Compensation Plans in the Future

Friday, November 29, 2013

 

At one time the standard model  for many compensation plans was to annually price jobs based on internal job evaluations and market data comparison to external competitors with similar organizations, benchmark jobs, labor forces, revenue streams, even down to regional variations.  Organizations often employed a merit matrix, designed to allocate specific salary percentage increases based on a combination of comp-ratio and performance levels.  It was not unusual for most employees to come to expect an increase simply because they had clocked one more year of service with the organization.  “Just doing one’s job” qualified many employees for an annual increase, although it was the same level of performance as the prior year.  While many employers reported they had a “performance based pay” system, many of those systems were performance based in name only and were neither robust nor valid.

 

But “the times they are a-changin’”, organizations have begun to re-think who, when, how, and. why employees are rewarded.  A trend that has been emerging for some time now is that employers must reward and recognize the continuous creation of “value” by their workers.  Current compensation design has already built into “base” pay, remuneration for an average level, i.e., “meets” level of performance.  Only those employees who can demonstrate creation of value for the organization should be rewarded.

 

But exactly what is “value creation”?  Value creation is whatever makes an organization more competitive, effective, efficient, and compliant either to its internal or external customers.  Value creation includes, designing new profitable and competitive products and processes, eliminating and reducing cost, waste, errors or re-work, developing new profitable markets, and customers, avoiding or limiting litigation, regulatory penalties, … etc.  How does an employee create value for an employer?  It starts with engaging and empowering workers to think like owners and entrepreneurs.  Even small changes in a process can yield significant results.  Often this change requires “creative destruction” of the existing process or product, which can make many organizational leaders uncomfortable.

 

Compensation plans in the future must reward an organization’s talent who recognize opportunities and convert those opportunities into desirable outcomes for their employers, thus adding value.  Merely continuing to “do one’s job”, will only delivery last-year’s results, which in today’s hyper-competitive world is no longer acceptable.  Organizational managers who inhibit innovation, change, and value creation must be re-educated to become coaches, mentors, and enablers of talent.  Future compensation systems must reward those managers who routinely produce a flow of talented employees for the organization.  While many managers consider themselves to be a control point, reward and recognition methods must reinforce their talent development and growth-enabling characteristics.

 

Finally, future compensation systems must be designed in a way which meets the organization’s needs today yet be flexible and robust enough to continue meeting its ever changing needs as the organization evolves, growths, and re-invents itself.

2014 Salary Outlook: A Repeat of Prior Years

Friday, November 22, 2013

 

About this time of the year, human resource professional organizations often disclose their salary and wage increase projections for the coming year.  In an 11/14/2013 article written by Jason Adwin, Vice President at Sibson Consulting and posted on The Society for Human Resource Management (SHRM) website, the author discusses salary and wage changes for the coming year and the last several years.  Adwin makes a clear and compelling connection between the continued high level of unemployment and the lack luster changes in employee compensation projected for 2014, as well as those experienced over the last two years.  With salary budget increases hovering at or just below 3% and salary-range adjustments near 2%, it is evident that most organizations feel no pressure to raise compensation levels.

 

With strong evidence there is little wage and labor market pressure to push salary budgets and ranges faster and higher, what is an organization’s alternative for rewarding and recognizing high achieving talent?  Variable pay plans, a.k.a., incentives, bonuses, and commissions is generally the response.  Stephen Bruce, Editor and HR Daily Advisor at Business and Legal Resources (BLR), quotes Teri Morning from a recent BLR webinar:

 

“Average performance is already compensated for in the base pay at the market rate.

Average performance doesn’t necessarily require a merit increase.

Variable pay programs should pay for themselves.

Incentive pay isn’t always applicable to every position.

Variable pay rewards outcomes—not good tries.”

 

The issue with many variable pay plans is they often fail to recognize and address that today’s workforce in not homogeneous.  Cohort members are going to perceive reward and recognition differently from their adjacent group associates.  What motivates a Baby Boomer may have the opposite effect for a Gen-Xer, even to the point of deceasing performance.  This phenomena means that how reward and recognition systems are designed and communicated, must include continuances for tailoring that reward and recognition to the individual employee.

 

When communicating feedback to a multi-generational labor force, reward and recognition messages have to be crafted to each group:
 

·         Traditionalists – you are valued for your experience,

·         Baby Boomers – you are valued, the organization needs you,

·         Gen-X’ers – have it your way,

·         Gen-Y’ers – you'll work with creative peers in a creative environment.

 

A variable pay plan which pays a 10% incentive for on-time on-budget project completion will be perceived differently by each generation.  A Traditionalist may expect a “pat of the back” and a “we could not have done it without your years of experience”.  A Baby Boomer would have been happy the check.  A Gen-X’er will want recognition that doing it their way was really the way to do it.  A Gen-Y’er will want to pick their next assignment and staff it with creative types just like themselves.

Gamification for Talent Development and Retention

Friday, November 15, 2013

 

We saw how gamification might play a role in the staffing of a new customer service center.  Now let’s look at the role that gamification could play in raising the skill level of talent and building employee affiliation with the organization.

 

Our new customer service center is up and has been operating for six months, but the analytics are pointing to some troubling trends.  First call resolution is below standard, mis-re-directed calls are too high, escalated call cases to Level 2 and 3 are too high, and staff turn-over is increasing.  Root cause analysis has identified several inter-related issues.  After reviewing various options, management has elected to re-design the gamification platform and re-introduce it to the call center staff.

 

All call center staff members are encouraged to explore the re-designed gamification platform.  Staff who participant and reach top level game performance will be recognized with an achievement “badge” as a mentor.  As part of their recognition, mentors will also be provided with development in coaching the work of other employees.  Staff members who are struggling with a specific issue, e.g., first call resolution are encouraged to voluntarily seek out a mentor for one-on-one coaching.  In addition, mentors will be asked to seek out and engage with employees who may be at risk of turnover.

 

Management is confident this approach will lead to significant improvements in the center’s analytics, nevertheless, they are expecting to see a change in the trend into more positive territory and they have allowed us 90 days to change the trend direction.  In addition to tools for recognizing mentors, staff members who improve their individual and team performance are eligible for spot bonuses, time-off with pay, and travel and entertainment gifts, and the opportunity to become mentors themselves.

 

While management wants to see improvement in individual performance, they recognize that call center functionality is highly correlated to the overall inter-workings of the “team”.  Management does NOT want to engender an “us vs. them” or a “have vs. have not” environment.  Consequently, in the re-design of the gamification platform now includes an internal “crowd-sourcing” component which was added to encourage and allow both real and spontaneous “teams” of Customer Relations Representatives to achieve recognition by solutions to performance issues.

 

While not a panacea, gamification holds the prospect of becoming another viable tool to address talent motivational and retention concerns.  Gamification may have a special and unique connection to both Generation “X” and “Y” employees.  Generation “X”, the lost generation, may be skeptical of gamification, nevertheless, they entered the labor force as personal computing took over the workplace.  On the other hand, generation “Y”, the millennium generation, has grown up with ubiquitous technology. 

 

Last but not least are Baby Boomers, an estimated 79 million Baby Boomers are in the work force and many plan to continue working well past their normal retirement age.  Baby Boomers are not “technology” novices, however, they are idealistic, competitive, loyal, and tend to question authority.  So, gamification design must address these characteristics if it is to be effective with this cohort.

Gamification in the Selection Process

Friday, November 08, 2013

 

Gamification is the process of applying of game-like techniques to address organizational issues including employee screening and selection.  Consider that you must source, recruit, select, onboard, train, and assign 50 new customer service representatives (CSR) for a new service center within 30 days.  Traditional methods could take much more than 30 days just to source, recruit, select, and onboard 50 employees.  Now they have to be trained, requiring 40 classroom hours to reach mastery.  Past experience has show that 20% of new hires fail to achieve mastery and must be released, requiring that you over staff to compensate for the potential turnover.

 

Our gamification approach is to create a game-like scenario and invite our pool of applicants to “play” the game as part of the selection process.  The applicant creates a profile giving themselves a user name, password, and an alter ego avatar and enters the game at the lowest level.  The applicant’s avatar is presented with the basic duties of the CSR’s role as well as a tool kit with a limited number of solutions to entry level tasks.

 

Next the CSR is faced with entry level challenges and simulations from the game’s “wizard”, i.e., logging on to the system, recording time and tasks, logging an inbound call,  re-directing calls, assigning calls to a higher level CSR, … etc.  Our avatar is permitted to reach into their toolkit for solutions to these entry-level tasks.  Each solution contains basic information on the task, response(s) to the task, and a simulated exercise.  Successful completion of the simulation and challenge allows our avatar to attempt the next challenge.

 

The game’s wizard rewards each successful challenge encounter with “game bucks” and offers coaching on any unsuccessful encounter.  Our avatar may attempt any challenge an unlimited number of times, but cannot advance to the next game level until they have successfully completed each challenge at the current level.  As our avatar advances to the next level, they are awarded a “badge” recognizing their current level of achievement and a few game bucks.  Game bucks are used to buy a solution toolkit for each succeeding level and can be used to buy additional solutions for the current level if our avatar runs out of toolkit solutions.

 

The game’s design may include numerous task levels from entry to supervisory.  As our avatar progresses to each succeeding level in the game, the challenges become more difficult and the simulations become more complex and lengthy.  Our avatar may choose to stop and end the game at any level.  Based on the applicant’s past experience and skill level, they may successfully complete one or all levels.  Information collected during the applicant’s play provides the selection decision maker(s) with an insight into the applicant’s possible performance.  Such information is intended to “assist” with a robust selection and assignment process and is NOT intended to supplant practices such as personal interviews, background, and reference checks.

To Train or Not To Train

Friday, November 01, 2013

 

This must be another age-old question every organization has faced.  Does an organization train its employees and face the possibility those employees will leave or does an organization NOT train its employees and face the possibility those employees will leave?  Either way, the organization could be faced with the loss of talent.  Yes, it is possible that whether you train or not, employees might choose to exit the organization and that is the chance every employer takes.  While there are no guarantees in life or for that matter, business; the bonds between the organization and its top talent must be based on more than a paycheck or the availability of training.  “… rewards create a stronger emotional bond between employees and the company.”

 

Training is an investment.  Like any investment, the investor expects, demands a return.  As with any investment, there is a risk the expected rate of return will or will not materialize.  If the only bond between the employee and their organization is a paycheck, the likelihood of the employee’s continued retention is small.  The employee has to “desire” to remain with the organization.  The value of that “desire” is complex and multidimensional.  Cash compensation is certainly part of the equitation, but so are employee benefits, as is non-cash recognition, the organization’s brand, peer relationships, managers, organizational leaders and their agenda.

 

Training is a multiplier.  Just as capital investment in new equipment, systems or an organizational acquisition can leverage an employer’s ability to compete, so can training.  While training on a new Customer Relationship Management system (CRM) is required for all Customer Service Representatives, leadership development should be reserved for the organization’s top performers.  Although training should never be couched in terms of punishment; training is a development tool for all levels of performance.

 

Training transfers core organizational values.  The transfer of core organizational values is essential to the sustainability of every culture, including a corporate culture.  Common core values, between the employer and employee, help to bond an employee to that organization.  As with any relationship, core values must be communicated, training provides one means of effecting that communication.  To be effective at engaging employees, training must incorporate core organizational values in all phases of its design and implementation.

 

Training is global.  It should come as no surprise to anyone that training is a global issue in retaining top talent.  While it is an over simplification, the desire for training and top talent are mutual values competitive organizations want in their global workforce.  As such training provides a means to engage a workforce that is often disconnected and out of touch with an organization’s mission.  Training is the glue that bonds together the various components which make-up a multinational employer.

 

Training is a motivator.  Training can be designed in a manner that will excite, instill focus, and direction in otherwise unguided employees.