seekingperspectives

[seekingperspectives]

Why Market Data Should Drive Pay, and How To Make it Happen

From my earliest days as a line manager, to my later roles as CFO and head of HR, I’ve been approached by employees who felt they were underpaid; the most common reasons were rooted in what they heard about “a company down the street”, or what someone had told them, or what they had seen online.  Usually, the data they were referencing did not account for differences in geography, credentials, job experience, industry or even individual performance level.  The discontent arose because of apples-to-oranges comparisons. Usually, a quick chat about our approach reassured the employee that we were committed to paying everyone fairly and competitively for the job they were doing.    

Let’s be honest – while company culture and work environment are key influences, the first bridge any prospective employee crosses is whether the pay is in the ballpark compared to other companies recruiting them.  According to SHRM, 40% of employers plan to add full-time employees in 2017, the strongest forecast in 10 years.  As CFO and head of HR, the risk of losing good talent over an inadequate pay offer spurred me to develop compensation structures using market data. Implementing competitive compensation programs that are grounded in relevant data will improve the prospects of winning over the best candidates.

Fair pay is obviously important to your current employees, too. An April 2016 research report published by SHRM, “Employee Job Satisfaction and Engagement”, revealed that 92% of employees consider it important or very important to be paid competitively, yet only 65% feel satisfied with their current compensation. People want to feel like they are being valued for their contributions; a well-executed compensation review goes a long way toward responding to that sense of fairness.

There are several strategic reasons for pursuing an organization-wide compensation analysis, including:

• Spotlight pay inequities across departments • Reduce pay-related attrition of high-performing employees • Create confidence in your employees that they are paid fairly • Improve recruiting through competitive market pay

A smart planning strategy involves a company’s senior leadership team asking some basic questions, which will improve the prospect of long-term success with compensation data.  At minimum, ask yourself three simple questions –

Recruiting – “are we having difficulty attracting talent because of pay?” Attrition – “are we losing people over pay?” Frequency – “when is the last time we did a study?  Has our pay structure grown outdated?”

A ‘yes’ to any of these questions should warrant some further discussion on whether to further explore the need for companywide review.   Understand Your Objective Annually assessing pay ranges with compensation data will certainly keep you at the leading edge of any developing discrepancies with the market.  But updating the entire catalog of jobs in your company with a market pay study every year can be impractical, in terms of either cost or staff time.  If you have decided to embark on such a study, the senior leadership team should also reach consensus on the philosophical question of how to use the findings when it comes to balancing internal and external pay equity. Answering three key questions will help frame any analytical effort:

Do you set a broad pay structure where every job resides in a single pay grade? (let’s call this “internal benchmarking”)

Do you go with a straight ‘market pay’ approach for every job? (let’s call this “external benchmarking”)

Do you apply a market factor to a job’s pay range (a blend of the above two)?

For example, if you want to lower barriers to interdepartmental transfers, you may opt for a few broad pay bands (or pay “grades”). See the following illustrative example, where a company set five pay bands (A1 – E1) covering everyone from entry-level to the senior leadership executives.  The C1 paygrade can span a broad range of positions from different departments:

PAY GRADE “C1”  ($75,000  - $110,000) BASE SALARIES Customer Service Manager $78,450 Human Resource Manager $92,320 Sales Manager $106,300 Marketing Manager $77,420

Grouping these positions in one broad band simplifies pay administration, facilitates succession planning across the organization and reduces the risk that someone feels they are taking a step “backwards” when looking at opportunities in other departments.  There are key factors that should influence the band decisions, but there is no pure right or wrong answer when choosing to align against external benchmarks or internally among a group of employees.  Being consistent across all jobs is the key. This calibration exercise is part science, part judgment based on experience; the final approval of the band schematic should be the job of the CEO and your head of HR. Getting Started: Understand the Jobs The starting point for the project is an up-to-date organization chart of all departments, accompanied by a complete catalog of written job descriptions.  Each description should accurately describe the current role and responsibilities of the job, as well as the expected qualifications.  Writing a good job description is a topic all its own, so suffice to say here that you need reliable source documents that describe each job in sufficient detail.   Validating the accuracy of each job description can be done through manager and employee interviews, and even observing employees doing the jobs.  The output from this first step is critical to the legitimacy of the benchmarking decisions that follow, and should be handled by a professional with experience mapping job descriptions to external pay data.  If you have HR staff that specialize in compensation analysis, you already have the skills in-house to do this work.  Otherwise, there are outside consultants that have experience doing this type of project.  Unless you intend to do this type of analysis every year, I would recommend retaining an outsider for the task. Using a temporary consultant keeps the permanent payroll and headcount in check, eliminates any internal politics on pay grade decisions and frees your valuable HR team to continue executing on the essential daily work already on their plate. Beware the Quicksand There are a few pitfalls to avoid when doing a compensation study.  Beware of ‘bubbles’ in the labor market; reacting too quickly to current market trends when setting or adjusting salary ranges can create long-range cost dilemmas.  In the mid-to-late 1990’s, software engineers were in high demand because of Y2K coding efforts, and the salaries for those jobs rapidly accelerated as a result of the demand for their skill sets.  However, a few short years later, the dot.com bust left a surplus of coding talent in the workforce; many companies found themselves overpaying for those positions because of the overreaction to the market in 1999.  Another example is the healthcare industry, which has been a rapidly-growing area driving pay up for certain types of jobs.  Look not only at the present, but also the demand for the skill sets over the next few years. Before adjusting pay bands or grades via a compensation review, be thoughtful about the message being sent to employees particularly where “pay-for-performance” is highly emphasized in the organization.  If you decide to raise the low end of a range, you may find yourself raising the pay of employees who fall below the new minimum.  Granting pay increases to poor performers may conflict with your compensation philosophy, and when word spreads, the action can be easily misinterpreted.  The low performing workers may view it as a tacit recognition for their work, and top performers may get demoralized that raises are being doled out to low-performers. Any changes to company pay bands or ranges needs to be done thoughtfully, supported by the right compensation data and communicated clearly to everyone. Understand the Data There are numerous compensation data providers out there, all with their own strengths and weaknesses.  I’ve used a few, in addition to examining pay data provided by the Bureau of Labor Statistics.  A key advantage of the commercial data providers is the extra level of normalization they offer.  The BLS data doesn’t normalize for job scope or experience level; pay of both entry-level and senior people in the same BLS job code are all lumped together.  Another critical consideration is the amount of data directly relevant to your company.  How much of the data sampling contains survey responses within your industry segment?  That answer determines the extent to which your benchmarking will be against actual peer companies, versus internal algorithms that impute a figure based on “similar” jobs.  However, even without a large sampling size of your industry, most compensation data products will still add a measure of objective value that you can fine tune with some local research – this is one of those moments where ‘some data is better than no data.’ Market pay data studies can be updated every few years.  Even when not doing a full study, you should still ‘spot audit’ the job description catalog each year in advance of the annual planning cycle to identify any jobs where new responsibilities may have been assigned during the past twelve months. The job description should be updated (for legal reasons beyond any comp study), and then assessed against market data to determine whether the pay range warrants adjustment that would affect the upcoming budget period.  This simple step can save many hours of time explaining budget variances to the Finance group. Communicate, Communicate, Communicate Perhaps the most important consideration to remember when embarking on any compensation project is the unspoken message being sent to current or potential employees and what the data about your compensation programs are showing you.  Is your pay lined up with your stated compensation philosophy? Are you trying to encourage internal transfers and promotions among departments; does that rotation serve the company well?   Build a solid foundation of trust by clearly explaining how your compensation programs were developed, and how they value each employee’s contributions, learning and development.  Organize team meetings to discuss with each department, and encourage asking questions about the process so that everyone understands the methods behind the work.  The investment you make in building a credible reputation for fair compensation will pay handsome dividends in loyalty and goodwill up and down your organization, and give your company the edge in drawing and retaining top talent!

[seekingperspectives]

Finding and Sharing Truth in a ‘Post-Truth’ World

Take your pick - Fox News. CNN. The Huffington Post. The Daily Kos.  Breitbart.  BuzzFeed.  The Daily Caller. The list is virtually endless ….

What do all these news outlets appear to share in common?   An editor, or perhaps several editors, hoping to insert their perspective into the mind of the viewer, reader, etc.  This selective use (and omission) of data has been common practice since the earliest days of parchment and quill pens.  What was once clearly labeled as opinion or satire is now increasingly cloaked as “journalism" and "fact”.  The Oxford Dictionary declared "post-truth" as its 2016 Word of the Year, which they defined as  “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief.”   The United States Constitution was crafted by the Founders in the belief that the public interest was well-served by a free press.  Should distorted or intentionally false news stories be given the same constitutional protection as objective, balanced journalism?   And how can you improve your odds of getting and sharing the full set of facts on an issue?  Let’s explore that a little further…

The American Press Institute says ‘journalism’ is distinguished from other media by a presumed unwavering commitment to telling the truth and serving the public interest.  Bill Kovach and Tom Rosenstiel, co-authors of The Elements of Journalism, observed that “all truths – even the laws of science – are subject to revision, but we operate by them in the meantime because they are necessary and they work.”   Journalists, in their view, have an ethical commitment to assembling and verifying the full set of facts that exist in that moment.  In the U.S., we have traditionally relied on the work of conscientious journalists to keep us informed. But wIthout a commitment to presenting all the facts, you really aren’t engaged in ‘journalism’ - - you simply have an opinion.

So, if journalism is a pursuit of the truth, what constitutes ‘truth’?  According to Merriam-Webster, “truth” is defined as a) sincerity in action, character, and utterance b) the body of real things, events, and facts c) the body of true statements and propositions

Let’s consider WikiLeaks, now infamous for its publication of a wide range of confidential and politically-sensitive material, from U.S. Department of Defense documents and foreign government diplomatic cables to the more recent Podesta email archive.  Are they journalists seeking to provide "truth"?  The content appears to contain real things, events and facts (thus far, the authenticity of Wikileaks material has been rock-solid). However, Wikileaks doesn’t offer any context or understanding (the body) of the material. Their work is akin to providing a jury with most, but not necessarily all, evidentiary exhibits without any accompanying narrative to tie it all together. Where is the commitment to Merriam-Webster’s definition of "truth"?

Or consider the use of Twitter, Facebook and other social media by many public figures, news channels, politicians and even teenagers in Macedonia.  Propaganda, half-truths and completely fabricated stories are spread across the globe almost instantaneously via social media, creating an overarching, lingering doubt about the truth of everything we see, read or hear (what I call the "blog smog“). Facebook’s recently-announced plan of employing fact-checkers to combat fake news is well-intended, although the plan has already sparked publicly-voiced concerns that the effort to restrict what gets posted will cause Facebook content to begin reflecting the inherent bias of its fact-checkers.

This emerging ‘post-truth’ world in the United States flourishes largely because of the inalienable right to freedom of speech provided by the Constitution. The Supreme Court has rightfully rejected government attempts to regulate content of expression, either by the press or the individual, as contrary to the public interest. But the Constitution doesn’t require, promise or guarantee that any speech will be truthful. Is questionable accuracy in the public interest?   Perhaps not, but censorship is one of those first steps down the slippery slope towards the end of a free society. Although spreading false or biased stories may be intellectually dishonest and wholly unworthy of the label ‘journalism’, the stuff is protected by the First Amendment and thus here to stay.

At the end of the day, a civilized, democratic society relies on diverse viewpoints shared freely and non-violently by citizens genuinely interested in seeking the Merriam-Webster version of truth.  The rapid growth of the Internet over the past few decades has certainly revolutionized the speed with which information reaches people, but has also made it much harder to distinguish fact from fiction (or opinion). The "blog smog” is leading to a society where people get overwhelmed and opt to tune out.  How ironic that more information could reduce much-needed open dialogue and sharing of ideas.

Post-truth is everywhere.  Journalism is becoming harder to distinguish from propaganda.  The News Literacy Project recently unveiled its Checkology virtual classroom to help teachers equip students with the proper methods for discerning fake news (you can check it out at www.thenewsliteracyproject.org). The ability to form reasoned opinions and make sound decisions depends on access to reliable, accurate information. With each of us now accountable for making the choice to be well-informed, or lazily guided by post-truth, how does one diligently gather the right information and communicate the most reliable version of the ‘truth’, as it exists in that moment?

Here are (3) ‘best practices’ that can serve you well in 2017:

Create a list of reliable (and neutral) “go-to” sources   Don’t rely solely on your Twitter feed, Facebook friends, favorite news anchor, talk show host, or newspaper.  Research the most unbiased reporting sources and bookmark them in your browser, your phone, address book, etc. This list will allow your daily diet of news to contain reasonably trustworthy, factual and objective reporting of any news story.  A survey conducted by the Pew Research Center in 2014 produced a list of news sources that have the strongest reputations for unbiased, accurate news reporting.  Include a fact-checker site in your list.  Once you have your short list, you can quickly vet any breaking “news” for accuracy and completeness and reduce the risk of being blindsided by certain facts that went unmentioned due to bias (or outright fabrication).

Seek out and listen to opposing perspectives   If it’s an issue about the environment, look at both industry and conservationist news sources.  For labor relations, read both management and union perspectives.  On political matters, seek out liberal, centrist and conservative reporting.  Where specific data is mentioned, consider looking at other mentions of the source, or looking directly at the source itself, to verify whether all the key contextual points are being provided.  Much like mediating an argument between two children, you should get both sides of the story before drawing any conclusions.  An extra hour spent obtaining a balanced perspective can save many hours of damage control from drawing (and communicating) the wrong conclusion.  As Ben Franklin once said, “an ounce of prevention is worth a pound of cure.”

Prepare before communicating Develop a sound understanding of the factual, historical context on topics you plan to discuss with others. Ground your message in facts and data that reflect all sides of an issue to counter distorted or partial versions of the ‘truth’.  If something you didn’t anticipate comes up, commit to following up on it in the same objective manner.  And then complete that follow-up quickly.  While everyone may not agree with your decision or position on an issue, they can at least walk away with the sense that you’re listening to them, that you’re genuinely interested in the facts, and that you won’t easily fall victim to some radical crazy spouting alt-right or far-left nonsense.

With the explosion in ‘post truth’ nowadays, being educated and well-informed on current events is imperative for everyone, but especially so for today’s leaders.  Fight back against the rhetoric-filled, factually-skewed ‘post truth’ world – seek out alternative points-of-view from your own, cross-check the information you gather and be sure to provide a factually-supported, well-reasoned case to support your own viewpoint. If everyone you encounter walks away knowing that you’re genuinely committed to the ‘truth’, you will have done your part.