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Interesting post as always, Ann. I would caution Gibbons drawing a direct connection between the compensation shift and the layoff of 70,000 employees as a compensation issue or a compensation design issue. Many more factors are also at play. I hear a management or business issue in lack of education that they poured more dollars into fixed contracts, not a compensation design issue per se. I think there is a great deal of merit to ensuring organizations pay competitively enough to take what I'll "comp anxiety" off the table. As compensation professionals, we need to help businesses find the balance between the budget, comp mix and what does truly motivate employees. Call me Pollyanna, yet I think these things can co-exist.

Compensation design that ignores relevant laws and local customs is bad compensation process. When employees are guaranteed pay regardless of work output outcomes, the principal adjustment mechanism becomes termination. Comp designers need to be sensitive to the potential consequences of their programs in order to avoid systems designed for optimal circumstances with no GTH plan for Murphy's inevitable arrival.


I'd agree (and I'm guessing Gibbons - and Bloomberg - would as well) that compensation is not the sole factor at play here. And hard to argue that there was a failure of management at some level in the decision to pour that kind of money into what inevitably became fixed contracts. But I stick to the idea that there is a cautionary lesson for us here, in that there must be a balance between employee and employer needs and considerations in setting pay - pay decisions that put the employer at risk will ultimately come back to bite the employees as well. Any plan or program which promises to significantly alter the organization's cost base must be made with thoughtful consideration of potential impact and consequences.

I don't think its Pollyanna-ish at all to think we can balance these things - but it does take exceptional study, foresight and care. Hopefully, we're up to the task!


No arguing that this was bad (perhaps unbelievably so) compensation process. You state it well and succinctly, I think, when you say "when employees are guaranteed pay regardless of work output outcomes, the principal adjustment mechanism becomes termination." Pay without risk, implemented without thought or consideration of possibilities and consequences, inevitably creates a different set of risks for the payees.

Thanks - both of you - for weighing in with your thoughts and comments!

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About The Author

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    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.

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