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    Entries in compensation (16)

    Tuesday
    Oct132015

    Fondly remembering the days of 3% raises

    Quick shot for a busy Tuesday - check out this piece that ran on USA Today online over the weekend - Is the annual pay raise dead?, a look at some recent studies and trends in the world of employee compensation.

    For what seems like ages, once per year the big total rewards consultancies like Towers Watson or Aon Hewitt would diligently report back that for the average employee annual salary increases would be about 3% (again). The news that annual salary increases would be about 3% became somewhat of a running joke, since it was so consistent and predictable. The phrase of employees being '3-percented until retirement' was fairly common.

    Well, if the latest news on annual salary increases is accurate, we may all look back on the 3% raises of the past and wonder what happened to them. Check out some of the comments in the above-mentioned USA Today piece:

    "Base salary increases are flat. We don't see the prospect of that changing much at all in the next several years," said Ken Abosch, who studies compensation issues for Aon Hewitt.

    In other words, the annual raise is dead. It was already on life support last decade, but the Great Recession has finished off the raise. It's been replaced by "variable compensation" — the bonus.

    "The quiet revolution has been the change in compensation mix," Abosch said. "Through a series of recessions, organizations have pulled back dramatically on fixed costs. And base salaries are often a company's most significant fixed cost ... [They] have a compounding effect, and create a drag on an organization's ability to change."

    Awesome isn't it when your salary, (and by extension, you), are described and probably considered as 'a drag on an organization's ability to change', instead of, I don't know, a strategic investment of organizational resources in order to hire and retain great people.

    One of the effects of a relatively higher percentage of one's overall compensation being shifted towards bonuses or other kinds of variable pay is that it makes 'regular' employment look and feel more like contingent labor. One of the reasons people like 'regular' jobs is the 'regular' nature of their weekly, monthly, and annual earnings. Drive more of these earnings into more company-friendly (and easier to reduce and/or eliminate), irregular compensation, then, well, earnings stability becomes much more tenuous.

    Companies need to be more agile and flexible these days, no doubt. But at least in the US they have had the benefit of pretty much universal employment-at-will arrangements to ensure labor and labor cost flexibility. Now it seems like that might not be flexible enough for many organizations.

    They want your 3% as well.

    Thursday
    Oct012015

    Should you ask for a 1200% raise?

    Hey it's October!  The best month of the year by far. If you don't believe me, check out Months, ranked and get up to speed.

    So happy October. 

    Hey question for you career-minded folks or for those of you who might sit on the other side of the compensation table, making decisions about comp offers, raises, and bonuses for your teams.

    Should you (or anyone) ever have the gumption to ask for a 1200% raise?

    Sounds kind of ridiculous in the land of 3% annual salary increases, (maybe 4% if you are a 'top performer'), and with organizations continuing to do everything they can to resist the inevitable upward pressure on wages that an improving economy with falling unemployment will drive.

    But 1200% of a pop? You would have to be really confident to make that kind of a salary demand.

    Why is that particular figure on my mind?

    From reading recent piece on Business Insider, Vikings part ways with their mascot after he demanded a 1200% raise.

    From the piece:

    Ragnar, the Vikings' unofficial mascot, and his motorcycle have been a fixture at Minnesota Vikings games for over two decades, but that appears to be over as the two sides have been unable to reach an agreement on a new contract.

    Ragnar, whose real name is Joe Juranitch, was seeking a new contract that would pay him $20,000 per game, according to Michael Rand of the Star Tribune. That would translate to an annual salary of $200,000 for eight regular season and two preseason games, and an increase of more than 1,200% from his previous pay of "about $1,500 per game" last season.

    I have never been to a Vikings home game, so I am really not too sure what exactly Ragnar brought to the table, and particularly what he thought would be worth about $5,000/hour (game lasts about 3 hours, add 1 hour for pre and post game work). But it is pretty clear from the way the Vikings basically responded to this demand with a 'Thanks Ragnar, it's been really nice working with you. Good luck!' that Ragnar had severely overestimated his value and his leverage.

    What can us normals take away from this little viking adventure, even if we are just trying to secure a reasonable bump, say 10% or so?

    1. Have some idea of how much actual value, (revenue, increased customer retention, tangible cost savings, etc.), we are directly responsible for creating. 

    2. Have some idea how painful it would be to the company if we actually walked out when our crazy demands were not met.

    3. Have some idea of the market more generally for folks who do what we do.

    Our pal Ragnar pretty much failed on all accounts. He likely did not generate any appreciable revenue for the team. Even though his Facebook page was full of comments from fans expressing support and anger towards the team, it would take an enormous stretch of believability to conclude that any actual fans would refuse to attend games due to his absence. 

    He also didn't really grasp that the games would carry on pretty much unaffected once he was no longer a part of the show. The team preparation certainly would not be affected. His absence actually would create less work not more for the game day operations staff. In fact, other than the small number of fans who missed his performance at the game, everyone else lives got a little bit easier.

    Finally, there is almost no chance that Ragnar surveyed the landscape of professional sports mascots to come up with market comparables that led him to make a $20K per game demand. If team mascots were really pulling down anywhere near that kind of scratch, there would be line hundreds of people long to try out for those gigs. More than likely, one of Ragnar's buddies got into his head that he was somehow underpaid and under appreciated, (and that he was WAY more important to the product than he was).

    Look, I get wanting to make every last dollar you can. We are probably all underpaid for the amount of crap we have to put up with. But the key question is knowing just how much you are really underpaid, and making sure you are honest about your value, how replaceable you are, and your ego.

    Happy October.

    Monday
    Dec152014

    LEAKED: Two observations from the Sony Pictures hack

    I am sure you have heard or read about the widespread hack and subsequent leaks of massive amounts of corporate information like email archives and other sensitive organizational (and HR) data at Sony Pictures.

    If you would like to be familiar, or at least caught up, a useful timeline of the hack and the leaks, (which appear to be ongoing), is here.

    Embarrassing email exchanges, written potshots being taken at various industry players, and even a dump (in the form of an Excel spreadsheet), of salary and other HR data for the organization's executives.

    A mess. And seemingly not going anywhere, not for a while anyway.

    So here are my two, thought about this for 10 minutes, observations for HR/Talent professionals from this brouhaha.

    1. It's time to stop thinking of Email as private, secured communication. I think since the rapid rise, and subsequent realization of the lack of privacy of public social networks like Twitter and Facebook, we somehow look at email, in comparison, and think it is private and secure. And while it should be, the Sony hack is just another example that reminds us that any communication in written, digital form is not ever 100% secure. We use Email so much, and in the large company environment it is so essential and ubiquitous, we have become beguiled to accept it as (mostly) private by default. And that is, in a word, insane. Forget about getting hacked by a malicious 3rd party - all it takes for your private, sensitive, possibly career-threatening email to get out into the world is one tiny error in the CC box, or one slip-up when forwarding something to John Jones and having it go to John Johnson instead. Lesson: Stop emailing so much (general). And talk to your leaders, managers, and employees about maybe picking up the phone once in a while.

    2. Employee and HR data in Excel spreadsheets is likely your single largest HR data-related risk area. Every single company has HR or Comp people with salary, bonuses, and other HR/Compensation data sitting in Excel spreadsheets on individual PCs and company servers. For smaller companies, this is usually out of necessity: Excel is the only tool available to them to do comp calculations and analyses. But even in larger companies that have powerful and sophisticated Compensation Planning tools, often these tools are used to simply dump Employee and Comp data into Excel for additional manipulation and even file sharing. The Comp planning systems are powerful and secure. Excel spreadsheets are powerful and highly insecure (ask Sony). Where should you insist your Comp data remain?

    We have spent literally years reminding our kids and each other that nothing that gets posted on Facebook or Instagram is really private.

    It is also time to remind ourselves and our employees that nothing posted anywhere is really private either.

    Have a great week!

    Monday
    Jul212014

    NBA Summer League Part 1 - The Relative Value of Talent

    I'm just back from a great 8 Man Rotation trip to Las Vegas to take in a few days of the NBA's annual Summer League and tournament that features 24 teams of rookies, less experienced veterans, and guys trying either to hang on to their NBA dreams just a bit longer, or ones trying to crack that elite 450 or so of players that get to call themselves NBA ballers. It was a super fun trip with the boys, and I will have more on some of the really interesting things we saw, heard, and talked about during the trip, as well as a amusing in a watching a car accident kind of way, HR Happy Hour Show and Podcast I recorded with the 8 Man crew while having cheeseburgers and beers.

    In the run up to Summer League, much of the talk around NBA circles was centered around free agent player signings and player movement in general. Most notably, the league's best player LeBron James made the biggest news when he signed to return to his original NBA team, the Cleveland Cavaliers, which set off a chain of events including his former teammate Chris Bosh re-signing with the Miami Heat for a massive, 5 years and $118M. This Bosh contract led to tons of internet chatter about whether or not in the wake of losing James, that Miami was indeed overpaying to keep Bosh, their next most important player from the last four years, to maintain some semblance of competitiveness in the near term.

    The problem with most of the 'Miami overpaid for Bosh' takes, (and there are plenty of them), is that they usually fail to address the context in which the Bosh contract was given, and the set of circumstances that make Miami's decision to pay Bosh near the maximum amount allowed by the NBA's collective bargaining agreement with the Player's Association. This contextual factors, also apply quite often to the day-to-day decisions that HR/Talent pros have to make every day when tackling compensation issues - either offers to candidates, counter-offers, (probably a bad idea to even try them, but still), and the nuts and bolts of annual compensation package decisions for existing employees. In both cases, these are the kinds of questions that HR pros and NBA GMs need to think about, plus I will hit you with some of the rationale behind the Bosh decision from which (hopefully) you'll see some parallels to your comp-related challenges.

    What's the 'right' salary?

    What, in the classic 'perfect information' kind of economy that academics like to talk about, would be the 'correct' salary' for Bosh? This is close to the market rate, but not exactly the same, as the 'market' for any NBA player, as well as for that Ruby on Rails developer you can't find, is never truly perfect.

    What would the market value (and actually pay) for his/her role, skills, and ability to contribute to an organization?

    This is the classic, 'What did the last 3-5 players similar as we can find to Bosh actually get paid in their last contracts?' question. These numbers create an interesting set of data points that may or may not be relevant to your team. If that last team that signed a 17 and 10 guy like Bosh to an insane contract, does that mean necessarily that you should? Or maybe another team got a relative bargain for a different player (like a Tim Duncan), who at this point in his career is more concerned about winning titles than maximizing his personal earnings, and thus accepted a 'discount' on his deal. Don't think that applies to you? I bet you have lots of employees that turn down 10-20% bumps in salary from competing firms because their 'transaction costs' (moving, pulling kids out of school, learning a new corporate political game, etc.), seems too steep. These employees are probably already giving you the home team discount like we hear about in the NBA. Bottom line, the 'market' doesn't represent you, or anyone other specific firm for that matter. It is just more data. 

    What kind of compensation would this person be likely to get from a specific competitor that might be interested in their services?

    This piece of 'market' data is much more interesting (and valuable). In the NBA GMs often have to factor in what might happen if a given player like Bosh were to end up on a specific rival team, and how that move might impact competitive balance (and chances to win). Overpaying to keep a player away from a specific rival can happen, and might be one of the few times in the NBA, (and possibly your business too), that tossing money at a problem makes sense from a business standpoint. This takes more insight and effort than simply looking at the 'market' rate, and knowing the compensation and business strategies of your rivals.

    What is this person worth to his/her current company or team?

    This is the flip side of the last question - what specific skills, capabilities and knowledge of company-specific operations, products, culture, politics, etc. does the person have that are uniquely relevant to your organization, and need to be factored in to the discussion. With James leaving the Heat, Bosh now assumes the role of the team's #1 star, and the Heat elected to offer him a contract reflective of what #1 stars in the NBA are making. He also knows the city, the coaching staff, the other players on the club, etc. There aren't any 'transaction costs' with retaining Bosh, and there is some value in that. There has been a fair amount of research that suggests that in many fields that employee performance degrades when switching organizations. The amount and importance of local, situational understanding of people, process, and culture can provide employees a performance boost that is immediately lost when they jimp to a new organization.

    Simply put, Bosh was probably 'worth' more to the Heat than to many other teams in the league, and while seeming to overpay him, the Heat might have made the smart move for their own team.

    With Bosh, and with compensation decisions for just about every other important contributor, context matters. 

    Tuesday
    Jul302013

    Three keys if you want to become a more data-driven organization

    So you've bought into it -  Big Data, Moneyball for HR, workforce analytics - all of it. And whatever you call this increased reliance on data, analysis, and more objective information in your talent processes, chances are this represents a pretty significant change to the way you've always done business, how managers and leaders have made decisions, and perhaps most importantly how you evaluate and reward employees.

    Of the many tough challenges you have to negotiate if indeed you are the designated numbers geek/quant in your shop, once again the world of sports offers three recent examples, (NOT AGAIN), that help to point out some key focus points or areas of concern as you hatch your nefarious plans.

    One - Make sure you as the 'stats' person, knows how to translate the numbers into strategies that are likely to get buy-in from the team. From the SB Nation blog - How and why NBA coaches communicate advanced metric to players, an interesting piece on the Boston Celtics' new coach Brad Stevens and his desire to bring more data and analytics to bear in the organization:

    The numbers don't always offer solutions, but they do tend to generate better options and that's all an NBA team can offer with each possession and every front office decision. That's the next step in the analytics movement. What started in blogs has been appropriated by front offices and has now trickled down to coaches. Communicating those ideas effectively to players is the final hurdle.

    Two - Make sure the team members know how to and understand the importance of doing more accurate self-assessments in light of the new measurements. It is great when management and leaders make the move towards a more data-driven decision making process, but don't forget the folks on the front lines.

    Here is a great example from a recent piece on the WEEI Radio site by former Major League baseball player Gabe Kapler titled STATS 101: Why it's time to re-educate players in meaningful statistics:

    To take it a step further, when we discussed our numbers with our agents, it was in the form of the traditional verticals, the ones we used for decades prior. We correctly assumed that our reps were using these statistics in conversations with the general managers of our clubs. We stood in the truth that our value — our worth as baseball players — was wrapped up in these metrics.

    Times have changed, but substantially less among players. While progressive front offices have altered the way they evaluate us, we have lagged far behind in the way we grade ourselves. It’s akin to unhealthy communication in a relationship.

    Three - Make sure what you are measuring and holding people accountable for, is actually at least largely in their conrol or influence. This really isn't exclusive to a more data-centric approach to business, it applies everywhere. We generally can only control what we can control and penalizing the clever point guard because the slow-footed center can't convert enough of his excellent passes near the rim is not a long-term winning strategy.

    More from the Kapler piece:

     If, for example, we taught pitchers about Fielding Independent Pitching — which truly spotlights what a pitcher can control (walks, strikeouts and homers) and removes balls in play, thereby eliminating a fielder’s ability to have an impact on the outcome of a play and consequently a pitcher’s line — we place the responsibility right where it belongs. If we show a hitter how well hit balls and exit velocity/speed off the bat are being examined more and more closely, then the hitter will freak out less when crushing a ball off the pitcher’s forearm and having it ricochet safely into the glove of the first baseman for an out. He may walk back to the dugout thinking, “Ka-ching!” instead of throwing a water cooler and forcing some nearby cameraman to change clothes. 

    Let's do a quick review:

    One -  make sure you know how to communicate the value and merit of these new statistical approaches to the team. 

    Two - make sure the team starts to do their own self-assessments through the lens of these new data-driven approaches

    Three - make sure you are holding people accountable for numbers that they can legitimately influence and can they can own.

    What other tips or recommendations do you have to transform an organization from one that relies on gut feeling to one that counts on the data?