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Compensation in the Real World

Editor’s Note: Workspan will be reproducing a monthly Compensation Café blog post for the benefit of our readers and to encourage further discourse on topics vital to compensation professionals. New to WorldatWork? Please feel free to join the discussion in our Online Community or send your thoughts to workspan@worldatwork.org.

I once supervised a compensation analyst who had spent a lot of time attending professional seminars and workshops. One result of that education was that when faced with a challenge at work, she would repeat her class experience by saying, “the greatest minds in Compensation say that . . .”  It took a lot of patience to educate this part-time practitioner/part-time student on the difference between the classroom/textbook answer and the reality of the workplace.

I came across a human resources blog in which the author was instructing readers on how to create a merit performance matrix. Very good stuff, I thought, admiring the technical step-by-step instructions, except I knew from long experience that the described procedure was impractical and would never work in the real world.

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Yes, it is very important to understand the technical foundations of compensation methodology and practice. But first and foremost, you need to anchor yourself in the here and now to know what will work and not work in your organization, what will be accepted and what will be rejected — no matter what the finest minds in compensation think.

Why doesn’t compensation theory match with workplace reality?

  • Business realities: Management will typically know more about a particular business situation than you do. What you are able to provide to the decision-making process as a compensation professional is limited to your particular subject area, while management usually has the bigger picture — the perspective of multiple viewpoints. Your compensation advice may not fit their business reality, no matter how logical an argument you make.
  • The bias of decision makers: Decision makers may feel that they intuitively knowthe right approach to take (they’ve done it before, if-it’s-not-broke-don’t-fix-it, a friend/relation/old college chum suggested an approach, etc.). Perhaps they simply read an article and now insist you follow the advice of an author who doesn’t have a clue about this particular business. Years ago, I worked for a company whose CEO forced HR to implement a particular benefit plan because he had read a magazine article. 
  • Problem avoidance: Short of killing the messenger, one solution for management is to do nothing about a problem (you’ve exaggerated it, the solution costs too much, there’s still time, etc.). Senior managers can be like politicians in avoiding the big decision unless and until it bites them in the leg. Have a care, as it can be dangerous to your career if you try to force a decision.
  • Business culture or model: Some initiatives just don’t “fit” into your organization. Managers with a laid-back organization style will not be interested in recommendations to document everything, standardize policies and procedures and have approved forms for every possible use. Picture your head banging against the wall.

Sometimes those subject matter experts who instruct in compensation techniques fail to ground their instructions with a caution to their students; check this process out in the reality of your workplace before you take a classroom or textbook technique and wave it in the face of management.

An example:

Cost of living as a basis for pay increases: I once watched over a fascinating exchange on a compensation bulletin board where a debate raged on for several days. The dispute was over the appropriate formulae to use for calculating the cost of living vs. cost or labor as it affected average pay increases that management would approve. Each side of the argument provided formulae, charts and graphs and quotes from notable experts to press home their opinion.

The underlying reality behind this exchange is that management does not use the cost of living as a prime determinant in their decision-making. They are more likely to roll their eyes at the technical debate and focus on competitiveness and bottom-line costs (affordability) — and why can’t we do the same as we did last year? If their ultimate decision relates to the cost of living in some way, that’s only a nice coincidence that they can use in their employee communications.

A skillset that separates the compensation technician from the compensation professional is the ability to deal with what I call the “softer” side of compensation. Survey statistics, charts and formulae are very good to a point, but management will want to know what it means and what to do about it. So, the answer isn’t simply reporting the data, but in taking that next step to help management understand and strategize their next move.

The contribution you can make to your organization is to blend your 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.

About the Author

Chuck Csizmar

Chuck Csizmar, CCP, is founder and principal of CMC Compensation Group, which provides global compensation consulting services to a wide variety of industries and non-profit organizations.

First published at Compensation Café on Dec. 28, 2017.


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