Perception of Pay: Powerful Engagement Factor

Check out these numbers…

Employees who understood how their pay was determined.  67% engaged

Employees who didn’t understand how their pay was determined. only 32% engaged

Workers who knew how to maximize their pay.  73% engaged

Workers who did not know how to maximize their pay.  only 33% engaged

Employees who believed pay was related to performance.  77% engaged

Employees who didn’t believe pay was related to performance. only 40% engaged

Source:  HR Magazine, September 2014

Pay may not be the best motivator, but it is truly a powerful engagement detractor.  The lesson: Make sure you have a transparent, easy to understand pay plan that is tied to performance.

Do we really want to retain our best? – Question of the day

Why do we spend so much time and energy saying we want to keep our best people and then use compensation structures that encourage them to leave every couple of years?

Rising Tides or Sinking Ships?

Average CEO pay is now 257 times greater than the average worker’s pay. 

What does this say about the health of our economy? Our society?

Sound off.  Tell us what you think. 

To ‘Rank and Yank’ or Not

Does your organization need forced ranking? An overlooked source of guidance sits within your quality improvement framework.

“Zero defects” is a popular slogan, but quality management warns that not all defects are equally bad. Zero defects can impede quality if you try to drive out every defect. Optimal process improvement is applied only where its value exceeds its cost.

In November, Microsoft ceased its long-held performance management practice of force ranking employees, just as Yahoo introduced the same practice. Does your organization need forced ranking? An overlooked source of guidance sits within your quality improvement framework.

The Microsoft announcement emphasized the company’s goal to encourage teamwork and collaboration. Lisa Brummel, Microsoft’s executive vice president of human resources, stated, “No more curve. We will continue to invest in a generous rewards budget, but there will no longer be a predetermined targeted distribution. Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget.”

Yet forced ranking can clarify performance differences and allow (or force) managers to improve or remove low performers. One Forbes report suggested that Marissa Mayer, Yahoo’s CEO, “inherited a workforce that was bigger than it needed to be and riddled with paycheck-cashing clock-punchers. Precisely because it’s so big, figuring out who the slackers are isn’t easy.” This description may overstate reality, but it illustrates the point that forced ranking has value when restructuring benefits from better revealing high- and low-performers.

David Calhoun, the former CEO of Nielsen Holdings who had a 27-year career at GE, has defended the forced ranking system, saying, “At GE there was only one objective … to force an honest discussion between your manager and you. And there’s nothing that quite forces that more than employees knowing … how that manager ranks them, and then asking that manager, ‘Tell me where I rank and tell me why.’”

Let’s retool this debate using quality management principles: Performance management, including forced ranking, should be applied when value exceeds cost, and that depends on the consequences of the defects discovered and corrected. The defects are unaddressed poor performance (lingering problems) or unrewarded high performance. This helps explain the Microsoft/Yahoo distinction.

By scrapping forced ranking, Microsoft will likely see some high performance not rewarded as handsomely and some poor performance lingering longer. That’s a good trade-off if the lost value is less than the increased collaboration created without forced rankings. Microsoft used forced ranking for a while, which may have removed most low performers, so the value of detecting low performance is less. Microsoft may also now be better at rewarding high performance without rankings.

By adding forced ranking, Yahoo will incur new costs (in managerial time and effort, public backlash, employee resistance and internal competition). That may be worth it if its workforce is too large, and poor performance is costly and hard to identify. The defects of unaddressed poor performance and unrewarded high performance are more consequential at Yahoo, so the quality improvement value of forced ranking is greater.

Microsoft and Yahoo have engineering-driven cultures, where leaders make quality improvement investment decisions like this every day. Hopefully, those leaders are as rigorous in decisions about forced ranking.

One thing suggests they could do better. The quality improvement discipline suggests that a single approach is rarely valuable for an entire process, let alone an entire organization. Targeting matters. Yet, Microsoft and Yahoo both seemed to make these decisions for their entire workforce. We know the consequences of high and low performance varies across jobs, so one-size-fits-all is almost certainly not optimal, just as with software or any other process.

How will your organization decide about forced ranking? Too often, it is with anecdotes or a one-size-fits-all solution that swings from one extreme to the other. A better answer may be as close as the quality improvement processes you already use.

Originally published in Talent Management

Report: Equal Pay Would Cut Women’s Poverty in Half

According to a regression analysis of federal data by the Institute for Women’s Policy Research, the poverty rate for working women would be cut in half if women were paid the same as comparable men.

The analysis — prepared by IWPR for use in The Shriver Report’s “A Woman’s Nation Pushes Back From the Brink ,” produced in partnership with the Center for American Progress — also estimates that the U.S. economy would have produced income of $447.6 billion more if women received equal pay, which represents 2.9 percent of 2012 gross domestic product.

Persistent earnings inequality for working women translates into lower pay, less family income and more poverty in families with a working woman. About 71 percent of all mothers in the U.S. work for pay. One-third (32 percent) are single mothers and often the sole support of their families.

“The Shriver Report emphasizes that women play a vital role in the American economy and in the financial security of families around the country,” said IWPR President Heidi Hartmann. “Paying women fairly for their work would go a long way in reducing poverty and giving the economy the jump start it needs.”

Additional findings from IWPR’s analysis include:
• Nearly 60 percent of women would earn more if working women were paid the same as men of the same age with similar education and hours of work.
• The poverty rate for women would be cut in half, falling to 3.9 percent from 8.1 percent among working women. The poverty rate for working single mothers would fall by nearly half, from 28.7 percent to 15 percent.
• The total increase in women’s earnings with pay equity represents more than 14 times what the federal and state governments spent in fiscal year 2012 on Temporary Assistance to Needy Families.

Source: Institute for Women’s Policy Research

Originally published in Talent Management

Paying for Performance, Benefits and Perks Article – Inc. Article

Back in 1999, Daman Products Co. implemented a bonus plan. The 65 manufacturing employees at the Mishawaka, Ind., maker of parts for hydraulic systems would be evaluated on these criteria: meeting production schedules; maintaining their machines; and reducing overtime, scrap, and shipping errors. Productivity surged, and some employees added as much as 15% to their paychecks.

Then the economy took an unexpected U-turn, and so did Daman’s sales, plunging some 20%. Forget about bonuses. The company went into survival mode, cutting about 20 jobs. And after just one year, Daman Products put its bonus program on indefinite hold.

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Wage Wars, Compensation Article – Inc. Article

An employee who makes $35,000 a year might think that’s a great salary. But if he learns that a peer makes $40,000, suddenly he’s an Upton Sinclair character. CEOs who don’t realize that employees’ salary expectations are fluid may be blindsided by unexpected defections. Put simply, managing those perceptions is a critical task for a leader.

Nicole Geller is founder of GCS Inc., a $4-million company based in McLean, Va., that specializes in placing contract and finance professionals. When it comes to tracking employee satisfaction vis-à-vis salary, Geller employs three key rules:

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