Company management is always asking, “what is the market value of our jobs?”   But just how precise does your market pricing analysis really have to be?  To what extra lengths will you go, or should you go,  to increase the level of precision in your analysis, and would that effort prove worthwhile?   Does the appearance of a more precise figure bring meaningful results for you and for your management?

For example, would you consider that a market rate of $47,512 is an accurate reflection of current national trends for the subject job, or is that figure simply an arithmetic average that looks precise?  Would you fall on your sword over the accuracy of your analysis?

Regardless of need, how precise can you be?

The competitive “marketplace” is an imprecise animal, not often well defined and subject to numerous variations and interpretations.

• One survey doesn’t use the same companies as the next survey.

• The job matching spectrum swings from easy (benchmark) to difficult (unique jobs).

• Surveys provide different mixtures of industries and revenue (size).

• Weighted Average / Average / Median / 50^th Percentile formats are not always consistent, and they are not the same.

• International data is often a shadow of what is available in the U.S.

Meanwhile, the market itself is a moving target, never static, always changing, and the use of aging factors to bring it up-to-date will add a degree of guesswork.   For icing on the cake many practitioners round their analysis to the nearest Currency 100, in order to emphasize the “pulse” of the marketplace.   A minor distortion, I’ll admit, but exactitude is often an illusion anyway.

Each of us, in our respective roles, needs to ask of ourselves, what degree of precision is necessary?   Not what is attainable, but what is necessary to achieve our goals.  Is it sufficient to report the pulse, or does your organization require a digital thermometer that slices whatever data is available to a much finer degree?

When survey data is not robust (limited participation and scant industry and / or revenue segments) the extra effort expended in the search for precision can result in short cuts, assumptions and questionable (stretch) job matches – all to deliver a data capture anomaly that has only the appearance of exactitude.

Remember that the average of two survey sources doesn’t necessarily indicate a market trend, but only an arithmetic average – in effect, a splitting of the difference between two credible, or incredible figures.  That’s not a sign of anything.

A useful rule of thumb to consider is that any incumbent figure within +5% to -5% of a reported “market rate” is close enough to be considered as “on target.”   There are some who think that figure should be 10%, but to my thinking that leaves too wide a range for a so-called “going rate.”

Caution:  lots of analysis – paralysis jockeys out there advocate increasingly precise techniques to zero in on what they call your true market rate.  Toward that end several vendors have built a business model around encouraging organizations to slice and dice available information, trying to define and refine exactly what a “market” is, what jobs are exact matches and after a fashion how their singular survey source is the answer to your needs.

Part of that marketing strategy is to use custom designed evaluation techniques and their proprietary job matching system.  Such a strategy effectively marries the organization to the vendor, as one cannot easily co-mingle proprietary language and techniques with methodologies used by other survey sources.  Apples and oranges.

The hunt for precision can deliver less perceived value

Sometimes the pressure to report ever more refined analysis might actually result with the opposite effect; weakened credibility as the figures face challenges.

• When too few companies are reporting data.

• When having to stretch survey descriptions to match unique job content.

• When dealing with locations having volatile inflation spikes.

• When management doesn’t need to “dot the I and cross the T.”

At the end of the day, what does the client or your company management desire from your view of the competitive marketplace?  Chances are they simply want an understanding of approximately what the job is worth.   To gain a “ballpark” figure that could be used in planning, in recruiting, in assessing their reward programs.  You won’t have to report $47,512 to paint that picture.

On the other hand a simplistic sore thumb analysis is not an effective solution either, but instead let me suggest that a balance of time, effort and cost be used when conducting market analysis.  The key question is, what level of precision is really necessary?  What level will deliver credible results?

Do you really need such analytic exactitude to make a business decision?

I think you don’t, no matter what the over-analyzers suggest.  But then again, it may be rocket science in your organization.

One of the most debated issues among Human Resource professionals for the past several years has been the back and forth arguments regarding effective performance appraisal processes.  Everyone seems to have their oar in the water, anxious to join the debate about what works and what doesn’t.

What companies should do, and what they shouldn’t.

In one corner you have the performance management crowd who want to divorce pay increases from the performance appraisal process.  Two separate discussions.  They prefer to focus attention on performance improvements and career counseling – issues that tend to have a longer term focus. Looking forward, not backward.  The subject of pay determination (the increase) would come later, during some vaguely defined subsequent conversation.

In another corner you have the so-called traditional practitioners, those who tie rewards directly to the work effort and in doing so tend to combine performance, reward determination and career counseling steps into a single conversation.  Performance improvements and the where-are-we-going? discussion are the epilogue here, not the main topic.

And finally you have the employee perspective, those who have delivered the performance and await management’s assessment and reward determination.  They want to see, and expect to see a direct connection between their efforts (performance) and a subsequent connecting reward (pay increase).

What’s wrong with performance appraisal?

Part of the reason for such active and long lasting debate between often opposing viewpoints is that performance appraisal systems are flawed; we all recognize that they are the object of numerous well-deserved criticisms.

• Managers do a poor job of it.  Whether it’s lack of training, lack of interest or simply an attitude of “I’ve got more important issues to deal with,” the result is often rushed, inadequately thought out and . . . short.

• Should pay increases be tied / linked with performance?  Appraisal conversations run the gamut from emphasizing the past review cycle’s performance to “looking forward for a more productive tomorrow.”  The cause-and-effect pay increase may or may not even be discussed.

• Favored son (or daughter) treatment.  The “I like you” or opposite syndrome, regardless of performance.  Fair treatment can be a casualty if appraisals are too subjective.  Refer again to the training issue.

• Job responsibilities not clarified. When the manager expects performance “A” and the employee thinks “B” is called for, and the outdated description shows a muddled “C” – what follows is going to be an awkward conversation.

• Forms gone wild.  Human Resources and systems people always tinkering with forms, creating ever longer, more complicated processes.  The usual result is a manager’s passive resistance and poorly handled assessments.

• Process evolution.  A good idea evolved into something bad, something feared, something to be avoided.  Other than the potential for a pay increase, almost nobody looks forward to these discussions.

• The focal date review.  “Let’s do these things all at once.”  Procedures that mass produce performance appraisal forms and meetings usually result in a loss of quality – and credibility for the process.  Pity the manager who has ten of these to work on at the same time.

What’s good about performance appraisal?

The process of performance appraisal has been around since the first manager – subordinate conversation, and that learning curve of experience has brought about a number of solid advantages:

• How else are you going to tell an employee how they’re doing?

• If your compensation strategy is to have a pay-for-performance program, you’ll need performance appraisal to assess the employee’s contribution, and to somehow assign a corresponding reward – to pay . . for. . performance.

• Employees expect a connection between performance and pay.  That’s what they’re listening for during the performance discussion.

• It makes sense to periodically review performance, to eliminate the need for employees to stress over when to ask for a raise.

During any performance appraisal discussion the employee’s first question (asked or simply thought) is always going to be, “how much is my raise?”  If you’re not prepared to discuss that, even mentioning your “recommendation,” you’re in trouble.  Because employees tend to pay closer attention to career counseling and next performance steps after the raise for past performance has been resolved.

When an employee expects a performance appraisal discussion to include a reference (at least) to a likely pay raise, and you don’t cover that topic, the meeting will go rapidly downhill from there.

• They won’t be hearing your thoughts for the future, as they’ve stopped listening.  You’re not talking about what they want to hear.

• Frustration and lost engagement are going to seep into body language, tone and perhaps even conversation, with the recognition that pay-for-performance is somehow not viewed as a primary concern by management (by you).

• To make the assessment process work employees need to be engaged in the  conversation.  Otherwise what you’re left with is delivering a lecture, a boring monologue to a half-interested party who only hears bla-bla-bla.

What do I think?

I like to connect rewards with performance, because performance rewarded is performance repeated.

I like to acknowledge the elephant in the room, that employees want and expect that their performance appraisal meeting would cover reward determination as a key component, even if senior management approval remains pending.

I don’t like to artificially separate performance from reward, as if somehow the two aren’t connected.  The employee considers it a solid, direct line connection.

Go ahead and disagree, if you like.  There are many valid points of view on the subject, and no single answer works every time, for every organization.

But now you have my two cents.

When it’s time to fix your Compensation program, and you’re the one in charge, what do you do?

Suppose you’ve just been promoted to the Compensation leadership role in your organization, or you’ve just been hired and inherited someone else’s legacy.   Perhaps you already have ownership, but have recently experienced an epiphany that demanded corrections and adjustments, or maybe you simply have the boss’s enraged shouts still ringing in your ears.

Whatever the catalyst, suppose you suddenly face a situation where you need to fix your compensation program; how would you go about it?  Where do you start?

What would you do?

Check your points of pain

First things first; where does it hurt?  The clarion call of action is coming from . . . somewhere, so find out and determine what those burning platform issues mean for your business.

Typical problem areas would include the following favorites:

• High turnover: have your avoidable separations (excluding deaths, retirements, relocations, etc.) reached a level that has attracted senior management attention – and concern?

• Recruiting: has the Staffing section complained that it’s become increasingly difficult to attract the right caliber of candidate?  That you aren’t paying enough?

• Payroll: is the cost of labor considered too high?  Too many FTEs?  Cumulative employee expenses are out of control?

• Morale: has your organization flunked the latest employee engagement survey – and fingers point at Comp?

Or is it something else that is poking you in the eye, causing the organization to consider its compensation programs as more a problem than a solution?

Look and learn.  It’s the first step toward a solution.

Take a health examination

Next, extend your research beyond the obvious and look under a few rocks for what you aren’t being told.

Start asking questions of key management personnel regarding their views about how healthy (effective, efficient, performing as intended, etc.) are your reward programs.  Talk with line managers (those who operate in the trenches) to gain a perspective from the other side of the desk, where employee friction points make the most noise.

Then review your compensation metrics (you are using metrics as a statistical aide, aren’t you?) to determine whether the numbers are telling you a story that you might not have noticed before.

For example:

• How competitive are your actual pay levels?   When was the last time you conducted a competitive analysis?  What did it tell you, and more importantly, what did you do about it?

• Is grade and title inflation boosting costs without adding value?  Bogus titles and inflated evaluations, often used to salve an employee for whom you can’t provide cash rewards, are not  harmless gestures.  Those backdoor tactics cost real dollars, without providing a corresponding return in performance, productivity or engagement.

• What is the average performance rating, and how does that correlate with the success of the business?  If the employees tend to be rated as above average performers, while the business is having an average year, that disconnect is costing you money.

• Do you segment your employee population?  Not everyone’s external value changes at the same rate, nor does the market move in lockstep.  Find out how different employee groups (non-exempt, exempt, professional, management, sales, executives) are being treated (pay rates and trends).  You may have problem pockets, not universal trends.

Chances are that the statistics from your metrics database will validate the concerns raised from your interviews – and focus your corrective actions.

Reinforce the existing infrastructure

Likely you already have in place a salary structure, complete with grades and salary ranges.  You may even have multiple structures, based on employee segment, specialty departments or geography.  Make sure they are up-to-date.

Consider preparing a Compensation Administration Guidelines document for your managers, as a aid in applying standards of consistent treatment for your employees.  These guidelines would lay out in a single voice the policies and procedures to be used in managing your reward programs.

When are performance reviews conducted, how large are promotional increases, how are exception requests processed?  How are jobs evaluated, who is eligible for incentives, and how do you use geographic differentials across the country?  Who has to approve what actions?

And what are doing about Management training?  How do you ensure that those empowered to spend the company’s money (hiring, promotions, performance increases, etc.) actually understand the intent of your compensation programs?  Or are they making a series of well-intentioned emotional decisions that spend the company’s money without concern for financial operating pressures?

One could argue that focused training is a minimal cost solution to the problem of managers wasting the company’s money through ill-advised pay decisions.

Get your message out

Once you have determined where the problem areas are, their magnitude (impact) and the prioritization of gaining solutions, you should consider taking the offensive to make sure that your message is the one employees are talking about.

Note: most other corrective steps are defensive in nature, like putting your finger in the dike.  Survey analysis, salary structure redesign, performance appraisal modifications etc. are all reactive in nature, fixing a problem.  They don’t by themselves attack what could be your most serious challenge – employee perceptions.

• Explain out competitive you are.  Employees will never assume that you’re paying competitively.  At best they consider you average.  If you’re doing better than that, you’d better be telling folks.  Repeatedly.  Because paying above average rates to employees who think you’re average – is a waste of money.

• Use reward statements to show how much the company does for employees.  Have you ever added up how much your organization spends for the betterment of employees, for everything – not just cash?  Consider voluntary as well as required benefits, statutory obligations like social security and workers compensation, vacations, perquisites, recognition programs, company-sponsored programs, cafeteria, employee discounts, tuition reimbursement, stock purchase plans, community involvement programs, the parking garage . . . the list can be quite extensive.

Get your arms around the issues, identify your pain and priorities, communicate with employees and get started.

Do you pay out incentive awards to your management staff on the basis of their performance, or simply because the year is up and it’s time to cut checks?

Silly question?  I wish it was.  But think about what goes on behind the scenes during your year-end bonus processing cycle.

Perhaps your company’s variable pay plan, that which you may have touted across hither and yon as your “pay at risk” program, operates more like a delayed compensation scheme when the facts are known.  Does the message that your pay practices deliver to employees sound like, “not to worry, you’ll get it; you just have to wait a bit?”  Are your eligible employees concerned that their annual incentive payment is money at-risk, that they could actually take a hit at year-end if they and the company haven’t performed well?  Or are they fairly certain that they will receive at least an on-target payment?

Design vs. practice

There probably aren’t too many plan designs out there these days that don’t make a strong case for early-on objective setting, periodic mid-course correction meetings and a thorough year-end assessment of quantifiable results.  But does the implementation practice follow this path?  There lies the rub.

Give yourself a quick quiz.  Ask yourself, how many of your incentive-eligible employees routinely receive their target bonus amount – or even higher?  Has that been your standard practice, that almost everybody wins?  Then ask, how do the average performance ratings compare with the overall business rating?  Is there a strong correlation?  Do your overall bonus payments fluctuate to the same degree between good and bad business cycles?

Note: it would be a good idea to make sure that this information is captured as part of your compensation metrics.

Every year management incentive plans pay out substantial amounts in total reward payments, but do you know whether you’re gaining some real ROI for your money, or is your plan only going through administrative motions – like the process is on automatic pilot?

The administrators rule!

By the time the performance year nears its close and the incentive assessment and payment cycle starts almost no one is looking at these questions.  That ship has sailed.  Attention would now be focused on the processing, the administrative busy work of getting the checks out on time. With all the paperwork passing through multiple hands, the quality control effort usually relegates itself to proper completion and signature of forms, not on whether individual performance has warranted the payments.

I remember one business unit President scanning the management incentive appraisal forms with a dark frown, then saying, “Just tell me how to get Bob an above average bonus”.  Process went out the window.

When the clock is ticking and Finance is clamoring for the numbers there is little time left for self-reflection about the effectiveness of your reward programs.  Some might even shrug off your concerns with a “we have the money budgeted,” as if somehow that solves the design vs. practice dilemma.

It may already be too late for this year.  But before you start the next incentive year cycle, before your administrative processes take on a life of their own, have a look-see at whether your variable pay plans are really variable; whether they’re really working for you.

There’s a lot of money at stake.

More than a few times I’ve stood in front of a podium, either discussing the intricacies of Compensation Management with practitioners and business leaders, or trying to instruct HR Generalists so that those who didn’t give a hoot about Comp could pass a SHRM certification test.

A question that often comes up during such sessions is a matter of strategy;  whether a company’s pay structure should lead or lag the competitive market.  What do companies do?  That’s an interesting question, even from those new to the profession – though often it’s asked because someone thinks the question will be on the test.

But now that I’ve raised the issue here, how would you answer for your organization?  Lead or lag?  Or is there a strategy at all?

Definitions

At first blush the concept is straightforward; if you Lead the market your pay structure (salary range midpoints) are targeted to be better / higher than the competition.  Conversely, to Lag the market is to provide less in midpoints than the proverbial going rate.

But is the decision that simple?  That black-and-white?  Isn’t the market a moving target?  Aren’t other variables also at work?

For those with a conscious strategy, many choose to pin their market competitiveness to a certain calendar date, either the first of the year, midway or the end.   Their goal is to position themselves to either lead or lag the market as of that target date, which means that their competitive situation would fluctuate before and after.

Let’s take a closer look.

• Lead-Lead:  If you want your pay structure to remain ahead of the market for the entire year (i.e., certain industries, skilled workforce, limited labor pool, etc.), you peg your midpoints to be competitive throughout.   By targeting the end date, December 31st you will stay ahead of the game even as the market slowly catches up.  You will lead the market for both the first and second six months of the year.

• Lag-Lag:  On the opposite scale, if you’re satisfied to remain behind the market for the complete fiscal year (i.e., certain industries, less skilled workforce, abundant labor pool, affordability issues, etc.), you peg your pay structure to be competitive (matched) only for one day, the first of the year.  From January 2nd onward your structure then slips behind the market, falling ever further all the way through to December 31st.  You will lag the first six months and even more so for the second six months.

• Lead Lag: A common practice is to split the difference, because you’re not too worried over six months of slippage.  So you peg your structure to July 1st.  You will then lead the market for the first six months, then lag the market by an acceptable amount for the second six months.

So now you can answer that test question.

The Real World

Often times though, you won’t have much of a choice, no matter what strategy you aspire to implement.  Because where you stand today versus the competitive market may limit your options to take corrective action.  For example, if your midpoints are 10% behind as you plan forward into the next year, trying to move toward a lead-lead approach would be a herculean task indeed.  You would have to advance your midpoints beyond normal annual progression to shorten the gap (normal structure movement percentage plus a catch-up adder).  The size of your movement could create potential compa-ratio issues (employees falling much lower in their salary range) that you might not have the budget – or management will – to correct.

And explaining to an experienced employee why they have suddenly fallen low in their salary range is always an awkward affair.  Thus you will likely be stuck with a variation of the status quo for awhile, on account of the difficulty you’ll experience trying to make improvements (increasing competitiveness).  It can be done, but to avoid disruption  it would take a phased approach over several years.

Conversely, in our example you could let your structure remain behind the market, because that would require little in terms of painful action.  You simply make a smaller annual adjustment, or none at all.  Though how you would handle the employee relations fallout is a different matter.

So going back to the answer from the podium, companies usually strategize and implement an approach if they already have a pay structure close to the market.  If not, the choices will be limited because of the costs involved in making a correction.

Sometimes that choice, to lead or lag the market, is made for us, and we’re left to make the best of it.

An employer’s payroll cost represents anywhere from 40% to 60% of their revenue.  In most cases it’s their single largest expense.  But when you ask someone in leadership how well that money is being managed, an all-too-typical response is a blank stare.  They really don’t know.

They may not even recognize the value of leadership vs. administration when it comes to overseeing the effectiveness of their reward programs – of getting an ROI for those dollars spent.   That value is a matter of someone either making a difference to the organization’s bottom line or simply holding the fort – keeping a finger in the dike.

Without that value recognition, is it any surprise that many companies have placed administrators in charge of their pay programs, managers who don’t rock the boat, keep the processes and paperwork moving along smoothly and who don’t look up from their desk to glance around and ask, why?  Is there a better way, a more effective way?

How would you describe the behavior that characterizes the leadership of your own company’s pay programs?   Are they managing the growth and direction of your compensation costs, or are they just managing administrative routines, paper pushing, in effect practicing a version of “compensation-lite” as your money trickles out the door?

What is Compensation-Lite?

In today’s lexicon the term “lite” usually applies to something that is only a portion of the whole, a watered down version of a fully functioning product or service.  In this case it may represent a failure of management to apply themselves in effectively utilizing reward dollars to positively affect the business and the employees.

How do you know if this tag belongs to you?  How many of these reward practices are used by your organization?

• All competitive market data is viewed the same, regardless of the source – and the cheaper the price the better
• Recommendations for annual merit spend budgets are based on the figures that surveys suggest is common practice – what everyone else is doing.
• Annual salary range midpoint adjustments are based on how surveys suggest other companies will move.
• Perceived effectiveness is based more on whether current problems exist (turnover, morale, burgeoning costs, recruiting difficulties, etc.) than using measurements to gauge developing trends.
• Management actions are reactive vs. proactive in the face of changing business dynamics.  The organization will stay the course until a problem develops.

If your tendency is to follow a similar conservative, half-hearted path as shown by the examples above, then you’re practicing Compensation-Lite, whether you planned to or not.

So What’s Wrong with That?

The administration of standardized policies and procedures is not a bad thing.  In fact, routine processes are critical to providing employees with equitable treatment, as well as with a uniformity of decision-making.  But if this is the extent of your management of reward programs,  opportunities are being missed that could maximize the value of dollars spent, that could improve the ROI from your largest expense item.  The potential liabilities:

• Passive administrators are more often surprised and unprepared for the unplanned.  They do not anticipate, but carry on until a problem develops

• Costs tend to rise when programs are left on auto-pilot.  Reward programs are not self-policing, and if no one is in charge . . . .

• Effective compensation programs require a strategy and hands-on implementation and communication.  Having neither creates an environment of inconsistency and inequity.

• This is work – it is paying attention, being involved in the business, knowing your employees – as compared with “shut off the lights and wake me when it’s time to retire”

But let’s not be too critical.  Sometimes the organization provides little opportunity for compensation practitioners to steer the ship, never mind change course.  Management bias is a reality that we all face, and sometimes it takes the shape of “if it ain’t broke, don’t fix it” or simply a passive resistance to new thinking.  Regardless of the significant expense associated with reward programs, there are those in senior leadership who will dismiss cost concerns with “it’s in the budget” or “we have the money” or similar phrases that may fly in the face of good economic sense.

When faced with such roadblocks a compensation practitioner will have to gauge whether senior management can be educated, even over time, or whether should they give up and go with the flow – ultimately becoming part of the problem.  Or perhaps they should start looking elsewhere for the sake of their career.

Leadership isn’t standing in front of a freight train when senior management bias kicks in, but being able to offer professional advice that is good for the business and the employees.  It’s being flexible enough to pick your battles, while keeping an eye on the direction the organization needs to follow.

So now you know.  Are you satisfied with the way employee costs are being managed?  Is your senior management satisfied with the way their single largest expense is being watched over?

Is it time to provide leadership?

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

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

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

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

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

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

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

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

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

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

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

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

When you’re trying to grab the attention of Senior Management, remember this; they like a good story, especially one with pictures.

If you’re addressing your company’s single largest expense, its employee pay programs, the pictures become charts & graphs that illustrate the points being made.

Pictures capture attention and build memories much better than text or even the spoken word.  Show a picture and the image is locked in, while reliance only on text is a risk.  The drone of dry prose can grow boring and is liable to lose the attention of all but your strongest supporters.

Attention grabbers that work: 1) speedometer style formats that graphically indicate the current situation against the target; 2) the green light, yellow light, red light approach, again to colorfully paint a picture that stays in the mind; and 3) pie charts, tables, even regressed lines that tell a story.

People remember images because they capture the imagination.  They have a harder time recalling (and taking to heart) what you said or what you wrote.  So concentrate on your supportive imagery.

Make the story a short one.  I once worked for a CEO who thought any proposal could be reduced to a single piece of paper, with plenty of white.  “If you need more than that,” he would say, “it’s not such a grand idea.”

You need a plan

However, before you settle on the visual format best suited to sell your case you should focus on the data points necessary to make that case.  Remember the old adage that a dream without a plan is only a fantasy?  If you don’t take action steps to convert ideas to reality, what you’ll be left with is smoke & mirrors – with no results to show for your efforts.

For those of you who have ever been on a diet, you treat it like a project plan, right?  Experts advise that participants write down everything they eat, have goals to strive for and milestones to gauge progress.  It helps to have a plan and to keep score – to know where you stand and where you’re headed.

To accomplish this you should create quantifiable metrics that will collectively illustrate the well-being of your compensation program(s) – and then establish baselines (current state) and targets for each performance indicator.  This key step will help you understand whether your costs are being contained and whether the ROI on employee rewards is at the level your company requires.

Commonly used HR metrics:

• Average salary / wage

• Compa-ratios (comparison of pay to a range midpoint)

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

• Average performance ratings

• Average annual pay rise for each performance rating

• Count and average promotional and “equity” increases

• Voluntary turnover (employees who decided to leave)

• Average employee age and length of service

We could go on and on, but you get the point.  Refine these and any other quantifiable factors by further segmentation – per salary grade, employee group, male / female, etc.  Make sure each metric is measurable, because accuracy counts.  A compelling argument demands precision.

To make these metrics work for you, to avoid a series of make-work arithmetic exercises that do nothing more than capture minutiae, be certain to measure what is important to your business – not simply what data you can capture.  Make sure the importance of the metric is clear to management (or can be made so).  Management needs to grasp the importance of success, to understand why the metric is important and what achievement would mean.

Once you have the right metrics established (collectively called the “dashboard”) and a baseline in place, you will readily see where the problems lie.  Then set specific targets going forward to improve these weak areas, creating periodic milestones to mark your progress.

What to look for

Every organization has different pressure points.  However, if your metrics data indicates any of the following situations, management should be informed.

• Average performance ratings that exceed how the business was rated

• A workforce where key segments are approaching retirement age

• Promotion and “equity” increase activity that overwhelms the merit budget

• Low compa-ratios that indicate you are not paying your salary ranges

• Any figure that is an unpleasant surprise

When you’re telling a story to management, make it compelling – with facts and pictures that feed off critical metrics analysis that form the pulse of your business.  Then bring home the sale by showing how to solve the challenges being faced – with practical strategies designed to end your story on a happy and successful note.