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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.

Learning From Mistakes

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 02-09-2013

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At speaking engagements or during webinars I’m often asked what key takeaways, what gems of wisdom have I learned during the course of my career.  Like most of you out there I’m still at it; learning something new every day.  But I’ve gained a valuable perspective from what I’ve seen and experienced.  I’ve learned that professional wisdom comes to each of us in two ways:  1) what you learn to do (what works), and 2) what mistakes you’ve seen or made (what doesn’t work).

It’s wonderful when your career development manages to stay on the straight and narrow – with positive role models and good experiences – but all too often we learn our most valuable lessons from failures, from tactics or decisions that didn’t work.  Or from failed managers for whom we’ve worked, and those who apparently made error repetition a personal career choice.

With that practical experience in hand you’ll find yourself saying either, “yes, I should do that, when the decision is mine” or conversely, “no, I’ll never do that.”  Both experiences can offer valuable lessons and help shape your career.

One manager’s gems . . . .

Putting together an all-inclusive list can be an endless affair, given the myriad scenarios, personalities and business circumstances that could be involved.  Instead we’ll try to highlight the big mistakes.

These are provided in no particular order of relative importance, and only reflect my own experiences.  No doubt I’ve missed a few, so feel free to add your own experiences.

  • General Adjustment vs. Merit:  Granting all employees the same pay raise, instead of varying increases on the basis of performance delivered.  It’s easy to administer, but rarely an effective strategy.
  • Performance vs. Entitlement:  Rewarding management with a more generous hand vs. other employee segments – simply because they’re management.  Leadership is no more entitled to fair and equitable rewards than any other employee group.
  • Overuse of Discretion vs. Objectivity:  Reliance on subjective measures in lieu of quantifiable results.  When assessing employees on a subjective vs. quantifiable basis management discretion can sometimes lead to abuses (favored sons, “halo” effect, or even discrimination).
  • Abuse of FLSA Exemptions:  Avoiding overtime by treating non-exempt employees as if they were exempt.  Managers try this tactic all the time, for numerous reasons.  This is when you need to put on your policeman’s hat.
  • Surveys says:  Using a title and a generic write-up for matching jobs against “the market.”  It’s the easy way; anyone can do it.  There’s nothing to interpret, is there?  And then there’s the matter of quality surveys vs. . . . the others.
  • The Performance Distribution Curve:  Assigning employee performance assessments in a manner set to follow a bell-shaped graph.  The operative dirty word here is “assign.”  Nobody likes this tactic, except perhaps employment lawyers.
  • Ignoring Internal Equity: Hiring candidates without consideration of how other like-qualified employees are paid.  There are no secrets, so pleasing the new one while angering two veterans is a dubious strategy.
  • Title Inflation:  That meaningless “bone” you toss employees you can’t otherwise reward.  This tactic will raise fixed compensation costs without providing a corresponding benefit to the company.  You’ll eventually regret the decision.
  • Absent Safety Valve:  It’s often said that a good compensation program should cover 85% to 90% of contingencies; for the remainder a degree of flexibility and common sense should guide the decision-maker.  For those more rigid in their thinking, for whom the policy manual is gospel, or those who avoid stick-out-your-neck decision-making, authorizing of exceptions can be a struggle.

Can you see possible rationalizations for each side of the above?  Of course, depending on a litany of possible mitigating circumstances, individuals and . . . whatever.  Just have a care that your rationalizations don’t become a pattern of excuses, and that you document.

. . . are another manager’s errors

Then there are those decisions that over the course of one’s career you continue to regret – wishing you had the time to reboot your thought processes.

  • Hiring a friend / relative: If you would hesitate to sell them a used car, why would you ever think that hiring them would be an idyllic experience?  Correcting this mistake can be painful.
  • Ignoring Office PoliticsI’m not very good at politics” is a poor response to an important reality that all managers must deal with.  It’s all around us, so to pretend you’re above it all, or otherwise ignore it, is likely counter-productive.
  • Performance will take care of everything:  No, it won’t.  Not anymore.  In today’s work environment image and exposure have grown in importance, to the extent that just doing a good job is no longer enough to ensure career progression, or even longevity.
  • I was too busy for networking:  I usually hear this from people in transition, from those who failed to connect with colleagues, peers and industry insiders while they were employed.  You build a network when you don’t need it, so it’s there for you when you do.

Have I missed anything?  Are there other ill-considered practices or policies that you’ve experienced during your own career?

Of course there are.

Make sure that you learn from them.

Are You the Stuff of Heroes?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 21-08-2013

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Do you want to be admired and respected by your colleagues, recognized by senior leadership for who and what you are?  Do you want to be known throughout your universe as one who sets the standard?

Then solve a problem.  Stand up and show someone how to get things done.  Clear the pathway; support someone’s idea, save a step somewhere.  Do what it takes.

Just do it.

It’s not hard, really.  It’s a matter of thinking not of yourself first and foremost, but of a greater good that is broader than yourself – and of focusing your attention on getting the results that help the department, the team, the business.   It’s called a giving of yourself.

All too often what we see from many employees and managers, indeed at all levels of the organization, is an effort to be the star, the success story, the stuff of legend, but often at the expense of someone else.  Look at me,” these eager A-types seem to shout, “look at what I have achieved.”  These are folks who seem to have missed reading the memo on team effort.

We all have them in our organization.  They surround us.

Here’s a thought, though.  Isn’t it better to be lifted up (reward, recognition, a simple thanks, etc.) by someone else, then to be constantly trying to push yourself up there?  Doesn’t that ego rush get a bit tiring, what with the constant pressure of looking over your shoulder to gauge the competition?  To paln your next moves?  Do you have periodic stress headaches, where the muscles at the back of your neck tighten to stone?  Are you sleeping well?

Now picture yourself receiving that award, with the accompanying recognition, spotlight, accolades etc.  Nice feeling, isn’t it?  A proud moment.

I think it does make a difference in how one gets recognized.  I suppose that there are levels of self-satisfaction, but the highest must be when you’re lifted on someone’s shoulder.   When you hear the cheer of the audience.  Self advertisement, political deal-making and a passive resistance that holds others back can’t provide the same level of genuine personal satisfaction.  Because deep down you’ll know you cheated to get there.

Think about someone whom you really admire, in whatever field of endeavor you like.   Chances are it’s a person  who has accomplished something, delivered the desired results, made something of themselves.   They stood up for something.  Likely that person you admire so much isn’t someone who took shortcuts, pushed others aside, ignored the call for help or otherwise kept their focus solely on the mirror.

So why would you want to do that yourself?

Of course you wouldn’t.  But now reflect a bit on how you practice at your relationships at work.  Do you admire yourself to the exclusion of others, or can you spruce up your act a bit and become more of a team player?

Naive?  Politically incompetent?  Perhaps I am.  But I think we need more heroes out there, more decision-makers, more team players and more people willing to make a stand for what they believe in.

More folks who aren’t in it just for themselves.

But that’s just me.  What about you?

Don’t Shoot Yourself in the Foot

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 07-08-2013

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A company’s sales incentive plan is like the Pied Piper from the childhood fable; it plays a tune and the sales force follows.  Wherever the Pied Piper leads, the sales force will go – whether it be down the straight and narrow toward a successful business, or into the rough, down the hillside 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 contacted by a client whose sales incentive plan rewarded the sale of products that generated an actual loss on each sale.  The sales reps got paid though – even though their actions were harmful to the company.   Bad behavior was rewarded, and therefore it was guaranteed to be repeated – over and over again.

Which begs the question, why would a tactical plan for incentivizing sales employees encourage  and reward actions that don’t support the company’s own self-interest? 

What behavior does your own plan reward? 

Can you be sure that you’re not doing the same thing?

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?”  Ain’t gonna 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 plan lately?  Do they outline a plan of action that rewards the type of behavior (sales volume, revenue, margin, market share, etc.) that supports the company’s objectives – that drives the sort of behavior that helps to deliver business success?  Are you expecting a Return on Investment (ROI) for the incentive money you’ve targeted for payment?

Considerations

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

  • The company has to succeed.  Only sales objectives whose achievement advances the company’s operations (bottom line) should be used to incent employees.  Otherwise, you might be paying for busy work.
  • Spell out what you want the sales force to achieve.   Employees should understand their specific objectives; what they’ll be paid to achieve.
  • Provide enough reward to change behavior.  If you want to encourage certain behaviors you need to place a fat carrot out in front.  Otherwise, you might be paying for what would have happened anyway.
  • Measure  performance against quantifiable milestones.   An objective you can’t measure is hard to effectively reward.  Avoid payments made on the basis of discretionary judgment.

Yes, there are other important criteria for sales plan success, but unless you start with a clear map that details what you want your sales force to focus their efforts on, you run the risk of missing the mark – which can be an expensive mistake. 

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 (solely) 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 disconnected 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.

 

Beware The Manager Bearing Gifts

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 02-08-2013

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A client once asked me why a Senior Accountant (non-exempt) reported to an Accountant (exempt).  This same company used the title “Supervisor” to describe individual contributor positions and it wasn’t uncommon for Managers to report to Managers and Directors to report to Directors. 

Given that these situations occurred in a large and presumably sophisticated company, one might ask – what’s the big deal, and is anyone being harmed?  Advocates say that offering an employee a special title is a harmless and inexpensive reward, one that doesn’t increase employer costs. 

I don’t think so.

Source of the problem

·         Managers grant esoteric titles to those for whom they have limited means of reward.  I can’t give you the increase you deserve, so let’s change your title to xxxxx.”  Like greasing a squeaky wheel for a short term fix they want to do something to keep the employee quiet.

·         Employees are given titles where none should exist, like the Secretary / Administrative Assistant promoted to Office Manager, while still performing the same job.

·         A “special” title is used because the position is considered so different from other jobs that it needs to be specifically identified.  Unique titles can also be seen as reflecting on the importance of the managers themselves.

A bitter harvest

Let ‘s look ahead at what you can expect from planting these problem “seeds.”

·         Role clarity (job duties, business impact, decision-making, etc.) becomes blurred.  This in turn generates confusion as the company creates Senior Managers and Group or Area Directors and other in-between titles to differentiate the “real” jobs from inflated titles.

·         When reviewing market competitiveness the less accurate the title is in relation to the work performed, the more likely your analysis will be skewed.  Benchmarking unique, employee-specific and inflated titles hampers an accurate assessment of your competitiveness. 

·         Those with inflated titles will expect the perks or privileges that accompany the title, and their absence could cause difficulties.  It’s an awkward conversation when you tell an employee that the import of their new level in the organization is “title only.”

·         Inflated titles can be a detriment to incumbents as well, such as the “Director” who now only qualifies for a “Manager” title with a prospective employer.  Opportunities outside your company are limited because potential employers would be reluctant to hire someone where the new title is lateral or even backward to that currently held. 

·         The natural extension of inflated titles is inflated grades / salary ranges, as the bogus “senior” position would be placed in a higher grade than the “intermediate” position.  This practice increases your fixed costs without a corresponding rise in either capability or performance.

·         Employees don’t like giving up inappropriate titles.  Thus employee relations  issues will likely develop as you try to correct past practices.  You may have to develop creative “buy out” or “grandfather” scenarios.

What to do

If you do find yourself in a situation with inflated and confusing job titles, what steps can improve your lot? 

1.       Organize a cleaning exercise; start with the low hanging fruit and eliminate all unoccupied titles.

2.       Accompany that initiative by implementing tighter authorization procedures before a new title is created.  This would cut off the flow of new problems even as you address the core issue – incumbents.

3.       Fewer job descriptions would be needed if wording was more generalized.  Standardized titles would clear away much of the role responsibility confusion.

The general nature of clerical duties (filing, record keeping, secretarial, forms processing, etc.) lends itself to standardization – which in turn makes it easier to transfer employees without having to “promote” someone when their title changes. 

Remember though, that  title standardization makes more sense in a conference room than it does during an employee discussion.  A “Senior Depository Research Clerk” sounds more important than a “Clerk III” or even “Senior Clerk.”

Fewer titles provide greater role clarity, improved accuracy in assessing pay competitiveness, more control of labor costs and higher morale as employees know where they stand and what they must do to succeed in your organization.

A final caution: be careful of setting up titles without occupants “in case we want to promote someone down the road.”  Guess what?  You will.

Do You Really Pay For Performance?

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 17-07-2013

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To answer this question most companies would say that, yes – they have a pay-for-performance (PFP) program.  Such a statement is chic, politically correct and offers a positive message about how the company values its employees.  What’s to argue with?  Paying employees on the basis of what they have contributed to the company makes sense, does it not?  If they give more they receive more.

On the other hand, to answer that question in the negative is to suggest that you are not being fair to your employees, that your idea of a proper reward is to bypass individual performance in favor of treating everyone the same, regardless of contribution.  However, as that acknowledgement would paint you as an employer who is insensitive to variations of employee effort and achievement, it’s more likely that you’ll fall in line and say “yes, of course we pay our employees for their performance.”

But do they?  Do you?

There is an entrenched viewpoint by many in management that the granting of variable pay increases automatically means that their company provides pay for performance.  However, if as is usually the case practically everyone receives some form of pay increase (90%+), is there really a meaningful distinction being made between high performers and those who merely occupied a chair for the past 12 months?  Isn’t such a practice (if we haven’t fired you, then you’ll get an increase) more like a modified attendance award?

If you’re serious about it, your decision to adopt an effective pay-for-performance strategy should include two critical elements:

  • The decision not to pay if the employee hasn’t performed
  • The decision to make it worthwhile for an employee to be a high performer

One of the common pay practices that continue to hamper the effectiveness of PFP plans for base salary increases is the misuse of the annual merit pay pool through inflated performance evaluations and automatic increases.   Continued use of this practice will increase your fixed costs, but in a manner that will not effectively reward employee performance or encourage extra effort.

Making PFP actually work for your company will require hard decisions from line managers who are otherwise accustomed to maintaining employee morale through the avoidance of objective performance reviews.  We have seen that, while there is a shift toward greater rewarding of individual effort, additional monies are not being provided as a result of that shift.  Merit spend budgets will not increase to accommodate “feel good” increases.  So in order to more effectively use available salary increase dollars companies need to reward their high performers with money effectively taken away from (not granted to) those performing at lower levels.  You can call this, “taking from Peter (average) to pay Paul (higher performer).”

This may also mean that many average performers, the bulwark of most companies, will receive less than they might otherwise have expected from past experience (which is at least an average raise).  What it comes down to is a company’s ability to afford proper rewards for their higher achieving employees (thus motivating and retaining them in the process) by reducing or eliminating rewards to those deemed as underperforming or going through the motions.

The risk exposure is that if managers, through the utilization of performance management programs, do not properly identify and restrict awards for less deserving employees, the PFP budget will not have enough funds to afford appropriate rewards for high performers.  So you should ask yourself, who is it you would rather disappoint?  Who has less impact on your business and whose loss would be less disruptive to your operations?

While published reports clearly indicate a trend away from one-size-fits-all reward systems, one should look below the surface to learn whether employee performance is being appropriately measured and rewarded.  That distinction is the true measure of PFP.

Getting serious

To effectively use a pay-for-performance system a company should:

  • Educate employees as to what performance will be rewarded.  This requires measurements, and performance objectives that align vertically in the organization (employee goals relate to supervision, whose own goals relate to management, and on upward to corporate goals).
  • Provide a well-defined rating scale that helps managers distinguish between levels of performance.  Be careful of the word, “average,” as many managers use that as a default rating.
  • Provide a clear distinction of reward between those who have delivered and those who have not.  An employee who does not see a relative gain from working hard all year (2%+ differential) is less likely to repeat their performance the following year.  For an extra 1%, would you?

So the next time you are asked whether your company rewards employees for their performance, perhaps your answer might not differ, but now you recognize the distinction being made by your employees.   It’s up to you whether to be satisfied with your answer.

DIY Isn’t For Everyone

Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 11-07-2013

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Does changing a light bulb make you an electrician?  Does replacing your car’s oil make you an auto mechanic?

No?  When it comes to Human Resources, though – sometimes the perception is different .

In a smallish company the role of Compensation is essentially one of market pricing.  Managers want to know how much a job is worth out there in the marketplace.  Nothing fancy, nothing complicated, just answer the question – how much?  Given the easy access to survey information some HR Managers tend to diminish the significance of compensation analysis with a shrug of the shoulders and a smug, “oh, we can do that.”

Piece of cake

To their view, market pricing is a simple process of matching a job description to a generic, boiled down paragraph from a survey source, then noting the highlighted figure that corresponds to that job.  How difficult is that? 

How bad can it get, they figure, to ask an HR generalist or even a department manager to flip the pages of a survey to find the “going rate”?  Are they going to be that far off?

Yes, they can.  Yes, they will.

Now I admit to having a bit of a bias, but consider this:

  • Survey complexity has increased as customers demand ever greater degrees of “slice and dice” data analysis / market segmentation (industry, revenue,  geography, etc.).
  • Surveys no longer provide just “the number,” but multiple figures to choose from.  Which is best for you?
  • The HR Generalist already has a full time job, and not a lot of time to spend dabbling in the intricacies of market pricing.  They’re looking for the quick answer.  Does quick suit your needs?
  • The periodic dabblers may also be affected by their own biases (they know the job holder) and a simplified grasp of the job under review (relying on title matches or abbreviated “descriptions”).
  • What happens when a critical job isn’t well matched in the survey?  Do you check off “no match” and move on?  What if you really need the data?  Is your ad hoc analyst able to triangulate other jobs into a reasonable assumption of an appropriate market rate?
  • When dealing with international jobs there are a host of limitations on data availability not commonly experienced in the US.  Market pricing overseas can become more of an art than a science.

What can go wrong

The inherent risk is in misreading relationships between jobs, where a wrong job match or an out-of-context figure could become the single domino that starts a chain of distortions.

If a mistake is made with a Systems Analyst, likely that error will be compounded when coming up with the Senior Systems Analyst figure.  And if you’ve historically considered a Financial Analyst similar in value to the Systems Analyst, you can easily peg the Financial Analyst to the wrong market rate.  And so the story goes, for as often as other jobs are considered of similar value. 

But perhaps the greatest challenge to the wannabe analyst is when they’re challenged by two commonly asked questions:

  • Are you sure of these figures?  In other words, defend them as if they were your own creation.  What survey(s) did you use, who are the participants, did you properly match the job, let me see the data, etc.
  • What do we do now?  Having the data is usually the tip of the problem, and like an iceberg there’s always a lot more underneath.  How do we take the knowledge of competitive market pricing and develop tactical strategies to move the organization from a problem zone to safer ground?

So have a care when flipping pages through a survey, searching for the right number.  The figures can mislead you, even as you don’t know what to do with what you have.

Sometimes you do need an electrician, because DIY won’t get you where you need to go.