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Why Do They Do That?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 14-01-2014

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Bureaucrat, by Delmarva.DealingsHave you ever visited the Post Office, or the Department of Motor Vehicles (DMV), or had the opportunity of spending quality phone time with a government employee?  Of course you have, and it can be a frustrating experience.  You need help, or advice, perhaps a creative solution to your problem – maybe simply someone to point you in the right direction. 

Argghhh!

More often than not what you’ll get instead is a quote from a policy or a regulation that doesn’t help you at all.  And this is usually accompanied by an air of indifference for your circumstances.   Should you dare ask them, why? they stumble, seem a bit startled at the question, and then finally repeat what they said before – usually word for word.

When I was an expat living in England I was able to cruise all over the country for a full year on my international drivers license.  This was driving on the wrong side of the road – and with a manual transmission.  The experience gave me and those with me a few close calls.  But no one questioned the risks I took or shared with other drivers; just get off the plane and drive off was the common practice.

However, after that initial twelve months expired the bureaucrats wanted me to get a British license, which meant a period of driving with Learners tag prominently displayed on the car (L) and taking a written as well as a driving test.  When I asked the clerk why I was required to act like I was 16 years old again the fellow’s eyes glazed over as he parroted the regulations.  When I said, “but that makes no sense,”his only response was repetition.

Though he was very pleasant about it.

Bureaucrats are everywhere

Cute story, isn’t it?  But the humor might wear a bit thin if you find the same experience where you work.  Consider those managers who treat their employees in a similar manner, including that air of indifference.  How do they react when approached by an employee thinking outside of the box; or when a request falls outside the norm?  Too often I’ve seen managers play the bureaucrat card and quote the rules.  That’s against company policy,” or “we never do it that way,” or even “that’s the way it is.” 

In other words, they don’t seem to know the reasoning behind their own response, so they parrot a rule or a policy or even a common practice – all without stopping to think whether what they’re saying makes sense or is helpful to those who have come to them for assistance.  It’s like a parent saying, “because I said so.”

Why do they do that?

Let’s face it, it is easy to say, “That’s the policy” without taking the time to understand the reasoning that goes behind the policy.  Kind of a knee-jerk response.  It’s safe, you can’t get blamed, and the questioner goes away.  But is that the right answer for the circumstances?  And is that what you want, for your employee to simply go away?

What do employees think when treated in such a fashion?  In polite terms they’ll write the manager off as a waste of time.  Won’t go there again.”  And so goes morale, engagement, collaboration, team effort, productivity and every other positive aspect of employee relations.  Poof!  Just like that.  Blow them off and they do the same to you.

So don’t do that.  Don’t make decisions – just because.  Don’t parrot what you can’t explain.  Have a reason for what you tell employees.  They don’t have to agree with you.  But you owe them the courtesy and respect of considering their point of view and to respond in a thoughtful manner.  They deserve a proper answer, not something taken off the shelf.

Btw, I never did bother getting my British driving license.

Christmas Is Over, Isn’t It?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 09-01-2014

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Gifts by stevendepoloIt’s that time again.  The end of the business year, when managers everywhere turn their thoughts to – bonuses!  The calculators are out and every eligible soul from Marketing to Manufacturing to Sales, IT, HR and the Executive Suite tries to figure out how fat that check will be.  For many, it’s the gift receiving season.

And thus the same bad script repeats itself for the annual management incentive process, year upon year upon year:  objectives created at the last minute, embellished accomplishments artfully recorded, problems and shortcomings diminished or forgotten and assessment forms looked at with bureaucratic disdain – as in, how do I fill out this thing to pump up my results?

More than the mechanics are at fault

Oh yes, the process is flawed, yet the foxes are in charge of the chicken coup – and they offer little hope for reform.  Why?  For those in charge the process works, and self-interest pays its own rewards.  Picture a belated Santa Claus with a large bag of goodies.

Cynical?  You bet.  For many of us in the trenches true pay for performance is an elusive concept best remembered from Compensation 101 textbooks, suitable only for life as it should be, not as it is.  Sad to say, but senior management is often the worst offender.  I’ve seen senior executives manipulate or adjust financial results to ensure that their own incentive awards wouldn’t be reduced.  Senior staff deserves competitive incentives, don’t they?  How can you not reward your senior leadership for their efforts?  And so once again entitlement trumps performance.

Studies suggest that the I-deserve-it mentality has weakened through this recession and slow recovery.  However I’m convinced that it’s still alive and well wherever rewards are viewed as payment due for time served and effort, not results.

But we go on hoping, one company and one client at a time, trying to persuade leadership that it’s primarily good performance that should provide rewards; that tenure isn’t a compensable factor, that incentive payments should be earned, not simply an automatic gift of delayed compensation.  Lower level employees are expected to earn their rewards; shouldn’t the same case be made for management?

End of year expectation

Have you ever told an executive that their annual incentive might be reduced because of either corporate or individual performance didn’t meet expectations?  They would look aghast at the possibility.  I’ve taken calls from spouses asking when the money would be available (post Christmas sales) – who then grew upset when told of the review process and that the Board of Directors has to approve.  The common attitude was, times up! – where’s the money?

Will the situation be any different for the bonus cycle in 2014?  I hope so, but bucking the trend of human nature is far from a sure bet.

To change those dynamics, as well as the effectiveness of your incentive plans you need to stand up and speak up.  The process is starting now, so it’s not too late to have an impact, to instill a management pay-for-performance philosophy in your company – even if it’s only one step at a time.  

·         Performance appraisal shouldn’t be an activity list (I was very busy), but a focused statement of achievement against quantifiable and measureable objectives.

·         Let the assessment tell you the rating, not the other way around (“how do I fill out this form to give a 4 rating”?).

·         Confirm that the language on the assessment form corresponds to the performance rating.  Oh yes, you have to check.

·         Assessment forms should be required before an incentive payment is made – negating an old procrastination trick (“oh, just process the check.  I’ll get the form to you . . . tomorrow or the next day”).

·         For the 2014 cycle, start by having objectives established early in the year, not in an after-the-fact rush at the end

Granted, you’ll need more than a steely look and a waving flashlight to stop a speeding freight train, so you should educate management about their ineffective and wasteful practices before the cycle starts.  Because afterward is usually too late; discipline as a learning tool is best used to prevent problems, not when Santa is already reaching into his bag of checks.

Maybe this can be your New Year’s resolution?

Merit Pay’s Fatal Flaw

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 30-12-2013

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It’s likely that your pay-for-performance program has a fatal flaw built into it; an inadvertent side effect of the design that, if ignored by management will almost certainly guarantee failure.

 But no one wants to talk about it.

Instead, what you’ll hear is a steady drumbeat of, “Oh yes, we have a pay for performance program.  All our employees are rewarded on the basis of their performance.”  But what if those merit increases won’t be enough to move an employee from low in their salary range up to the midpoint, the “going rate?”  What if merit increases alone won’t assure competitive pay?

The problem

Over time increases to the external marketplace will outstretch the company’s ability to keep pace through rewarding performance.  Annual performance awards can’t keep up with increasing market values and often new hires will be paid more than current, experienced employees.

The company usually describes their midpoint as associated with the market “going rate.”  Thus any employee who has performed their job responsibilities for a set period of time without performance penalty will reasonably expect that their pay rate should at least equal that market rate.

That sounds like a fair and reasonable expectation.

When that doesn’t happen though, when individual pay remains below midpoint / market, the employee’s disappointment over perceived unfair treatment can fester into lower morale and disengagement, which in turn often leads to separation.  If the employee is a high performer, the company has just suffered a significant loss.

Doesn’t happen here, you say?  Then test yourself.  Ask Human Resources how their pay-for-performance system works over time, over several years.  Ask them how they’re going to move a new employee’s pay from the minimum or low end to the midpoint value.

I wonder what they would say.

Look at the numbers

Let’s look at an example: say you’re hired at the bottom of the salary range, at $80.  The midpoint is $100 and the maximum is $120 (typical salary range).  Your compa-ratio is 80%.  After three years with the market / midpoint rising at approx. 2.5% per year, the $100 has become $107.70.  Meanwhile, let’s say you’re performing well, receiving 4% annual increases.  After three years your pay is now $90, and your new compa-ratio is 83.6%.

If you believe that three years of satisfactory (or better) performance has brought you to a point where you are thoroughly familiar with the job, and therefore should be paid the “going rate,” guess what?  You’re stuck at 83.6%, while the moving “market” remains at 100%.

And if you’re fortunate enough to receive a promotion?  Chances are your present 83.6% compa-ratio will likely have you starting the new job similarly low in your new salary range.  So the self-defeating process starts once again.

But what if you’re not promoted?  How many more years will it take to get you to competitive pay?  Are you willing to wait that long?  Or will you become another statistic in the company’s turnover rate?

The causes that make the effect

This doesn’t need to happen, but all too often does.

  •  When a company is caught up in an “everyone deserves a raise” mentality, there isn’t enough money left over to properly reward the higher performers.
  • Many companies don’t provide significant reward differentials between performance levels.  Is 1% or 2% enough between your stars and “Joe Average”?   Are you motivating through pay, or simply administering?
  • When managers fail to consider employee contributions vs. the evolving competitive market.  When decision-makers ignore external realities and instead focus solely on internal balance (equity). 
  • Merit budgets are not designed to address the issue of “market creep.”  It’s as if the company presumes that the external marketplace isn’t moving at all.

With the above as backdrop an organization’s internal pay practices can easily become disconnected from an employee’s market value.

Not many companies recognize this inherent flaw in their pay-for-performance program.  Individual managers may notice the danger, but most organizations tend to turn an official blind eye.  Granted, most don’t have the extra money that would be required to jumpstart employees to match their growing marketability.  They don’t have enough resources to be fair to everyone; it just costs too much.

Instead, they prefer to take one year at a time, all the while telling employees that the merit system works.

That’s where the cynical viewpoint of some employees is created, suggesting that quitting and getting rehired is a sure way to get the money you deserve.  It’s a risk, but I’ve seen that tactic work.

What can you do?

Develop a Ring Fence: identify your key employees and make sure that they are both competitively paid as well as appropriately paid for their value to the organization.  Build a protective “fence” around these employees, similar to “franchise players” in professional sports.  These are the ones you can’t afford to lose – so keep track of their compensation packages.

Then every year review your entire staff.  Who is paid properly and who is not.  Having this knowledge is half the battle, halfway toward a solution.  Because from this point individual corrective tactics can be devised.

Caution: you may have to decrease or even forgo some increases for “Joe Average” employees.  Can you do that?

—————-

The merit pay process usually works well for one full cycle, but for the long term the mechanics don’t provide the compensation level that the employee is worth.   Management touts their merit reward programs as a one-time event, but over time employees will see the fly in the soup, that unless one gets promoted on a regular basis the “system” actually works against you.

But no one wants to talk about it.

I Don’t Get It

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 15-12-2013

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Falling Down Cat, by Celine. QI really don’t.  Can someone explain why some companies are interested in what other companies are planning to do next year with their salary range midpoints?  I presume that’s what’s happening, because there are surveys out there compiling and reporting such data.  But who really cares?  Aside from anecdotal information I’ve never understood the importance of this reporting.

To be fair, perhaps my experiences are the exception, as I’ve never used such information 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 organization I’ve worked with, either as an employee or as a consultant.  Which leads me to ask, do some companies actually propose raising their midpoints on the basis of a survey listing what other companies are doing?  Is that metric as important as what’s being paid for jobs, or what the average merit spend might be next year?  How does someone else’s projected salary structure movement relate to my company’s particular situation?

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

The focal point of my survey analysis has always been to determine the competitiveness of current  midpoints and actual pay practices.  In planning for next year I can see adjusting 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 said was common practice.  Am I wrong here?  I’ve 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 the wrong 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’s 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 decision 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 back 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?

And when exactly are these midpoint estimates made?   How predictive are they?  In reality they’re guesstimates, and many times the questionnaire is completed in haste, just to get the form submitted.  After all, most companies won’t confirm their new structure commitment until late November, while the survey questionnaires are completed in mid-summer. 

How good is your crystal ball 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 total 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 percentage than for hourly employees.   Suggesting that only a single figure would reflect your entire population would distort the reality of your multiple competitive markets.

Now I suppose there may be companies out there that have changes to their reward programs contractually tied to “market movement” or even midpoint growth, but in this day that number is likely a very small minority.

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

 

You Get What You Reward

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 30-11-2013

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Carrot and Stick, by mr_k_rmA company’s sales incentive plan is like the Pied Piper from the childhood fable; it plays a tune and the sales force follows behind.  Wherever the Pied Piper leads, the sales force will go – whether it be down the straight and narrow toward a bright tomorrow, or into the rough, down the hillside, through the brambles and over the cliff.  Because the melody being played is about money, and when that tune catches the ear those chasing behind will follow it anywhere.

I was once brought in by a client whose sales incentive plan rewarded the sale of products that generated a loss on each sale.  And it wasn’t part of a loss-leader tactic, either.  The sales reps were rewarded – even though their actions were detrimental to the company.   Bad behavior was rewarded, and therefore it was repeated – over and over again.

Which begs the question, why would a tactical plan for incenting sales employees encourage actions that don’t support the company’s own self-interest?  Isn’t anyone watching the store?

What behavior do your own plans reward? 

Do you know?

It’s up to those who design the sales incentive plans to carefully pick the right pathway.  Because as long as the money is flowing the sales rep isn’t going to raise a red flag and ask, “are you sure you want us to do this?”  That’s not going to happen, as most incentive plans are not self-correcting.  The lemmings will race over the cliff as long as a dollar bill is waved in front of them.

Have you looked at the details of your own plans lately?  Do they outline a plan of action that rewards the right kind of measurements (sales volume, revenue, margin, market share, etc.) that support the company’s objectives?   That drives an employee behavior that helps to deliver business success?  Do you expect a Return on Investment (ROI) for the incentive money you’ve targeted for payment?

Get your checklist ready

While there might be more variations in sales incentive schemes than snowflakes in the winter sky, certain fundamental design elements do apply as prerequisites for success.

  • First and foremost the company has to succeed.  Only sales targets whose achievement advances the company’s bottom line should be used to incent employees.  Are you paying for busy work?
  • Spell out what you want the sales force to achieve.   Can employees tell you what their specific targets are?
  • Provide enough reward to change behavior.  Like any incentive, if you want to encourage a certain behavior you need to place a carrot out in front.   Not enough reward usually equates to not enough effort.
  •  The greater the selling effort, the greater should be the reward.  If your reps are simply taking orders (product sells itself), are you paying for what would have happened anyway?
  • Make sure you can measure  performance against quantifiable milestones.  Are payments made on the basis of measurable results or discretionary judgment?

Yes, there are other important criteria for sales plan success, but unless you start with a clear map that details where you want your sales force to focus their efforts, you run the risk of missing the mark – which can be an expensive mistake.  You will need a team effort, not the disconnected activities of individually focused entrepreneurs.

The success (and continued use) of a sales incentive plan should be measured by the success of the business, not by how busy employees are, or even how much revenue is generated.  Unless activities can be measured and achieved, and support the company’s business plan, you’re better off with a straight base salary plan (horrors!).  Because providing incentive rewards that don’t advantage the company is often paying for busy work.

So ask yourself, does your sales incentive plan encourage the right sort of behavior, activities that will drive business success?  Are you paying for the results you need?  Are you getting your money’s worth?

It might be time to check.

Are You Still Playing Follow The Leader?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 21-10-2013

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Picture the scene;  you’ve just completed a presentation to senior management, complete with analysis and recommendations for next year’s compensation program.  Now you stand ready for the question and answer session.  Now is the time to defend your proposals.

With a carefully blank expression on his face your COO poses a single question . . . why does it cost so much?

Justification Or Excuse?

But you’re prepared.   You’ve anticipated the question.   You know that properly answering this “why” question is your once-a-year opportunity to make your mark, show off your CCP designation and help direct the reward programs for your organization.

So chances are you won’t respond with, “because that’s what everyone else is doing.”  Uttering that lame comment would suck the air right out of the room – and likely your career with it.   So you won’t say that.  However,  just between us, would that actually be the truth of it?  Are your recommendations based on the unique status of your own organization’s external competitiveness, internal equity, overriding Compensation strategy and financial affordability, or have you simply parroted what the Compensation surveys report that everyone else is supposedly doing?   Have you pushed the EASY button and followed the all-powerful lure of “common practice?”

Beneath the COO’s simple question your senior leadership is really asking whether your proposals set a course to  simply follow the pack, or do they lead toward solutions crafted for your organization’s own needs?  Follow the crowd or strike out your own path?

Are your recommendations for the company’s compensation programs a compilation of “everyone else is doing it” rationale, or are those proposals based on what you feel is necessary for your own organization – regardless of the “average?”

Are Decisions Being Made For You?

Is your view of presenting competitive programs a reaction to the behavior of others, or because certain tactics also make sense for you as well?

  • Raising Salary Ranges: Surveys will report the projected average increase in salary range midpoints for next year.  But how does that figure relate to the competitiveness of your own situation?  Do your ranges need a similar adjustment?  What would you recommend if you didn’t have a survey whispering in your ear?
  • The Average Spend: When survey sources report a projected average spend for next year, is that your recommendation as well?  And when responding to the why question, what else do you have to offer as justification?  Does the survey figure make sense for you?  Can you afford it?
  • Pay Decisions: Are the survey sources reliable indicators (multiple?) that you can point to as the prime reason for making individual or group pay decisions, or are external sources only one aspect of your analysis, one element of your reward program strategy?

Before you make that next reward presentation ask yourself whether your decisions and your recommendations are adding value to the organization.   Or was your analysis complete once the survey data suggested a common trend?  Gave you the answer, so-to-speak.

The easy way is to point at others, to argue the common sense of common action.  However that strategy bespeaks more of a Compensation Administrator than one who is charged with overseeing the proper design, competitiveness and effectiveness of the company’s reward programs.

To be fair, sometimes what everyone else is doing is the right action for you.   Then again, the reported “average” may be no more than an arithmetic exercise that is less a strong trend than rather a convenient manipulation of data points.  Who’s to say?

So be careful before you sign on to tactics decided upon by other companies.  That nameless average of common practice is not responsible for your organization’s compensation programs.  You are.  And you’d better have a better reason for your proposals than that’s what the survey said.

Mistakes Can Help, Really

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 09-10-2013

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

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

Bet you won’t do that again!

Perhaps not, but that doesn’t mean you shouldn’t stick out your neck again.  Turtles don’t make for good leaders. And neither do ostriches.

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

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

No pain, no gain?

If your strategy is to use your mistakes as a learning experience, what lessons would you take away if you never stubbed your toe?  Chances are your ego would swell with self-importance, and what had been healthy self-confidence would morph into supreme over-confidence.  You would start reading your own press releases, and that pathway leads to a steep cliff.  It’s only a matter of distance.

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

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

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

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

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

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

Do You Keep Skeletons In The Closet?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 29-09-2013

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

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

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

Those were the days

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

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

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

But I’m betting that’s not the case.

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

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

Perhaps it was some form of management discretion that they felt would be challenged by letting too many people know what was going on.  But the tactic never did make sense to me, as folks are even more curious about that which they’re told they can’t see.

Hiding the crown jewels

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

  • Salary range – Communicating the minimum and maximum, or even just the midpoint.  Letting you know how much you’re paid in relation to how the company has valued your job.
  • Grade – The designation of a position within the hierarchy.  If you know your grade, chances are you can figure (or guess) the grade of others – including perhaps your boss.

Then again, if the grading structure can be manipulated by management discretion (whimsy), or job evaluations slanted one way or another, perhaps there are a few skeletons in the closet after all. Perhaps there are indeed little secrets that are best kept out of sight.

If not, then why not post the salary structure on the office wall?  All the grades, all the salary ranges, and all the jobs covered by the compensation program.  For those who like to keep their confidentiality, you can cut off the disclosure at the executive level. 

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

What’s the big secret?

I think we know.

Who Deserves A Raise?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 19-09-2013

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Dollars by bfshadowYou just received an above average performance rating from your manager, which naturally put a big grin on your face.  Which was subsequently wiped away when you heard that for your annual salary adjustment you would receive what amounted to one percent (1%) more of a salary increase than “Joe Average” down the hall.  Tight budget this year, you’re told. 

You know Joe, or his type.  He’s the disengaged clock watcher whose most notable accomplishment is keeping his chair warm.  Doesn’t do enough to either get fired or stand above the crowd.  However, his level of performance is considered the standard in a bell-shaped curve, and so receives an “average” award.

One percent more than the clock watcher.  For delivering what your boss described as your terrific effort for the entire performance period.  Was it worth it?  Some studies have suggested that, if the differential between performance levels isn’t at least 2% (which sounds better than the actual dollars involved), then you’d be better off with a general adjustment.

How does this happen?

When assessing the dynamics of employees and their work ethic, it’s generally agreed that performance rewarded is often performance that is repeated.  Like the Pavlov experiments of so long ago, we tend to repeat that activity which previously gave us pleasure or reward.  We want more of it.  However, if the performer doesn’t feel rewarded, or is not pleased by the company’s reaction to their performance, does the company gain or lose when that desirable performance is no longer repeated? 

Perhaps your performance reward system is not as effective as you would like.

So the question becomes, how much of a reward differential between the best and just OK is enough to keep your better performers motivated and feeling appreciated?  A good guess is that it’s not 1%.

As a manager, can you balance the need to reward your better performers against the reality of tight budgets?  If you want to retain the high performers, you’d better find a way.  So then, what if you started by figuring out how much reward to provide?  Then whatever is left can be carved out among lesser performers.  That will protect your “stars.”

Ahh, but that won’t make you popular among the masses, will it?  And for many managers being liked is a key element of self-worth.  But how high up the priority list should popularity as a manager be marked?  Will you be assessed for popularity when your performance review is due?  I don’t think so.  Likely it won’t be in the top three of what senior leadership is expecting from you.

Your job description probably doesn’t even list this characteristic, and it is certainly not a factor in job evaluation.  So perhaps there are other criteria for a successful manager that should receive more attention.

If you’re concerned about differentials another consideration is the number of ratings you have in your performance appraisal system.  For example, with a seven scale system the need to provide percentages for at least five makes the division of reward opportunity a bit tight.  And if you try to maintain a two percentage point differential between performance levels, the numbers might become higher than what’s deemed affordable.

I don’t believe in reward for tenure, but I do believe in reward for outstanding job performance.  If the merit spend budget doesn’t have enough monies to recognize and reward everybody, each in turn for their contribution, then I’d suggest that you take care of your better performers first.

You can afford to disappoint “Joe Average,” but not “Bob the Superstar.”

When They Want a Bit More

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 08-09-2013

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

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

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

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

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

Handling the angry employee

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

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

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

  • Remind the employee that there’s a process.  Start with the reminder that the company does review performance and pay levels, that there is a process.  No one is being forgotten.
  • Get them to talk about their qualifications.  You still need to let the employee have their say, but steer the conversation toward the employee’s own capabilities, background and experience. 
  • Don’t address emotional issues like need.  That’s a slippery slope that pulls the conversation away from business and into the grey area of personalities, home life and pressures from outside the work environment.
  • Keep the conversation about only the employee.  While you’re willing to discuss how the employee facing you is being treated, you shouldn’t open the conversation as to how other employees are treated.  There are too many variables at play here, but perhaps most important is that it isn’t any of the employee’s business.
  • Show an open mind.  Never give the impression that you’re only going through the motions, offering only a “courtesy” meeting.  You need to genuinely listen, ask questions and show the employee that you’re prepared to listen and consider.
  • Don’t get defensive.  Avoid being trapped into defending the company’s pay programs against the employee’s “research” into market pay.   Company pay programs are typically developed by professionals and it’s likely that the employee is using biased and simplistic figures.
  • Don’t get into an argument.  No one wins here, but you’ll likely lose more because the court of employee opinion likely gave you one or two strikes before you came to bat.
  • Don’t make promises, especially if you’re not authorized.  Avoid using throw away phrases like “I’ll look into it” or “let me talk to HR,” unless you mean it.  Unless you’re actually going to take up the employee’s issue and run with it. 

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