Compensation Cafe

Numbers That Lie

Hard numbers can turn out to be really soft and squishy upon closer examination.  Perhaps that is why predictive foresight is rarely fully accurate, even when based on the Best Available Data.  (Note the nifty acronym, proving that even an optimal decision is still doomed to be a BAD decision.)

Reliance on data¹ does increase the certainty people feel when making their mistakes.  Numbers are therefore fondly embraced by most compensation people, because numeric data seem to confirm the accuracy of measurements.  But those very numbers can cause us to stumble because they promise a degree of precision that can be quite misleading, if not downright false. 

Last year, the initial Apple effect greatly skewed exec comp survey results (see The Apple Effect note at the bottom here).  Some frowned at the $376,000,000 in stock options granted to the new Apple CEO Tim Cook (which temporarily ballooned in value to over $600 million shortly thereafter) but little attention was given to his subsequent 99% pay cut this year… perhaps because it’s all RELATIVE.  Funny, how a relative increase gets headline attention but a relative decrease is ignored.  Surveys that did not make allowances for massive swings in isolated observations like that would leave their followers spinning in confusion.

Maybe it all depends on whether you want to find what is normal (the median), discover the most popular (the mode) or simply compute the average.  Those arcane terms are really important in compensation work, because each has a different precise meaning. 

When Bill Gates enters a Starbucks, the average customer in the shop becomes a millionaire.   Averages are directly impacted by outliers, while medians are the middle figure no matter how high the high or how low the low observation.  Conventional society tends to favor AVERAGES even though they are more problematic in statistical terms.  There are all sorts of fancy tricks statisticians use to manipulate the figures they process into “hard numbers.”  They include winsorizing, trimming, hot decking (where a missing value is replaced by a similar but different observation) and others .  Excuse me, but some of those gimmicks strike me as flat-out falsehoods; yet they are enshrined in statistical lore and thus may be applied without your knowing.

Likewise, anyone who finesses you with a claim that pay falls in a bell-shaped curve is yanking your chain (or pulling your thumb) in a big way. Wages are never symmetrical nor do salaries have a normal distribution.  That means some of the standard statistical techniques just don’t fit the world of total rewards where the observations are living, breathing human beings.  Whenever the science of number-crunching is invoked, the art of judgment must be added to assure its proper application.

These are just a few of the common compensation conundrums of lying numbers.  What are your favorites?

¹Mark Twain - There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact. 

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 "Bell Curve" by hardeep singh

Don't Do It: US-Centric Global Operations

Sounds like a contradiction in terms, doesn't it?  How can a company profess to have global operations while clinging to a US-centric mode of dealing with its overseas employees?

Sad to say though, it's easy; happens all the time.  And causes problems across the border with an alarming frequency.

One example of many

For example: Recently one of my US-based clients faced a challenge in a particular country regarding high employee separations coupled with difficulty in recruiting qualified staff.   The company was at a loss to understand the root cause of their problems, as they felt that they were providing a more generous reward package for employees then was their normal practice in the US.  The trouble is, they were looking at the problem from a US-centric perspective.

A quick study revealed that the clients’ international employees were indeed receiving a great deal more than their American counterparts.  However, in many areas they were in fact being given no more than the minimum benefit provisions that were mandated by statutory requirement.  They were receiving only what the company was compelled to grant.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what government regulations say you must?

This client bemoaned having to grant four weeks of vacation upon hire, because it was the law, when their US employees received only two weeks after completing a full year of employment.  They thought they were being generous, and quite the global employer.

But then they discovered that common practice indicated that five or more weeks were the norm.   To their employees and prospective candidates they offered no more than what they were required to offer by law.  By ignoring competitive practice they were now paying a steep price in struggling to build and retain a quality staff.  They had earned a reputation in the local market as a “minimalist employer.”

And it's hard to dig yourself out of that hole.

Establishing the employee footprint

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to dealing with at home.  Every country is a separate and unique entity, with differences in HR policies, practices, taxation, local competitiveness and statutory requirements, each of which must be acknowledged and addressed in order to develop and maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – and typically coupled with differing social charges and benefit coverage.

Choosing to operate under the guidance of U.S employment law and US-based corporate practices ("what we do at home") is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most worrisome of all from local governments whose laws you may have ignored or bypassed.

Think how you would feel if elements of your own reward package, policies or procedures were based on European or Asian common practice.   That wouldn’t go over well with you, now would it?

If your organization has decided that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its U.S. counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with the US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

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 Oskay

One Size Does Not Fit All

"If you find a good solution and you become attached to it, the solution may become your next problem." ----- Robert Anthony

I had an "aha" moment recently and then very quickly became embarrassed for what should  have been obvious in the first place.

“One size does not fit all”.  My “aha” was realizing that this doesn’t apply just to HR/compensation --- but everyone in business --- even (drumroll) CEOs!  

JC Penney, the department store chain, recently fired Ron Johnson their CEO of 18 months.   He came from Apple where he created the retail operation that was a smashing success. 

Many people believe his firing was due to poor execution of a strategy that hadn’t been fully thought out.  Some of his innovations were radical, like ending discount sales in a department store known for its markdowns. Perhaps the biggest reason outsiders give for his failure is that he did not listen to customers.

Let’s look a little deeper.  How could such a wildly successful executive from Apple fail so abysmally at JCP?  He obviously had exhibited both great strategy AND great execution at Apple.  Why would his ability to think strategically and execute flawlessly fail him at JCP?

The simple answer:  “One size does not fit all”.

He took a page from Steve Job's playbook:  “Customers don’t know what they want until you show it to them.”  That sounds arrogant but for Apple it made sense.  Let's look deeper still: “If you ask customers what they want, they will tell you, ‘Better, faster, and cheaper’—that is, better sameness, not revolutionary change. They can describe their desires only in terms of what they are already using."   But big wins happen when you go beyond better sameness.

Ron’s mantra at JCP was --- guess what:  “Customers don’t know what they want”.  Like Jobs he wanted to go with revolutionary change --- not sameness.   But JCP’s products are commodities ---- not revolutionary tech products.  Apple’s business model doesn’t work at JCP.

Here’s an example of someone who wasn’t effective at Apple.   John Sculley took his commodity business model at PepsiCo with him to Apple.  As the new CEO he tried to change Apple from a “techie” company to one similar to PepsiCo ---- buttoned-down, slick and marketing oriented. 

In the end he failed because he began producing mass market machines to compete with IBM and was opposed to licensing Macintosh software. Apple is not in the commodity business like PepsiCo. Its products are about revolutionary change. 

The point to all of this is that CEOs/top management take what has worked for them at Company A and then go to another company, another industry, another culture and try to replicate what was a smashing success at Company A.  And they fail.

Of course we already know this applies to HR and compensation.  Like we haven’t heard it enough?!

I tried to take a team bonus plan for manufacturing assembly lines (line A, B, C, etc.) to another company and it failed.  In the first company it created a healthy competition where assembly lines competed with each other, had fun and celebrated winning.   In the second company it led to divisive competition where teams laughed at each other's failures, took shortcuts in their work leading to defective parts and scrapped material.   Not so successful.  Different culture.

Morale of the story:  Think about what you need to create.  Is it a revolutionary design for a compensation plan that will satisfy a need the company doesn’t even know it has?   Or is an upgraded  “sameness” plan what is really needed?

Put this someplace where you will see it daily. "If you find a good solution and become attached to it, the solution may become your next problem."

P.S.  Aren’t you glad that compensation people like us aren’t the only ones that forget “one size does not fit all”?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and SeagateTechnology. 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. 

Image courtesy:  http://money.cnn.com

Memo to Dan Pink and Friends: Incentives Do Not Undermine Employee Motivation

Editor's Note: I am proud to feature today's guest post from Dr. Gerry Ledford, who shares some key findings and points from his presentation at this week's WorldatWork Total Rewards and his recent WorldatWork Journal article.  As a big fan of Gerry's work, I am particularly pleased to be able to share his thoughts and wisdom with the Cafe audience.  Take it away, Gerry!

The rewards field is filled with mythology about what research has to say, and practice is guided by the mythology. Consultants, famous executives, the business press, and ultimately academics who don’t know their stuff monotonously repeat the popular wisdom until it becomes generally accepted as truth.  All too often the body of research flatly contradicts the popular wisdom. 

 Two of my favorite myths are Herzberg’s claim that money is hygiene factor rather than a motivator (not supported by his own data, by the way) and the undying faith in the idea that a happy worker is a productive worker (the underpinning of much of the work-life and best place to work movements).  We will leave a discussion of these myths for another day. Here I focus on a destructive myth, namely that extrinsic rewards such as monetary incentives undermine intrinsic motivation to such a degree that they make incentives ineffective. 

You might imagine that effects of extrinsic rewards on intrinsic motivation is an obscure academic topic of little interest to practitioners.  If so, you would be wrong.  In fact, this position was championed the authors of perhaps the two best selling books on rewards in history, Alfie Kohn (1993) and Daniel Pink (2009).  For example, Kohn claimed in his 1993 book that, The bottom line is that any approach that offers a reward for better performance is destined to be ineffective.” Furthermore, “Possibly the most compelling reason that incentive systems fail is . . . (that) extrinsic motivators not only are less effective than intrinsic motivation but actually reduce intrinsic motivation . . . Furthermore, the more closely we tie compensation (or other rewards) to performance, the more damage we do” (emphasis in original).  Both books were heavily referenced, but neither author was particularly qualified to review the hundreds of research studies on this topic.  Kohn was a high school teacher and Pink was a political speechwriter turned author. 

The research says something quite different than Kohn, Pink, and their friends suggest.    

• Monetary incentives generally lead to increased performance.  There have been six major reviews of the literature on incentives in the past 20 years, and there were several others during the 1980s.  As I demonstrated in my presentation at the WorldatWork meeting this week, all these reviews reached the same conclusion: monetary rewards increase performance. Even academic proponents of the Kohn and Pink position such as Edward Deci concede this.  So much for the claim that any negative effect on intrinsic motivation is so serious that it causes incentive failure. 
• Extrinsic rewards actually can increase intrinsic motivation depending on how they are implemented.  All relevant academic theorists agree on this point.  Good implementation means communicating the importance of the task and how the incentive works; setting specific, meaningful goals; providing supervisor feedback and support; hiring employees who want incentives; and building an incentive-oriented organizational culture.  The idea that incentives are actually a source of intrinsic (not just extrinsic) motivation is not a surprise to anyone who has seen a salesperson, production worker, or CEO engrossed in calculations of their next performance bonus payout and developing tactics to maximize the payout. 
• Rewards have no negative effect on intrinsic motivation for boring, routine work because the tasks have little intrinsic motivation to reduce.  This is important because much of the work of our society would not be done if we did not offer extrinsic rewards for task performance.  In fact, incentives (but not salary alone) can increase intrinsic motivation in routine work.
• The negative effect of incentives on intrinsic motivation can be manufactured in the laboratory, where most of the studies in this literature were originally conducted, but the effect disappears in real-world conditions.  A review of 43 field studies found that incentives actually tend to increase intrinsic motivation.

Compensation professionals who are familiar with our topic may have wondered whether their work on incentives is an exercise in futility, and doomed to fail because incentives undermine intrinsic motivation. Fortunately, compensation professionals can rest easy.  Extrinsic rewards increase performance because they increase total motivation (extrinsic plus intrinsic).  Any negative effects of rewards on intrinsic motivation can be easily avoided by the sound implementation of incentive plans.

ENDNOTE: Readers interested in more information on this topic are encouraged to see the article by Ledford, Gerhart, and Fung in the current issue of the WorldatWork Journal (Q2 2013) entitled, “Negative Effects of Extrinsic Rewards on Intrinsic Motivation:  More Smoke than Fire.” (Access the article on the USC site here.) The article offers an overview of the extensive literature on this topic. 

Gerry Ledford is Senior Research Scientist at the Center for Effective Organizations, Marshall School of Business, University of Southern California.  Much of his professional work focuses on employee reward systems.  He returned to the Center for Effective Organizations in 2012; he was a key contributor there from 1982-1998.  From 1998 to 2003, he held leadership positions at Sibson Consulting. Since 2004, he has been President of Ledford Consulting Network LLC.  He received a Ph.D. and M.A. in Psychology from the University of Michigan.  Gerry has authored over 100 articles and ten books and he frequently speaks at professional events.

How Money Can Buy You Happiness

Today’s post has ramifications on executive compensation, employee base pay theory, and the value of recognition for employee satisfaction and happiness. As you can see, I only like to tackle the large challenges – especially when you recall that compensation philosophies (at any level) are not my area of expertise.

Yet Jim Brennan, a fellow Compensation Café colleague, pointed out this article to the Café klatch, and I couldn’t resist calling “dibs” to write about it. It seems, according to the economists cited in the article, money can buy you happiness. Check out the article for the two graphs showing first, by country, that richer households experience more life satisfaction and second, by households within countries, that more money means happier countries. 

So what does this boil down to? As a country, though US households make more money (and this, in fact, has doubled in size since the 1970s), overall well-being is lower. The article concludes:

“That's not a reason to stop reaching for policies that grow the pie. But it might be a reason to consider better policies to divide it so that more reaches the poorest families.”

I’ll go the extra step the article does not – achieving more of a balance between executive compensation and employee pay. The Swiss passed the strongest “say on pay” legislation yet (though average Swiss employees are also among the highest compensated). The research is a good reminder that pay matters. Regular readers of my posts may be surprised to hear me say that as I usually fall hard on the side of the importance of employee recognition vs. cash bonuses, but don’t misunderstand me. Until base pay is right, fair and appropriate, then it doesn’t matter how much you praise and appreciate employees.

Then just yesterday I saw this article on how money can, indeed, buy happiness. It all depends on how you spend your money with research showing, “We find that people are happier when they spend money on others rather than on themselves.” The author also points out, “Give your time to someone else and you will elevate your level of overall happiness.” These have ramifications directly on employee recognition, which is my area of expertise.

Based on these two articles, I offer three lessons:

1) Compensate people appropriately and fairly, with no single person or band of employees (regardless of rank) earning exponentially more than is relevant to the role or function. In other words, realize that all employees, pulling together, move the ship forward, and should be relevantly compensated for doing so.

2) For many people, their pay cheque is already fully allocated for the daily expenses of life, long before they ever receive it. Rewards and bonuses often offer the most acceptable reason to splurge. When recognizing and rewarding employees for great work or performance, do so in a way that makes it easy for them to use their rewards for others. I’ve heard countless stories of team members redeeming rewards for the benefit of family members (a ballerina outfit for their daughter, a vacation experience for everyone) and not just for something they can individually enjoy.

3) Don’t forget the importance of time. We are all very busy. Our peers as well as those we manage know how busy we are. If we choose to take time from our busy schedules to help them; to answer questions when asked; to pause, notice their good work and recognize them for it, then that can be a tremendous boost to employee happiness in itself.

Can money buy you happiness?

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.

Is Co-Creative Analytics the Answer?

There's been a lot of talk about skill shortages at the Cafe lately. Jim Brennan points out that the educational system may be incapable of closing the talent deficit, resulting in a broken link between compensation and education. Ann Bares also discusses the skill shortage, and thinks the answer may lie in cooperation between the recruiting and compensation functions.

Addressing the challenge of the skill shortage in today's economic environment requires a new approach, and I think Ann may be on to something. I'm a big fan of interdisciplinary solutions. The interdisciplinary approach has led to advancements in disease prevention, economic development and global climate change. It has even led to the development of new fields of study like nanotechnology, genomics and bioinformatics. It brings fresh perspectives to old problems, and can lead to astonishing breakthroughs. 

It may be difficult to find a starting point for this inter-departmental cooperation, given that recruiting and compensation are each unfamiliar with the other's vernacular. Data may be the universal translator, and co-creative analytics may be the ideal starting point.

What is co-creative analytics? Here's how the process was described in a recent HBR blog post:

You put together ad-hoc teams that involve not only analysts with relevant domain expertise but also represent skills from other domains, which brings new ways of thinking to old analytical problems. Over a short two or three day period the team will brainstorm around the problem involved and bring together as much data and as many analytical frameworks as they can to both frame up the problem and outline potential solutions or at least pathways to solutions.

As Ann points out, the solution to the skill shortage may lie in a collaborative effort to better understand alternate candidate pools and identify the rewards strategies likely to attract and retain these candidates. It's easy to see how co-creative analytics could facilitate this collaboration.

This same interdisciplinary approach has applications in other areas of the organization. Performance management immediately comes to mind. A co-creative analytics approach could provide better alignment of individual performance goals with the goals of the organization. It's likely that based on different past successes and failures, different departments will approach a given organizational goal in different ways. Sharing those approaches across departmental lines can spark new ways of looking at old problems, pushing the organization forward.

What other kinds of organizational challenges could co-creative analytics address? 

 

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr. 

Switzerland Pay - Great for Employees, Less So for Execs

In the past several months, Switzerland has made some interesting compensation headlines. Swiss voters recently passed a referendum on executive compensation that is more far-reaching and restrictive than anything we currently have in the U.S. This new set of rules was supported by a convincing 68% of voters. At nearly the same time, a UBS report from September 2012 shows that Swiss employees in Geneva and Zurich receive the highest net wages in the world. Does this tell us anything?

The highest paid employees in the world just voted for some of the most restrictive executive compensation reform we have seen to date. To be fair, Geneva and Zurich are among the most expensive cities in the world, but UBS reports they also have some of the lowest tax rates. I think it is telling when people who are doing relatively well compared to the rest of the world still have an issue with how much executives are making. I am just not sure what it is really telling us.

Are executives paid too much? Is there a misunderstanding of how and why executive pay came to be at its current levels? Has the media, or have politicians, flamed the fires of executive compensation unrest? Or are executives in some sort of compensation cold war, outspending each other to show their relevance and power? Let’s be honest, all of the above are far too simplistic, but each is believed by groups of employees, shareholders or others.

The new Swiss limitations on executives apply to publicly traded companies. Among the new rules is a requirement that pension funds vote in the interest of their members. They must also report how they voted. There are also annual say on pay votes, annual elections for directors and a ban on severance and golden parachute payments. Companies’ Articles of Association (similar to U.S. Articles of Incorporation) must add new details on compensation structure and rules for how compensation may be used for several groups and purposes. The final kicker is the potential for criminal penalties and fines if these rules are broken.

These new rules may simply be a shot across the bow in the new battle to bring executive compensation levels into publicly acceptable ranges. Several other countries, including the U.S. and a few Western European countries, have incomplete rules on the books or in the works. Executives may find themselves boxed in by the many stakeholder and influencers with different perspectives on this issue.

A decade ago when the UK rolled out its Say on Pay rules, few consultants or companies believed that similar restrictions were likely to occur in the US. They were right for almost ten years. While we will not see aggressive new restrictions on executive pay in the immediate future, the approval and gradual acceptance of these rules across the Atlantic may be writing our future. In the past, rules like this have taken 5-10 year to reach our shores, but we all know that cycles are speeding up. We may well see restrictions like this sooner than expected. Are you ready, and will you support or oppose these efforts? 

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.

Compensation and Education: A Broken Link?

Has the tie between education and compensation been broken?  Or is a new conflict emerging due to the inability of our educational system to close the talent deficit?  Any break in the chain linking teaching institutions and the KSAs that earn pay is troubling.

While we face a shortage of viable candidates for the critical STEM jobs vital for economic recovery, we have an excess supply of people burdened with immense debt incurred pursuing educations which do not produce suitable employment.  Obviously, college curriculum developers and placement officers are not doing a very good job.  Universities produce graduates in disciplines with no job openings.  Part of the blame rests on the flat economy, because no one can help even the most qualified candidate find employment that doesn’t exist.  The jobs available today are increasingly less middle-class and more of the low-wage type, too, and that further reduces the pool of opportunities for those with university degrees.  Arguments that more education MIGHT change that dilemma rest on the doubtful presumption that students will choose the tougher academic fields where strong skills are badly needed but qualified applicants are in short supply.  Don’t bet on it.

Workforce participation by college grads has been steadily declining, despite the fact they seem to have lower unemployment rates even if they can’t find work in their career field .  Part of that paradox exists because they are frequently willing to take any job despite being “overqualified,” probably because of the immense pressure of student loans that cannot be discharged under new bankruptcy rules.

Student debt is the next U.S. financial crisis, because it already exceeds credit card debt.   An advertorial for an auto equity loan scheme offering temporary cash flow to the typical under/unemployed grad illustrates how bad the situation has become.  Determined people who invest in higher education still have a hard time finding steady income from a suitable job in their field.

In a planned society, this misallocation might not happen because it would not be permitted.  In an openly competitive economic system, you would think that “free market forces” would operate to efficiently match supply with demand.  But this has not happened.  Or maybe it is happening, because pressure is increasing to lower barriers against importing foreigners with the skills our home-grown educational system seems incompetent to produce.  Even professional societies (IEEE) propose immigration reform for STEM talent.

Meanwhile, industry seems to be turning away from an academia seemingly unable to close the skill gaps (talent deficit) in the real world. Everyone agrees that higher education does pay off, over time, despite initial employment issues and similar problems when unemployed; but mismatches between abilities and jobs persist.

The alternatives for solutions are shrinking due to a confluence of forces.  There are fewer people sufficiently educated for the diminishing supply of skilled jobs required for modern employment.  “American workers are overeducated and underskilled,” according to one report.  Large numbers of degreed workers remain underemployed.  At the same time, there are more people literally being encouraged to disappear from the job market and become dependent on new forms of “the dole”  funded by taxes on increasingly stressed and underemployed workers.

How can this mess be fixed?  As the unprecedented number of embedded research links demonstrate, these are deep and serious problems.  What are the most promising possible options to solve them?

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 Photo "060713 Tangle" by Dan4th

Skill Shortages: An Opportunity for Recruiting and Compensation to Converge?

Too much focus on job titles is undermining our ability to fill our more challenging job openings, argues Matt Ferguson, CEO of CareerBuilder, in his recent HBR blog post.  By looking only at applicants with specific job titles and overlooking candidates who possess many of the essential skills required and who could take on the responsibilities with a basic investment in on-the-job training, he observes that many employers could be creating their own skill gaps.

In making his point, Ferguson highlights a study conducted recently by Economic Modeling Specialists International.  EMSI completed an analysis of 41 occupations commonly reported as having a skills shortage and then used their own compatibility index (which is based on O*Net competency calculations) to identify and estimate the number of workers who would be willing and able to switch occupations into categories where there skills may be more highly valued than in their current positions.  Where there appears to be an available and adequate pipeline of qualified workers, the EMSI analysis examines wage comparisons as well as other potential "opportunity costs" to understand the degree to which there are incentives for workers to cross occupational lines.

Essentially, EMSI is using this process to highlight situations where organizations could be overlooking "nearly perfect" candidates who possess many of the essential qualifications for a position.  Examples noted include a technology company trying to hire technical writers who might also consider paralegals with exposure to technology subject matter -- or a healthcare organization needing to find medical assistants who might also consider pharmacy technicians as a viable candidate pool.

The EMSI study (of which I have provided only a cursory overview here) raises some interesting questions and possibilities for both recruiting and compensation.  Through its analysis and findings, it prompts employers to consider supporting their recruiting efforts with deeper studies of the available labor markets in order to better understand the possibility and presence of alternate candidate pools -- and to also contemplate the pay and other types of incentives that might be necessary to attract candidates with compatible skills, so that appropriate reward strategies can be explored and put in place.

Seems to me to be an interesting opportunity for recruiting and compensation to put on their respective thinking caps and do a little collaborative problem solving.  You?

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 "Converging Footsteps: My Father and Stepmother" by CarbonNYC

At the Comp Cafe, We're Counting the Days 'til 2021

Last week I mentioned a report called "Global Talent 2021: How the new geography of talent will transform human resource strategies" from Oxford Economics. I found it exciting and timely because the report describes a future that is already emerging around us. 

The changes that have begun are going to involve business and cultural shifts that were unimaginable fifteen years ago. Our businesses will be globally networked with employees shifting their employment from the U.S. to emerging markets and back again, as business needs or job opportunities arise. 

We'll need to track and explain to executives where to invest in talent and where to reduce investment as areas become less critical. These adjustments will be ongoing rather than epic events. And in this shifting employment environment, implementation of adaptable compensation practices will become as important as program design.

Here are a couple of the quotes from the report:

"Employers who are candid with their employees about how they rate relative to peers and what future leadership potential they possess may find their workers more motivated to develop new skills and master new techniques."

"Making employees feel more part of the conversation is critical to business success, and closely correlates to the overall health and prosperity of the company."

"Take a greater evidence-based approach to talent management. Employing workforce analytics to assess and segment talent, and using quantitative tools to indentify risk and integrate HR into business planning can lead to superior results."

Just wondering. Do any of these recommendations sound familiar to you? If you are a regular Compensation Cafe reader, you must have heard these suggestions repeatedly over the last four years.

Compensation Cafe writers are itchy for improvement. We're a group of cheeky, opinionated HR practitioners who spend a lot of time looking to the future. Each one of us is a big fan of evidence-based analysis for every and any HR strategy. We'll even give you ideas on how to pull it off.

"Our research reveals not only that tomorrow's landscape for global talent will be dramatically different than that of today, but that some countries and industries will need to adapt more quickly to accomodate these rapid shifts."

If you love this drama, keep reading the Compensation Cafe!

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.