Compensation Force

Practical news, information, tips and musings about employee performance and compensation

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My 8 Random Facts

Lisa at HR Thoughts has tagged me, asking me to reveal 8 random thoughts about myself.  So here goes.

First, the Rules:

1) Post these rules before you give your facts

2) List 8 random facts about yourself

3) At the end of your post, choose (tag) 8 people and list their names, linking to them

4) Leave a comment on their blog, letting them know they've been tagged

Now, 8 random facts about me (this was tougher than I thought):

1.  I have the world's best office mate.  She is a 9 pound Jack Russell Terrier who my daughter (accurately but not very imaginatively) named "Peppy".   She rarely makes noise, but has had the occasional barking fit during an important telephone call.  That's when I introduce her as the Chief Morale Officer.

2.  I am a leg jiggler.

3.  I am also a voracious and fast reader - fiction, non-fiction, business, etc.  My favorite all-time novel is Staggerford by Jon Hassler (a MN author).

4.  I finally started reading the Harry Potter series; my son has been after me for years to do so.  I am on Book #3.

5.  My undergraduate degree is in Social Work.  I went on to get an M.B.A.  An ideal combination for a compensation consultant, I think!

6.  My husband is an amateur wine expert, and I am making an effort to learn more about wine from him.  What I have learned so far - I really like wine!

7.  As the only non-player in a family of excellent tennis players, I am learning the sport as an adult this summer.  While I am not hitting very well yet, one of my lesson-mates informs me that I look quite intimidating across the court (I think it is my stance).  So, I've got that going for me.

8.  I have found my experience in the blogosphere so far to be fascinating; I really appreciate the opportunity to learn from my fellow bloggers and the sense of community that seems to exist "out here"!

Here are my "tag-ees", people that I'd love to know more about and urge my readers to get to know as well.  Lisa has already tagged some of my favorites, including Peggy at the Career Encouragement Blog, and Peggy has already tagged another one of my personal favorites, How to Almost Get the Job.  So here are the six bloggers that I tag - 

1. Ryan Johnson, who authors the WorldatWork blog

2. Paul Hebert at Incentive Intelligence

3. Holden at the GiveWell blog

4. Travis Sinquefield at Disorganizational Behavior

5. Michele Martin at the Bamboo Project Blog

6. Charles Green at Trusted Advisor

I'm looking forward to learning more about the group!

Do Employees Trust Performance Management? Should They?

Sibson Consulting and WorldatWork collaborated on and recently released their 2007 State of Performance Management Study.  The study features the responses of more than 550 primarily senior level HR professionals in organizations that range from less than 100 employees to more than 100,000 employees.

Some key findings from the study include:

  • There isn't much difference in the performance management techniques used in organizations where the programs are rated as effective versus those rated as less effective.  The difference comes in the level of active leadership support and championing of the process.  My experience would confirm this:  performance management processes that are HR driven are rarely as successful as those driven by top management.  It is critical to bring leadership into a role of active support (as in walking the talk) of performance management.  One way to do this is to help them see (and help position) the process as one of business improvement rather than administrative compliance.  Executives get more excited about the former than the latter.
  • Only 30% of respondents report that employees trust the performance management system.  This is a hugely disappointing statistic, and I would bet it is correlated to the first point above.  In many organizations - unfortunately - members of senior management pay lip service to the performance management process, and then don't hold either themselves or their subordinates accountable for doing it well.  With that kind of duplicity at work, no wonder employees don't trust it.
  • Overwhelmingly, the top challenge faced by organizations in making performance management successful is the inability of managers to hold difficult performance discussions. Holding difficult performance discussions is tough; this much is undeniable.  But candid communication and feedback - done, of course, in a professional and considerate manner - is essential to improvement.  However, if this candor and responsibility is not modeled from the top (see, again, first point above) , is it really a surprise that it isn't trickling very far or very well through the organization?

If there were any remaining doubts, this study makes it clear to me that unwavering commitment from the top is essential for performance management success.

Full copies of the survey report can be ordered from WorldatWork

The Compensation Communication Challenge, In a Nutshell

Today Paul Hebert of Incentive Intelligence has a noteworthy post on the challenge of effectively communicating reward programs, featuring a quote by George Bernard Shaw that cuts to the very essence of the problem.  I can't resist sharing it here:

The problem with communication ... is the illusion that it has been accomplished.

Wise words!

Check out Paul's post for some helpful tips on how to meet the communication challenge, and help position your reward program for success.

The Peril of the "I" in Program Design

A sometime client phoned me recently, stumped and looking for help.  He explained that he had completed development of a new performance management program, was in the process of rolling it out to the organization, and was meeting with tremendous resistance from leadership and employees alike.  He couldn't figure out what the problem was.  Could he email me the materials describing his new program, so that I could review them and then discuss them with him?

It was a quick call; he was in a hurry to get his stuff in front of me and anxious for my commentary.  I agreed to take a look.  We hung up and I waited for his email and attachments, which came quickly.

I looked through the materials, a new performance management form, featuring a detailed set of behavioral competencies against which all employees would be assessed as well as a new rating scale, and accompanying set of policy guidelines describing the performance management cycle, the roles and responsibilities of the different participants (i.e., employees, their supervisors, HR, etc.).  Without any real context to put them in, it was hard to effectively judge the materials, but I didn't see anything that struck me as particularly troublesome.

I phoned my client back and told him that my review of the materials didn't produce any immediate insights as to the source of his difficulties.  Perhaps he could talk me through the process he followed to develop the program and his plan for implementing it.

That's when the tip-off came.  He launched into a description of how he put together the new program and prepared it for launch.  It was one "I" statement after another.

"First, I started by ..."

"And then I ...."

"When I got to that point, I ..."

"And when I thought about it a little, I decided to ..."

You get the drift.  It became clear to me - and to him, after we discussed it - that the reason for the organization's resistance to his new program stemmed from the fact that he involved and got input from absolutely nobody but himself.  Nobody else had been given a voice, and there had been no opportunity to test his ideas and plans against the perspective of anyone else in the organization.

This is a bad approach for a number of reasons.  First, a process that provides the chance for input and involvement - from leadership as well as the employees and front-line managers who will be key "customers" of the program - is essential in paving the way for acceptance.  Even more, drawing upon multiple perspectives and vantage points is critical to identifying (and figuring out how to deal with) potential barriers to program success.  This is true not only for performance management programs, but for any HR program or initiative.

So beware the peril of too much "I" in your program design efforts.  Seek opinions, input and involvement from as broad a group as you can, at multiple stages of the process.   Sure, it means more time and hassle, but my experience would suggest that the benefits of taking this step make it way more than worthwhile. 

Otherwise you risk finding yourself in my client's shoes, having invested a ton of time and energy in a program destined to go absolutely nowhere.

The Carnival of HR is Up

The Carnival of HR #12 is up at Ask a Manager.  Check out the great array of HR wisdom and advice, from rewards to leadership, second careers to WIGs and PIGs!

The next Carnival will be hosted here by yours truly on August 8!

Economic Inequality: A Consequence of Pay for Performance?

Ryan Johnson's WorldatWork blog has a great post about variable compensation and economic inequality.  In it, he calls our attention to a recent Business Week column where author James Sherk of The Heritage Foundation posits that pay for performance programs have been a significant contributor to the growing economic gap (between our richest and poorest citizens) and that there is an upside to economic inequality that is being overlooked in current discussions of this trend.

In Sherk's column:

According to a study by the National Bureau of Economic Research, much of the increased inequality in the past generation - including almost all the gains among top earners - occurred because companies upped their use of performance pay.  That is, inequality has risen for a good reason:  The economy is increasingly rewarding hard work.

Of itself, inequality is niether positive or negative.  What mattes is why incomes are unequal.  In a class-based society where a few families control wealth through inheritance or coercive means, rising inequality does indeed cause harm.  Higher inequality, in 17th century England or in Saudi Arabia today, means increased hardship for most workers.

However, in a society where most wealth is earned, some great inequality can benefit most citizens.  Consider Google Inc. founders Larry Page and Sergey Brin, each worth $16 billion, thanks to their stake in the search giant.  Their success has amde America a demonstrably less equal country - who wouldn't want to swap paychecks with them? - yet most people are better off for it.  Google's services allow tens of millions of Americans to find what they want fast on the Internet and use a quality e-mail service free of charge.  Page and Brin got rich, and thus increased inequality, by improving the lives of others.

The growth in popularity of pay for performance, particularly variable or incentive pay, is undeniable.  As Ryan points out, WorldatWork's very own research confirms the steady climb in the number of organizations who report using variable pay, up to 79% in the most recent Salary Budget Survey.  Taking this point further, the NBER study notes that "the growing incidence of performance pay can explain 24% of the growth of male wages between the late 1970's and the early 1990's, and accounts for nearly all of the top end growth in wage dispersion."

Certainly we can all point out cases of wealthy individuals who did not get to that place on the basis of good performance (not only a number of CEOS but also some professional athletes come to mind), but I think that Sherk makes a worthy point that - as Ryan notes - may not be getting due consideration in today's public policy debates.

Sherk's closing thoughts:

Yes, an economy that rewards hard work generates inequality.  But that economy is indisputably fair.  That's why, rather than bemoaning inequality, policymakers must search for ways to expand the number of jobs that can base pay on performance and allow more workers to share in the gain. 

 

Defining Outstanding Performance

A number of my clients, in seeking to improve the value of their performance management processes, are wrestling with the question "what is Outstanding (or "Exceeds Expectations") performance in our organization?"

I found some helpful thoughts in the Corner Office column in the August issue of a local publication "Twin Cities Business" written by Mark Sheffert, who is Chairman and CEO of Manchester Companies, Inc. in Minneapolis.  In addressing the topic of "followership", he offers ways for all of us to be more effective in the role of follower (which he portrays as an essential partner to the leader in any organization or endeavor).

While the article is certainly interesting in its own right, for its exploration of followership, one of Sheffert's "ten ways" spoke particularly to what constitutes outstanding employee performance in today's business environment.  I thought his words worth sharing here.

Make Yourself Valuable

We all have coworkers who only do what's asked of them and rarely take the initiative to take on a project that they simply know needs to get done.  Too many people wait for a leader to tell them what to do, instead of having ideas themselves or being creative and resourceful on their own.  They say, "Why hasn't anyone trained me on this?" or "Why doesn't anyone value what I contribute to this organization?"  Good followers ask, "How can I learn how to do this?" or "How can I make myself more valuable?"  There's a difference.

On Deming's Objections to Numerical Goals

In the comment thread of a recent post reflecting on Alfie Kohn's book Punished by Rewards, Frank Giancola and I touched on W. Edward Deming and his call to eliminate numerical goals and quotas.  In our exchange, we conceded that neither of us has a deep enough understanding of Deming's work and philosophy to know precisely what this call means.

A post today on the Curious Cat Management Improvement blog provides helpful clarity on this point, using a story about Google to illustrate the difference between "managing for what is best for the business" and "managing to hit a target."   It quotes a recent explanation from Google about quarterly earnings performance:

The company hired more people than expected last quarter, Chief Executive Officer Eric Schmidt said on a conference call.  Google added 1,548 jobs, mostly in sales, marketing and engineering, bringing its total to 13,786.  "We overspent against our own plan on headcount," he said.  "We decided it was not a mistake.  The kind of people we brought in were so good that we're glad we did this."

Curious Cat's take?

Great statement.  And if more people could manage that way, one of the problems with numerical goals would be eliminated.  But with so many organizations tying huge bonuses to meeting arbitrary numerical targets you will have a great deal of difficulty getting managers to hire 3 extra people this quarter, who will help the business, but will ruin their chance at a bonus.  Or even if they just take a hit on their performance appraisal compared to other managers that meet the headcount target - even if it meant turning away talent the organization could have benefited from greatly - and then the manager that missed their target loses out in the next promotion opportunity.

I believe the point here - and its an important one - is not to eliminate all goals and objectives, but rather to set and use them judiciously.  Notice that Google clearly does have a plan that features quantitative goals, but rather than adhering blindly to them, Google leaders are applying managerial judgment and wisdom.

Rather than leadership in lieu of goals and objectives, perhaps what is really called for here is leadership applied to the use of goals and objectives.

Job Exchanges: A Way to Boost Workforce Retention, Development & Flexibility?

A recent Fast Company article lauds the job exchange program developed by a Virginia county government institution as a way to address a host of talent management challenges -- from employee retention and development to succession planning and inter-department cooperation.  The program, which was born of the desire to try something radical, is now in its fifth year.

According to the article:

An endless combination of special projects, committee assignments, internships, job shadows and stair-step swaps provides people variety and broadens their professional experience.  From these exchanges people gain insight larger than any single job offers.  Upon return, they inevitably inject fresh views into their existing departments.  Some people also find better jobs, giving someone else a chance to grow into the job they had.

The article also tells of several success stories, including:

Take the case of the custodian deemed to be doing a crappy job.  In his evaluation, it was also noted he was great at talking with people.  The department and HR discussed options to probation.  His supervisor was thrilled to have a chance to, even temporarily, backfill his job with someone else and the custodian welcomed the chance to prove he was a good fit in another department.  After six months he was moved permanently into social services where he began training to become a case aide.  Now he's a successful, happy, and helpful social worker. 

And ...

During a crucial budgeting season, thecounty couldn't fill accounting jobs fast enough.  The supervisor listed the foundation skills needed for the position and the HR team went to work seeing if they could find people in-house.  Within a week, they found two qualified people voicing interest in an exchange.  One was in grounds maintenance and the other was running after-school programs.  Each was brought in for six months.  One liked the new role and eventually took it full-time.  The other hated the job, realizing he never wanted to work in accounting again.  However, the people he worked with were impressed with his initiative to step outside his previous role and it eventually led to a new job better suited for him.

The article also highlights some administrative and procedural details, which are helpful to note for anyone considering a similar program:

  • Most exchanges are full-time and last six months.
  • Employees don't get a pay change unless they're in a new role for more than six months.
  • About 30% of exchanges have led to promotions or permanent changes within the organization.
  • Exchanges aren't always employee-driven; sometimes when a big project or critical job opens up, "the people in HR get nosy!"

In a time when limitations to advancement within an organization can be seen as a liability, this job exchange program provides interesting food for thought!

Punished By (Poorly Conceived) Rewards

My copy of Alfie Kohn's Punished by Rewards has been sitting on my desk for several weeks, as I've been piecing together this post.  What finally prompted me to complete it was Paul Hebert's (Incentive Intelligence) post and his responses to some of Mr. Kohn's precepts.  Here are mine.

As many of you probably know, Kohn's book is essentially an indictment of rewards, or what he calls "carrot and stick psychology" in the workplace, the classroom and the world in general.  If you are a rewards professional and haven't yet read it, I recommend that you do.  His perspective is one that you should know and appreciate, even if you don't always (as I don't always) agree with it. 

As the centerpiece of his argument against workplace rewards, Kohn puts forth The Five Problems with Rewards ... at Work.  I'd like to highlight and respond to each of these in turn, based on my own experience in and knowledge of the field.

1.  Rewards punish.

Kohn says "In some circles, it is no longer necessary to make the case that punishment destroys motivation:  this fact is already understood."  I believe you'd be hard pressed to find a reward professional, or any other student of management, who speaks out in favor of punitive management practices of any kind.  Not only because they don't work, but also because of their destructive impact.  The success of Bob Sutton's book The No Asshole Rule would suggest that most of us finally get this.

Having said that, however, it is disingenuous to pretend that negative consequences have no place in the adult workplace.  Failure to perform the job for which one is hired can - and typically does - lead to consequences more serious than withheld rewards.  Along with any other things it represents, the employment relationship does have at its heart an economic transaction in which both parties agree on certain expectations that will be met as part of the exchange.  And while we don't effectively manage people simply by either providing or witholding rewards (though I've seen it tried), rewards - along with clear communication, regular feedback, coaching and development - are a valid component of the overall management toolkit.

2.  Rewards rupture relationships.

Relationships, Kohn tells us, "are casualties of the scramble for rewards."  Using individual rewards to pit people against each other in an environment where they need to work together is, frankly, stupid.  Of course, such a practice would "discourage the social support and sense of belongingness", as Kohn notes.  Reward professionals understand that effective reward practices must strike a balance between recognizing the role of the group and the role of the individual employee.  Tipping that balance too much in one direction or the other inevitably causes problems - much like the problems that Kohn alludes to.

3.  Rewards ignore reasons.

"The point here is remarkably simple," Kohn says.  "In order to solve problems in the workplace, we must know what caused them."  Not to be flippant, but ... duh!  No reward professional worth their pay would overlay an incentive plan on a workplace issue without first seeking to understand the root causes.  I find that nearly half of the incentive plan "feasibility studies" that I conduct end with the conclusion that there are a number (sometimes a big number) of needs that must be addressed (which can range from communication to process improvement to management development) before any incentive plan should be put in place.  And I have difficulty believing that I am alone here. As I am fond of repeating, incentive plans support, but are no substitute for, sound management practices.

4.  Rewards discourage risk taking.

Kohn relates the following anecdote. "'People will do precisely what they are asked to do if the reward is significant' enthuses one proponent of pay-for-performance programs.  And here we have identified exactly what is wrong with such programs."  And he's right.  Rewards that are too singular in their focus, or so heavily weighted (as part of the overall pay package) as to disproportionately and inappropriately influence behavior, do tend to produce problematic results.  As incentive guru Jerry McAdams is fond of saying, "Be careful what you reward, for you will surely get it."

Reward professionals understand that the design and implementation of effective rewards demands careful consideration of and planning for the potential consequences - intended and otherwise.

5.  Rewards undermine interest.

Kohn's point here is that "extrinsic motivators not only are less effective than intrinsic motivators, but actually reduce intrinsic motivation."  While this is certainly true in many cases (again, with ill-considered and ineptly implemented rewards), I have difficulty believing that it is true across the board, and that intrinsic and extrinsic motivation are always mutually exclusive.

Bottom line, I think there is a fundamental difference between the way Kohn views rewards, at their very core, and they way that I do.  He sees them as a bribe, a way to get people to do what they wouldn't otherwise be willing to do.  I see them as a form of partnership; which is what I believe the employment relationship represents at its best, a way of creating and sharing success.  It is a dialogue, as in the example of a group incentive plan where leadership says, "These are the things we must accomplish together, as an organization, to be successful.  Help us get there and we'll share the value generated by that accomplishment."  In this context, the incentive provides important directional cues - as Paul Hebert notes in his post - as well as an agreement to work together and share the benefits. 

Getting this agreement right, which is admittedly a challenge, can be a very powerful, positive thing.  I've seen it first hand.  To convince me otherwise is asking me to disbelieve my own experience.

In summary, I do want to say that Kohn does us all a service by calling attention to the often misguided and flawed programs which are put in place in an attempt to improve performance.  The essence of my issue with his perspective, however, is that he paints all reward efforts with the broad brush of condemnation using arguments and examples that, in fact, represent very poorly conceived and implemented practices.  Not only is this incorrect, but it is also insulting to those of us who work diligently to ascertain where rewards will make a positive contribution and where they will not, and who apply the principles of sound reward design to their development and implementation.

So, there it is. 

My blog is blessed with a lot of smart readers.  I would welcome your thoughts and responses to this, particularly if you're familiar with Kohn's work. 

Jeffrey Pfeffer on Incentives

Guy Kawasaki  has posted an interview with Jeffrey Pfeffer, Thomas D. Dee II Professor of Organizational Behavior at Stanton University's Graduate School of Business and author/co-author of 12 books, and I thought that Professor Pfeffer had some worthwhile wisdom to share on the specific topic of incentives:

Incentives should be large enough to provide an occasion for celebrating success but not so large as to distort behavior.  And incentives can include recognition and things other than money.  Companies get themselves into trouble all the time by being too clever with their incentives.

Words worth noting!

SMARTER Guidelines for Goal Setting

So many of us rely on the traditional SMART acronym and guidelines for setting effective goals.  And they're ... not bad.  But I continue to keep an eye out for better things to help with the challenge of goal setting.

Sandy Piderit, author of the blog Work-Life Chronicles has come up with her own alternative to the SMART framework which, in her words, "focuses less on how the goal is phrased and more on the process that is used to move toward goal achievement."  She calls her framework START NOW.

Check it out and let Sandy know what you think!

And a hat tip to Terrence Seamon who tipped me off to Sandy by featuring both my blog and hers in a post on employee engagement.

Top Six Reasons to Care About Salary Increase Projections

"They" say that lists are a key ingredient to the engaging and successful blog.  Well, catchy titles and snappy prose are not exactly my forte (I am, after all, a compensation geek), but in the spirit of continuous improvement I offer here my list of the top six reasons to care about salary increase projections (which are all we compensation people can talk about this time of year - see WorldatWork's Ryan Johnson's post on this topic, also here and here).

And here they go...

Reason #6 - Its a Budgeting Mainstay.  If your finance people aren't already camped on your doorstep asking (nay, demanding) what should be budgeted for salary increases next year, they will be soon.  Whether or not your organization is in a position to mimic market salary growth practices, you'd better at least know what they are when you address this question.

Reason #5 - Be in The Know; Scoop the Press.  As press releases from completed salary budget surveys begin to roll out over the coming weeks, media sources from the Wall Street Journal to your local newspaper will be carrying blurbs about what employees can expect for pay increases next year (juxtaposed, naturally, with corresponding stories on inflation and the continued rise in health care expenses).  Employees will be reading these with great interest, of course.  Know before they do.

Reason #4 - Age That Old Survey Data.  Someday, when the coming revolution in the compensation survey business has played out, we will all have ever-fresh, up-to-the-minute pay data at our fingertips whenever we need it.  In the meantime, actual and projected salary increase figures from salary budget surveys help us determine the rate at which to "age" old pay survey data to bring it approximatly current.

Reason #3 - Freshen Up That Matrix.  Are you using a matrix to guide salary increase decisions?  If designed well (and, by the way, you should revisit that design on an annual basis), that salary increase matrix rests on a fulcrum - and that fulcrum is the competitive salary increase, which most organizations intend to deliver to competent ("meets expectations") employees who are in the middle part of their assigned salary range.  Shifts in competitive salary increase levels, even minor ones, may require you to re-tool your matrix to ensure that it is delivering what you intend.

Reason #2 - Get That Structure In Line.  In addition to actual and projected salary increase information, salary budget surveys also provide data on the adjustments that organizations have made - and are projecting to make - to their salary range structures.  This information is helpful if you are contemplating (as you should, on an annual basis) whether and by how much you should bump up your salary structures, assuming you aren't in a position to do a more detailed market benchmarking study.  But beware of responding too literally to the structure adjustment numbers (which tend to run at about 75% of average salary increase amounts) when making your adjustment decision.

Reason #1 - Realize - Once Again - The Limits of Merit Pay.  Having difficulty motivating and rewarding employees with a merit increase budget of under 4%?  Of course you are!  Even in organizations that do the heavy lifting necessary for effective performance appraisal and salary differentiation, it is hard to produce meaningful rewards under the circumstances that these kinds of budgets impose.  This problem has been the driving force behind the surge in recognition and incentive plans.  Just know that meaningful "pay-for-performance" can no longer (if it ever could) be one-dimensional (i.e. via salary increases alone), but will have to involve a thoughtfully coordinated portfolio of different programs. 

Business Travel - or Less of it - Now a Part of the Total Reward Package

I posted recently about work environment as a key element of the total reward package.  Now it looks as though we should probably add business travel - or the ability to do less of it - to the list as well.

From the Work & Family column of today's Wall Street Journal:

More job candidates are bargaining hard for a perk very rare in the past: less travel. Competition for skilled recruits is so intense in certain sectors, including some marketing and consulting jobs, that companies are bending to job seekers' requests.

Reduced-travel deals rank among the top three nonfinancial concessions sought by new hires, says the Association of Executive Search Consultants, New York. Some 48% of men and 67% of women said they are more likely today to negotiate for less travel, compared with five years ago, says a 2006 survey of 477 executives by the association. Tensions over the issue are mounting as business travel edges higher: The total number of business trips this year is expected rise 1.6%, says the Travel Industry Association, Washington, D.C., based on government data and a 70,000-household survey.

Something to think about for organizations looking to differentiate themselves as employers in the hunt for top talent.  Particularly those in high-travel industries and sectors, and particularly with all the collaboration tools and opportunities afforded by today's technology.

Fueled by Competition, New Grad Pay Continues to Rise

NACE (the National Association of Colleges and Employers) has released the Summer 2007 issue of its quarterly Salary Survey, which tells us that increasing competition for new college graduates is translating into average starting salaries that continue to climb.  Liberal arts majors as well as those majoring in business and engineering all seem to be profiting from this trend.

Some specific data from the survey, which features both average starting salary and the percent increase(presumably from a year ago) by discipline:

Business

  • Accounting - $46,718 (+2.3%)
  • Business Admin/Management - $43,701 (+3.9%)
  • Economics - $48,483 (no historical data for comparison)
  • Finance - $47,239 (no historical data for comparison)
  • MIS/Business Data Processing - $47,648 (+4.2%)
  • Marketing - $40,161 (+6.1%)
  • Computer Science - $53,396 (+4.1%)
  • Info Science & Systems - $50,852 (+4.6%)

Engineering

  • Chemical Engineering - $59,361 (+5.4%)
  • Civil Engineering - $48,509 (+5.4%)
  • Computer Engineering - $56,201 (+4.8%)
  • Mechanical Engineering - $54,128 (+4.6%)
  • Electrical Engineering - $55,292 (+3.2%)

Liberal Arts

  • Political Science/Government - $34,590 (+5.9%)
  • English - $32,553 (+5.3%)
  • Psychology - $31,631 (+4.7%)
  • Sociology - $32,033 (3.5%)
  • History - $33,768 (+3.3%)

WorldatWork Provides Advance Look at 2008 Salary Increase Budgets

Today WorldatWork published advance top level U.S. data from its upcoming Salary Budget Survey.  As the data is specified for members only, I will share only overall figures here.  Actual salary budget increases for 2007 ended up at about 3.9%, averaged across all employee groups, and projected 2008 salary increases come out essentially the same, at 3.9%.

Based on this information and advance data recently released by Mercer and Hewitt, overall salary increase budgets for 2008 look to be in the 3.8% to 3.9% vicinity for general industry.

More coming as more data is released.

Preventing the Performance Management Cop Out

I have posted before on the quandary of what number of performance ratings is optimal (i.e., a scale with five points?  Three points?  Four?) and my preference for fewer, clearer performance categories.  Kris Dunn, aka the HR Capitalist, addresses this topic in a great online article at Workforce Management, asking "Does your performance management system have a 'bail out' rating that allows managers to avoid confrontation?"

Kris speaks of the initiative, at his company, to evolve from a standard five-point performance scale to a more simple three-point scale.  This removes the trap of the "4=Sometimes Exceeds" rating, which allows managers to essentially cop out of the tough conversation about what it takes to truly "exceed" in an employee's job, and sets up (or perhaps forces) an opportunity for more honest and direct dialogue.

I have often noted (and sometimes posted) about the puzzling (to me) reluctance I see in managers to define for employees - clearly and upfront - what "exceeds" performance looks like in their role.  I am an advocate of setting the bar high, but painting a clear picture of that "exceeds" target.  Why not?  Doesn't this cut to the very essence of what we all claim we want our performance management systems to do for us:  Create environments where outstanding performance is a high probability outcome?  I have to confess that nothing leaves me scratching my head quite like a conversation with an employee (and I've had many) who informs me that his/her boss refuses to answer the question of what they have to do to perform at an "exceeds" level in their job.

I agree with Kris that a five-point scale, which includes the choice of a "4=Sometimes Exceeds" rating,  may allow managers off the hook too easily.  And that a three-point scale rather forces the issue, making it more difficult to dodge.

And I think that's a good thing.

More Early Predictions for 2008 Salary Increases

None of the big salary planning surveys have yet released any formal results for 2008, but Mercer HR and Hewitt Associates shared preliminary findings for a recent CNN/Money article which suggest that base pay will increase by an average of 3.8% in 2008.  This is slightly higher than the figures published about a month ago by CompData Surveys.

Stay tuned - I anticipate that Mercer, Hewitt and WorldatWork will be releasing more salary planning information in the coming weeks.

Work Environment Drives Employee Engagement

In a comment to my previous post on Work Environment as a Reward Element, which looks at the powerful role that both the physical and psychic aspects of work environment play in attracting and retaining employees, Frank Giancola shared an interesting piece of research from a Towers Perrin study a few years ago.

The TP study Working Today: Understanding What Drives Employee Engagement examines the level of engagement in the workforce, and also looks at the elements of work that most strongly drive employee engagement.

Interesting finding #1:  Employee engagement is higher in nonprofits than in any other industry segment.

Look at the following data, which highlights the % of employees surveyed who score as "highly engaged" (high scores across all engagement factors surveyed) by industry sector -

  • High technology - 15%
  • Insurance - 18%
  • Pharmaceuticals - 16%
  • Heavy manufacturing - 14%
  • Hospital - 15%
  • Finance/banking - 17%
  • Nonprofit - 42%
  • All industry composite - 17%

Interesting finding #2:  Employee engagement is driven by work environment, not pay and benefits. 

Now take a look at what the TP study found to be the top ten drivers of employee engagement.  Notice that neither pay nor benefits shows up in this list, which syncs up with what we know to be mostly true:  that the nonprofit sector is not "buying" high levels of engagement through generous compensation offerings. 

    1. Senior management interest in employees
    2. Challenging work
    3. Decision-making authority
    4. Customer orientation
    5. Career advancement opportunities
    6. Reputation of the company
    7. Collaboration with coworkers
    8. Resources to get the job done
    9. Input on decision making
    10. Senior management vision

Most of these engagement drivers can be classified as aspects of the work environment - reinforcing the point that this "qualitative" aspect of employment at your organization is just as important as the more "quantitative" (i.e., pay and benefits) elements, and that your total reward philosophy must take into account the entire picture.

And for nonprofits in particular:  don't overlook the opportunity you have to capitalize on your work environment to attract, retain and engage employees.

Balancing Results & Process in Sales Rewards

Check out the great post and lively comments on the delicate balance between rewarding results and process in sales incentives at the HR Capitalist - and jump into the discussion!

Incentive Award Trends for Non-Management Positions

I did some analysis on trends in incentive prevalence and average award size for non-management jobs, and thought I'd share some highlights here.  Sources for this information include newly released surveys from Watson Wyatt Data Services and others, representing thousands of organizations and hundreds of thousands of employees nationally.  I have also separated the data by profit sector, to look at not-for-profit practices versus those of for-profit organizations.  (The careful observer will note that the dominance of for-profit practices in the "all" data, probably due to sample sizes.)

Note also that the prevalence statistics here reflect employees who received an incentive award, not those who were eligible to receive one (presumable a larger number, as not every incentive plan pays out each year or for each employee).

Production/Technical/Trades Positions

  • Percent receiving an incentive award
    • For-profit organizations:  32%
    • Not-for-profit organizations:  11%
    • All organizations:  28%
  • Average incentive award paid (as % of base salary)
    • For-profit organizations:  4.4%
    • Not-for-profit organizations:  3.5%
    • All organizations:  4.3%

Office/Administrative Support Positions

  • Percent receiving an incentive award
    • For-profit organizations:  39%
    • Not-for-profit organizations:  13%
    • All organizations:  35%
  • Average incentive award paid (as % of base salary)
    • For-profit organizations:  5.6%
    • Not-for-profit organizations:  4.3%
    • All organizations:  5.5%

Professional Positions

  • Percent receiving an incentive award
    • For-profit organizations:  41%
    • Not-for-profit organizations:  15%
    • All organizations:  37%
  • Average incentive award paid (as % of base salary)
    • For-profit organizations:  7.5%
    • Not-for-profit organizations:  5.7%
    • All organizations:  7.4%
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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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