New Model Illustrates Decent, Fair Base Pay May Boost Employee Productivity

Oscar Berg (www.thecontenteconomy.com), in his recent blog post, talks about why “knowledge workers’” (as separate from manual workers) engagement is getting lower and lower. Berg says the world of business is dramatically changing (primarily due to communication and technology) and we need to change our thinking about how to motivate workers to operate in a changing reality. He believes the needs of the successful knowledge worker of today are completely different from what we know of existing business models.

Interesting, he also speaks to the fact that such disengagement comes from a disconnect between what rewards knowledge workers want and what management perceives they want. Berg says “These (compensation) models worked pretty fine (sic) for routine, left-brain, rule-based work of 20th century, but they are not working very well for right-brained, creative, and self-propelled people performing non-routine and highly collaborative conceptual tasks.” In his chart below, he refutes the idea that carrot rewards lead to more productivity. What people really want is meaningful work and a decent and fair salary.

As compensation experts, we cannot change your culture to one where work is more inclusive, flexible, and meaningful. However, we continue to believe that a solid base pay program that incorporates both labor market data and internal equity is a core component of maintaining and growing employee engagement.

Lisa Norris, Senior Consultant

https://companalysis.wordpress.com/

Time to Bring Pay Practices Out of the Dark Ages

A recent survey of nonprofit HR professionals focused on hiring trends and the use of technology by their organizations.  The good news is that hiring remains steady among nonprofits.  The bad news is that many of these HR programs and practices are antiquated.  Budgets for recruiting are notoriously limited, and the tools used don’t reflect the growth of social media as a method for sourcing talent.

I can’t help but think that other common HR practices are not leveraging current innovations either.  I speak with many nonprofit HR professionals who feel the dire need to implement some type of pay plan in their organizations, but are stymied at every turn.  The main stumbling block is, of course, the cost to develop and implement a plan.  Initially, the cost of developing a plan may appear expensive, but as a percentage of payroll, this cost is minimal.  Also, our experience shows that in most organizations 25% of employees are paid over market wage and 25% are paid under market for their jobs ― both of which may have costly consequences.

While this could be part of a coherent pay philosophy, generally it isn’t.  With a structured pay plan, the organization would at least know where it stands rather than burying its head in the sand, perpetuating pay inequities.  And as hiring trends continue, with new employees being added, well, we all know that pay creep is inevitable.  When new hires make more than their seasoned, high performing peers, employee engagement takes a dive.

So who is responsible for bringing nonprofit HR practices out of the dark ages?  Generally it’s nonprofit EDs, Presidents and CEOs who have a huge personal impact on their organizations’ culture.  If these leaders are not hearing how trends have changed and what benefits these changes can bring, it’s up to human resources to keep that information flowing to them.  HR should be sending links and printing out key metrics and news for management.  I know it can be a frustrating task, but it could be worth the effort.  And if key decision makers remain stuck in the dark ages, it’s time to find a job where your innovative thinking will result in a more cost effective, productive workplace.

– Lisa Norris, Senior Consultant

https://companalysis.wordpress.com/

Compensation Resolutions for a Smoother 2013

We are approaching year end and it’s time to prepare some New Year’s resolutions regarding your compensation program.

Over the course of the last year, most of my wonderful clients have taken my advice to heart, making hard decisions and implementing changes to their compensation plans.  However, there have been a few cases in point where the process, let us say, could have been smoother!

So from these experiences, I recommend that you take an honest look at your compensation plan and use your persuasive skills with upper management to make some changes in 2013.

1. Use clear messaging.  Often, management does not want to declare its compensation philosophy because they think that people will be unhappy with it.  If that’s the thinking, it’s generally the case that employees are already unhappy, and are making up all kinds of stories about compensation, most of which are not true.  Be clear, be honest, be forthcoming.  Even if employees don’t like what they hear, everyone knows where they stand.
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2. Do what you say you are going to do.  If you embark on a compensation project and tell employees you will be making decisions in March – do it!  If you implement a bonus program – make sure it pays out like you said it would!  There’s nothing worse than breaking your word and losing credibility with your workforce.  You may see it as a “whoops” moment, but losing employee engagement results in a downward spiral that is hard to reverse.
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3. Keep managing your compensation plan.  You’ve implemented a compensation plan and you can rest for a couple years.  Wrong!   Labor market inflation continues, even though it seems like no one got a pay increase for the last few years.  In actuality, many people did get raises because employers knew that even with fewer employees, it’s important to pay market rates for jobs.  So pay structures should be adjusted annually for labor market inflation (check WorldatWork and others for their data).  Changes in job duties (material ones) should result in the repricing of jobs.  You may not be able to allocate large sums of money for pay adjustments, but you should at least be aware of where your pay stands relative to the market.  Knowledge is power!

– Lisa Norris, Senior Consultant

https://companalysis.wordpress.com

Pay Secrecy: Why Bother?

http://bit.ly/SBBZbt

This post by Ed Lawler, one of the all-time great thinkers on compensation matters, on Forbes.com is nutritious food for thought for all HR professionals!  I have always said that what you don’t tell employees about pay has the potential to be more damaging than the truth because the vacuum such absence creates will soon be filled with misinformation.  Communicating about pay on a need to know basis is good, but more disclosure is even better, but only when you’ve done your homework and made solid, credible and justifiable pay decisions in a systematic and objective way.  So, the order in which this occurs is critical: (1st) make sure your employees’ salaries and bonus actually do reflect job values, internally and externally, and performance, and (2nd) decide how best to communicate both the pay plan design process and the outcomes so that all understand that their pay actually is fair and reflective of their contributions.  Some employees may feel that their personal privacy has been violated if their pay is published within the organization, so this needs to be addressed.  Another potential downside to transparency is that it may encourage a number of employees to dabble in being a compensation analyst, which is probably not the best use of their time or talents.   The communication scheme should also clarify that the only legitimate market data sources are those to which employers (not employees) report salaries, which will disqualify most free Internet sites as purveyors of market values … don’t get me started!

– Shari Dunn, Managing Director

 

https://companalysis.wordpress.com/

Rethink Your Pay Philosophy

Here’s a thought-provoking article and video about Whole Foods’ approach to paying their retail service staff.  It’s a reminder that we all need to re-think and re-communicate our pay philosophies from time to time.  Where to pay relative to the market medians, issues about union avoidance, and general concern for employees’ economic well-being are all relevant.  Some additional philosophical issues include internal pay equity, linkages to performance measures, and whether tenure should be a factor in making pay decisions.

http://finance.yahoo.com/blogs/daily-ticker/whole-foods-ceo-why-pay-employees-more-131203168.html

– Shari Dunn, Managing Director

https://companalysis.wordpress.com/