Compensation Cafe

Technology and Engagement

We talk a lot about engagement here at the Café from a compensation perspective although there is general - if not universal - agreement that there’s more to engagement than money.

A number of things impact engagement such as good management, autonomy, appreciation, etc., but today's topic is how technology can drive higher levels of engagement.

(I know, you didn't see that coming at all.)

Let’s face it, consumer technology has changed the face of business. The mobile device is today’s desktop. People shop with their phones. They’re empowered in their consumer lives and expect an intuitive, personal experience at work, too.

Social technology has also changed how people expect to work. Millennials in particular have grown up with collaborative technology and feel at home in open environments where they can share information and ideas.

In today’s social economy, where employees and customers are connected by the Internet and social networks, technology is a key ingredient to attract and engage people who are used to personal laptops, the Internet, social networks, mobile phones, and online consumerism.

Let’s look at some of the ways technology can impact engagement:

Accuracy - To drive engagement it’s important people believe that they matter to the organization. However, in order for someone to feel they matter, you need to get their name right. You need to get their job right. You need to get their pay right. You can't get it wrong very often and still have someone feeling you care about them. However, having accurate data requires business solutions that are easy to use so that people can and will use them and take ownership of their own personal information.

Productivity - Not surprisingly, you don’t find too many highly engaged people spending lots of time correcting HR data or trying and failing to submit expense reports because these are not productive or engaging activities. If basic business processes are quick and easy to complete and provide the data support needed to make the right decisions, people can finish them quickly and move on to more interesting activities.

Communication - Good management and teamwork require regular communication and feedback. Technology isn’t a replacement for actual conversation but it can facilitate regular dialog with online chat capability, invitations to give feedback, formal and information performance evaluations, comments and reminders.

Collaboration - Engaging systems help people network, collaborate and share information, which have been shown to drive higher levels of performance and innovation.

Autonomy - Dan Pink fans will recall that autonomy is one of the three drivers of engagement but autonomy requires trust and trust requires accountability. The right technology can provide guidance as well as immediate visibility into what’s going on, so that problems can be identified and corrected immediately.

Transparency - This is the arguably most important point of all. Managers need transparency into the people who work for them so they can provide coaching and growth opportunities. Business leaders need insight into who the best (and worst) managers are. If you have live, accurate data around engagement, recruitment, turnover, absence, payment, grievances, performance, etc., you can start to make better assessments about things that impact engagement.

I’m guessing the CIO at your company isn’t invited to many discussions about workforce engagement but maybe that’s an oversight in today’s social, collaborative, networked world.

Laura Schroeder is EMEA product marketing director at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

4 Themes for Strategic Recognition from WorldatWork's Latest “Trends In Employee Recognition Report”

Last week WorldatWork released their latest “Trends in Employee Recognition Report,” which comes out every two to three years. Since the last report, I’m seeing many encouraging trends as organizations leaders are growing in their understanding of the power of strategic recognition to drive business results, yet there also remains many areas for improvement.

I see four clear themes emerging in this research.

Theme 1: Companies are moving away from traditional approaches to recognition to new forms that drive business results.

“What we may be seeing are organizations moving away from legacy recognition programs and toward those programs that can drive results… Organizations continue to leverage newer programs that can have a more direct impact on business results such as above-and-beyond performance, peer-to-peer and programs to motivate specific behaviors. In fact, many of these programs in use today were first implemented within the past five years. Programs to motivate specific behaviors, in particular, continue to grow every year.”

The “Top 5 Recognition Goals” don’t vary often in these reports, yet this year, “motivate specific behaviors” jumped into the list. The research shows the programs that have been around the longest as least effective at driving results, in particular Years of Service, Retirement, Employee of the Year/Month, Family Event and Attendance. None of these traditional approaches to recognition drive the strategic business goals and objectives deep into the daily work of employees.

Theme 2: Strategy is still lacking in many programs, limiting the real results that can be achieved.

“Regarding strategy, even though formal recognition programs have structure to them, 49% of respondents indicated there is not a written strategy behind their organization’s recognition program. Furthermore 97% of those that have a strategy align recognition programs with their organizational strategies.”

This finding is even more disturbing when correlated to the result that companies, on average, invest 2% of payroll in their recognition programs. Without a strategy behind it, that 2% is largely being thrown away. Before launching any strategic employee recognition initiative, it is imperative to outline the strategy for the program and, critically, the metrics that will be used to measure the success of the program in delivering against that strategy.

The most successful programs do, indeed, align their program strategy with that of their organization overall, as truly strategic recognition programs are designed to reinforce organization strategy in the daily work of every employee.

Theme 3: Global recognition programs are making strides, but too many companies still treat international employees as second-class citizens.

“46% of participating organizations with employees outside of North America indicated that international/global employees participate in all or most of the same recognition programs as North American employees.”

This figure has grown from 39% in June 2011, yet that’s still far too many employees who are not fully integrated in the company’s approach motivating desired behaviors in alignment with the company strategy. All employees should be pulling together towards the same goal.

Theme 4: Just as senior management buys into the importance of strategic recognition, training efforts for managers are falling.

“Most respondents believe their workforces would say that the effect of recognition programs on employee engagement, motivation and satisfaction are positive or extremely positive… Additionally, correlations demonstrated a positive relationship between senior management support for recognition and the perceived effect on employee engagement, satisfaction and motivation.”

Senior managers are increasingly seeing the value of strategic recognition (with 46% seeing recognition as an investment rather than an expense), yet little training is provided to managers on effective recognition (only 12% or organizations provide some level of training for managers). Investing in strategic recognition approaches will fall short of achieving desired results unless all employees – managers and individual contributors alike – are trained on the importance of recognition to achieving desired results and how to appropriate reinforce desired behaviors in others.

What kind of employee recognition programs does your company offer? Are they strategic in nature, motivating employees to deliver on strategic company objectives, or are they primarily traditional approaches? What would you like to see happen in recognition in your organization?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Reader Update: Comment Publication

Dear Readers:

Good news - we have taken a step toward resolving the comment publication conundrum.  Typepad support personnel have provided me with instructions for locating and publishing the 30+ post comments that vanished from our site.  So, as of now, all the comments that vanished should now be showing up intact in the comment threads of their respective posts.  Be aware that there are duplicates, as many of us (including me) have gone back in, assuming user error, and tried to publish comments a second time.

Bad news (mostly for me, as the Editor) - Typepad support personnel have no idea why the platform is suddenly filtering out all of these legitimate comments, so the problem has not truly been resolved.  Hopefully that will happen in the near future.  In the meantime, I'll try to keep an eye on the situation, checking for and publishing any legitimate comments which fall prey to this particular filtering mechanism. 

Now and going forward, hopefully any comment disappearance will be a temporary thing, as I'll try to keep on top of this as much as my schedule allows. 

Thanks once again for your patience and understanding around this technical issue!

When Is A Job Like A Prius? When It's A Hybrid

A hybrid job is one with multiple skillsets.  We've all had to deal with them at some point in time.

Let's look at them ---- ones that are commonly known ----and a new type that is increasingly found in companies today.

Traditional hybrid jobs

Traditional jobs with one or two responsibilities added to them.  An employee might spend 75% of the time on the traditional job and 25% on the extra duties.  Usually the additional duties come from the same job family.

Trying to determine what to pay is an issue. There are several solutions, but the most common one is to tack a premium on top of pay for the traditional job. Sometimes surveys allow three different degrees of match:  solid match, match plus and match minus.

This type of hybrid job continues to exist today. 

New hybrid jobs

Newly created hybrid jobs have increased dramatically in the last few years. There are two main reasons why.

1) Many companies had layoffs during the recession. The survivors had to pick up the slack by taking over the responsibilities of those who were laid off.  In some cases the combined skillsets came from different job familes.  In many cases these were non-exempt jobs.

Companies have squeezed more productivity out of surviving employees.  As they begin hiring again, they believe there is no need to backfill positions left vacant after the lay-offs.  Why backfill if the same work is being done with fewer employees? 

2)Companies are testing new business models they must use in the “new normal” of globalization.  They’re re-engineering, streamlining and reconfiguring themselves --- including jobs.  Most cases involve exempt/professional jobs. These reconfigured hybrids are the ones that are making the most waves today. 

Skillsets are being combined in various ways in an effort to add greater value to the business.  This melding of disparate jobs involves more than just adding a couple of responsibilities.

Here are examples of “hybrid” jobs at IBM:
•Combining a nursing or pharmacy degree with IT consulting experience to work on “operating room information system" projects.
•Combining IT expertise with knowledge of petroleum exploration and production
•“Healthcare Informatics Architect" position requiring a background in epidemiology and public health plus IT knowledge

Hybrids like these combine completely different skillsets that are found in more than one job family. They’re much more complex.

Impact on compensation

How do Compensation Professionals benchmark these jobs?  Where are the survey providers in all this?   Are they developing any tools to address the growing presence of these new hybrids? 

A few surveys allow participants to input multiple component positions to form a unique hybrid job tailored to consolidated duties.  One survey allows up to nine jobs to be combined. 

But ---- these hybrid jobs are truly “one of a kind” with skillsets pulled from different job families.   No other company is likely to match them even 70%.   Therefore, the market data provided is weak.  At some point surveys may become a much less relevant tool in Compensation’s toolbox.

Changing strategy, relentless technology and external competition will cause continued proliferation of hybrids.  They’re so prevalent now that the major job boards have special categories in their job listings called “hybrid jobs”.

As market surveys end up toward the bottom of Compensation’s toolbox, we’ll be forced to develop more evidence-based and company customized techniques for building/managing pay plans.

Tricky hmm?   What is your company doing about it?

One last thought.   Could the volume of hybrids be one reason why companies keep complaining:  “We can’t find qualified people!”   Are they looking for “purple squirrels”?  The perfect fit?  I wonder . . . . .

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career.   Her true love is working with local national issues.  Jacque has the following certifications:  CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA.    She belongs to SHRM, Human Capital Institute and World at Work.   Jacque been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.   

Reader Alert: Comment Publication Problems

Dear Cafe Readers:

Just a quick note this morning to let you know that we are experiencing technical problems with the publication of comments on our blog posts.  Because of this problem, many of the comments you have left and many of our responses to those comments are disappearing from the site after initially being published.

My thanks to the readers who have contacted me directly to call attention to this.  Let me assure any who have encountered this issue that it is not a result of us censoring or blocking your comments, but rather an issue with Typepad, our blogging platform.  I have contacted the service's technical support staff and am hopeful that this will be resolved in the very near future.

In the meantime, please accept our apologies for the frustration and inconvenience that I know this has caused.  Know how much we value and appreciate the time so many of you take to respond to our posts and engage us (and each other) in debate about the compensation issues of the day.

Job Titles as Pay

Titles are frequently seen as cheap alternatives to real compensation.  Every HR executive knows that many a challenge can be prevented with the proper timely endowment of a fancier title.  The reality, of course, is that awarding a new job title as a form of compensation in lieu of cash can create new and different problems:

• a promotional increase is demanded;
• the wrong messages are sent;
• discrimination claims result;
• internal equity is disrupted;
• pay compression occurs;
• appetites are whetted, etc.

Sometimes giving a troublesome worker a fancier jumped-up title satisfies a critical need of theirs and produces a faithful and compliant producer more efficiently than any incentive that only touches the bank account.  That is the perfect win-win resolution.  At other times, the new title sets off a flurry of “me-too” cries from former peers who now feel overshadowed by their rival’s greater prestige.  Jealously lays behind many a petition for “fairness” and “equity.” 

Occasionally, the more impressive position name solves the problem by enabling the complainer to wrangle an even bigger promotion to a legitimately larger job elsewhere with substantially more of all good total rewards things, like a SrVP title, big salary and generous bonus, stock options, fat expense accounts, corporate apartments, company jets and such.  Without that title change from Most Annoying Clown to Clown Director, the gullible rival firm might never have recruited the clown away, to your great delight.  

Titles also carry cachet and communicate prestige, such as when major political donors are rewarded by plum diplomatic assignments.  Those are title rewards with major potential consequences.  As in the corporate environment, some such postings can work well.  It is ideal if the accepted role actually demands the particular competencies and KSAs held by the individual who receives the position.  In that case, the practicalities of politics intersect with solid recruiting techniques and competent placement decisions.  But Joe the Plumber, despite his great contributions to your election campaign, may not be the best representative to serve the national interest of America in a sensitive diplomatic post where complicated challenges exist and major risks require special competencies.  On the other hand, there are places where it can be completely safe to offer a deceptively important title to a place-holder who fits a suitably acceptable image and fills a largely symbolic function.  Emeritus Pope and Vice President of the United States could be examples. 

Let me know if anyone spots a highly compensated opening for a Supreme Comp Guru.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), and will express his opinion on almost anything.

Creative Commons image "Dollars" by Tax Credits

Share Price Not Always Linked to Performance

Recently, Financial Times published an article titled “Share price windfall reignites debate over executive pay.” Reigniting a fire that has not died down for decades seems a bit much, but let’s talk about it.

The article focuses on how quantitative easing has increased share prices for companies in the UK. One argument is that this monetary policy relieves pressure on the economy and pushes stock prices upward even if companies underperform. The other argument is that by removing limiting barriers, this policy allows stock prices to perform as they should.

Executives usually have more pay linked to stock than other employees. Because of this, their pay is more beneficially impacted by upward market trends, even when those price increases may have little or nothing to do with individual performance. The recovery of the markets has lead to gains in executive pay not seen by most others in the workforce. This has lead to complaints about rising stock prices driving higher executive pay.

Ironically, one of the major “fixes” regularly discussed for executive compensation is more equity compensation. UK has been a leader in executive pay reform in the form of regulations. They have had Say on Pay for more than a decade. Similar to our own experience, the greatest impact was a move from time-based vesting to performance-based vesting for equity awards. The key metric used for these awards has been Total Shareholder Return or “TSR” (my 2010 article can be found here). This has apparently not appeased people because the UK will be moving from an advisory to a binding Say on Pay vote later this year.

But, there’s an obvious truth that we seldom speak of. Stock price (and/or Total Shareholder Return) is a great measure of performance for those people invested in your company. However, for those watching from the sidelines, it will always seem spurious at best. This basic fact drives much of the misunderstanding in executive compensation. Performance for those working at a company means jobs, raises and bonuses. Performance for those outside of the company generally means investment gains. In between are those in the media and politics who try to make the crowds happy without upsetting the applecart.

Executive compensation is a complex matrix of issues that will never leave everyone satisfied. It is important to note that stock price is often a poor analog for performance, especially for people who do not hold stock. It is also important to remember that every steep drop in the market, like that of four or five years ago, is followed by a recovery. Equity granted during those drops will always seem overvalued when the recovery is peaking. At the same time, equity granted during peaks will seem paltry when the price goes down in the future. This does not make stock price or TSR bad metrics. It means that those metrics are best when balanced by internal financial and operational metrics. More on that soon.

P.S. A shout out to pay equity. Burberry CEO Angela Ahrendts, an American woman, is currently the highest paid executive in the FTSE 100.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation”, “If I’d Only Know That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.

Is Your Guess as Good as Mine?

Why do we think that compensation survey data is the equivalent of Moses coming down from the Mount with the tablets - the ten commandments?  That whatever the survey says must be right?  We don't believe that about what we read in newspapers anymore, or see on television, or certainly not from the "anything goes" internet.  So do you think that a compensation survey is somehow the last bastion of a "trust me, I saw it here" innocence?

Are you kidding me?

Consider your own organization; who is responsible for completing those compensation survey questionnaires?  Some high level specialist possessing an in-depth knowledge of the organization's jobs, organization charts and inter-relationships?  Or perhaps you tap the lowest level employee,  the newbie, who finds themselves assigned with the task that no one else wants?

Do you think that your organization is the only one using the inexperienced to complete undesirable tasks?  Or is that common practice?  And somehow out of this skewed process you think that the result of inexperience, rushed deadlines and minimalist involvement delivers gold?  Delivers results that deserve to be treated as gospel?  That whatever the resultant survey report says must be accurate, must be a reflection of the prevailing pay practices out there, and must be representative of what others are paying for your job?

Seriously?

I have the number!

Compensation practitioners will tell you, that management has a tendency to take the number you give them and run with it - often ignoring whatever cautions or qualifiers you might have tried to provide.  Perhaps the job match is tentative, or only five companies showed a match at all, or all that is available is national data, not your industry or revenue size.  Many managers won't see it, they won't hear  the "yes, but," because now they have the number in their hands.  That's what they care about.  Unless of course they don't like the number you gave them; then you'll get their attention - usually in the form of criticism over the data sources, the process and on a bad day even your professionalism.

Some survey providers or consultancies offer their own "system" of job evaluation that's tied to a proprietary survey software - or an evaluation process advertised as objective.  This could also mean that they're guessing at a market number, based on algorithms (how many managers understand what that is) and formulae to project a marketplace figure - on the basis of what other jobs are being paid.  So if you know the value of Job A and Job B the "system" would offer you a projected figure for Job C.

Yeah, you could take that to the bank.

So what's a good practitioner to do?

Of course, if all you're looking at is a number in your hand, you might lose sight of the fact that the figure you're running down the hall with is a simple formulaic guess.  Which could later burn you and the poor soul who gave you the data.

So I have two simple pieces of advice: 1) use multiple survey sources to establish a trend of information, and 2) avoid giving out draft information.  And if you can't do #2, provide the figures in writing, accompanied by whatever qualifiers you feel are necessary.

CYA.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Creative Commons image courtesy of angelofsweetbitter2009

Do You Have Enough Social Media in Your Life?

We haven't talked about social media for a while. In the meantime, instant messaging and streaming video have become part of our daily lives. Twitter, Facebook? We run into them in the news or for the news every day.

But what about HR communications? Surely social media is playing a role in engaging employees? ("But never in compensation," I hear someone call out in the background.) The last time we kicked these questions around in Compensation Cafe we were all pretty curious, I think, but unable to put the pieces together.

Well, time's moved quickly. Today we have data and patterns that we can all learn from. Insights we can use to parse how these media can support HR and to determine whether they have a role in your compensation communications. I thought you'd like to take a look.

Has social media become a widespread corporate tool? Towers Watson just found that 56% of those responding to a recent survey use social media for company communications. Tellingly, only 40% rated the use of social media as cost effective.

Does that mean it's going away sometime soon? Business will just move on? Hardly. 

Social media in its various forms is ubiquitous and powerful. But we are having trouble injecting them into existing business cultures that, by definition, have a relatively inflexible communication hierarchy and less wide-ranging dialogues. In-house initiation of social media is not at all like the organic approach that has made it work quickly and comfortably in the larger society. There, the members of the culture are on a level playing field when they reach out for messaging, blogging and shared video. They use these tools to interact quickly with subgroups in their lives. 

Corporate culture rarely allows for such countercultures in its midst. Even though lots of companies have been cheering teams on, it's still not that comfortable to be texting among colleagues in competitor departments with dirty laundry flying. I bet it's just a question of business getting it -- seeing that the real power of social media is building community, culture, teams. Not the usual tell from the top down, tell and then tell some more.

Some quick thoughts about social media's alignment and role with compensation communications. Think about the various things we could do as part of our compensation work to build and support a community. For instance, manager decision makers who struggle by themselves during performance evaluation and budget allocation, etc. Couldn't they benefit from joining a texting stream for give and take on calibration? Or a library of very short videos to help them through the various milestones at the end of the year? Or a blog with real life examples and discussion of employee development?

In a larger study called, "2013 Change and Communication ROI Study" Towers Watson illustrates the corporate social media story in an infographic. This synopsis of the story may sound familiar!

• Most companies begin to use social media to communicate with in-country employees who work away from the office -- field employees, salespeople and home-based employees. The companies typically don't create a strategy for this phase, so it soon peters out. After all, these are groups of pretty independent, self-reliant employees who have opted out of the community experience. That doesn't mean they wouldn't opt in to an online community, though, if only they felt confident it was doing something for them.
• The company learns from its lack of discipline in the first phase and it develops a strategy for the next, when it uses social media to influence group collaboration and strengthen culture. Community building is beginning to be at the heart of HR's social media work.
• Then community building becomes a more clear priority and social media is targeted to specifically support team building, share feedback with senior leaders and facilitate innovation.
• Ultimately organizations that become savvy begin to use social media to support the larger community. They open up to company-wide give-and-take about topics like organizational performance that have traditionally been limited to top-down information dissemination.  

Oddly enough, while most organizations are growing more globally dispersed and many social media options are more widely used outside of the US, only 23% of the Towers Watson survey participants report using social media to build a shared experience with their remote workforce.

Trying, stumbling, learning, puttering, building networks, unleashing innovation. It's all happening out there. We're sure to hear more clear, detailed insights on the role of social media in our HR life as more of us get the hang of it.

Margaret O'Hanlon is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication -- in an upcoming book. Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, she was a Principal with Towers Watson. Margaret is Deputy Director of the International Association of Business Communicators (IABC) Pacific Plains Region. She earned her M.S. and Ed.S. in Instructional Technology at Indiana University, Bloomington. Creative writing is one of her outside passions, along with Masters Swimming.

Getting Clear on the Segmentation Imperative

Are we witnessing the beginning of the end of the age of treating our workforces as a semi-homogenous whole, pay-wise? 

A number of forces are converging to push us this way, ranging from the crushing pressure to ensure our compensation investments deliver business results to the availability of technology and tools that give us a window into information we could only guess at in the past.

That's right.  Welcome to the Age of Segmentation, my friends.  If you aren't already there, expect to face the question sometime soon in a leadership conversation near you.

Which takes me to the real point of my post.  As the segmentation imperative overtakes us, I am noticing two distinct threads emerging.  I am also seeing that the differences between these two threads is not being called out as clearly as it should be, even escaping notice entirely in some cases.  This blurriness may become an obstacle in our efforts to get on board the segmentation train and make sure it delivers for our organizations.

Here's what I see.

(1) The "Employee as Consumer" Approach.  This approach, which draws from consumer marketing principles, seeks to understand and segment employees by dimensions that reflect their wants, needs, values and preferences.  This type of segmentation often begins with traditional demographic information and preferences gleaned from employee surveys, but in more advanced efforts can lead to developing sophisticated employee profiles based on reward preferences.  The purpose here is to use segmentation to deliver a reward package that maximizes employee appreciation and satisfaction for the monies invested.

(2) The "Employee as Capital" Approach.  This approach, which is grounded in the strategy and priorities of the employer, seeks to understand and segment employees by the talent variables that are most critical to the success of the employer's business.  This segmentation might focus on the competencies most important to emerging and anticipated future competitive needs, the roles with the biggest impact on the business model, or the facets of employee performance most key to strategy execution, to name a few.  The purpose here is to use segmentation to deliver a reward package that maximizes business impact for the monies invested.

Because we in HR have a historic tendency to approach things from the employee perspective rather than the business perspective, we are likely drawn to and initially more comfortable with #1 above.  This isn't a bad thing, in and of itself.  Understanding employee preferences and values can only be a help in designing effective reward programs.  The problem comes when we stop there, or when we do #1 thinking that we're also doing #2.  For too many of us, understanding business strategy and the economics of how our organizations create value, and then being able to translate those into talent priorities, falls at the edge or even outside of our comfort zones.

Ideally, of course, our segmentation efforts will address both #1 and #2 - allowing us to design reward packages that maximize both employee satisfaction and business impact for the monies spent.  Ideally, of course, there should be nobody in a better position to bring these two threads together than HR and the compensation function.

Have we got our business game on enough to rise to the challenge?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a wide range of client organizations.  Ann was recently named President Elect of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and has joined the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Creative Commons image "Examining Clouds" by katerha