I once supervised a Compensation Analyst who had learned her craft through professional seminars and workshops. One result of that education was her favored response when faced with a challenge at work: “the greatest minds in Compensation say that . . . ” It took patience to educate this budding practitioner about the difference between classroom / textbook answers and workplace reality.
A while ago I came across an HR blog where the author instructed readers in how to create a merit performance matrix. Very good stuff, I thought, admiring the technical step-by-step directions, except I knew from long experience that the procedure being described would never work in the real world.
While it is critical to understand the technical foundations of compensation methodology and practice, practitioners first need to anchor themselves in the here and now, to know what will work and not work in their organizations – no matter what the finest minds in compensation think.
Why does Compensation theory often clash with workplace reality?
- Business realities: Management will know more about a particular business situation than you do. What you provide to the decision-making process as a compensation professional is often limited to your subject area, while management possesses the larger picture – the perspective of multiple viewpoints. Your advice may not fit their business reality, no matter how logical your argument.
- Bias of decision-makers: Management may feel that they intuitively know the right strategy (they’ve done it before, if-it’s-not-broke-don’t-fit-it mentality, a friend / relation / old college chum suggested an approach, etc.). Perhaps they read an intriguing article and now are insistent to follow the advice of an author who unfortunately lacks an understanding of their business. Years ago I worked for a company whose CEO forced HR to implement a particular benefit plan solely because he had read a magazine article.
- Problem avoidance: A favored management solution is to do nothing (you’ve exaggerated it, the solution costs too much, there’s still time, etc.). These senior managers avoid major decisions until the issue bites them in the leg. In such a situation it can be dangerous to your career if you try to force a decision.
- Business culture or model: Some initiatives don’t “fit” the organization. For example, Managers with a laid back organization style will not be interested in recommendations to document uniform policies and procedures and have standardized forms for every action. Picture your head banging against the wall.
Sometimes those experts who teach compensation techniques fail to provide their instructions with a caution: check this process out in the reality of your workplace before you take a classroom technique and wave it in management’s face.
When designing a pay-for-performance merit increase matrix the standard rule is to place the average increase percentage in the cell block most populated by employees (average performance and average position-in-range). The sound reasoning for this technique is to better manage the costs associated with that year’s annual increase process.
Many years ago, I followed that approach in my first compensation leadership role. I still have a little bump where my head hit the wall.
Here’s the rub: such a technique requires that the matrix change every year, as the analysis demands you study where the population averages fall each year. But management will likely have none of that. They want the same matrix every year, for ease of administration and communication.
Another area that separates the compensation technician from the professional is the ability to deal with what I call the “softer” side of compensation. Survey statistics, charts and formulae are very good analytic tools, but management will want to know what it all means and what to do about it. So the answer isn’t simply reporting competitive data, but taking that next step to help management understand and strategize future action.
The contribution you can make to your organization is blending technical knowledge (the how-to) with seasoning and experience to understand what will work for your organization, considering culture and management bias. Technical knowledge will give you the same answer every time, but knowing how to use that knowledge like a craftsman’s tool to aid in achieving business objectives – that is the key to success as a compensation professional.
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