Compensation- Getting it Right

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This time of year brings all the excitement of the holidays, Halloween, Thanksgiving, Christmas and Hanukkah, among others.  Amid all the festivities, for many organizations, it brings Compensation planning activities including revisions of salary structures, decisions on merit increases, promotions, adjustments and bonuses.  Before you say “Bah Humbug” let’s take a closer look at how to structure a compensation plan and why it’s so important to your organization. 

For all of the articles out there espousing compensation as a short term motivator, compensation speaks to our employees.  It tells a story of how we perceive their value in the workplace.  There is little that is more important than the value one sees in oneself and that is partly determined by the value others place on us and our contributions.

Ask Questions

You have to start out by asking the right questions in order to determine what your company’s compensation strategy should be.  It’s OK not to have all the answers, they will provide topics for discussion with your internal teams.

What are your goals?   

It’s important to know what problem you are trying to solve before you launch into a strategy to solve it.  Do you have excessive turnover?  Are you having a hard time attracting candidates?  Are you losing your high potential employees at an alarming rate?  Do you need to focus certain groups on different goals

How would you define your market?

Is it defined solely based on a geography you are in?  Do you need to include competitors outside of your geographical regions?  Is it domestic or do you have international competitors as well?  Sometimes, you can get a good clue to identifying this by asking where do your employees come from, and where do they go when they leave?

How competitive do you need to be?   

Some disciplines like Big Data are highly competitive and there may only be a handful of candidates that everyone is competing for.  On the other hand, if your positions are relatively common and there are many candidates available, you may be able to set you target closer to the 50th percentile and be just fine

What and how should you reward?  

What behavior do you want to reinforce and what types of rewards will you give?  The most effective plans focus on a Purpose Statement and/or Guiding Principles.  Your rewards should ultimately drive the culture you are trying to create.  Even monetary rewards come in many different forms.  They could be merit increases, promotions, short term or long term cash incentives.

All of the above questions will help to guide you toward the most effective compensation strategy for your organization and drive employee productivity forward. 

 

Holocracy- Implementation Challenges

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Last week we talked about Holocracy, what it is and what its advocates say the potential benefits are.  But in reality, does Holocracy work ?  Can a type of self-management that gives decision making power to fluid teams, or “circles,” and roles rather than individuals yield results and better decisions than a traditional structure?  How well do people deal with the uncertainty that a holocratic approach creates

Sourcing and Hiring

Holocracy models complicate sourcing and hiring decisions.  How do you advertise for a job that is comprised of ever changing micro roles and how do you assess whether the person sitting in front of you actually is competent at those micro roles and any other talents they might have?  People are used to looking for traditional job titles, but in holocracy, there are no traditional job titles.  Do management level employees worry that deviating from their career path might stall out their careers.  What if they are at a Director level now and you are trying to recruit for a team member with a skill set normally held by an Accounting Dir.  How many would take a “team or circle member” title?

Micro Roles

Another issue that holocracy creates is the formation of micro roles.  No longer is one individual responsible for a specific set of set roles, but a swirling set of micro roles that are ever changing.  It can complicate the work actually getting done as employees may be responsible for up to 25 different responsibilities and struggle with prioritizing them and deciding where to focus first.  They may be members of a number of different circles and have weighty responsibilities to each, but not be able to satisfy all of them or be forced to prioritize in conflict with others. 

Compensation

Compensation becomes difficult as well.  Not only are there struggles with determining internal equity as this now requires each of 100’s of micro roles to be assessed and the value of these roles change as new circles are created and as the organization matures and different skills become more or less valuable, but external equity is an issue.  How do you go to the market to assess the worth of a position when there is no longer a match for the position?  There is nothing to compare the person’s position to.

Unlearning old behavior

For holocrcay to be successful it necessitates that both bosses and subordinates unlearn old behavior.  If everyone is truly to be tapped for their full potential then there cannot be those who are hesitant to express opposing views in front of what used to be superiors.  This is a hard habit to break for both bosses and subordinates.  It is hard for leaders to learn to step back and not lead all the time.

Holocary has yet to be proven as a model that offers significant benefits over a traditional structure. The best of both worlds may be to incorporate some of the circle mentality into the traditional structure allowing everyone a voice to be heard and encouraging growth horizontally as well as vertically.

Hierarchy versus holacracy

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Before we delve into whether or not holacracy is right for your organization, how many of us know what holacracy is?  Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested in a management hierarchy.  In theory, holacracy empowers people to make meaningful decisions and drive change.

Instead of a traditional management structure where questions must go from the bottom to the top and decisions go in reverse, organizations that adopt holacracy empower agile teams of people to make and implement decisions.

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Self-organization models typically share three characteristics:

Teams are the structure

In holacracy, there are “circles” or many companies simply call them “teams.” Whatever they’re called, these basic components are not, individuals, and not units, departments, or divisions but they are the essential organizational building blocks.  Individual roles are defined and assigned in order to accomplish the work. As in more traditional hierarchical organizations, there may be different teams for different projects or functions like finance, tech, sales. But self-managing enterprises have a lot more of them. After Zappos implemented holacracy, 150 departmental units evolved into over 500 circles.

Teams design and govern themselves

Although self-organizing companies try to avoid the traditional hierarchy, the teams are a part of a larger structure, which they are actually able to shape and refine. Holacratic organizations have everyone sign a constitution—a document outlining the rules by which circles are created, changed, and removed. So the circles not only manage themselves; within those guidelines, they also design and govern themselves. The constitution doesn’t dictate exactly how people should do their tasks. It explains in a broad way how circles should be created and operate: how they should assign roles, what boundaries the roles should have, and how the circles should interact with one another. 

Leadership is constantly changing

In self-managed organizations, leadership is distributed among roles, not individual people.  People usually hold multiple roles, on multiple teams. Leadership responsibilities continually change as the work changes and as teams create and define new roles. Technology is essential for keeping all these changes straight. The information is accessible to anyone in the organization and each individual’s commitments are visible to everybody at the company. Supposedly, transparency enables cross-team integration.

Although it is becoming a buzz word, holacracy is not being adopted at a rapid pace. The organizations who have tried to adopt it run into a myriad of issues, including increased turnover and decreased productivity given the endless meetings.  While some look at it with interest, others simply say it does not work.  Next week we will delve into some of the issues that have arisen when organizations have tried to implement holacracy.

 

Let leaders lead

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Most who enter the Human Resources disciplines due so out of a desire to help others and to help the organization to align their employee workforce with the goals of the company to further productivity.  Often times, however, we forget to let our leaders lead.  Especially as an organization grows, HR functions need to adopt a “train the trainer” approach more than a train everyone approach.  Although enlightened organizations put their full support and resources into HR functions, the team still has a responsibility to be able to scale the organization without adding significant numbers of HR team members.  Efficiency is key.

Train- the- trainer

A train-the-trainer model allows experienced trainers to show a less-experienced individuals how to deliver courses, workshops and seminars. http://work.chron.com/train-trainer-model-5463.html Usually, a new instructor first observes a training event led by the course designer. A train-the-trainer approach can build a pool of competent instructors who can then teach the material to other people. Instead of having just one instructor who teaches a course for a long time, you have multiple instructors teaching the same course at the same time. This ensures that employees get timely training to complete tasks according to company policies and procedures.

Identify SME’s

SME’s or subject matter experts exist in all corners of the organizations and at all levels.  It is a fairly good bet that your excel gurus are not sitting in the corner office.  Tap those resources!  Find out how has a skill set that the rest of the organization could benefit from and engage the SME to deliver the training. This serves two purposes.  One, it enhances your pool of trainers and two, it gives well deserved recognition to a group of people who might be overlooked otherwise, further engaging them in the business.  

Step out of the way

The inclination is to teach every class to every audience, but the real goal is to get the training out to a broad audience in a timely manner.  Like a proud parent, you need to teach your junior trainers your techniques, ensure that they know their material, do a few dry runs with them and then let them launch.  Will it be perfect, no. Will it improve with time, yes and will you gain far more by engaging your workforce then trying to do it all yourself, a big YES!

Training is not a one and done.  It is a process over an unending period of time that, done correctly, not only teaches a new skill, but also engages and inspires a workforce to do greater things both in their work and personal lives.

Organizational Value

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There are multiple ways a Human Resources organization can add value.  Too often though, there is a mismatch between the value that HR is bringing and the growth and maturity curve of a company.  Imagine, for instance, heading HR for a large, established, multinational corporation and believing that the value HR brings lies in the mechanics of setting up employee files, creating salary structures and running benefit programs.  Conversely, imagine a situation where there is a relatively small start =up company.  The company has grown to the size, maybe 100 employees, where they finally need an HR presence.  The person selected start out by talking about aligning the employees to the organizational objectives, but the organizational objectives have yet to be defined.  It is important to always keep in mind the match between the HR function and the organization.  There are three primary ways that HR can bring true value to an organization.

Mechanics

HR has the responsibility to provide the basic mechanics of the HR function.  This can include such basics as:

  • Running ads and hiring for candidates
  • Creating salary structures to ensure the workforce is paid correctly
  • Selecting and running health insurance plans
  • Keeping I-9’s
  • Running basic training programs
  • Legal Compliance

Processes

Moving along the continuum, HR should provide the processes that ensure that an organization can scale efficiently

  • Hiring becomes……. an on-boarding process with predictive capability
  • Providing benefits becomes ……..a well thought out approach to which benefits, how to create a benefit matrix and judgment applied to the types and cost sharing of benefits
  • Legal compliance becomes……an understanding of what we are trying to accomplish and how best to accomplish it
  • Basic Training programs become….. Training program that meet key corporate objectives where impact is measurable
  • Basic compensation administration becomes…..internal and external equity comparisons, creative approaches to a three pronged approach and the most bang for our buck, social performance management systems

Strategy

Where HR can truly contribute the most value is when the Mechanics and Processes are in place and we can step back and view the big picture strategy.  Where are we going and how are we going to get there?

  • Thoroughly understand the goals of the organization and get ahead of the curve- what processes, practices and strategies will be needed in 1 year?  3 years?
  • Communicate corporate goals that align the workforce to the vision and mission of the Company
  • Align processes and programs across the organization to create high performing teams
  • Continually monitor the pulse of the organization and make recommendations to solve small problems before they become big ones
  • Assist executive teams to make sense of the internal and external environments and the impact they have on the organization

What do we hope to Achieve?

Crafted effectively, we orchestrate the above to achieve:

  • Increased alignment between organizational objectives and employee population goals
  • Most value extracted from each hire
  • Greater employee engagement yielding greater employee satisfaction
  • Reduced turnover
  • Better hiring decisions
  • Better use of resources reflected at the bottom line

International HR – Germany

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There are significant differences when it comes to the Human Resources organizations in the US versus companies in Germany, and many other countries in the EU.

 

Managerial Discretion

Anyone who has worked in the US understands that managers and HR have a lot of discretion over who to hire and who and when to terminate.  Sometimes these kinds of decisions can be made in a few days or weeks.  In Germany, specifically, these types of decisions are months if not years long, with serious infractions needing to have taken place.  Germany has a co-determination practice.  Co-determination is a practice whereby the employees have a role in the management of a company. The word is a literal translation from the German word Mitbestimmung.. In some countries, like the USA, the workers have virtually no role in corporate management; and in others, like Germany, their role is more important.

 

Wage differences

In the US, many studies show that white collar workers can make as much as 20 times that of blue collar workers in the same company.  This is drastically different than in Germany. Germany  is known for its balanced remuneration system.  The average white-collar worker’s wage is only 20% over the average blue collar worker`s wage. In addition, companies are not allowed to hire skilled workers from other companies by offering higher salaries.

 

Company Loyalty

Here too, the perception differs.  In the US, workers are generally always in search of something new or better, and there is very little company loyalty.  In Germany, employees feel a much greater sense of loyalty to their companies and, general, will not leave.  They will look for opportunities within their current company or subsidiaries and the company will work hard to provide those. 

 

Management decisions

While the US is typically a very individualistic society, making quick decisions and reversing them if necessary, Germany, in stark contrast, tends to work like a democracy in their companies. It is important the whole team has a say and the whole team is bought into the decision.  While this can seem appealing, the trade off is time.  Decision making will take much longer with a group of employees when everyone needs to be in agreement. 

Both cultures have their pros and cons and neither is necessarily best.  The US, acting as an impulsive, decisive,  all knowing teenager and Germany as the wise parent, moving slowly with certain purpose.

International HR – UK

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Differences between the UK and US

Much like there are slight difference between states in the US, like the timing of final pay for an involuntary or voluntary termination, ranging from day of termination in California to next scheduled pay period in Georgia, there are greater difference amongst countries around the world. Many of these differences relate to working hours and leave.

 

Overtime

In the UK, for instance, employees cannot be required to work more than 48 hours in a work week, while in the US, there are companies that require, legally, far in excess of this amount, especially during peak seasonal times.

 

Vacation Pay

While most workers in the US get 10 paid vacation days per year, their lucky UK counterparts are enjoying more than twice that at 28 days. And, if you are in the UK, you are going on “holiday”, not on “vacation.”

 

Maternity Leave

In the UK you can take a year off for maternity leave without losing your employee rights. No matter how long you’ve worked for a company. Just let the company know 15 weeks before the due date. The official UK maternity leave policy – known as Statutory Maternity Leave (SMP) – means that employees will still earn money for up to 39 weeks. During the first 6 weeks they receive 90% of their average weekly earnings before tax.

Then for the next 33 weeks either £136.78 pounds sterling (about $225 US  per week) or 90% of their average weekly earnings before tax depending which is lower. Their employee rights, including holiday entitlements and pay raises, are safeguarded during the time they take off. Compare that to the 6-8 weeks that most US employees take and only receive 66% of their normal wages IF they have SDI.

 

 

Teach a Man to Fish

One of life’s conundrums is the choice of when to do something for someone and when to teach them to do it for themselves.  This is an age old struggle between parents and children, teachers and students, managers and employees and the Human Resources team and our internal customers.  We all want to help those in need whether it’s a child struggling to open a heavy door or an employee who needs a quick answer.  But are we really “helping” when we constantly rush in to be the hero or are we really fueling a need within ourselves?  Might it not actually be better to teach someone how to be self-sufficient and then step back and out of the way?  This would allow you to make a greater and more broad reaching impact.

Especially for those of us in HR who, generally, are in this function because we enjoy helping others, we might want to take a look at how to more effectively “help” others in the organization.  It would be beneficial to have a plan when someone comes to you with a problem.  A way to identify whether this is a crisis and an immediate need or an opportunity to teach someone to be able to do it for themselves.

Urgent or Immediate needs

HR gets bombarded daily with immediate needs or at least needs that the internal customer thinks are immediate needs.  A few examples of actual immediate needs:  Someone has fallen and you need to call 911, someone is making credible threats and needs to be escorted out of the building, access to systems need to be shut down due to an involuntary termination for cause.  These are the types of needs that you will always handle and are probably not teachable, necessarily, to someone else.

Important needs

Important needs are those that are important but not urgent.   Examples might be a question on an incentive plan and how it works or an update on a particular position you are hiring for.  Some critical needs can lend themselves to establishing SOP’s, Standard Operating Procedures.  Requisitions reports can be created and distributed so that managers can check statuses of their openings.  Webinars can be held to explain the nuances of the incentive plans.

Routine needs

Routine needs are those that someone will call you for every time they need the answer. Someone has an address change, or a title change or a change in the car reimbursement program.  Routine needs are wonderful teaching opportunities.  Offer to walk the person through the steps needed and then establish the SOP’s, standard operating procedures,  and let them know where to access them.

Un-needs

Occasionally, you run into those people, or they hunt you down, with on-going, what we will call, un-needs.  This is the desire to have someone listen to them by creating a perceived need.  In these situations, the best thing to do is to politely remind the person that you have a call coming in or must get back to your work.  You can train someone out of this behavior, but not necessarily teach them.

By defining the different classification of needs, you will work more efficiently, have a broader impact and be able to help others to help themselves.

Applicant Tracking Systems

Applicant Tracking Systems are systems that allow you to create a user/applicant experience.

The application process becomes paperless with an applicant tracking system, so it is simple to store, recall, or purge applications from the system with just a few clicks. This helps to ensure that no critical information is lost and all necessary information is readily available for open positions now or in the future.  If you choose the right system it will make your life much easier.  If you choose the wrong one, it may be unusable or more cumbersome than an actual paper process.

Applicant tracking systems fulfill four main purposes: 1) to manage applications for positions (especially in the face of a high volume of applicants regularly received today) 2) to screen out candidates who lack the required skills 3) to assist with hiring compliance 4) to provide metrics that can enhance the hiring process.

Manage Applications

Depending on the volume of positions you have open and the volume of applications received, this can be a lifesaver or not worth the efforts.  If you have say 10-20 generic positions, an ATS may not be necessary.  However, if you have 100 positions and they are more specialized requiring advanced degrees and skill sets, an ATS will save you a significant amount of time. 

Screen out Candidates

It’s just as important to know what you don’t want as to know what you do. As any recruiter who manages a high volume of positions in a market or time where unemployment is high, knows, it takes an inordinate amount of time just to sift through all the resumes from people who are not remotely qualified for the positions.  With a good ATS you can input key words and the system will spit out resumes that have those key words. 

Hiring Compliance

An ATS can assist companies with hiring compliance. Employment laws prevent employers from discriminating in their hiring practices based on age, gender and ethnicity, among other things. By using an applicant tracking system to select candidates to interview the system gives employers the ability to stay at an arm’s length when selecting their candidates.  They simply type in the key words and the system selects the candidates.  Although failure to hire litigation is much rarer than wrongful termination, it does happen.

Metrics

Every department needs to be responsible for metrics that drive the business.  HR can gain a well-deserved place at the table by focusing on the same metrics that drive the rest of the organization.  By utilizing an ATS, you will be able to pull resumes submitted for a particular position, pre-screed resumes, candidates brought in for interviews and offers made and rejected.  Armed with this information, you can laser focus your recruiting efforts and provide funnel data by position to your hiring managers.  Most are surprised to see that it could take 100 resumes received to net 1 hire.

HR Systems

Sherrie Suski, HR Systems

The choices in HR systems today are mind boggling.  Everyone wants to get on the band wagon and sell you something that will supposedly make your life easier, is user friendly, (read good UX), allows you to crunch large volumes of data in minutes.  HR systems can be as basic as an HRIS or as complicated as a performance management system with 360 review capability and goal planning and accomplishments.

Let’s talk first about functionality and next week about what you want to look for.

HRIS

An HRIS is a Human Resources Information System.  

This is your basic system that tracks all the pertinent information about your employees.  

HRIS solutions typically track:

  • Training of employees
  • Open enrollment and management of benefits
  • Compensation management
  • Human resources reporting
  • Self-service for applicants, employees, and managers
  • Personal information, Pay information, title, job grade etc..

Performance Management Systems

You may also have a separate Performance System.  A Performance Management System normally includes performance appraisal data and productivity information data. Documentation of employee performance and of how the performance was measured and reported is critical to your employees understanding this type of system.  Many of these systems come with the capability to offer:

  • Performance appraisals
  • 360 reviews where an employee is reviewed by the manager, their peers and their subordinates
  • goal planning, setting and accomplishments
  • Succession and development plans

Applicant Tracking Systems

Applicant Tracking Systems are systems that allow you to create a user/applicant experience.

The application process becomes paperless with an applicant tracking system, so it is simple to store, recall, or purge applications from the system with just a few clicks. This helps to ensure that no critical information is lost and all necessary information is readily available for open positions now or in the future.

Compensation systems

Ideally your compensation system should track all aspects of your employee’s compensation including:

  • Base salary
  • Bonuses
  • Incentive comp
  • Long term incentive comp
  • Equity/stock/RSU’s etc..

It is helpful if your Performance Appraisal system feeds directly into your compensation system, meaning less manual input or expensive integration for you.

Be very careful in selecting your systems.  Spend at least 3x the time you allotted to understanding and testing the system before you commit.  On a personal note, we have had a very bad experience with Cornestone.  While their systems have a lot of capability, you would literally need to be a system admin in order to build out the back end which they require you to do.  They are the farthest thing from user friendly with very poor UX design.