Where Market Based Pay & Employee Choice Intersect

Can a market based pay approach, employee choice and the concept of customized rewards ever find common ground?  The answer, apparently, is yes!

I've been working my way through Workforce of One, the book on talent management customization by Susan Cantrell and David Smith.  As you might surmise, I have a particular interest in their ideas about reward customization.  This story, about an employee-defined compensation approach, is one that I find particularly intriguing.

You might have trouble imagining how employees could set their own salaries with no organizationally imposed limits.  But that's exactly what people do in the U.S. Navy.  The navy has an online job-auction site where employees can bid on hard-to-fill jobs; whoever offers the lowest salary and meets the qualifications gets the job.  Sometimes, this results in much higher salaries that the organization normally would define, and sometimes much lower ones.  But the navy has found that the system works well to correct a long-standing problem in the service - what sailors call slamming - where personnel specialists send sailors wherever needed with organizationally defined pay, regardless of whether they want to go.

The result? This democratic, market-based system means that the navy's top performers who seek extra education and a broader range of assignments will have the opportunity to be paid more and advance more quickly on their own timetable, based on their custom-designed career paths - not the navy's.  (Of course, the reverse is also true: sailors with mediocre work records or limited training will find themselves without chances for promotion.)  The navy is considering eventually posting all jobs on its online job-auction site to allow all personnel to define their own pay and career paths using a market-based system.

I understand that the devil is in the details with something like this but it sure has appeal on a conceptual level.

And I'm fairly certain I've read about similar market-based systems at work out in the private sector, but I can't seem to track them down.  Anybody have examples, intelligence or first-hand experience to share here? 

Market Reality

I ran across an instructive quote in the weekend's Wall Street Journal.  It's meant for a broader discussion of the market, but I think it also has particular application to the world of compensation, pay level setting and wage regulation.  From P.J. O'Rourke's remarks at Radio Free Europe in Prague (and published in the WSJ's Notables & Quotables section, subscription may be required):

The free market is not an ideology or a creed or something we're supposed to take on faith, it's a measurement.  It's a bathroom scale.  I may hate what I see when I step on the bathroom scale, but I can't pass a law saying I weigh 160 pounds. 

The market forces that drive compensation levels for various roles, skill sets, certifications and backgrounds are moving in ways that are more dynamic and less predictable than what we are accustomed to.  This will present us with many challenges, at the organizational talent management level as well as at the collective policy setting level.  We can paddle furiously against the market flow by passing laws and driving efforts to change these patterns, particularly as they impact certain classes of people or certain businesses.  Or we can dedicate our energies, efforts and available dollars toward helping people recognize, prepare for and ride out the turbulence as successfully as possible - so that employees can maximize their earning potential during their working lives and their employers can secure the talent needed to survive and prosper.

I know what makes more sense to me. 

Where's MY Pay Czar? Why We Need a Total Rewards Audit of Congress

With Congress (mostly) in recess and the rest of us getting a chance to catch a breath before our elected representatives return to make any additional, er, progress, I'd like to take this moment to make the case for a total rewards audit of Congress.

The purpose of a total rewards audit, as you know, is to examine the full scope of rewards (financial and non-financial) in light of the key accountabilities and expected performance results of the role as well as the employer's (in this case, the U.S. taxpayers') broad requirements and objectives, to ensure that there is alignment. 

In this audit and in the spirit of "total rewards" as we've come to understand it, it will be important to consider all elements of Congressional rewards; not simply salaries and benefits, but the full spectrum of what is provided and made available in exchange for service in the House or Senate.  This should include, but not be limited to:

• Perquisites
• Power and influence
• Recognition, attention and acknowledgement
• Continued and future employment/service opportunities

Conducting the audit will demand that we develop a deep understanding of the full motivational context of the role of the Congressional representative.  This will require asking and getting responses to questions such as:

• What attracts people to service in Congress?
• What causes them to seek re-election and additional terms?
• What motivates them to seek leadership roles in Congress?
• What causes them to end their service, to pass up the opportunity to seek additional terms?

And then, finally, it will be critical to take what we learn in the information gathering steps above and determine:

• What behaviors and outcomes are being driven by the total reward package, overall as well as the various individual elements?
• Are the behaviors and outcomes being driven in alignment with the role's key accountabilities and expected performance results?
• Are the behaviors and outcomes that are being driven in alignment with the long term requirements and objectives of the "employer"?
• Are there misalignments that might be creating the motivation to work and act in ways that are at odds with key accountabilities, expected performance results and/or the requirements and objectives of the employer?
• Are there misalignments that create the motivation to push short term results over long term value and viability?  To take risks on behalf of the employer that are out of proportion to the possible benefits?
• What changes to the total reward package, and/or its individual aspects and elements, should be made to strengthen overall alignment and to correct the misalignments, if any, that are discovered?

It's probably just me, but I can't help thinking that such an audit might produce some enlightening and actionable findings.  As a member of the collective body of citizens that comprise the employer in this scenario, I think it's high time someone took a closer look.

I mean... where's my Say on Pay and Disclosure of Risk? Where's my Clawback Policy?

Where's MY Pay Czar?

Image: Creative Commons Photo "U.S. Capital" by Cliff1066

Blogging Inspiration

I've been blogging for awhile now.  My first post was in May 2006.  No kidding. Just thank God nobody much was reading at that point.

Now I am only rarely a daily poster (we can't all have the Capitalist's energy) and I'll never be as cool as some (we can't all have a punk rock soul), but overall it's been a hugely rewarding (no compensation pun intended) gig.

Here's the thing that's been particularly amazing to me: Every time I find my motivation and enthusiasm flagging, the online community seems to find a way to reach out and give me a kick.  In the very best sense of the word.  Sometimes its just a great shout out on Twitter, sometimes (and especially when I most need it) it's more.

Until today, I hadn't posted for over a week - a long time, even for me.  Really, I've been trying, but everything I've written has totally sucked.  Once again, I began to wonder whether this was a sign.  Whether I had said everything I could say, and it was simply time to hang it up and move on.  Then ... Boom!  Here comes this great and - for me - inspirational discussion started by Trish McFarlane on her HR Ringleader blog.  Her post, about being a social media "pitchman", asked the questions "who was the person that convinced you to get involved in social media?" and "who's the pitchman or woman we can learn from?"  Some of my favorite HR bloggers mention my name and I, of course, have my own list that includes many of them.  Cool.

The first HR bloggers I found online were Evil HR Lady and Joel Cheesman.  I read and tried to learn from them.  Soon after I started blogging myself, I ran into Kris Dunn, Paul Hebert, Lisa Rosendahl and Frank Roche - their styles and their content were so great and so inspirational. Things snowballed from there and I quickly discovered a host of terrific HR bloggers, including Lance Haun and Mike Haberman.  Then it was Kris and Jessica Lee, and their work in founding and editing Fistful of Talent, that inspired me to bring together a group to write about rewards at the Compensation Cafe.  And now the last year or two have seen a number of impressive new voices in the HR blogosphere.  So many smart people devoting their time and energy to pushing the profession forward with great ideas and conversations. 

How can I not be motivated?

I am grateful for the online HR community.  Thanks, once again, for delivering the kick that inspires me to keep going - to follow along and try to contribute what I can.  I am in all of your debt.

Planning for 2011: Reconciling Rainbow Chasing & Common Sense

On the subject of breakthrough ideas, Stanford professor and organizational theorist James March had this to say (via Bob Sutton):

Most claims of originality are testimony to ignorance and most claims of magic are testimony to hubris.

This is good advice for us as we work to resurrect our compensation budgets, structures, plans and ideas from the morass of the recession and position them for 2011.

There are a lot of pitches out there... books, articles, webcast and even (yes!) blog posts on NEW approaches for engaging, motivating and improving the performance of employees.

This presents us with a paradox of sorts. On the one hand, we must keep our minds open to new ideas and perspectives.  We must summon the courage to challenge the status quo and "the way we've always done things", where old patterns and habits have locked us into policies and practices that no longer deliver value.  No denying that the last few years have brought some harsh lessons, and we'd be wise not to ignore or overlook them.

On the other hand, we must stay grounded in the reality that many of the challenges we face are simply the newest incarnation or twist on the same problems we've always come up against.  They are the universal issues inherent in managing organizations full of human beings.  We must also recognize that our employees are weary and stressed out, and we must acknowledge this fact in planning for new initiatives and changes.

At the end of the day, much of successful reward practice amounts to doing the basics well.  Setting clear and thoughtful objectives and strategy.  Grounding plan design in sound research and assessment ... and in business reality.  Paying attention to process and participation.  Communication.  Education. 

And so my thought is this:  Perhaps most of our 2011 planning energy and focus is best used shoring up the basics of our programs and plans (see the points above), reserving a small amount for working to incorporate that one new idea or insight - however small - that speaks to you with the most promise.

What's your take?

Image: Creative Commons Photo "rainbow-aerial" by Cessna 206

Sales People ARE Different, But Not Every Sales Problem is a Sales Incentive Problem

While there is movement toward a broader and more encompassing definition of employee rewards underway, it doesn't appear that the concept has gained much traction in the sales compensation arena.

Should it?

Experience and research has shown us that sales people are different.  Study results released a couple of years ago by Sibson Consulting confirmed that sales employees are more motivated by compensation than non-sales employees (82% versus 62%).  They also tend to be more engaged (57% versus 51%), more committed to their employers (68% versus 62%) and have higher career satisfaction (57% versus 52%).  I would hypothesize that at least part of these findings can be attributed to the highly leveraged and performance-based compensation programs in place for most sales employees, where cash rewards are tied very clearly and directly to sales results achieved.

So, we don't want to mess with that, right?

Mostly, yes. But neither do we want to over-rely on cash as the only tool available to manage sales people and sales results.  Our propensity for treating all sales problems as sales incentive problems shows how easy it is to fall into that trap.  And the consequence of landing there can be overly complicated (and ultimately ineffective) sales compensation plans loaded up with too many measures and mechanics.

Using one of the visuals I am so fond of, the problem can look like this:

 
So we end up leaning on only a couple (albeit very powerful) tools and rewards to drive sales behaviors while overlooking the other "levers" we have available.

I think there is a place for a total rewards conversation in all sales compensation design efforts.  To keep the focus exclusively on sales incentives is to miss the opportunity to throw a larger arsenal at our sales problems.

And who, these days, can afford to do that?