When you’re on the international stage and designing programs to recognize and reward an employee’s extraordinary achievements, it’s important to understand the cultural implications of these programs.  Because not everyone thinks the same way.  Companies with a truly global operating mindset will take into account national and cultural differences that distinguish its widespread employee populations.  On the other hand, domestic-oriented organizations with international operations often struggle with their viewpoint, preferring a standardized strategy.

One size rarely fits all.  One size rarely pleases everyone.

You might think that the positive aspects of employee recognition programs are a universally accepted principle, but that’s only partially correct.  Critical distinctions do exist.  In some cultures / national identities the role of the team is such a core element of employee identification that seeking out an individual contributor for recognition would not be a welcome practice.  Some employees might be reluctant to step forward, not wanting to be pushed into the spotlight.

In other countries you will find that the perceived value of cash as a recognition award varies a great deal.

Case study

A former employer of mine once implemented a global Spot Award program for its worldwide employees – without including their international HR community in the planning discussions.  Finalized program elements and procedures covered employees in over 20 countries in exactly the same fashion.  The premise was to provide immediate (read that, fast) recognition and financial rewards (Spot Awards) for those non-incentive-eligible employees who demonstrated performance above and beyond their normal job roles.  Nominations for awards would come from the employee’s direct manager, though employees could recommend co-workers as well.

While the program was deemed a success in the US (defined by the dollars spent), it proved much less successful elsewhere among the company’s far-flung international operations.

Lessons Learned

The first problem was that Managers outside the US placed a much more conservative financial value on so-called “extraordinary” employee contributions.  Or put another way, the U.S. Managers were more generous in their payment awards than elsewhere.  The result was that the cash payments on a per-employee basis were widely skewed to the U.S. employee.  Notwithstanding the vagaries of the various currency exchanges, the international offices did not spend their allotted recognition reward monies as frequently or as generously as their U.S. counterparts.

I recall one scenario where a US employee received thousands of dollars for a particular project effort, while their European counterpart was given a non-cash award (recognition dinner).  This created more than a few awkward moments when the two employees shared experiences.

The second challenge was that many international employees did not want to be individually spotlighted by the recognition program.  They were willing to receive the award, but would prefer that the recognition remain confidential.  Given that Corporate had planned an internal communications campaign to highlight individual award winners, that reluctance proved quite a hindrance.

Compounding the preference for anonymity was the desire for team over personal awards, as individual employees proved resistant to receiving the planned fanfare or preferential treatment – especially in front of their co-workers (team members).

The bottom line was that the recognition and reward program recognized a smaller than anticipated number of non-US employees, less reward money was spent per international employee, and Corporate Communications was hard pressed to find international employees amenable to being highlighted for the program.  Not exactly what the program designers had intended.

Corrective action

The solution seems straightforward.  If a global program is to affect all employees, then potential national or cultural distinctions among groups should be addressed well in advance.  Taking that step would mean including representatives from those groups in the design and communication phases of the project.  However, such a simple step seems a difficult one to take for many corporate global plan designers.  Why?

When they have the bit between their teeth developing a program that affects the majority of employees, management is often reluctant to change course to include the differing sensitivities of small populations, especially if those populations do not speak with one voice.  What they prefer to do is have local representatives accept the global directives, or at best “tweak” the round peg into the square hole.

How does that approach work for you?  I can tell you that such a tactic doesn’t work for your international employees.

The time will come when you find yourself between a rock and a hard place at work.  Your ability to produce project deliverables will be challenged by staff shortages, multiple projects simultaneously coming due, or the requirement of particular skill sets not possessed by your existing personnel.  And while you’re stressing out those problems Senior Management won’t let matters slide until circumstances are more convenient.

You need help.  You need it now.  But do you need a hired-gun professional, a consultant?

Reaching Out For Help

You could try to find a temporary Compensation Analyst to run some numbers for you, and if that solves your immediate dilemma you need not read any further.

However, if your challenge is deeper and broader than simple spreadsheets, you might seek out the services of a seasoned expert, one who can provide hands-on advice and counsel, who can take data from the analyst and advance your agenda: What does this information tell us?  What can we do now?  Where are the risks?  What corrective strategies can be employed?

The following circumstances are examples of when the use of outside expertise can be beneficial:

• Technical knowledge is not currently available to existing staff (i.e., international, executive, expatriate or sales compensation).  This may not be the time for on-the-job training.

• When the current staff is overwhelmed and you need temporary assistance to take charge and drive your multiple project(s) forward.

• Interim replacement for absent staff (separation, leave, etc.).  Someone to fill the gap, holding things together and advancing the agenda until the replacement is secured.

External professionals have the experience and broad perspective to impact your business, not simply report on it.  If used properly and in a focused manner subject matter experts will save you time, money and sleepless nights.

Caution: many professionals currently between jobs (“in transition”) consider themselves temporary consultants while continuing their job search.  Dependent on your time line these individuals may not be able to provide the focus or dedicated support (staying power) that you need.  They’re still looking for their next permanent job.

As you would expect, specialists cost more than general labor, on account of their broad and deep subject matter capabilities that are available “on demand.”  However, consider whether the expense is justified before you commit.

• An improper one-time “fix” will cost a great deal more over time (dollars, morale, turnover, training etc.) than if the problem was properly corrected in the first place.
• Consultants have the seasoning and long service expertise to look past the figures to the root causes and underlying issues.
• Someone who has a broad background working with diverse industries, geographies and employee segments can provide a richer perspective as to how best to approach your particular challenges.

Or Choose To Go It Alone

Of course you can decide to do the work yourself.  Perhaps you don’t have the budget, have never gone “outside,” or simply feel defensive about admitting you need help.  But that “little engine that could” strategy can present its own challenges.

• Your staff may be slow to focus on projects additive to their full time jobs, plus they will need to overcome numerous day-to-day distractions.  Project time lines will be drawn out.

• Internals tend to focus on easy-to-achieve short term improvements, like low hanging fruit, vs. what core issue decisions are needed to affect a permanent solution.  This is not solving the problem, but shoving it into a closet – with the other skeletons.

• Managers are often in a hurry to check off the project (problem) as completed (fixed) or “addressed” – the so-called “check mark” management style.

• Internal staff is often restrained in their thinking by experiences limited to the What and Why of their organization.  They may not be able to see out of the box into the wider universe of possibilities.

Help Needs To Be Monitored

If you have decided to bring in outside assistance, exercise care that you utilize them effectively to gain the maximum value:

• Proper scoping of the project saves time and money.  Understand the challenge you need addressed, as confusion here leads to greater expense and longer time lines.

• Scrub your data before handing it over; otherwise you’ll be paying for “grunt” work easily completed by inside staff.

• Monitor work progress, lest you end up with charges for unanticipated (though not specifically prohibited) work.  The grey areas will cost you every time.

• Avoid consultants who are themselves incented by billable hours; they may encourage additional steps that render your project(s) more complex / expensive.

• Be cautious of fancy report formats and four-color charts; you’re paying extra for the fluff, which can sometimes disguise a scarcity of core material.

Seasoned external experts have the advantage of concentration; they focus on the project at hand, while avoiding the trap of non-productive time (socializing at work, interruptions, meetings, other distractions from the work at hand).

So if you need a bit of help to address your Compensation challenges, to help you achieve your objectives in the face of staffing issues and simultaneous projects, give some thought to calling for roadside assistance.

Do you remember this line from the movie “A Few Good Men?”   Jack Nicholson’s character was telling Tom Cruise’s character that average folk couldn’t deal with the harsher facts of life.  As a result higher ups would tell them what they wanted to hear.  They would offer excuses, verbal hedges that sidestepped reality and offered the illusion of comfort.

Today we remain stuck in the mire of a severe economic malaise, a situation that is causing enormous employment anxiety, deep concern for the future and perhaps more than a few sleepless nights.  As organizations ponder the question of whether employees can handle the true state of affairs (health and future prospects) they can choose to deal from either the top or the bottom of the deck with their internal communications.

The troubling issues raised could be pending layoffs, reduced or frozen pay increases, hiring freezes, reorganizations or other such “bad news.”

Management messaging can either be straightforward regarding current events – addressing the cause of problems and how economic circumstances would likely affect employees – or they could toss out a series of artful communication hedges (i.e. excuses).  In other words, employees could be fed “corporate-speak.”

Corporate Speak

By this I mean a headquarters-generated sleight-of-hand communications effort, typically prepared by smooth-tongued professional writers instead of subject matter experts.  The prose, approved by corporate legal to insure that no liability is stated or implied, minimizes the negative and accentuates the positive.  The intent is to say little of substance, while at the same time making a self-congratulatory production of their communication efforts.

Content in these communications is usually a combination of feel-good phraseology intended to instill a sense of confidence.   The target of the communications is expected to walk away feeling that, whatever the problem, management is a) doing the best they can, b) not at fault, c) continues to have the interests of the employees firmly in mind, and d) will be providing more details soon.

When these officious corporate pronouncements inevitably provide little in the way of satisfactory answers, most employees turn to their direct managers in an effort to obtain straight information.  However, when the going gets rough (challenging, complex, contentious), many managers will waffle, dribble their thoughts, obfuscate and start to make their own excuses.  They may even point a finger in the direction of Human Resources.  Poorly prepared managers have difficulty facing issues important to employees without trying to pass the buck.  Employees want to know the why, the what next and what about me?, but managers are rarely equipped to offer an effective response.

So when the straight story is not forthcoming, employees will tend to read between the lines and form their own perceptions of the company message, and that perception is less reliable than the grapevine for spreading accurate information.  It is also more skeptical.

What employees “hear” can usually be generalized by the following attitudes:

• “Where are they going to go?”: Employees are trapped in their jobs and have little choice but to remain, because other jobs will be hard to find.  Management has implied, “We don’t need to do anything for them.”

• “Everyone else is cutting back, so we have to as well”: This trite phrase only gets dragged out when the circumstances being described save the company money.  Has the “everyone else” phrase ever been used to support giving something to employees?

• “In anticipation of difficult economic times ahead we are forced to / reluctantly / have no choice but . . . “: This is a pre-emptive strike while the sun is still shining.  It’s a particularly onerous practice if rewards for past performance are cut, and is often viewed by those on the receiving end as a breach of trust.

• “We employ average workers, so they should be satisfied . . .”: Perhaps an after-the-fact rationalization, but sometimes your senior leadership feels that most employees can easily be replaced, like a commodity.

Not surprising, the reaction to such doomsday communication efforts is always negative, planting seeds in your workforce for a bitter harvest of lowered morale and increasing disengagement.

• The ineffective message lacks credibility with an increasingly skeptical audience, as does the messenger and the organization behind it

• As insincerity is recognized employee listening (and attention) stops – like shutting off the TV – so the communication effort is wasted

• Engagement and performance levels drop as trust, confidence and loyalty erode and employees start to ask themselves, “why bother?”

• The supposition gains traction that the company is lying, holding back or not telling the whole story.  It is hard to see the glass as half-full when attitudes have soured.

On the other hand, when the message is honest, straightforward and without guile the opposite reaction tends to occur:

• Organizational credibility is strengthened

• Company loyalty is fostered

• Engagement levels and management support are strengthened

The implication is clear:  employees can handle the truth, should rightly expect it from their employer, and will not take kindly to bland corporate-speak.   So don’t get caught making excuses; it didn’t work when you tried it with your mother, and it won’t work with your employees either.

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.

You just received an above average performance rating, which put a big grin on your face.  Which was soon wiped away when you heard that you’d receive only one percent (1%) more of a salary increase than “Joe Average” down the hall (there are no secrets out there).

One percent more?  For giving 110% effort for a full year?  Not worth it, you say?

What Does One Percent Gain You?

The pundits say that performance rewarded is often repeated.  So what if good performance is not rewarded?  In the eyes of the recipient.  Likely you won’t see the same level of personal contribution again next year.  Instead, what you’ll see is more of “Joe Average,” or worse.

So how much of a reward difference between you and Joe is enough to keep you and other high performers motivated and feeling appreciated?  Because Joe seems to be content with his lot in life, and you’re not.  Is a fair differential 2%, 3%, or even more?

Does the organization realize that such soul searching is happening among those employees they most want to retain?  Can their recognition systems balance the need to reward better performers against the reality of tight budgets?  It might mean that one would have to take from Joe to pay Bob – because the pool of reward dollars is not likely to expand.

But that idea flies against the practice that most managers follow – of trying to reward everyone – to keep everyone happy.  After all, if you’ve put in your twelve months you deserve a raise at the end, don’t you?  Kind of automatic, especially if the average spend isn’t much.

Have a look-see at how your high performers are being rewarded, then compare that against Joe’s contribution and reward.  Are you being fair?  With Joe, probably, but how about with the high flyers?  You can afford if Joe left.

Can You Make a Performance Decision?

Another consideration for determining fair rewards is the number of performance ratings you have in your appraisal system.  For example, with a seven scale system (from Walks On Water to Show ‘em The Door) the need to provide percentages for at least five assessment scores makes things rather tight.  And if you try to maintain a two percentage point differential between performance levels, the numbers might become higher than what’s affordable (if a 3 rating [Average] gains you 2.0%, then what do you do for a 7 rating?).  And what’s the population density of those receiving a 4, 5 or 6?

And while you’re ruminating over that dilemma, would Joe Average  be satisfied with a 2.0% increase?  He’s going to grumble and complain about what’s “fair” for those twelve months he spent on the job.

So you say, a proper rating scale looks to be three factors, right?  Wonderful, Pretty Good and Needs Improvement.  With three factors it’s easier to provide reward differentials that make a difference.

But then reality bursts that nice fantasy you had going.   Many companies experience managerial ambivalence (can’t make a decision) around performance assessments, where the desire is great to place employees in between ratings, as in 1.5 or a 2.5 score.  Somehow the employee(s) just don’t fit right into those three neat buckets.  “We need more choices,” they say – and so the five scale system was borne.

When the managerial ambivalence is acute, more than a few companies have decided that even five performance ratings aren’t enough to accurately reflect employee performance; thus the seven scale system was created.

And in each case the ability to differentiate performance with rewards  has lessened.  How do you reward a 7 or 6 rating, vs. a 5, vs. a 4, vs. a 3, etc,  when the average spend for everyone might be only 3.0% – or a tad less?

You don’t.  At least not if you try to reward everyone.  You won’t have enough money.

Recently I was asked by a U.S. client why I recommended that they create an international assignment letter for their expatriate employees.  After all, they only had a few employees overseas and previously had resisted the call to “play the lawyer card.” They felt that management could effectively deal with the circumstances of expatriate situations as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

This is not the first time I’ve been asked that question, as it’s not unusual for small companies or non-profit organizations to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, often these casual and hurried arrangements have proved painful and expensive experiences:

• The shock faced when coming to grips with actually living in a foreign country, vs. visiting.  The realities of daily life, combined with cultural differences compared against “back home” become quite a wake-up call when no longer insulated by the transitory nature of a business or vacation trip

• The constancy of unforeseen and confusing local situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction that employees lost focus on the job – the reason they were there in the first place.

• Relationships with headquarters suffered as the employee asked for repeated consideration (increased payments) to redress what they considered coverage gaps in their terms & conditions.  The trust element was weakened as employees felt they were being short-changed by management.

Coming from an environment where every expatriate was given a detailed assignment letter “before” getting on the plane, I was at first taken aback by the client’s question – because the absence of mutually agreed terms and conditions is almost certain to prove expensive to companies trying to take a “short cut.”

So why is providing an assignment letter a good idea?

• Protection:  Like any contract, confirming the terms & conditions of the assignment protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity:  Accepting an overseas assignment is a major step for any employee, as well as for family members.  The more you clarify the terms and conditions of the assignment, the more likely you are to ensure a smooth assignment for all parties.

• Cost control:  Defines expenses that the company will pay for and conversely what they will not.  An agreement here will mitigate issues rising once the expatriate is on the ground in the host country.  Concerns raised once the assignee is relocated usually result in increased company costs, as negotiating leverage is lost and the company feels compelled to avoid alienating an expensive investment.

• Standardization:  Your international policy should strive to treat expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be followed for every assignee.

So how bad can it be, playing it by ear and leaving terms & conditions to be developed over the duration of an employee’s assignment?  Aren’t flexibility and quick thinking positive management traits?

Yes, but when courting the inherent risks that accompany an undocumented assignment, you should be prepared for:

• Higher and unbudgeted costs.

• Frequent negotiations to improve the expat’s situation.

• Disgruntled assignees and / or affected family members.

• Greater risk of failed assignment.

Short cuts usually limits the financial and emotional protection the employee and their family will rely on, while the company has committed  substantial monies to place them overseas.  That is not a good management practice.

Terms and Conditions

When preparing an international assignment letter, the following  key elements should be included.

• Title, compensation and assignment duration – critical elements of status and reward in the host country.

• Housing and cost of living allowance – should include the amounts involved and frequency of review.

• Benefit coverage (medical, dental, life, vacation, holidays etc.) – how will home country benefit protections be handled in the host country.

• Relocation –coverage for the employee’s home country residence, to include overseas movement of household goods.

• Property management (as applicable) – what will happen to the home country residence?

• Tax preparation – employee obligations in both countries.  Usually a statement of company liability for “additional” taxes.

• Home leave – how often, and under what circumstances?

• Schooling, language, cultural orientation (as applicable).

• Repatriation – a balance is usually struck here between the employee’s strong concern and the company’s natural vagueness for what the future might bring.

The items listed above represent only a portion of the questions that your expatriate candidate will have.   So should your company consider taking a casual approach to sending an employee overseas, unsupported by a signed assignment letter, be aware of the risks involved.

Once your company decides to send an employee overseas on expatriate assignment the danger of imminent waste looms large.  The problem usually begins with management not understanding or even choosing to ignore the real costs of the international assignment.  The looming money pit is then deepened by having only a weak business reason to support the assignment.   If you lack a compelling business justification for why an employee is needed overseas, it’s likely that you won’t be able to measure whether their assignment will be a success or not.

Below are some of the major reasons for the cost spiral of money slipping out of your hands; however, this is by no mean an all-inclusive list.  I have no doubt that you can provide your own reasons as well.

• Don’t worry about the ROI

For some companies it’s easier for a manager to have an international assignment given a green light than it is to have a piece of hardware or software approved for purchase.   Where is the business case?   Where is the justification via projected financial return that management should be held accountable for?  Is anyone being held accountable that an ROI is achieved?

You should think twice before agreeing to pay out 2-3 times annual salary (per year) to provide for an expatriate assignment.  “It’s in the budget” is never a good business reason.

• Tell the employee that they are the only one who can do the job

Once an employee realizes that they are the only, or preferred choice for the assignment, you lose all negotiating leverage.   I recall one fellow who insisted that he and his family live in Inner London (meaning: uber expensive) – though the office was 35 mi. north – or else he wouldn’t take the assignment.   Don’t expect someone holding leverage to be reasonable and accommodating when discussing the terms & conditions of what you are willing pay for.

Strive to develop a stable of qualified candidates.   It would also help if you remember that the ability to perform the job should not be the only criteria for selection.  A bad cultural “fit” would be a painful and expensive experience for everyone.

Note: an employee who displays an attitude of doing you a favor, versus appreciating the career opportunity being offered, is a bad bet.  Count on it.

• Don’t bother to create an international assignment policy

Unless you enjoy living in a “let’s make a deal” world, you would be advised to lay down an international assignment policy, and then adhere to it.  You will still be challenged by the employee / spouse to make improvements in their terms & conditions, but without the support of a policy you will be hard pressed to stand your ground.

Note: make sure all terms & conditions have been confirmed before the plane departs.  Once you have an expat on the ground in the host country you have lost whatever leverage you might have had.  From there you will agree to term revisions, because senior management will conclude that having already made the investment you have to keep the expat happy or risk the assignment.

• Focus on the employee; don’t worry about the family

Even an otherwise contented expatriate will be rattled if every night they come home to complaints about life in the host country.  Such a situation will distract the employee from concentrating on their assignment, and eventually you will face the need to further revise terms (increase costs) and / or the employee will throw in the towel and the assignment will be deemed a failure.

Thus you should be sensitive to potential family issues and include everyone in cultural orientations.  The family is the expat’s support group, and if they are unhappy . . . well, you know the rest.

• Confuse assignment costs by using multiple budget categories and line items

This tactic makes it very difficult for someone to follow, or understand the full extent of the costs involved.  During my own five years spent overseas on assignment, neither Corporate nor local Finance was able to explain the full costs involved.   They had assigned expenses into so many diverse costs centers and budget line items that the confusion never cleared.  Imagine the drip – drip – drip of your money if no one is even asking – or looking.

If no one is watching the costs of the assignment, those costs cannot be controlled.  It would be like handing over a blank check – with no guarantees of gaining anything in return.

Finally, watch out for the manager who tries to “save money” by circumventing HR assignment policies.  These creative thinkers consider that short cuts save money, but typically such “cuts” do little more than alienate the expatriate (and / or family) by treating them as second class citizens.  Bad idea.

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.

Really?  Seriously.

Sometimes a warning flag needs to be waved more than once.   Because sometimes the decision-makers out there just don’t get it.   After all, goes the wide-eyed and innocent lament, what’s the big deal if you give an employee a bogus title?  Is anyone being harmed?  It doesn’t cost anything, right?

Some Human Resource advocates even claim that offering an employee a special title is a harmless and inexpensive reward, one that doesn’t raise employer costs.  It’s nothing more than a feel-good gesture.   It also raises the morale of affected employees.

I don’t think so.  So pay attention to the red flag I’m waving.

Why does this happen?

• 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.”  Like greasing a squeaky wheel for a short term fix they want to do something to keep the employee quiet.

• Employees are given opportunities (titles) where none should exist.  Have you experienced the long serving Secretary / Administrative Assistant promoted to Office Manager, while performing the same job?

• As a salve to employees a “special” title is used because the position (usually clerical) is considered so different from other jobs that it needs to be specifically identified.  Special titles can also be seen as reflecting on the importance of the managers themselves.

You Can Reap A bitter harvest

Let me explain what you can expect from planting these problem “seeds.”

• Role clarity (job duties, business impact, decision-making, etc.) behind questionable titles becomes blurred.  This in turn generates more 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 attempting to determine 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.  This could have real cost impact.

• Those with inflated titles will expect the perks or privileges that accompany the title, and their absence could cause difficulties.  What do you think went through the Receptionist’s mind when her title was changed to “First Impressions Manager?”  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.  These employees have limited opportunities outside your company because other employers would be reluctant to hire someone where the title is lateral or even backward to what they currently hold.  The result could be that mediocre performers remain with your company.

• 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 will gradually increase your fixed costs without a corresponding rise in either performance or capability.

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

What to do

If you are in a situation with inflated, redundant and confusing job titles, what steps can improve your lot?

• Organize a cleaning exercise: start with the low hanging fruit by eliminating all questionable titles that are unoccupied.

• 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 of incumbents.

• The company would need fewer job descriptions if the wording was more generalized.  Standardized titles would clear away much of the role responsibility confusion.

Fewer titles provide greater role clarity for your organization, 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.

“Why doesn’t my Company consider inflation when determining my pay increase?”

Have you heard this question before?  What this employee is actually asking is: “Shouldn’t my annual pay increase percentage at least match increases in the cost of living?  And as management is always talking about the company’s ”pay-for-performance” philosophy, shouldn’t my increase be higher than that, given that I’m a good worker?”

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Have you ever been in a situation where an employee complains to you that their pay increase is no better than the inflation rate?  Or worse, that it’s lower?  As a further aggravation they might ask you how the company can say there’s a pay for performance policy when all they do is grant increases that no more than match the inflation rate?  Isn’t that like treading water, just staying in place without moving forward?  Is that fair?  Where is the reward for good performance?  Shouldn’t everybody receive at least the inflation rate?

The truth of the matter is that it’s common practice for companies to only give a side look at inflation (cost of living) when determining their annual pay increase budget.  They do make note of it as a reference point, and to compare against a final decision, but what they’re actually focused on are two prime considerations: 1) competitive market survey data that tells them what everyone else is paying for like jobs in their area; and 2) the expense (annual grant and fixed costs) to maintain competitiveness.

Competition and affordability

Companies routinely promise to pay competitively, and as such will analyze what they consider the marketplace to learn what other companies are paying for jobs (base salaries) and standards for increases.  Their so-called “promise” does not include the granting of inflation-proof increases, or even to reflect the cost of living in their analysis.  Their intent is to pay employees a competitive wage – including increases – and competitive means what others are doing, not necessarily what’s happening in the world of inflation.

If budget is an issue for any given year, it’s likely that maintaining competitiveness will have to suffer.  Consider the past two years of layoffs, wage freezes and reduced increases as recession gripped the country.

Is that fair?  Well, let’s imagine that your name is the one on the company door.  How would you plan to spend your money?  Likely you would seek to pay the least that you can, while still attracting, motivating and retaining qualified talent for your business.  That doesn’t mean you would lower pay levels, but as the owner you would want to allocate your substantial payroll expense as effectively and efficiently as possible to staff your business with qualified and engaged employees.  It wouldn’t make good business sense to spend more than you need to, for any overhead, be it facilities, raw materials or employee compensation.

Consider the market for talent as similar to making a purchase at a retail store.  How frequently would you pay more than the advertised price if your extra money purchased nothing more than the same item?  Chances are you wouldn’t often take that approach.

The view from the other side of the desk

Now let’s consider the employee perspective.  What factors weigh heavily on their minds when considering the potential for pay increases?

Most employees expect management considerations to reflect the inflation rate (cost of living), the average increase for their industry / geography (typically as pointed out by newspaper “factoids”), and – if the company had a good year – a share of the financial success.  You can be sure that the figure employees have in mind is the highest number calculated from the three possibilities just mentioned.  And, lest you forget, that figure is for the average performer; better employees should receive more.

Now this view is not necessarily wrong, from their perspective, and one certainly can’t blame employees for a viewpoint that puts their interests first.  However companies typically maintain a “this is a business first” strategy, that seeks to minimize controllable expenses without losing sight of their competitive pay target.  The goal of paying competitive wages, a concept hard to argue against, is not likely to be overturned by changes to the cost of living, newspaper snippets or a feel good moment following company success.

Another factor to consider is that employees are comfortable with changing their reasoning from year to year, while companies are stuck on the same track.  So when inflation goes up or down, or the company has had a good (or not so good) year, or the media is touting higher or lower industry averages, employee expectations may likely swing from one argument to another, rationalizing a consistently more aggressive pay increase strategy.

Now a little tongue-in-cheek: turnabout is not considered fair play.  Employees would not want the size of their increases to fall with their chosen economic indicator.  It should only rise.  They would object to smaller increases if the company hit a rough patch, or if inflation nosed downward.  You shouldn’t be surprised that they want their cake and want to eat it too.

However management strategies tend to be consistent over time, continually focusing on the marketplace and its affordability to maintain their posture of providing competitive pay and pay opportunities.

So how do you avoid a clash of employee expectations with management strategy?  If companies would communicate pay philosophy or strategies they would be able to allay the employee guesses and assumptions that always accompany the grapevine and rumor mill.  Employees would know in advance what to expect.  They might not like what they hear, but the employer / employee relationship would be improved by some straight talk about how the company determines pay increases.