Have you ever used a babysitter?  This is when you have someone else assume your responsibilities while you take a break and focus on something else.  The babysitter stands in for you, is you during the period of your absence.  Someone else does your job.

Typically we think of babysitting when there’s actually a dependent child involved, but it’s not uncommon for ineffective managers in the workplace to use the same concept when dealing with their employees.  These managers seek to use the pay that their employees receive as a surrogate for leadership – for keeping those workers complacent, retained and generally “in line.”

The practice of manipulating rewards presumes that the employee will chase the money, and will be happy with their lot, while at the same time will not require much in the way of supervision, periodic direction or even meaningful conversation.  The thinking here is that, if I provide you with enough rewards you will act as desired in order to not jeopardize those rewards.  The goal is to place the employee’s attitude and performance on automatic pilot while the manager is engaged elsewhere.

So far, so good.  Not necessarily a problem, right?  The red flag goes up the pole when you ask whether these monies are warranted by either performance or business need, or are they simply bribes?

What are we talking about?

Scenarios where pay is used in lieu of actual management are easy to spot.

• The Grand Giveaway:  Where managers try to give away as much money as they can to as many as possible, not worrying overmuch with distinctions between individual performances.  The key is to build an employee’s appreciation of their manager’s largesse.

• Title inflation: The promise of bloated and meaningless titles that distort organizational structures, for the prime purpose of rewarding employees in lieu of cash.

• Over rated performance:  Play the good guy by over-rating performance during salary reviews.  Culprits are often seen rewarding activity over results.  So look busy!

• Assured compensation: Take the risk out of rewards.  Everybody receives an annual merit raise, everyone earns a bonus.  This fosters an attitude of entitlement.

• Counter-offers: “Let’s make a deal” attitude to keep resigning employees from actually leaving; a dangerous practice that increases costs and lowers morale.

What’s the cause of this behavior?   Managers typically receive inadequate training (if any) on how to use their company’s pay programs, so many use pay as a crutch instead.  Spending the company’s money effectively and efficiently isn’t on the radar screen.  They use employee pay like a club to get an employee’s attention.  And once they have that attention the manager is off doing something else – with the presumption that pay will substitute as supervision and motivation while the manager is absent – kind of like a babysitter.

Weak and ineffectual managers don’t actually manage their employees, in the sense of performance direction, leadership, setting good examples and decision-making.  Instead, they want to be liked.  They want to avoid conflict and they don’t want anyone to quit.  They want employees to get along, and to help foster a friendly team atmosphere they try to manipulate pay in support of their efforts.

It’s really kind of a bribe.

So what is “managing” to these people?  It’s not about making hard decisions.  Too often it’s trying to get the most for their employees, deserved or otherwise, whether the organization gains in the process or not.  The manager is focused on their own interests, and is using someone else’s money in the doing.

Why it doesn’t work

Relying on pay as a replacement for management has a short term effective life cycle, at best.

• Employees see arbitrary equal pay treatment as de-motivating to high performers.  Why bother extending yourself if you’re going to receive the same reward as the guy doing crossword puzzles?

• Employees resent favored-son treatment; the names of those who benefit for non-performance reasons will always become known.  There goes your morale.

• No amount of money replaces the value of honest performance direction and feedback.  Those with an interest in learning and growing appreciate the help.

• Absentee managers lose the respect of their employees, who know what’s going on.  Remember that employees leave managers, not companies.

• While employees will take any money carelessly handed out, the organization will not gain because of it.  So these “rewards” are ultimately wasted.

For managers who need a crutch to help motivate and retain their employees, to help them do their jobs, the above cautions likely won’t make a difference.  Their goal is not to manage, but to get-by, to be liked by their employees and to avoid disruptions to their routine.  This is not leadership, but administration.

But for those managers who wish to make a difference, who understand that managing employees is a challenging and rewarding role, abrogating responsibility through babysitting is not an option.  They recognize it as the opposite of management, a damaging practice that will not enhance anyone’s long term career prospects.

Have you heard this one?  “The Company would rather pay more to an outsider than give one of us insiders a decent promotion.”

The complaint is that, when considering two individuals for the same job someone on the inside oftentimes will be offered a lower salary than if the company went outside to hire a stranger.  To compound the insult, it is not unusual for managers to ask insiders to train and orient the new ‘wunderkinde” in how the company operates.

Aggrieved employees feel that an insider already knows the company, the people, the products / services as well as the policies / procedures.  That knowledge and experience is an advantage, they say, shortening any learning curve and cultural orientation.  Taking on the role and responsibilities of the new position and not being paid the “going rate” seems unfair – actually a penalty for being an insider.  It’s as if the company realizes they don’t have to pay as much for an existing employee, that the time spent in the company somehow reduces their market value and limits a willingness to pay a competitive wage.

Prevailing practice is that when a company looks to the outside recruiters will be instructed to search for someone who already meets the qualifications of the job; an experienced candidate who has already performed the job, whose only learning curve would be a brief acclimation to new policies and procedures.  Outsiders are considered to be free of “baggage”: no biases, preconceived notions or social network, and are thus considered more reliable as agents for change within the company.

Note: if someone already has performed the subject role the chances are good they are already being paid about the competitive rate.  If that is the case then the company would be forced to pay a premium to attract such qualified talent.  They would likely have to pay above the going rate (or above the midpoint in some companies).

So, what’s an insider to do?  How can you best position yourself for the inevitable comparison with an outside candidate?

Compare yourself against the description or requirements of the new position and try to be as honest as you can with your internal assessment.  Can you do this job from Day 1, or how much of a learning curve would you need?  Are there aspects of the new responsibilities that you haven’t experienced before?  The results of this assessment will give you an opening for your talk with HR.  They in turn will push the “we’re giving you an opportunity” angle, and you both know they could always go outside for a better qualified candidate.  In fact, an advantage you have is that you are likely a cheaper choice for the Company.  So don’t push the pay issue too hard, or you risk throwing the baby out with the bathwater.

Here’s a checklist for you to remember when you’re doing your self-assessment:

1) Are you already familiar with company policies, procedures and personnel?

2) In your present role have you already demonstrated an ability with the technical side of the new position?

3) An advantage: internal promotions look and sound good to other employees, and managers know this

4) Can you develop an inside track with the manager (the all-important “fit)

5) You are likely a cheaper option than hiring from the outside.  Use that fact to your advantage.

Don’t be afraid of compromise.  Your plan should be to gain visibility for your performance and value, though it may take some time for a positive result to work its way through the bureaucracy.  No matter what you gain from your initial conversation (short of complete victory) suggest a follow-up salary review in three months.  Managers know they’d have a better chance of getting an adjustment approved after the initial hire / promotion, when it’s more likely an exception would be approved.  A manager who agrees to that review (and who will be thankful to avoid a contentious meeting) is already halfway to approving an adjustment down the road.

By being aware of the restrictions your managers are operating under you may be able to help them help you.  Do not beat yourself against the wall of bureaucracy, but plan for your next step; use your insiders knowledge to your eventual advantage.

Have you ever watched and wondered how it is that some employees in your organization are recognized and moved upward, while others with more impressive credentials, experience and achievements seem to stagnate – and then eventually move out?

There’s a reason for that counter-intuitive phenomenon; you may have within your management ranks a form of “star chamber” or informal clique that anoints some employees (the chosen ones) while sidelining others.  Which explains why leadership mediocrity is sometimes overlooked, why personality trumps achievement and better qualified employees can be passed over for promotion.  For the select few, middle-of-the-road performance is not a barrier to success – like it is for the rest of us.

Not exactly what you hear in Management 101 training class is it?

What you are witnessing is an evolution of the informal pass-fail rating system that companies have used for generations to decide whether an employee is “one of us”.  Those deemed worthy receive a “get out of jail card” that boosts their career.  Those lacking sponsors are categorized as having questionable value and are liable to suffer a fall at the next organizational bump in the road.

Do you remember the “in crowd” from your high school days?  You may not have escaped them after all.

It’s all about PIE

Psychologists have identified several human factors that describe an employee’s ability to relate to their work environment.  While each may vary in importance from one organization to another, their combination has a critical impact on an employee’s likelihood for success.

Performance: your demonstrated ability to perform the job you were hired for.  How well do you handle your role?  Do you achieve results?  The rating scale is the traditional range of from wonderful to woeful.

Image: do you “fit” within the organization?  Is the image you project (personality, interests, clothing, demeanor, etc.) accepted by the rest of Management?  This rating scale ranges from “one of us” to “one of them”.

Exposure: to what extent are you known or would be recognized in the hallways by senior management?  Who are you rubbing shoulders with?  Here the rating scale ranges from “You are known” to “Who?”

The Way it Was

It wasn’t that long ago that Performance was King; that no matter what eccentricities you brought to the job, as long as you performed well no one bothered you.  Idiosyncrasies and personality quirks were overlooked; “oh, that’s just Bob”, you would be told.  “Don’t mind him.  Just deal with it.”  Your value was measured by getting the job done.

Management training classes would use a “scruffy-looking dude” as an example of a brilliant engineer buried beneath a beard, long hair and mismatched clothes.  Such employees possessed little in the way of social skills, no interest in office politics or traditional business hours, and never wore the company logo.  Their job performance, their contribution to the business was their defining identifier.  It marked them as a valuable human resource.

Image could be important, but was considered more as icing on the cake, not the critical ingredient.  Exposure was even less important, as long as you performed.  “Being seen” was more for those who lacked a strong performance record.  They were the ones who needed the help and support of others.

Btw, the classroom answer?  Treat each “dude” the same as you would anyone else.

The Way It Is

Today, good performance is not enough to ensure success.  Today you must also be a “player”.  You must be able to fit in, to blend with your other playmates, be liked as a person, adroitly play at office politics, be seen with the right people and have the same outside interests.  Your capabilities should not be a challenge to your boss.  How you dress is scrutinized for the image you present.

Of course, if you don’t perform well and you’re not in with the right group, your career with that firm will suffer.  You will shrivel on the vine, if not ultimately chopped off.  However, if you are considered to be in with the right group, that association will step in to help should your performance leave something to be desired.  This assistance can vary from softening the blow to overlooking shortcomings (accusations never stick) to shooting the messenger on your behalf.  Club mates stick together.  They circle the wagons when attacked.  They get even.

What to do?

Sound fair?  That’s the way it is when Performance is valued less than Image and Exposure.  But does that strategy have legs?  I don’t think so.  Leadership and a cadre of high performing people are critical requirements to drive your business forward.  You need such outwardly focused success drivers, not those more concerned about internal group dynamics.

Should you find yourself working for an organization where your personal interests and hobbies are valued more than performance and results, your options will be limited.

• You can try to re-invent yourself according to someone else’s value system, but how much success will you have?

• You can try to stay under the radar screen, lest you be judged – but that doesn’t seem a good career plan, does it?

• You can try to change the culture.  Good luck with that!

• Or you can leave

If you believe that your job performance is your best calling card, that employees should be measured and weighed by their contributions, you may need to reconsider the long term prospects of your current environment.

Leave the mediocrity behind.  Change can be a good thing.

Over the years the Human Resources Department has transitioned through any number of “latest thinking” management concepts and corresponding “buzz phrases” – from “matrix management” to “broadbanding” to “onboarding” and “headwinds”.  Each new approach seemed the brainchild of management consultants seeking to encourage what they called creative thinking and the latest strategies to improve the human factor.

Lately though a persistent theme has settled in that HR should become a “Business Partner” of the organization, in order to be taken seriously by senior management and enhance the value-added contribution of its programs.  This encouragement suggests that HR is not currently a player on the Senior Executive team – but needs to be.

So what exactly is an HR business partner?  Several key criteria have been tagged as descriptors:

• Diagnose business needs
• Develop management’s capability to address HR issues
• Provide advice and a point of view
• The primary focus is driving the business forward
• To educate, motivate and influence others

Does the above describe the HR function at your company?  Is HR considered a business partner?

Your Father’s Personnel Department

Today most would chuckle at memories of the “old” Personnel department, whose primary responsibilities seem to have been tasks like recruiting, record keeping, arranging the blood drives, the safety shoe program and running the annual picnic / Christmas party.  The head of Personnel was rarely considered a “player” at management meetings.  Some in management claimed that the department was only a necessary evil.

That Personnel was viewed as the department focused on the interests of the employees.  Its management was staffed by employee relations generalists, was sensitized by the needs of employees and left the running of the business to the “businessmen”.  Personnel dealt with people.

Today, companies expect more.   Leadership expects less transactional administration and more strategic thinking.  Being labeled a “people person” is now considered a negative, a source of humor among recruiters.

What are the signs that HR is a true business partner at your company?

• Direct report to the President / CEO and listed as a member of the Senior Team
• Able to speak with credibility and respect at the management table
• Able to advance the value of HR to those holding negative biases
• Consulted by senior management on human factor issues
• Company decisions affecting employees are initiated by the head of HR

As a newly designated business partner-wannabe, Human Resources in many companies has transitioned away from the traditional role of caring for / representing the employees.  It has focused instead on utilizing the human capital to assist management in achieving objectives and driving business success.  However, the more successful HR has become as a business partner the greater the danger that employees will lose trust and confidence in HR, exactly because the focus has moved away from employees.

As HR has developed a new stratagem, some might say a new identity, what has been the cost to the original mission?  What part of itself has been lost while chasing the role of business partner?

Danger Signs

Have a care that you don’t lose the heart and soul of HR – its caring connection about employees.  Don’t start looking at them as merely numbers on a spreadsheet or boxes on an organization chart.  There are other departments who already do that very well.

Is the HR function served or harmed by leadership that is “counting the chairs” on their way up the hierarchy?  These are typically fast-trackers who are not HR-trained, but only temporary visitors to the department for a “broadening” of their management experience.  Why is that acceptable for the HR function, but wouldn’t be tolerated in IT, Finance, Marketing, Engineering or Manufacturing?  Is the head of any of these other functions anything less than a seasoned expert in that profession?

Why is HR viewed as different?  Why are other functions already presumed to be business partners?  Only HR is being challenged, remaining a newbie, on probation at best, at worst one step away from getting the coffee.

Lip service to the people department?  Even while sitting at the Senior Management table negative biases from the old days often remain:

• Remember the safety shoe program?  It’s hard to be taken seriously after so many years focusing on administration.  Does HR deal with important issues today?
• If the head of HR has only been appointed to gain experience toward their ultimate loftier goal, how serious can we take a temporary worker who is only passing through?
• HR is still perceived of as offering restrictive advice, what can’t be done; they remain the gatekeeper of corporate policies.  Being an advocate of policy doesn’t win friends.

From the employee’s perspective it is important to consider HR as the source and advocate of fair and equitable treatment, compliance with all regulations affecting employees, and their representative among senior management.

What if senior management doesn’t feel that way?  What if they want HR to become just another “business partner” concerned more about the bottom line – to the exclusion of the human factor?

Have a care that we get what we want – Business Partner – and then our employees choke on it as we lose our way.

In our last post we introduced you to the Seven Step Compensation Diet – to strengthen the internal value of company reward programs while dampening the upward spiral of your labor costs.

Our 1st step focused on the need to identify the organization’s reward challenges (what must be changed) before beginning the effort to establish corrective action plans.  Now that we have taken a look at ourselves in the mirror and acknowledged the current state of flab and flaws we need to move forward to the next stage and start developing practical solutions.  We have to start the diet.

Step #2: Develop a Compensation Strategy

Solutions rarely arrive by whimsy or happenstance, except in popular fiction. In the real world they are the result of planning and forward thinking.  The same applies when the need is to improve your reward programs.  You begin this process by laying out in your mind the general theme of how you plan to reward your employees.  Then you word-smith clear and precise statements that describe your beliefs, and around which you will design, administer and communicate your reward programs.

How important is an effective reward strategy?

• Helps guide and inspire the workforce

• Provides specific, motivating direction for connected actions

• Identifies the focal points for your programs

• Positively brands the company and helps recruit better employees

Whether you choose a formal or informal approach (back of an envelope to a formal document posted on the wall) you should map out in broad terms a vision of how the Company should reward employees.  There is no need to be fancy here, but your series of statements should mark your organization as an advocate of certain Human Resource principles (pay-for-performance, competitive salaries, focus on internal promotions vs. hire, etc.) – to be communicated frequently, be easily understood and viewed by your candidates and employees as credible (trusted).

How does this help?  Like using a Carb counter or a calorie guide, when setting out the guideposts of your reward philosophy you establish critical “do’s and don’ts” and openly communicate your principles.  The organization plants a stick in the ground.  Be careful though, as this is something for both you and your employees to point at – for standardization, consistent treatment and, of course, precedents going forward.

Many companies are reluctant to formalize a transparent strategy (worries over gaining management consensus, strategic effort and required commitment to results).  Others equivocate and muddy the message through generic wording, lack of specific design elements and the look and feel of everyone else.  That result comes across like a vague Mission Statement; broad, aspirational phrases like market leader, shareholder value, supplier of choice, leading edge technology, etc.  Such prose is immediately forgotten by everyone.

Anecdotal examples to illustrate the difference of broad vs. specific:

• We will be market driven; market competitiveness will be given priority over internal equity

• We believe it’s important to share the cost of benefits with employees

• We will provide employees with the opportunity to earn above average compensation for above average performance

• Our compensation and benefit programs will be designed to be competitive within our industry and revenue size

• We reward employees on a pay-for-performance basis; general adjustments are to be avoided

At this early stage of designing reward program transformation you should ensure that senior management is not only supportive of your strategies, but engaged in achieving the vision.  You will need this air cover for the tough decisions and passive resistance to come.  If you cannot count on active and public support, it would be best if you stop your dieting plans here.  You either walk the talk or you sit down.

And yet, you still ask, what if we go without?

• Your largest single company expense would be left without a guiding principle

• Without a governing theme reward costs will rise at a greater rate than planned or desired

• Inconsistent or possible contradictory messages will continue to create difficulties and expense

So, what’s it going to be?

How many success stories start with the phrase, “I took the easy road”?

Most companies (@85%) with global operations tend to pay their internationally-based top level executives in accordance with some form of global compensation structure – in order to level the playing field for those with multiple country responsibilities.

However, for the rest of their international population it’s not as straightforward.

The Challenge

Companies with local national employees (hourly, professional, management) face a challenge and a risk when it comes to their decision as to how to reward (pay) in each of their operating countries.    Do they “do as the Romans do” and follow local practice, or do they seek to create a standardized global framework in an effort to equalize pay practices?

For those developing strategies to effectively pay employees across the globe, the headache is in dealing with a diverse collection of economies, cultures and competitive pressures – some of which may be moving in different directions.  However, the strategy of recognizing country-specific differences in pay methodology often comes up hard against the interests of corporate staff administrators, those who traditionally look for the easy way, the simple way, and the one-size-fits all way of dealing with far-flung employee groups.  For many companies and international compensation practitioners it is actually the administrators whom you have to overcome.

The headquarters staff will ask, what difference does it make?  Unless otherwise required by legislative action or representation, why can’t we be fair to all our employees in the same way?  Here are a few metrics to illustrate what they wish to standardize:

• Value (price) jobs irrespective of locale
• The pay mix of base salary and incentives
• Universal date pay increases
• Average pay increase percentages
• Pay-for-performance vs. general adjustment increases

Why Not?

Why doesn’t one size fit all?  Why can’t you treat all employees in the same fashion – because they all belong to the same “XYZ Corporation”, right?  You should consider the following before taking out that cookie cutter.

• Economy:  When you’re dealing with country-specific inflation rates that range from flat to 20%+, do you really want to offer the same percentage salary increases?  What if one country is in the grip of recession (US), while another remains relatively unscathed (Australia)?

• Culture: in some areas of the world job and income security needs command paramount interest over pay-at-risk, so in the pay mix the base salary dominates the variable portion.  For example, while China has a very aggressive sales compensation environment, in India there is more interest in base salary and their CTC (cost-to-company) package than variable pay-at-risk compensation.

• Competition: companies react to the cost of labor vs. the cost of living.  If the market they are in rewards in a certain fashion (pay mix, commission vs. bonus, quarterly vs. annual rewards, etc.), companies who provide a different approach risk lower employee engagement as well as a talent drain.

• Representation: National unions often dictate pay actions that could reverberate up the hierarchy as companies strive to maintain equitable treatment with their other employees.  Works Councils will have their impact as well.

On the other hand, varying your practices according to country-specific conditions could cause a degree of consternation with the back office staff and their computerized systems.  These are folks who like things neat and pretty.  In their defense though, senior management often asks for standardized metrics that may be difficult develop and compare:

• Tabulating global statistics when definitions or methods vary

• Identifying global trends based on diverse conditions

• Balancing the impact of cross border movement

If you force international operating units to convert their practices to an uncommon format and methodology, the result could be more than just confusion and local administrative difficulties.  It could also mean the greater likelihood of over payments in some quarters while paying less in others – all for the sake of sameness and common report generation. This would offer up a combination of hurting employees while also hurting the business.

Remember that ease of administration is rarely an effective rationale for making good business decisions.

I once supervised a Compensation Analyst who had learned her craft through professional seminars and workshops.  One result of that education was her favored response when faced with a challenge at work; “the greatest minds in Compensation say that . . . “.  It took patience to educate this budding practitioner in the difference between the classroom / textbook answer and the reality of the workplace.

A while ago I came across an HR blog where the author instructed readers in how to create a merit performance matrix.  Very good stuff, I thought, admiring the technical step-by-step directions, except I knew from long experience that the procedure being described would never work in the real world.

While it is critical to understand the technical foundations of Compensation methodology and practice, first and foremost you need to anchor yourself in the here and now, to know what will work and not work in your own organization – no matter what the finest minds in Compensation think.

Why does Compensation theory often clash with workplace reality?

• Business realities:  management knows more about a particular business situation than you do.  What you provide to the decision-making process as a Compensation professional is limited to your subject area, while management usually has the bigger picture – the perspective of multiple viewpoints.  Your advice may not fit their business reality, no matter how logical your argument.

• Bias of decision-makers:  they may feel that they intuitively know the right strategy (they’ve done it before, if-it’s-not-broke-don’t-fit-it mentality, a friend / relation / old college chum suggested an approach, etc.).  Perhaps they read an article and now are insistent to follow the advice of an author who lacks an understanding of their business.  Years ago I worked for a company whose CEO forced HR to implement a particular benefit plan because he had read a magazine article.

• Problem avoidance: short of killing the messenger, one solution for management is to do nothing (you’ve exaggerated it, the solution costs too much, there’s still time, etc.).  These senior managers avoid major decisions until it bites them in the leg.  It can sometimes be dangerous to your career if you try to force a decision.

• Business culture or model: some initiatives don’t “fit” in your organization.  Managers with a laid back organization style will not be interested in recommendations to document uniform policies and procedures and have standardized forms for every action.  Picture your head banging against the wall.

Sometimes those experts who teach Compensation techniques fail to ground their instructions with a caution: check this process out in the reality of your workplace *before* you take a classroom technique and wave it in management’s face.

For example:

When designing a pay-for-performance merit increase matrix the standard rule is to place the average increase percentage in the cell block most populated by employees (average performance and average position-in-range).   The sound reasoning for this technique is to better manage the costs associated with that year’s annual increase process.

A lot of years ago I followed that approach in my first compensation leadership role.  I still have a little bump where my head hit the wall.

Here’s the rub; such a technique requires that the matrix change every year, as the analysis demands you study where the population averages fall each year.  But management will likely have none of that. They want the same matrix every year, for ease of administration and communication.

Another area that separates the compensation technician from the professional is the ability to deal with what I call the “softer” side of compensation.  Survey statistics, charts and formulae are very good to a point, but management will want to know what it means and what to do about it.  So the answer isn’t simply reporting competitive data, but taking that next step to help management understand and strategize future action.

The contribution you can make to your organization is blending technical knowledge (the how-to) with seasoning and experience to understand what will work for your organization, considering culture and management bias.  Technical knowledge will give you the same answer every time, but knowing how to use that knowledge like a craftsman’s tool to aid in achieving business objectives – that is the key to success as a Compensation professional.

Of course you do.  I’d like one too.  But is it a good idea?  Is it money well spent, or a needless expense providing little benefit?

Clients and colleagues often ask, should we?  How much?  For who?

I’m talking about a one-time cash payment granted as part of the employment offer,  often considered a bonus for accepting the company’s offer.

How it is used

A sign-on bonus is like wallpaper; it can cover a lot of ugly cracks in the employment offer, and is sometimes used to avoid back-and-forth negotiations by cutting a check to call things “square.”

A company offers a sign-on bonus as a replacement for some element of the overall package that the candidate finds lacking, or as an inducement to pump up the candidate’s first year earnings.   It is usually because the candidate is walking away from some element that the hiring manager wishes to replace in-kind.

A sign-on is not common practice, or required as part of an employment offer.   Candidates may routinely ask for one (why not?), but at most levels companies are reluctant to agree.   It is simply one of the negotiating tools used, generally in concert with others, when negotiating complex or challenging employment offers – most commonly with the senior staff.  That is because those candidates are more likely to be leaving something on the table with their former employer.

Some common scenarios:

• When the offered salary is lower than the candidate wants

• When the candidate is not eligible for this year’s annual incentive

• When some benefit or perk with the present employer is not part of the offered package

• When  some portion of either current bonus payment eligibility or stock option vesting is lost to the candidate

• When there are no viable alternate candidates and an acceptance is critical

Below the Executive level the award is less common because of less complex package offerings, though a salary gap (offered vs. requested) often raises the issue.

A good idea?

Offering a one-time check to allay a candidate’s concerns can be an effective strategy to smooth over the bumps of a less-than-perfect employment offer, but like any additive cost it should be used with care and with a view toward a ROI.   Offering extra money when not necessary or not targeted to achieve a specific aim is a waste of that money.

If considering a sign-on bonus for a candidate, you should know why.  Hopefully it is to resolve a perceived gap within your offer package, not simply because the candidate asked for one – and certainly not because “at this level we always provide a sign-on.”

How much?  Awards are usually in discrete amounts like $10,000 or $15,000, versus a percentage of base salary, as in-between amounts suggest a formulaic approach and may create the illusion of precision.  The offer letter should also state “gross” after the amount, as payroll taxes should remain the candidate’s responsibility.

Caution:  remember that sign-on bonuses only address 1^st year earnings.   If the offered reward package has significant downsides for the candidate, the issues will resurface again after the first anniversary – but then it will be an employee problem.

Points to ponder

Like most effective company policies / practices, it is best to write things down, to establish standards of uniform practice.   Managers need guidance to keep from making expensive mistakes.  Here are a few Sign-On Bonus considerations:

• Eligibility: Is every position eligible to receive an offer, or does the practice begin at certain hierarchical levels?  Can circumstances allow for exceptions?

• Amount of award: Do you use discrete amounts (i.e., $5,000, $10,000, $15,000 etc.) or a percentage of base salary?  Or is it completely discretionary?

• Administration: Is the award a net amount, or grossed up for taxes?   Is a portion of the award recoverable in case of early resignation?  Senior management approval should be required.

Extending a sign-on award as a negotiating tactic to improve an otherwise flawed employment offer can be a sound strategy, but have a care that you’re doing it for the right reasons – and under the right circumstances.

When an employee is promoted to their first manager’s position, they are given the proverbial Keys to the Kingdom – your company.  They now have the authority to spend your company’s money.  From hiring, to promotions, to salary reviews and equity adjustments they are now able to make the decisions that directly impact (increase) your labor costs.

However, most of these managers turn out to be, at best, well intentioned amateurs at the process of making pay decisions that are appropriate for the needs of the business.   Fresh from being anointed they often lack the basic internal education necessary to make business vs. emotional decisions – and their actions commit you and the company to costs that may not be in your company’s best interests.

Actions taken by these managers not only increase direct costs, but often irritate other staff members as the circumstances become known, creating morale and internal equity problems at the same time.  The net result is usually a corresponding lack of engagement and ultimately separations by disenchanted employees.

Note:  Most employees leave managers, not companies.  Thus actions do have consequences.  Likely this is not what you envisioned when you made that promotional decision.

Now, how did (fill in the name of your company here) get themselves into this mess?

First of all, no one *really* trains managers on how to properly attract and reward employees via base salaries and incentive pay.

A few anecdotal examples:

• Just because some bloke is a good “XYZ Operator” does not mean they will be an equally good “XYZ Manager”.  The skill sets for success are dramatically different.
• How many managers understand your company’s philosophy about pay?  Do you?  How many understand the workings (the what and the why) of the company’s pay practices and methodology?  These are the folks responsible for spending 40% to 60% of your revenue in the form of employee pay, and even the most well-intentioned is prone to make mistakes.
• Managers want to be liked; they do not wish to pick favorites, do not want to discriminate on the basis of performance and definitely do not want to have their decisions challenged.  They would rather point a finger at HR and assign the blame to them for having to assess performance and distinguish one employee from the other.  Left to their own devices they would give everyone as much as they can.

If you were a high performing employee, would you like to work for this sort of Manager?  If you were coasting at work, barely putting your time in, would you want to work for this sort of Manager?  Which sort of employee do you think will eventually tire of being undervalued, and quit?   Leaving the Manager with a staff of . . . .  You get the picture.

Ineffective managers are always afraid that an unhappy employee will decide to quit, but that is usually a selfish thought.   Their prime concern is more often what your departure would mean to their deliverables, to their reputation as a manager.  Your departure is typically viewed as an inconvenience to them, not an avoidable loss for the company.  A reflection of this is when managers resist a transfer that is clearly in the employee’s career interests.  The manager’s concern is how that transfer affects their department – and whether their personal success becomes that much more difficult to attain.

Ineffective Managers can be a defensive lot, challenging attempts at reform.  Why?  Because of their fear that spotlighting reform action will demonstrate their ineffectiveness (make them look bad), and that is unacceptable.  Typically their advantage within the company is that the more ineffective the manager, the stronger their political connections.   And as senior management oftentimes surround themselves with those most agreeable to their own way of thinking, it’s not surprising.

Assuming the company’s willingness to make key decisions and the presence of the all-important support from senior management, companies can correct the problems that they’ve created.  They can:

• Select candidates for management positions on the basis of their skills / potential for actual management (dealing with people, managing projects, business-oriented, professional demeanor, etc.)
• Educate Managers in the philosophy and methodology of the company’s pay programs, ensuring that this information is shared with their staff
• Construct job specifications that call for a Manager to manage, as a prime accountability, limiting or even eliminating the retention of individual contributor responsibilities.
• Measure and reward the performance of the Managers  primarily on the basis of how they have actually managed their employees, or on the performance of their unit
• Encourage Managers to develop the potential of their employees, to the point that a staff member being promoted / transferred upward is a mark of success for the Manager
• Ensure that procedural checks and balances are in place to ensure that pay decisions are reviewed by at least one higher level
• Hold Managers to an annual salary budget; let them develop the budget and monitor / adhere to it during the year

Consider the above as a checklist that can be used to test your company’s vulnerability to wasted money, employee morale problems / turnover and avoidable cost increases.

Would you be comfortable with how your own company would score?

My advice to clients is to face these issues straight on, to implement policies & procedures that save money without penalizing high performers or mistreating their employee base.  But the challenge will always remain, as there is an inherent reluctance on the part of many managers to make the tough decisions, because we do want to be liked, we do like to give good news, and we do not like to play judge and jury with an employee’s career.

But that behavior is not managing is it?