Compensation Force

Lack of Organizational Respect Leading Cause of Employee Burnout

Time to stop putting all blame for employee burnout on the jobs and the employees themselves; a Wharton study shows that lack of respect and recognition from the organization can be a leading cause of this problem.

The article More Than Job Demands or Personality, Lack of Organizational Respect Fuels Employee Burnout featured in today's issue of Knowledge@Wharton tells us that it is often the organization, more than job demands or employee personality characteristics, that lead to burned out employees.

According to Sigal Barsade, Wharton professor and co-author (along with Lakshmi Ramarajan, doctoral student) of the research paper on which the article is based:

One of the biggest complaints employees have is they are not sufficiently recognized by their organization for the work they do.  Respect is a component of recognition.  When employees don't feel that the organization respects and values them, they tend to experience higher levels of burnout.

Among the research findings noted in the article:

• Organizational respect influences burnout above and beyond the effects of job demands and negative affectivity.  Because existing studies conceptualize burnout as stemming from the job or the individual, rather than the organization, "the 'problem' from a managerial perspective is the person," the authors note.  "Succumbing to burnout becomes a private affair of the employee, and not something of concern to the organization as a whole ... This ignores the contextual sources of the problem."

Incentive and Recognition Plans: A Classic Pairing!

I had a great discussion today with a CEO group that I was invited to speak to about employee incentives; we talked about the manner in which an incentive plan and a recognition program can really complement each other.  I wanted to share a bit of that conversation here.

This group of executives was particularly interested in the topic of broad-based group incentive plans.  I am a passionate fan of these plans as I believe that, when designed and implemented well, they provide a great vehicle for creating -- and then sharing -- the rewards of organizational success.  While incentive plans can certainly be, and often are, designed with a combination of individual and group performance measures, the most classic and popular broad-based design features a structure by which employees work together to impact a group performance measure (such as profit or net income), and then all are rewarded when they collectively reach that goal. 

The objection that is frequently raised to to this classic group incentive plan structure is that it doesn't provide a way to single out and reward the exceptional individual.  This objection is well-founded, this is not the purpose of a group incentive plan.  That's where a recognition program can enter the picture in a complementary way.  A recognition program (and I define recognition as "rewards, cash or non-cash and typically smaller than incentive awards in value, which are delivered after-the-fact to reinforce valued outcomes"; think movie tickets, spot bonuses or gift certificates) can provide you with a vehicle to celebrate and reward the accomplishments and contributions, to complement the "all or none" nature of the group incentive plan.  Of course, most merit increase programs (to the extent that they are functioning well) are designed to reward individual performance as well.

I encouraged this group to think of their "reward program" (or "total compensation package") as a portfolio of different plans.  Each plan element (like, for example, a group incentive plan) should serve a particular purpose in service of the overall "attract, retain, motivate" objective that complements, but doesn't overlap with, the other plan elements.  A "balanced" portfolio, so to speak.  In fact, taking the balanced portfolio approach to analyzing and reviewing a reward program can be helpful in picking out any "gaps" or "double dipping" that may suggest we are not spending our reward dollars in the most effective way.

Age Matters (A Lot) in Compensation & Benefits Preferences

One more piece of data from "2006/2007 Strategic Rewards Report: Aligning Rewards with the Changing Employment Deal", the study published jointly by Watson Wyatt Worldwide and WorldatWork:  Age makes a significant difference in the reasons why employees leave an organization.

For the following different age groups, here is a run through of the top reasons that employees would leave.  Note that pay is number one for every age group; but after that you can see the different life stage concerns migrate through this list.  Interesting!

For employees < 30

1. Pay
2. Promotional opportunity
3. Career Development

For employees 31-39

1. Pay
2. Promotional opportunity
3. Length of commute

For employees 40-49

1. Pay
2. Stress
3. Work life balance

For employees 50-59

1. Pay
2. Retirement benefits
3. Stress

For employees >60

1. Pay
2. Retirement benefits
3. Healthcare benefits

If there was ever a time for "one size fits all" reward programs, it has surely come and gone.  Now it will be important for every employer to really understand its current and planned future workforce in order to know how best to spend its reward dollars.  I have a client who is wrestling with this issue right now; they have implemented and funded a very generous profit sharing/retirement vehicle (it is the cornerpiece of their overall reward program), but are finding that it is largely unappreciated by the fastest growing segment of their employee population (the "under 30's" who want cash, cash, cash).  A dilemma.

Focus of Work-Life Programs Shifts in 2006

A 2006 study "State of the Work-Life Profession" conducted jointly by The Alliance for Work-Life Progress and WorldatWork shows a shift in emphasis among work-life effectiveness areas during 2006 in the responding organizations.  When asked which facets of work-life effectiveness their organizations would be placing greatest emphasis on in 2006 in order to attract, retain and motivate employees, the number one response was "health and well-being" (34%), with "workplace flexibility" coming in second (30%).  These two effectiveness areas have switched places since 2005, when "workplace flexibility" led (34%) and "health and well-being" was number two (29%).

These results are consistent with a growing trend and recognition by employers, and noted in several recent posts here (why top performers leave, benefits as #1 differentiator, recruiting challenges lead to benefits improvements), that benefits play an increasingly critical role in attracting and keeping talent.

Compensation & Benefit Implications of Election Victories by Democrats

An article by WorldatWork staff posted on the association's website (Newsline) today discussed some of the possible changes in the compensation and benefits arena which may come as a result of yesterday's election victories which gave Democrats a majority in the U.S. House of Representatives, including:

• Health Savings Accounts:  Efforts to improve and expand HSAs will be slowed down considerably according to James A. Klein, President of the American Benefits Council.  Kent Hoover, Washington Bureau Chief for bizjournals.com notes that "most Democrats see HSAs as just another tax break for the wealthy."
• Medicare Prescription Drug Benefit:  According to Klein, "revising various aspects of the Medicare prescription drug benefit -- especially the feature of the law restricting federal government negotiation of drug prices and the so-called doughnut hole -- will be front and center."
• Minimum Wage:  According to the Oct. 19-20, 2006 Newsweek Poll, 81% of Democrats and 53% of Republicans believe that increasing the minimum wage should be a top priority.
• Executive Compensation:  Expect continued scrutiny of executive compensation levels and arrangements.  Representative Barney Frank (D-Mass.), who is expected to become chairman of the House Financial Services Committee in January, has been a leader in the attack on rising CEO pay.
• 401(k) Plans:  There will be an increased focus on the fiduciary responsibilities surrounding 401(k) plan administration, including plan fees and related matters.

Typical Salary Increase Differentiation Based on Performance

Another interesting tidbit of information from the recently released study "2006/2007 Strategic Rewards Report: Aligning Rewards with the Changing Employment Deal" published jointly by Watson Wyatt Worldwide and WorldatWork (and featured on yesterday's post about why top performers leave organizations): the typical differentiation in salary increases for low and high performers at responding companies.  According to the report:

The typical salary increase for low performers (employees who only partially met expectations) is 1.5%

The typical salary increase for high performers (employees who far exceeded expectations) is 5.0%

As a baseline, the study reports an anticipated average merit increase of 3.6% for 2006 (essentially in line with most salary budget research). 

So, based on this data, there appears to be (very roughly) about a 50% swing in either direction from the "normal" or budgeted level of increase for the lowest and highest performers.  And top performers, on average, earn a salary increase more than 3 times that of the lowest performers.

Just thought these were some interesting "norms" to consider for those of us out in the world creating salary increase policies and practices.

Top Performers Leave Because of Pay

Some very interesting data is revealed in a new study, the "2006/2007 Strategic Rewards Report: Aligning Rewards with the Changing Employment Deal" published jointly by Watson Wyatt Worldwide and WorldatWork. (full report is available to members only).  In the study, both top performing employees (those recently rated either "exceeded expectations" or "far exceeded expectations" by their managers) and employers identified the reasons that top performers leave an organization. 

As highlighted in the summary statistics below, top performers identify pay as the #1 reason (cited by 71%) that they would leave an organization, while only 45% of employers think this is true.  Note that other items where employers are off the mark include the importance of healthcare and retirement benefits as well as the importance of the supervisory/management relationship.

REASONS WHY TOP PERFORMERS LEAVE AN ORGANIZATION, ACCORDING TO TOP PERFORMERS

• Pay 71%
• Promotional opportunity 33%
• Work life balance 26%
• Stress 24%
• Career development 23%
• Health care benefits 22%
• Length of commute 18%
• Nature of work 18%
• Retirement benefits 17%
• Company culture 13%
• Relationship with supervisor/manager (8%)

REASONS WHY TOP PERFORMERS LEAVE AN ORGANIZATION, EMPLOYERS' VIEW

• Promotional opportunity 68%
• Career development 66%
• Pay 45%
• Relationship with supervisor/manager 31%
• Work life balance 25%
• Company culture 10%
• Stress 8%
• Nature of work 8%
• Length of commute 4%
• Retirement benefits 2%
• Health care benefits 0%

Underutilized Workplace Best Practices

Recently the Center for Effective Organizations at the University of Southern California conducted an evaluation of the American workplace; the study followed the approach of -- and was intended to be an update to -- a similarly focused 1972 study commissioned by Secretary of Health, Education and Welfare Ellit Richardson.  As we all know, the workplace has changed plenty since the 1970's.

One of the more recent study's findings was the continued underutilization of a number of workplace "best practices" which were identified, and their potential benefits documented, back in the early 70's research.  These still unrealized and not widely pursued opportunities were documented in a recent Workspan article (November 2006 issue) about the two studies authored by Edward E. Lawler III and James O'Toole: 

• Flexible working hours
• Company-sponsored tuition reimbursement
• Benefits for part-time workers
• Employee participation in decision-making and profit-sharing
• Redesigning jobs to make them more challenging
• Providing on-the-job development opportunities

Gender Pay Gap Narrower in Organizations with Female Top Management

In a follow-up to Tuesday's post about the gender pay gap, where we reported that women now earn 81% of what men do (the highest level reported by the Bureau of Labor Statistics in the 26 years it has been tracking this information), comes a new study which shows us that it matters who is sitting in the top seats.  According to the results of the study "Working for the Man:  Management Characteristics and the Gender Wage Gap" published by sociologists Philip Cohen (University of North Carolina at Chapel Hill) and Matt Huffman (University of California, Irvine), in organizations in which women serve as senior managers, female employees of the company earn 91% of male employees' wages on average.

More on the Cohen and Huffman study here.

Base Salaries Up, Bonuses Mixed for In-House Lawyers

Median salaries for all positions in in-house law departments increased from 2.2% to 9.5% in 2006, according to the just released 2006 Altman Weil Law Department Compensation Benchmarking Survey.  Bonuses were more mixed -- some up, even way up, and others down -- according to Altman Weil principle James Wilber:

Corporations have two tools to set in-house cash compensation – guaranteed base salary and at-risk, performance-based bonus dollars.  Each year we see a balancing act between these two components.  Last year, salaries rose slightly, augmented by big bonuses.  This year, we’re seeing bigger salary increases reflecting greater corporate confidence, along with a mixed bag of bonus levels which seem designed to catch up some of the more junior in-house positions that were overlooked in past years.

Other findings:

• National median salary for Chief Legal Officers in 2006 is $280,000
• National median salary for Senior Attorney in 2006 is $140,000
• National median salary for a new law school graduate in 2006 is $65,000

Altman Weil also publishes a Survey of Law Firm Economics which includes information on compensation for law firm partners, associates and administrative staff.