process, and so next year the cycle of reward and debate repeats itself.  Such has been the case for years.

In my mind though, it’s the proverbial “man in the street” or “court of public opinion” that truly matters.  And if you take that point, that it is the general public who needs to be convinced that corporate leadership isn’t gorging themselves on financial largesse like hogs at a feed trough – then the multiple explanations that appear each season touting the rightness of executive pay fall disappointingly flat.

Who is buying this story?

Unfortunately it’s not the negative impressions of the general population that’s being addressed by these pundits, but instead you often find complex arguments presented in support of the executive leadership.  This is a circle-the-wagons strategy crafted by status quo enablers to refute challenges to the current executive reward process – by providing a technical defense that wouldn’t be understood by that same general population.

I recall a former CEO once telling me, it’s a matter of optics; the present system of determining executive suite reward looks bad to the general public.  No amount of explanatory formulae or charts and graphs is going to change that impression; the more complex the defense the more skepticism that will be generated. 

Another senior executive cautioned me that if I couldn’t sell my proposal on a single sheet of paper, including a lot of white space, then my arguments wouldn’t convince him.  In other words, keep it simple, keep it clear and keep it brief. 

All too often the defense of executive pay is presented as a series of formulaic methodologies to be utilized by corporate leadership (with the support of consultant intervention) to refute their critics.  However, even as these diverse calculations try to make their point the wider audience remains confused, skeptical and unconvinced, so how has the argument been advanced?   The executive reward process will still look bad.

I support the idea of measuring performance to gauge the amount of reward.  Who can argue with that?  But the convoluted process being described by those who tout the current approach is flawed by its complexity, by its confusing array of acronyms and ultimately by its inability to explain itself in laymen’s terms.

Can you repeat the rationale back to me?

Apologists for executive pay often fail to explain a key element of pay that looms large for the rest of us – determinants of “how high is up” or how much is “enough” reward.  Given that for similar performance non-executives typically receive considerably less reward, it’s disappointing that this disconnect in thinking is so often ignored.  A large portion of the looks bad picture is the amount of the reward.  Should those on “mahogany row” have parameters for their rewards, even maximums or caps like the rest of the population?  That sounds fair, doesn’t it?

The problem with connecting a pay-for-performance concept with examples of executive pay excesses is an optical one – it looks bad!  Attempts to rationalize the practice with complex terms, charts and theorem won’t convince anyone outside of the board room.  The way to change that negative impression is to challenge the convoluted methods that executives use to rationalize their reward structures.  The general population (not the financial analysts, proxy readers or even compensation specialists) wants to see a direct cause and effect (simple, clear and brief; performance equals reward), as that is how they are rewarded in their own lives.

Why make rocket science out of a basic concept?

Unless you’re hiding something.