There is nothing quite like gathering an organization's leaders around a table to debate what they intend to accomplish with the dollars the business spends on compensation - and then committing their agreement to paper - to bring clarity to reward design and administration.  This is the exercise we like to call setting compensation philosophy.

But what should the content of this conversation be - and what questions will serve us best in getting the right information and commitments out of our leaders?

In my post today at the Compensation Cafe, I share some of my thoughts on questions for the compensation philosophy conversation.  Hop over and respond with your suggestions and ideas!

Creative Commons image "The Thinker" by Erik Daniel Drost

While I will never outgrow the need to expand and sharpen my technical knowledge, I think some of my biggest "opportunities for improvement" lie in the area of process skills.  I would guess that this is true for many of us who grew up as compensation or benefits specialists - and likely for many in other specialty HR niches.  A colleague whose mastery of process has always impressed me recently recommended the book Helping by Edgar Schein. I'm about halfway through, and am finding it to be a gem.

Whether we are external advisors or internal staff consultants - regardless of the titles on our business cards - most of our roles involve helping.  But the "helper" role that many of us assume - in organizational settings as well as many others - is full of traps, many of which result from information we don't have or can't know at the beginning of a helping relationship. 

To illustrate, Schein describes the Five Things the Helper Does Not Know at the Beginning:

Will the client understand the information, advice or questions being asked?  "For example, when giving driving directions in Boston can you assume that the client knows what Mass. Ave., a traffic circle, and the MIT Bridge are?"  In an organizational setting, Schein notes, a client may not even grasp the meaning of the term "involve" when discussing whether and how they are involving subordinates in actions and decisions.  We in HR and rewards are often guilty of throwing jargon into our inquiries with clients, without knowing whether the client understands those words to mean the same things that we do.

Will the client have the knowledge and skill necessary to follow the helper's recommendations?  "For example, when the tennis coach instructs, 'Bend your knees more,' can the client actually do that?"  We in HR and rewards may feel, for example, that we've done our best by giving information on the purpose and mechanics of a pay program to a manager.  This may or may not mean that the manager has the knowledge and skill necessary to explain these effectively to his/her subordinates, who are likely to pose some pretty pointed questions.

Can the client trust the helper not to use the situation to sell something or exert control inappropriately?  "...it can be very disillusioning to discover after several sessions that the therapist, coach or management consultant is actually selling something."  This is particularly true for external advisors, but certainly has application for internal staff consultants as well.  Being trusted, as trust expert Charles Green notes, demands switching our orientation away from ourselves to our clients ... or, as Charlie puts it, "getting out of our own heads."  Especially important if you do, in fact, have something to sell.

As the client, will I be able to do what is suggested?  "I have never known what to do when my helper tells me more than I want to know or can remember, especially with directions or computer instructions."  Will we be able to tailor our advice or assistance in a manner that the client can absorb and act on it effectively - perhaps in digestible segments?  This can be a particular challenge with reward program overhauls.  We are often tempted to ram down a whole suite of reward program innovations in one swoop, overwhelming the client (who often asks us to do just this, for purposes of efficiency or whatever) and putting the success of the whole endeavor at risk in our haste.

What will it cost financially, emotionally and socially to accept the help?  "When a stranger has walked me to my destination or carried something for me, how do I reciprocate?"  Particularly in formal external consulting situations, we tend to focus on the financial aspect of the exchange - but we shouldn't overlook the nuances of emotional and social debt that accumulate (perhaps most notably in internal organizational situations) in connection with helping. 

These knowledge gaps help illustrate why it is so often important, especially for those of us in the more technical HR specialties, to move beyond what Schein describes as the "Expert Resource" (providing information or service) and even the "Doctor" (diagnosing and prescribing) roles to that of genuine process consulting.  He uses the term "humble inquiry" to describe the core of process consulting, as he sees it.  That says about the helper's degree of self-orientation, doesn't it?

Anyway... a quick outtake for those readers who, like me, are looking for ways to improve their "softer" skills.  I'm looking forward to the rest of the book and the chance to apply some of Schein's lessons!

Creative Commons image "Helping Hand" by popofatticus

In information collected via their most recent Executive Compensation Report, CompData Surveys shares some data on CEO perks that showcases the continued drop in prevalence of these "extra bennies" - a sign of the times.

According to CompData, whose study reflects the practices of more than 4,500 U.S. organizations, the proportion of companies who "do not offer perquisites for the position of CEO" has more than tripled between 2009 and 2011, going from 10.2% of respondents in 2009 to 38.5% of them in 2011.

And the perk-by-perk analysis presented below shows that the tumble in popularity impacts each individual category as well, with annual physical exams and spousal travel benefits taking the biggest proportionate hit.  Car allowances and supplemental life remain the most popular.

Many thanks to CompData for sharing this research with all of us!

A debate with a would-be client last week reminded me of a particular pet peeve, so I thought I'd trot it out here for discussion.  (The would-be client is probably moving on to find herself a less combative consultant, but that's a story for another post...)

Many salary surveys routinely collect and report salary range minimums, midpoints and maximums.  My question is:  How is this information useful?

Even if you know how representative those ranges are of the overall set of pay practices (some surveys tell you the number/percent of companies reporting ranges, many don't), you have no way of knowing:

• Which companies reporting salaries for the position also reported ranges (is it the higher paying ones or the lower paying ones?),
• The degree to which those ranges reflect actual underlying salary practices at the companies that reported them or
• How well-designed or up-to-date those reported ranges actually are.

Even worse than the fact that they deliver little to no helpful information - to my mind - is the fact that they seem to invite mispractice, particularly among survey users who don't have much training or expertise in compensation.  How many users simply lift the average salary range minimums, midpoints and maximums from the survey for each position and implement them as their own?  Quite a few, I am here to report.

Weigh in please, readers.  Is there something useful that can be gleaned from survey salary range data?  Or should we raise a call for its abolishment, before it leads more people astray?

Your thoughts?

Image courtesy of accountantcrossing.com

Jack Stack - founder/CEO of SRC Holdings, author of The Great Game of Business and considered by many to be the father of open-book management - has this to say about discretionary profit sharing plans (from the Inc. article The Problem with Profit Sharing) (bold emphasis mine):

By profit sharing, I mean the practice of taking a percentage of a company's profits, putting it into a pool, and disbursing it to the company's employees, usually sometime after the close of the year. Understand, I'm not saying that this is a bad thing to do, just that the benefits of doing it are limited. For openers, the recipients seldom know exactly how they helped generate the profits, beyond just doing their jobs. No doubt, they enjoy getting the money. They may even be grateful for it. But they aren't likely to think or act differently because of it or to be greatly motivated by it.

What's more, if they keep getting it, they will eventually come to expect it, depend on it. If they don't know what they've done to deserve the extra money, they will begin to view it as part of their regular compensation--that is, as an entitlement program. At that point, the profit-sharing check is a bonus in name only, no matter how much the amount may vary from year to year. Meanwhile, you're getting results that are the opposite of what you're paying for. You're promoting the same attitudes you had hoped to change by moving to variable pay in the first place.

Many thanks to Mr. Stack, not only for the variable pay wisdom, but for coining a useful new term.

Has your profit sharing plan become a BINO?

Great conversation with a client yesterday who is working to shift her organization's employee bonus plan from a purely discretionary one to one which will more directly engage employees in making the organization better.  This is an enormous change, as those of you who've done it or even contemplated it know.  It goes right to the heart of the employee's relationship with the employer -- and to the core purpose of the pay program.

We talked about ways to have a conversation about this shift with top executives.  I like to do it by positioning plan approaches as either value distribution or value creation in purpose.

A value distribution plan is one where you budget or set aside the monies necessary to fund current award amounts, and then work to devise the best possible design and measures to use in distributing those funds.

A value creation plan is one which strives to create economic value by improving one or more aspects of organization performance, and then provides a mechanism by which some part of the value generated is shared back with the workers who helped make it so.

This is not just a matter of semantics.  While the two approaches can sometimes be difficult to distinguish by plan mechanics alone, they are different in significant ways.

A value distribution plan is a reward plan.  A value creation plan is a business improvement plan, and as such is wider and more ambitious in its scope, operation and impact.  It involves compensation, yes, but it goes beyond that by seeking to involve employees in improving the operations of the organization.  As such, its implementation demands greater levels of communication, information sharing, education and participation. 

Value creation is the taller order, for sure.  It is also the one more likely to generate genuine organizational performance improvement.

The trick, of course, is being clear and honest about which one you're choosing.  You can't do the first and expect to get the results of the second.  Value creation rarely happens in a big way simply by changing the way you distribute compensation dollars - and not changing how work happens.

Image: Creative Commons Photo "Growing Your Investments" by Images_of_Money