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Great points Ann.

First of all running a company with only financial metrics is bad - can you say Bear Stearns, AIG, etc, etc.

And running a company based on employee satisfaction is bad as well. For one thing - what is "satisfied"? Is it really the same as engaged? I personally don't think so. Satisfied means don't change anything on your end and I won't change anything on mine. In fact, there has been a meta-analysis of satisfaction and company performance that showed the connection between satisfaction and company performance was largely spurious.

However, engaged is different. I look at the difference between engaged and satisfied like this... when you're satisfied you lean back - when you're engaged you lean forward. Satisfied is like watching TV - engaged is like working on the computer - both screens - one you lean into - the other away from.

But the real problem is picking one thing over another. You wouldn't make every decision in your household based on the budget and you also wouldn't make every decision based on the needs of your spouse (significant other) or children - you balance those. And just like how you manage your household you manage your business.

When times are good you indulge a bit - when times are tight you don't - and you explain and show the family why.

Business is no different. Balance baby, balance.

Ann,

Again, a great blog to stimulate the brain cells! I hope you don't mind me responding to your thought-provoking blog in bite size sections.

For now, I'd like to direct your readers to some other published documents supportive of a balanced focus on financial and non-financial metrics:
-- WorldatWork white paper on "Balanced Scorecard & Pay-For-Performance" at http://www.worldatwork.org/waw/adimLink?id=30331
-- WorldatWork Journal article "What Pay For Performance Should Measure" by Bruce Ellig at http://www.worldatwork.org/waw/adimLink?id=26401
-- WorldatWork Journal article "Pay For Performance Works: The United States Postal Service Presents a Powerful Business Case" at http://www.worldatwork.org/waw/adimLink?id=16925&nonav=yes

Paul

Ann, I particularly liked your link to the Wikipedia article on the Balanced Scorecard. My college professor/high school teacher/College Board consultant wife scoffs at my use of Wikipedia as good for nothing better than doing the NY Times crossword puzzles. However I have seen great entries on compensation issues such as the Balanced Scorecard, the Equal Pay Act, and the Employee Free Choice Act. Is Wikipedia perfect? No. But it strives to be fair and balanced; current; relevant; technically accurate; and FREE! Paul

Many compensation professionals will recognize the name of Graef Crystal as the long time Towers Perrin consultant who gained notoriety a few decades back by becoming disgruntled with his role of inflating executive salaries without organizations getting a return on their compensation investment.

WorldatWork (or was it their predecessor American Compensation Association) even gave Graef a Keystone Award for lifetime achievement in the profession.

But I noticed something in his many scalding blogs of executive compensation (http://www.graefcrystal.com/). He never assesses executive performance based on anything other than financial performance.

I wondered about that since I am a proponent of the balanced scorecard. But I admire Graef's courage for speaking out on compensation issues. So I emailed Graef to ask him about his thoughts on non-financial measures. I have yet to get an answer. If someone sees Graef, can you ask him to answer his emails. After all, he encourages people to email him on his web site.

Paul H:

Great points. In no way am I suggesting that we should run companies, or design rewards, based solely on financial metrics. I have argued that side of this discussion in many posts. I just want us to think carefully anytime we swing the pendulum from one direction to the other, to make sure we aren't moving from too much emphasis on one thing to too much emphasis on another.

Too much emphasis on employee engagement (regardless of how we define it) could produce unfortunate consequences at well. For all I know, the folks at Bear Stearns and AIG were highly engaged in what they were doing - but that doesn't mean they were doing the right thing.

As you say, it is all about balance. I think that's my point here as well.

Paul W:

Thanks for all the great points and links. I, too, am a fan of the balanced scorecard (lowercase, more in concept than literally from the Norton and Kaplan book). I actually posted awhile back on balanced scorecard based incentive plans ... here-

http://compforce.typepad.com/compensation_force/2008/08/scorecard-based.html

I am also a fan of Wikipedia. As you long as you accept and recognize it for what it is, it is a great source!

I once got a testy comment from Mr. Crystal on this blog - he took great exception to my interpretation of and comments on findings from some TP research. Kept referencing me as "The Author". (Hello sir, this is just a blog, not the New Yorker. You can use my first name when you pick me apart. It's more personal that way...)

Thanks - both of you, for the great discussion here!


Ann,

I remember Mr. Crystal's comments to you. They were way off base and I lost a lot of respect for him as a result. He did not pick you apart in my opinion and he came out of the discussion looking petty.

Carla

Bud gets cranky. Remember, he's the one built most the excessive comp programs he later decided to "out" when he retired from TPF&C (Towers Perrin) as their national Executive Compensation Practice Leader. Suspect he's still expiating feeling of guilt, deconstructing just as he constructed; hence his reliance on financial measurables, which are also more easily accessed, more defensible and less controversial than other output measures within the usual litany-list of "quality, quantity, time and costs".

An underlying problem you nail, Ann, is HR/Comp's focus on the subjects as their constituency.... relating to the comfort of the employees rather than the health of the enterprise or the metrics prized by the top management committee.

"We" (in our trade) tend to see ourselves as intermediaries, protectors/servants of the workers, shop stewards of a company union sensitive to (rather than antagonistic against) management, serving the firm as we best feel serves the employees. No top exec sitting at The Big Table thinks like that.

Bottom line: "we" literally misrepresent our client in all sorts of ways, pleasing the innmates while disappointing the wardens (mixing metaphors as I love to do), frequently pursuing the wrong outcomes and perhaps becoming as populist and dysfunctional as Congress, for much the same reason. Do what's right or do what's popular? See the difference?

Since the Compensation Force is becoming so huge could someone do an old man a favor and provide a link to the Ann/Bud debate? Sounds too good to miss!

Ann, thanks again in helping make our roundtable webinar a resounding success -- very positive comments all around.

To your point here, it's an excellent question. Beatty's quote adds to the confusion -- satisfaction and engagement are two very different things. Employees can be quite satisfied being unproductive but comfortable in their positions As I've said repeatedly on my blog, engagement is about employees willing giving discretionary effort and, critically, focusing that additional effort on achieving the company's strategic objectives. As you say, these are the things that will keep the company profitable and in business.

I've blogged all week on measurement, engagement, recognition and the bottom line. Check out the posts for more.

I think the question about whether you're engaging those you really would prefer not to have around is valid. It seems reasonable that much of what passes as an engagement issue may be, in large measure, a hiring issue.

That being said, it seems like the real trick is drawing a clear line between an engagement program and the final numbers.

Carla:

Thanks for the back-up and validation, I appreciate the thought.

Jim:

Thanks for your perspective and the metaphors. I hope I'm overexaggerating the underlying problem. The comparison to Congress is a little scary.

Paul:

I have collected a lot of posts here over the years, haven't I? I almost hate to do it, but here's the link. Not much of a debate, I folded pretty quickly in the face of "Bud"s" criticism. I was a little freaked out about it at the time. Friend Kris comes to the rescue ...

http://compforce.typepad.com/compensation_force/2008/11/should-variable-pay-be-cut-in-times-of-variable-performance.html

Derek:

It was a great pleasure to have the chance to partner with you and Jon Ingham in the roundtable webinar - hope to have the opportunity again in the future. I like your distinction between satisfaction and engagement. I wish I was confident that all organizations have and use that same level of useful clarity. But that's probably your objective!

Debbie:

Good thought - I'd agree that underlying hiring issues account for many of the engagement and performance problems we see organizations struggle with. And the key indeed is to tie engagement and final number together conclusively. Which I know a number of studies purport to do. Perhaps I need to take a deep dive into understanding how they see this working.

Thanks, everyone for the great discussion!


I have to confess that the older I get the more I find that I agree with the concepts of "engagement" and "balanced scorecard" more than the implementations of either.

With engagements we face the Dance of the Dueling Consultancies and their proprietary definitions. In addition, we wind up trying to get our heads around something that can only be "measured" (note the quotes) via a survey.

Balanced scorecards seem to be subject to measurement creep. What starts out as balancing somewhere between two and four measures evolves quickly to a system with dashboards measuring twenty-five or more things.

Wally:

We are in agreement. Funny how so many of these things work better in concept than in real life implementation.

Thanks!

Congratulations! This post was selected as one of the five best independent business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2009/05/20/52009-midweek-look-at-the-independent-business-blogs.aspx

Wally Bock

Ann,

I operate a medium sized retail organization under a franchise banner that has about 200 employees. We have built our business on a great store experience and solutions. In the past year we acquired a small franchise group within our brand that had a very poor service culture. We converted all their stores to our point of sale platform and implemented a "scorecard" that has both finanical and qualitative metrics such as training compliance on our online university. Overall it is heavily financial. We implemented a bonus structure that is a gain sharing system whereby the store team receives 25% of the amount of store contribution above budget. This has has significant results in generating growth and employee engagement. I have committed as CEO to a quarterly business review process by region to teach the business aspects of what they do and with repitition hope to develop teams that have a great understanding of the business. We also have a dashboard that updates weekely at the store level so the stores undrestand how they are doing relative to their score card.

I think you thoughts on employee engagement are intriging and have caused me to go searching for metrics that can be obtained through survey's and other means. Thanks for your article.

Steve:

Sounds like you are doing some great work! Glad that you found the post helpful!

Ann--I am glad to see you found Hay Group’s research interesting. First, I would like to answer the question you asked. The research focused on the performance metrics used in reward programs.

To your question about whether employee engagement should be a key measure of reward plan success – I think that balance – between financial and non-financial metrics – is not only a good thing, but is essential to any reward program’s success. However, at a time when the money available for salary increases and bonuses is squeezed, many employers are asking their employees to do more with less. If employees are going to put discretionary effort into their work to drive bottom-line results – they have to be engaged.

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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