Compensation Communication/Branding 2.0?

In a world that grows ever more demanding of transparency and information, the stakes for compensation communication are going up.  Big time.  Accordingly, the importance of pay communication and branding was noted by a number of speakers and in many of the sessions at WorldatWork's recent total rewards conference.

Marketing and branding are not typically part of our professional curriculum (maybe they should be) and organizational leaders are often reluctant to make the investment necessary to get the communication job done right.  Consequently, our compensation communication efforts often suffer from lack of expertise as well as lack of resources.  In our better attempts, we follow a program of setting communications objectives, defining key messages, identifying our audiences and their information needs, and then formulating a plan around the activities necessary to meet those needs.  Branding?  For many, at best, it involves crafting an identity, perhaps even a logo, for our key message and then blasting it out repeatedly.

This - often as not - is Compensation Communication and Branding 1.0, for those even taking a run at something resembling a dedicated communication effort.

Compensation Communication and Branding 2.0?  I think I caught a glimpse of it in a fascinating piece at Fast Company's Co.Design site written by Marc Shillum, principal at design and innovation consultancy Method.

Branding in today's dynamic and multiple media workplace, according to Shillum, is about creating patterns - not repeating messages.  As someone who is guilty of propagating the "repeat, repeat, repeat" philosophy of pay communication, I was struck by the logic of his advice and I thought his message was worth sharing here.  A few of Shillum's points about pattern-based branding that have particular application to pay communication and messages are highlighted below.

Branding is not static, but dynamic. Not one-way, but co-created.  Shillum describes a brand in today's world as an ongoing negotiation between the company and its constituents (in our case, the workforce).  For us, it means we can have no illusion that our pay program brand is something we create, completely control and disseminate at (our) will.  Rather, it is defined through successive interactions that employees have with the company around their pay - regardless of the lovely three color brochure we send out in January.

Consistency is at the heart of a brand's value - but consistency is derived from coherence, not just repetition.  Instead of a single, centralized big idea, a brand creates coherence by embracing multiple, smaller ideas.  As an example of a coherent brand experience formed by a pattern of smaller ideas - one that creates belief and trust - Shillum gives us Amazon:

Consider Amazon: The brand is built on the trust that a virtual interaction creates a physical outcome. This pattern of fulfillment builds successively across selection, aggressive pricing, delivery flexibility, embedded payment options, flawless data security, real-time tracking, responsive customer service, and final receipt of purchase. No matter the product, brand, or retailer, the application of each successful outcome builds belief that becomes transferred to the next purchase. The Amazon brand lives in the supply-chain pattern, and its identity literally becomes the interface to fulfillment.

And so if we buy Shillum's premise and we wish to establish a coherent compensation brand, one that truly inspires trust from our workforce, our efforts must go much deeper than brand statements and consistent messaging.  We must create a pattern of experiences across compensation interactions that build belief with every pay outcome.

How's THAT for a tall order?

Your reaction, please. Is this a valid take on where compensation communication and branding efforts must go to create trust and belief across today's demanding workforce?  Can we get there?  What will it take?

Image courtesy of diymarketers.com

The Future of Pay for Performance: Can the Membership Model Work For Us?

In their session on the next generation of pay for performance at last month's WorldatWork Total Rewards conference, Mercer consultants Brian Levine PhD and Haig Nalbantian presented the case that companies have overstepped in their move to variable pay during the downturn, as they have worked to leverage limited resources to the greatest productive advantage, and that - given employees' strong preference for base pay as a reward - we should return to more salary-centric model of compensation.  With this, they proposed two "alternative" pay for performance models (which focus on base pay as the primary reward) for our consideration:

The “Tournament” Model
- Pay rates need only vary with hierarchical level, not current performance
- Pay rates in levels above motivate those below
- Relative performance evaluation determines who advances

The “Membership” Model
- Pay rates exceed market
- Partial monitoring, supervision is difficult
= Employment discontinued when employee found not to meet threshold performance

I haven't yet given great consideration to the tournament model; that may be the topic of a future post.  On the surface of it, though, it strikes me as an approach which relies on the existence of substantial organizational and pay level hierarchy to have any motivational power.  Many of today's flatter, leaner organizations may not have the number of striations and upward growth slots required to make this approach ultimately effective.

For this post, however, I wanted to take a closer look at the membership model.  Interestingly, although he doesn't call it by this name, this is the pay model that Dan Pink advocates when he advises us, rather than relying overly on incentives, to 1) Pay people enough to take the issue of money off the table, and 2) Pay people fairly.

The membership model, in the words of the Mercer team, can motivate if premium pay - as a substitute for direct supervision - is coupled with threat of termination.

Call me vision-impaired, but I get stuck when I try to envision above-market pay as a substitute for supervision.  Particularly because I suspect that little supervision also means little performance management, direction or coaching.   Does this approach rest, then, on the assumption that employees who are "purchased" at a higher salary level - by definition - innately understand the link between company strategy and priorities and their own role ... and can be turned loose to collaborate and generate success on the required terms, without "interference" by leadership? 

To my way of thinking, the membership model must rest heavily on performance management - perhaps even more so than other approaches.  How else do we ensure that our high investment in talent delivers value for us?  And how else do we reliably, decisively, accurately and compassionately identify and terminate those individuals who aren't delivering on that investment?  After all, the threat of termination is the cornerstone of this approach, is it not?  Otherwise, don't you risk simply building an overpaid and entitled workforce?

In what I can't help seeing as a particularly ironic note, it often seems as though many of the calls for this model of compensation - the cries of "just pay them fairly!" crowd - come from the same group who insists that performance appraisals must be killed off.

Perhaps it ultimately hangs on what you see as the end goal.  The Mercer consultants reference employee turnover (or its reduction) as a key measure of reward plan success.  For sure, premium pay will likely reduce employee turnover.   I would argue that business results are at least as important a goal as reduced turnover; in the end, a successful and economically viable organization is in the best position to serve everyone's interests - owners, leaders and employees.

Help me here.  What's your take?  Does the membership model represent the best "next generation" of pay for performance?  Is it truly workable and, if so, for what kinds of organizations?  Where are we seeing it work effectively now and what have been the conditions for its success?

Image courtesy of aigasf.org

The Work is Reward Enough? Really?

One out of five companies claim to, on a very common or somewhat common basis, award promotions to employees without a salary increase, according to an OfficeTeam sponsored study of 508 HR Managers.

The survey asked: How common is it for your company to award promotions without salary increases? Respondents said:

• Very common - 3%
• Somewhat common - 19%
• Not common at all - 63%
• We do not offer promotions without raises - 14%
• Don't know/no answer - 1%

Can't help wondering if we're treading on thin ice here.

Back last December, my Compensation Cafe colleages and I participated in a holiday podcast where one of the questions we explored was "can learning and development really be considered forms of compensation?"  The conclusion we tentatively reached (at least within the confines of a 45 minute podcast conversation) was: Perhaps... but if and only if learning and development opportunities are linked to the ability to advance within the organization. 

I do subscribe to the view that employees must be willing to invest in their skills and put their capabilities on the line up front, if they want career advancement.  I don't subscribe to the idea that career advancement is an entitlement ... or that employees deserve a raise every time they take on a new project or responsibility.  But for an employer to actually award a higher level position with greater responsibility and not deliver any increase at all?  Unless the employee has exceptional development needs to address before they're likely to deliver any value in the role and there is a plan in place to bring their base income along as they grow into the responsibilities, I think promotions without promotional increases are a bad idea.

Interestingly, a slim majority of the 433 workers also surveyed in the OfficeTeam study indicated willingness to take this leap of faith - 55% of them responded "yes" when asked whether they would be willing to accept a promotion from their company that didn't include a raise.  And in a tough economy, it is reassuring to know that many employees are willing to step up to the plate and take on more responsibility.  But, as employers, we'd better be prepared to do right by them.  Motivated staff with a "can do" attitude will be ripe for poaching by another employer who is willing to pay the going rate - or more - for their increased capabilities and contribution.

And yes, I recognize that this study may reflect a certain number of smaller employers and HR managers of limited experience - but really, this isn't reward rocket science.

The work is rewarding enough?  Maybe in the short term, as times continue to be tough.  But this could also be the kind of short-sighted, cost saving tactic that comes back to bite us hard in the shorts later on.

What We Have Here May Be a Failure to Communicate...

I've had an important lesson reinforced for me.  I'm reminded again, via several recent conversations with employees and managers, of the wide range of definitions people hold for some very basic compensation terms.

Think there is some level of agreement on what terms like "bonus", "incentive" and "pay for performance" mean? Well, think again.

And it isn't just that people define them differently.  It's also that they feel strongly - even passionately - about those definitions and what they imply.

Take the word bonus, for starters.  I met recently with a group of employees, up in arms about the fact that their employer uses the term "bonus" to describe the organization-wide employee cash incentive plan that's been in place for several years.  Never mind the plan hurdles, design or award levels - they were upset because, to paraphrase them, "you should never use the word bonus to describe something that people have to meet certain criteria in order to earn.  A bonus is something you are just given, like a gift."  It was as if they'd been promised Santa Claus and Jack Welch showed up instead.

Or there's the group who objected to their employer's use of the term "variable pay" to describe their annual plan.  Variable pay, they informed me, implies that 100% of the variables on which plan payout is based are within employee control.  "Which parts of the plan do you feel employees cannot impact?" I asked. "The economy and the market," they replied, somewhat stunned that this wasn't obvious to me.  "These impact company performance in ways we cannot control.  Therefore, this plan must be called a bonus - and not a variable pay - plan."  So there you go.

How about the word incentive, which is not only a noun describing a host of different cash and non-cash tools, but has now been mangled into its own overused verb ... incentivize! 

Or even good old pay for performance.  To some, it is merit increases and only merit increases.  To others, it is strictly cash incentives.  Others, and I put myself in this boat, consider it to encompass many forms of reward that might be linked to performance accomplishments.  But even this got me into trouble the day I spent over an hour in puzzling conversation with a CEO about whether or not her organization should implement pay for performance before I realized that, for her, performance pay meant an incentive plan (which she was opposed to) while the HR executive and I were talking about whether to tie salary increases to performance.  That was an eye opener.

Key lesson?  Never mind what you were taught, what your handy compensation glossary says or what you read in Milkovich's and Newman's text.  Productive pay conversations, especially with new parties, require that we begin with a clear, fresh understanding of terms we use and their meanings. 

Without it, your attempts to communicate will indeed be futile.

Image courtesy of positivedevelopment.com

Join Us for "Lunch at the Compensation Cafe"

On Tuesday, June 28 (1 to 1: 45 p.m. Pacific), my Compensation Cafe colleagues and I will be debuting a new podcast series: Lunch at the Compensation Cafe!

This first episode in what we hope will become an ongoing monthly installment, Philosophy and Why You Pay The Things You Do, will focus on the topic of compensation philosophy or strategy.

The purpose of a compensation philosophy is to establish the intent, objectives and priorities that will guide the design and management of your reward system.  But how important is it – really - and what steps can you take to make the exercise a truly valuable one?  Join the team of Compensation Café experts for a caffeinated conversation on the topic, including:

• What’s the point?  Why should you bother with a compensation philosophy statement to begin with?
• Beyond “We Pay at the Median” – what role should culture, values and core principles play in your compensation philosophy statement?
• Can you avoid the “pretty words” trap, where you produce a well-written but ultimately meaningless document?

For more information and to register, please go to the event page, hosted by Focus.com. 

As part of the event, you can follow the Twitter stream at #CompCafe, ask questions and chat - so that the conversation can go on beyond the 45 minute live discussion.  If you are unable to join the live event, a recording of the session in .MP3 format will be posted to the event page within 24 hours - and a written transcript will be available within the following week.

(Note that we hope to move future events up to 11 a.m. PST in order to catch more of you during your "live" lunch!)

We're looking forward to it - and hope you'll join us!

Pay Fairness: It's Complicated...

What does it mean to be rewarded fairly? 

I would submit that this is one of the biggest and most loaded questions of our time.  Just look at the manner and levels at which it is driving our national dialogue and defining the reach of our regulatory efforts - from the decrying of executive compensation excesses to the push for gender equity, from the debate about public versus private sector pay packages to the increasing attention on wage and hour compliance matters.

Reward fairness is also the topic covered in new research conducted by Hay Group (Tom McMullen and Mark Royal, Ph.D.), in conjunction with Loyola University's Dr. Dow Scott, and featured in a session I attended during the recent WorldatWork Total Rewards conference.  The research, which features both quantitative and qualitative analyses, reflects the responses of 568 WorldatWork members.

A few of my key takeaways from the session:

Know what impacts fairness. 

According to the research, the two reward areas of highest concern to employees with respect to fairness are career development and base pay (both amount of and increases to).  Not surprising, as the researchers note, because these are two areas, in particular, where "demand" always exceeds "supply" - a condition which is bound to focus attention on the "distribution" mechanisms or procedures.  Since fairness concerns tend to relative, it is also interesting to note that for these and nearly all reward elements, concerns of internal equity appear to outweigh external equity concerns.

Don't confuse equitable treatment with equal treatment.

There is a simplistic tendency to take the approach that the more equal we make things, the more fair they will be.  Fairness in rewards, however, is not that easy or straightforward.  It is a complicated and multi-faceted concept.  The researchers note three components of fairness that are particularly important to rewards: distributive fairness (who gets what), procedural fairness (where a clear, fair and consistent reward process is important), and interactional fairness (quality of the employee/employer relationship and overall work climate). 

Unfair treatment - or just the perception of unfair treatment - is corrosive

Pervasive concerns about fairness will take their toll on morale, engagement, commitment and performance.  They can foster a climate of distrust and hostility - creating an unhealthy and unproductive workplace.  Number 1 eroder of reward fairness perceptions?  According to the research, it has been the economy with its trail of pay freezes, pay cuts, etc.  Numbers 2 and 3: inconsistency/favoritism/exceptions and communication.  The poor economy and its unhappy consequences, for most of us, is beyond our direct control.  The others are not - and we need to acknowledge their potential for sapping trust and goodwill from our reward practices.

Address fairness with good communication, not just transparency

Communication is king, when it comes to addressing concerns about fairness.  Assuming we have a strong and fair reward program in place to begin with, it is good - but not sufficient - to simply make it more transparent.  We need to proactively share information about the philosophy and principles on which the program is built and how it operates.  Without good information on the program's intent and mechanics, employees are forced to create their own stories and explanations.

Reward fairness is a complicated, murky and highly personal thing.  Employees are making their own equity comparisons every day, all in different ways, and guided by their own individual points of view and levels of understanding.  Given this, I believe it is nigh impossible for an organization to meet the individually-determined fairness criteria of every employee.  Instead, it must declare its own. 

The researchers note that few compensation philosophies or reward strategies explicitly address how fairness is defined and managed in the organization. 

Perhaps that needs to change.  What do you think?

Image courtesy of toppun.com 

Employer Response to High Gas Prices: Minimal

Questions have surfaced about what employers are doing, if anything, to help employees deal with the high prices of fuel.  BLR recently conducted a poll on this very question, and I thought it would be worth sharing the responses here for anyone on the lookout for data.

Responding employers indicate that they are:

• Doing nothing (71%)
• Allowing more telecommuting (13%)
• Two or more of these things (8%)
• Encouraging more carpooling (4%)
• Providing some form of reimbursement to offset costs (3%)
• Encouraging greater use of mass transit (1%)

For more related discussion - and because history repeats itself - see these related posts written back during the 2008 gas price surge:

Rising Gas Prices and Employee Total Rewards

Gas Price Spike: How Employers in One State Are Responding

Image courtesy of thenewsplanet.com

The Force Hits Five Year Mark!

A quick peek through my blog archives a few days ago reminded me that I began my blogging journey over Memorial Day weekend in 2006 - so Compensation Force has just celebrated its five year anniversary!

Many thanks to all who have read, commented and provided encouragement over the years!

Image courtesy of legacyalaska.com