There is a movement underfoot, particularly among start-up firms and profiled this week in a Wall Street Journal article, to open up business information that has traditionally been closely held. This includes not only financial and operating data but also information on individual hiring decisions, salary and bonus details, and employee performance appraisals.
While I remain conflicted about complete pay transparency, I do believe there are some basic conditions and ground rules that can be put in place to maximize the odds of "open salary" success.
How do we come to understand the conditions in which a bonus plan is likely to succeed or fail? How do we learn to read the landscape and understand the pain points that might be causing employees to feel that their salaries are unfair. When things go south (as they often do), was it the design, the implementation, the communication or something else that sent them there?
How do we learn in HR and Compensation? How does innovation and development in our fields happen? Does academia and research inform real-life practice ... or is it really the other way around?
And what do birds have to do with any of this?
The answers (or at least some answers) to these and other questions in my post today at the Compensation Cafe!
Creative Commons image "Playful Subsumption" by jurvetson
Pondering how (or whether) recognition and rewards can help smash silos and encourage collaboration where you work? Michael Schrage, MIT Research Fellow, shares a story in his HBR blog post about an organization that tried a simple -- but also clever and fun -- program to spark value exchange within its own firewalls.
A few years back, I helped a large, very compartmentalized and extremely silo-ed global organization launch an internal competition. Its goal was to promote greater sharing of ideas, information, best practice and innovative processes...
The design was simple, clever and cheap: top management would recognize and reward people who demonstrated an ability to cross-functionally get real value from their colleagues and cohorts. We created two complementary yet competitive awards: "Thief of the Month" — a modest prize and high-profile internal acknowledgement for teams and small groups who "stole" an idea or innovation from another unit and successfully incorporated it into their own business; and "We Wuz Robbed" — a comparably modest prize and recognition for having one's group's best practice or process adopted by another internal group.
Schrage notes that the dueling prizes helped create an internal marketplace, prompting both demand and supply, by encouraging employees to "not just to look for interesting ideas to 'steal' but to think about which of their own best practices deserved wider internal promotion." And all this, as we're made to understand, before intranet social media "sharing" applications had materialized in any substantive way.
The story illustrates not only how a reward plan with a playful and provocative spirit can engage people and help change their behavior, but (perhaps more importantly) reminds us that all the social media platforms and technology tools in the world might not make a difference if someone doesn't call people to the challenge in a way that captures attention and drives action.
Your organizations may be in the midst of planning holiday parties, gifts or special perks -- but know that cash is what's top of mind for employees as the year's end draws near.
A just-released survey by Glassdoor of more than 2,050 U.S. workers shows that what employees want most from their employers during the holidays -- by a significant margin -- is cash bonuses and salary increases. Results of the survey are summarized in the table below.
This isn't to say that employees don't want to be recognized and appreciated with gifts and perks, or that they don't value flexibility and time off. They do, of course. But as economic (and, for many, employment) uncertainty lingers, the sense of financial security associated with cash appears to be trumping everything else.
So knowing this, what are we to do?
For those without boatloads of money to give out at year-end, I would suggest that one of the best things you can do for your employees is to offer them the gift of cash clarity. Disclose and clearly explain your compensation objectives and priorities. Detail the purpose and workings of your salary and bonus programs. Tell them why things are done the way they are. Share what employees should expect under different scenarios -- this year and going forward.
Fuzziness around compensation provokes mistrust and anxiety - and heaven knows there is already plenty of this to go around. Give employees the facts and information necessary to understand why they are paid as they are, and what their options and opportunities are to earn more.
And if your pay program can't stand up to the light of day, perhaps this is a good time to start on a 2013 plan to review and improve it.
Designing new compensation plans. Many of us are in the final throes of this activity as we roll into the last month of the year. Perhaps it would help us to step out of our HR heads for a few moments and take a page from the playbook of Harvard Business School professor Clayton Christensen, author of The The Innovator's Dilemma and How Will You Measure Your Life?, and regarded as one of the world's foremost authorities on disruptive innovation.
Christensen advocates approaching product design and planning with what he describes as a "job-to-be-done" point of view. As he says:
The jobs-to-be-done point of view causes you to crawl into the skin of your customer and go with her as she goes about her day, always asking the question as she does something: Why did she do it that way?
To illustrate this approach, Christensen shares the story (in his MBA course) of a fast food restaurant that wanted to improve its milkshake sales. The company tried looking at the challenge using the demographic segmentation approach favored by marketers (who is the typical milkshake drinker? what do they like in their milkshake?), but had no luck in improving sales. The company then engaged one of Christensen's colleagues, who approached the situation by trying to learn what "job" the customers were "hiring" the milkshake to do. He describes the experience in the interesting - and entertaining - video below.
At the center of this experience is a fascinating mind shift, a way to frame design problems in a whole new light. Perhaps we could benefit from such a shift in perspective as we go about our business, assessing how well our pay programs work and attempting to make them better.
Looking at it from the perspective of one of our most basic "products", the base salary structure, we could ask our key customer, the line manager:
For what job does the typical manager "hire" the salary structure - what are the circumstances under which they consult it and what are they hoping to achieve?
When does it do the job well, and when does it not rise to the occasion?
When do they have to "hire" other tools to get the job they are trying to do done? What other tools do they turn to and what sort of help do these tools provide? Or are they forced to "jerry-rig" the structure in order to get the job done?
And yes, we may need to dig and push around a bit (or to use Christensen's words, crawl under the skin) to get to the true job the manager needs to get done, as many of them are attempting to hire that structure to simply help them circumvent salary policy and budgets in order to simply maximize the money they can give subordinates. Perhaps this can tee up an opportunity for mutual exploration, education and understanding.
At any rate, I find Christensen's framework an interesting one with which to engage our customers in attacking some of our thornier design problems. What about you?
Providing employees with specific information on their productivity is one no-to-low-cost way to drive improvements in their performance. A recent Harvard Business Review Daily Stat (To Boost Workers' Productivity, Tell Them How They Rank) reminds us of this reality, via the story of a German wholesaler that saw an average and apparently sustained jump in average productivity after sharing information about employees' relative performance. When the conditions are right, most of us will respond positively to feedback that either points directly to actions we can take or triggers an instinct to better our showing relative to our peers.
Appreciation, we all know, can work in a similar way. Big bang without the big bucks (and without a lot of the baggage that can accompany the delivery of those big bucks). Having our work recognized, knowing that somebody notices what we do and cares enough to directly acknowledge it -- this is powerful stuff and it can have a tremendous impact on work energy, motivation and performance.
Amid the exciting possibilities of all we can achieve with feedback and appreciation, it can be easy to lose sight of an important fact. The employment relationship, when you strip away all the bells and whistles, is an economic one at its core. And the foundation of that economic transation, for most workers, is their cash compensation. Right or wrong, good or bad, this is what's top of mind for the average worker when they take toll of the "rightness" of the employment exchange.
In my conversations with workers, I find many are particular sensitive to this balance. Top performers, often acutely so. They believe that when their efforts create economic value (e.g., profits) for the employer and other stakeholders, that they should reap some of the rewards of that success. In their minds, this might be through increases to base salary or some type of profit-based incentive award.
The point? While feedback, appreciation, and the well-placed "thank you" may deliver motivational impact that a cash award or raise does not, we cannot overlook the importance of the cash package as the baseline of the employment relationship. We must get cash compensation right - and do the communication and information sharing necessary for employees to understand how this critical baseline of the relationship is set and managed. If we fail this, if employees believe that there is a fundamental imbalance at the core of employment exchange, chances are good that our efforts to provide sound feedback and express genuine appreciation will fall on deaf (or at least highly skeptical) ears.
Creative Commons image "Bundle of Dollar Bills" by Images_of_Money
Last week, Seth Godin had a great post up about what he calls the "wishing/doing gap." In it, he urges us to focus our efforts and our sacrifices on work that will make a difference, that will give us what we need ... that will be rewarded. Otherwise, we are wasting valuable time "waiting for the prince to show up."
His advice, therefore:
If you can influence the outcome, do the work.
If you can't influence the outcome, ignore the possibility. It's merely a distraction.
How many reward programs would qualify as a distraction by this definition?
Are you using your discretionary reward dollars to focus and engage your employees in work that will make a difference - or do your plans have them simply waiting for their princes to come?
Creative Commons image "The Frog Prince" by Jennifer Barnard
One of the things I like to do for fun in my spare time is dive into WorldatWork's annual salary budget survey each year to see if I can tease out any interesting tidbits or trends. (Yes, I know - no need to say it...)
Here is an interesting nugget, featuring five years of high level plan design information from the survey. It examines the prevalence (% of organizations providing) of four different variable pay plan designs: combination awards (based on both individual and organizational performance), organization-wide awards, individual awards and business unit awards. Note that the plans covered here do not include either salesforce incentives or cash recognition.
Here's what I see:
Combo plans rule. Clearly no other broad plan design choice even comes close. Prevalence ticked up slightly last year (at the expense of organization-wide and individual plans), but otherwise, the combo has stayed at a pretty steady ~70%.
Organization-wide plans retain popularity and nose up in 2012. This year's data shows a slight shift away from combo plans in favor of those that focus solely on organization-wide measures of success, those that throw all their funds at measures of shared achievement. Whether a new trend, a one-time abberation or just a reset back to pre-downturn practice, only time will tell - for now organization-wide plans remain a distant #2 in prevalence.
Individual and business unit awards drift downward. Plan designs focused exclusively on individual performance or business unit performance appear to be very slowly but steadily declining in popularity.
How does this match up with your experience and observations? Other - or different - insights to share?
More Info Here Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.