The StratigicPay Blog's primary writer is on vacation for the next couple of weeks, but that won't prevent us from supplying you with some of the thought leaders in the field.  Today's guest post is from fellow Compensation Cafe blogger Chuck Csizmar. Chuck is one of the several great writers at the Cafe'.

Why Managers Don't Manage Pay

When an employee is promoted to their first manager's position, they are given the proverbial Keys to the Kingdom – your company.  They now have the authority to spend your company's money.  From hiring, to promotions, to salary reviews and equity adjustments they are now able to make the decisions that directly impact (increase) your labor costs.

However, most of these managers turn out to be, at best, well intentioned amateurs at the process of making pay decisions that are appropriate for the needs of the business.   Fresh from being anointed they often lack the basic internal education necessary to make business vs. emotional decisions – and their actions commit you and the company to costs that may not be in your company's best interests.

Actions taken by these managers not only increase direct costs, but often irritate other staff members as the circumstances become known, creating morale and internal equity problems at the same time.  The net result is usually a corresponding lack of engagement and ultimately separations by disenchanted employees. 
 
Note:  Most employees leave managers, not companies.  Thus actions do have consequences.  Likely this is not what you envisioned when you made that promotional decision. Now, how did (fill in the name of your company here) get themselves into this mess? First of all, no one really trains managers on how to properly attract and reward employees via base salaries and incentive pay.  A few anecdotal examples:

• Just because some bloke is a good "XYZ Operator" does not mean they will be an equally good "XYZ Manager".  The skill sets for success are dramatically different.
• How many managers understand your company's philosophy about pay?  Do you?  How many understand the workings (the what and the why) of the company's pay practices and methodology?  These are the folks responsible for spending 40% to 60% of your revenue in the form of employee pay, and even the most well-intentioned is prone to make mistakes.
• Managers want to be liked; they do not wish to pick favorites, do not want to discriminate on the basis of performance and definitely do not want to have their decisions challenged.  They would rather point a finger at HR and assign the blame to them for having to assess performance and distinguish one employee from the other.  Left to their own devices they would give everyone as much as they can.

If you were a high performing employee, would you like to work for this sort of Manager?  If you were coasting at work, barely putting your time in, would you want to work for this sort of Manager?  Which sort of employee do you think will eventually tire of being undervalued, and quit?   Leaving the Manager with a staff of . . . .  You get the picture.

Ineffective managers are always afraid that an unhappy employee will decide to quit, but that is usually a selfish thought.   Their prime concern is more often what your departure would mean to their deliverables, to their reputation as a manager.  Your departure is typically viewed as an inconvenience to them, not an avoidable loss for the company.  A reflection of this is when managers resist a transfer that is clearly in the employee's career interests.  The manager's concern is how that transfer affects their department – and whether their personal success becomes that much more difficult to attain.
 
Ineffective Managers can be a defensive lot, challenging attempts at reform.  Why?  Because of their fear that spotlighting reform action will demonstrate their ineffectiveness (make them look bad), and that is unacceptable.  Typically their advantage within the company is that the more ineffective the manager, the stronger their political connections.   And as senior management oftentimes surround themselves with those most agreeable to their own way of thinking, it's not surprising.

Assuming the company's willingness to make key decisions and the presence of the all-important support from senior management, companies can correct the problems that they've created.  They can:

• Select candidates for management positions on the basis of their skills / potential for actual management (dealing with people, managing projects, business-oriented, professional demeanor, etc.)
• Educate Managers in the philosophy and methodology of the company's pay programs, ensuring that this information is shared with their staff
• Construct job specifications that call for a Manager to manage, as a prime accountability, limiting or even eliminating the retention of individual contributor responsibilities.
• Measure and reward the performance of the Managers  primarily on the basis of how they have actually managed their employees, or on the performance of their unit
• Encourage Managers to develop the potential of their employees, to the point that a staff member being promoted / transferred upward is a mark of success for the Manager
• Ensure that procedural checks and balances are in place to ensure that pay decisions are reviewed by at least one higher level
• Hold Managers to an annual salary budget; let them develop the budget and monitor/adhere to it during the year

Consider the above as a checklist that can be used to test your company's vulnerability to wasted money, employee morale problems / turnover and avoidable cost increases. 
Would you be comfortable with how your own company would score?

My advice to clients is to face these issues straight on, to implement policies & procedures that save money without penalizing high performers or mistreating their employee base.  But the challenge will always remain, as there is an inherent reluctance on the part of many managers to make the tough decisions, because we do want to be liked, we do like to give good news, and we do not like to play judge and jury with an employee's career. But that behavior is not managing is it?

2009 was a real wake up call for just about everyone, and it was one for a lot of HR and rewards professionals too.  The merit pay budget cuts (or eliminations and/or actual pay reductions), mass layoffs, rising fear and plummeting morale rocked the employee-employer relationship to its core.

But wake up calls can be a good thing too.  Right out of college, between undergraduate and graduate school, I was a crisis counselor at a mental health center emergency services unit. I learned a lot about life there, and one of the many lessons I took away was that sometimes you have to hit rock-bottom before, before you can start climbing back up (2009 was rock bottom, let's hope).

If you're an HR or rewards pro responsible for dealing with issues like employee relations, organizational change efforts, and "motivating the troops," than maybe 2009 should have been your wake up call.  After the the past 18 months of budget cutting, layoffs and other forms of retrenchment, the foundation of the employee-employer relationship is looking a bit shaky and in need of reinforcement and/or rebuilding.

Shoring up employee engagement (or re-engagement) or should become a clarion call for us in the "people" business.  So will addressing the issue of employee retention, as numerous studies have shown that a large slice of the labor force is ready to bolt for greener pastures when the opportunity presents itself.  It's quite likely that engagement will become the "new" retention, as happy and engaged employers tend not to bolt for the proverbial greener pastures, because they already feel pretty good about the pasture they're already in.

Many compensation professionals will say that restoring the 2009 take-ways, and addressing competitive pay gaps are key for employee retention. And while I can't disagree with this conceptually, since dollars do matter, I believe the issues needing attention go far deeper than just dollars alone. 

It's about addressing the relationships we have with our people and restoring (or building from the ground up) a sense of belonging, a sense of appreciation and recognition; and a true valuing of the workforce that has come under a silent (but morale-crushing) attack in recent years, even if its been totally unintentional.

I saw a good post last month about workplace trends and issues for 2010 by the Herman Group, and thought it's a good (and brief) read on some of the issues being discussed here.

Over the next couple of months, I'll try and address some of these issues in more detail. 

Until then, I hope your 2010 is off to a great start!

On December 19th President Obama signed into law H.R.3326 - Department of Defense Appropriations Act, 2010 which contains the anticipated extension of the federal COBRA subsidy. The changes to the federal COBRA subsidy are effective immediately. Below is a summary of the new subsidy extension provisions.

Extending the period during which individuals may qualify for the subsidy:

Original Law – Both involuntary termination and COBRA continuation start date must occur by December 31, 2009.

New Law - Involuntary termination must occur no later than February 28, 2010.
The original law required the Assistance Eligible Individual's Qualifying Event to occur, and COBRA continuation coverage to begin no later than December 31, effectively denying the subsidy to many otherwise eligible Assistance Eligible Individuals whose active coverage extended through December 31. The new provision only requires the involuntary termination to occur on or before February 28, 2010 regardless of when the individual's COBRA eligibility period begins.

Extending the length of the subsidy:

Original Law – maximum 9-months of subsidy
New Law – maximum 15-months of subsidy

Assistance Eligible Individuals who exhausted the subsidy (generally beginning in November) and subsequently dropped or modified their COBRA coverage, are entitled to an extension of their December payment due date. (NOTE: Because COBRA is a federal law, this extension of the payment period is not binding on state plans not subject to the federal law. The individual states will have to address this issue relating to insurance plans in their specific state.)

Assistance Eligible Individuals who continued COBRA by paying the full premium will be entitled to a credit and must be notified of the Plan's application of the credit under rules similar to the original law.

Plans are required to provide notices to individuals affected by these changes explaining the revised provisions, as well as the Assistance Eligible Individuals' rights and responsibilities under the new law, including any reinstatement rights.

The timing for distribution of the notices is generally tied to either the date of passage or, if applicable, the date the COBRA subsidy was exhausted by an Assistance Eligible Individual.

If you have questions concerning technical details as to how this extension affects your COBRA eligible former or furloughed staff, you should consult with your benefits broker and/or COBRA administrator.

Note: Thank you to the folks at the LWHRA e-networks group for this information!

As a compensation professional who tries his best to stay up on what's happening on the business, HR and compensation world, I must say that I'm astonished at how much information and advice is available, especially on-line.  There is an amazing array of information for HR and compensation professionals on the web, but but it requires a fair amount of sifting through the mass of information to find the really valuable pieces of information out there.

One blog posting I read this morning while catching up on the latest happenings really got me going. The post, "Six Pay Raise Alternatives" presents some good issues and ideas to think about, but also floats a fair amount of questionable ideas and advice.  Briefly paraphrasing, here are six pay raise alternatives that were suggested:

1. Pass into your employees some of the perks you as a manager receive. The primary examples used were sporting and concert tickets, such as "a $150 ticket to a Billy Joel concert goes a long way, and provides maximum ROI." First of all, while this would be a nice firm of recognition, it's not a credible pay raise alternative.  Second, if the company is following the IRS code (always a good idea!), this example would create a taxable event for the employee, but I digress...
2. Treat your employee to a luxury meal. Certainly a nice gesture, and one that many employees would appreciate, but this is another form of recognition that should be an ongoing part of being a good manager, by recognizing and expressing appreciation for your employees and their performance. 
3. "Give cell phone breaks." Another nice gesture, but something employers should already be assisting with or providing for employees who are expected to be available or reachable most hours of the day.  This is a mild perk/benefit, but certainly not something virtually any employee would consider to an alternative or substitute for a merit-based pay increase, even a small one (which most of them are today).
4. "Award your employee a new title."  Yikes!  As compensation advisor that spends a good chunk of his time trying to untangle the messes and expectations that lie behind the indiscriminate awarding of job titles, this is really unsound advice (and I'm struggling to stay diplomatic).  Anyone who tells you that job titles are "free" or don't change expecations doesn't understand what they are talking about, because inflated or "vanity" titles almost inexorably lead to internal equity concerns, revised and/or unrealistic pay expectations, etc.
5. "Offer flexible schedule or telecommuting."  Yea, something we can agree on, but not really a pay increase alternative, although this would be considered is a valuable benefit to some.  Many employees appreciate the opportunity to save on commuting time and related time and cost elements of going into the office every day.  This benefit should be reserved for highly motivated self-starters that don't need a lot of prodding or supervision (in other words, the employees you should fight to give a raise to, and to ensure their on-going pay competitiveness).
6. Let your employees come up with their own perk, and if it's a viable option, implement it immediately.  This option has appeal on it's face, but be aware of potential perceptions of internal equity issues or favoritism.  I'm not opposed to individualized rewards and recognition, but most employees are are keenly aware of what they observe around them, and it they sniff "unearned" or obviously inequitable rewards, you as a manger will will suffer from other morale and internal equity concerns that can challenge your credibility and effectiveness.

There are actually some really good nuggets embedded in here: recognition is a good thing, but it's not something that should be done only on special occasions.  It's a part of being a good manager and component of being an employer of choice. Other nuggets: people really appreciate being appreciated, and we recommend showing appreciation as a habit, and not something done on an infrequent or special-occasion basis.

In short, there is a lot of information and advice out there, but be discriminating and choose carefully, because when it comes to base pay and other forms of rewards and recognition, there can be negative or unintended consequences of poorly designed efforts and programs.

For instance, if you're looking to implement a new recognition or incentive program, or a strategy to address pay issues while keeping down fixed cost increases, talk with a specialist or at least someone who truly understands the issues, alternatives and consequences of of various strategies and approaches.  Too much is at stake to to take the chance of implementing poorly-designed programs or un-vetted ideas without considering the consequences.

OK, I'm getting off the soapbox!

Earlier this week I posted an review of recent research on how employers are dealing or planning to deal with the upcoming recovery in relation to maintaining employee engagement, while limiting employee turnover at the Compensation Cafe.

While some of the findings were what you might expect, others were quite a surprise, such as most employer's plans for addressing pay issues and other elements of employee satisfaction, and an employee's propensity to potentially turnover.

See the post here.

In the past year and a half, compensation trends and practices have undergone the most rapid shifts in my 25+ years in the field. In late 2008 the sky was falling, as were merit budgets, and the stock market too. At the same time executive pay freezes and layoffs were taking off, and not in a good way.

A year later, the economy, while far from healthy, has stabilized and slowly started to improve.

Watson Wyatt has done an admirable job of tracking HR and compensation trends over this remarkable period. Every two months they have surveyed large groups of employers to capture the latest trends and practices of import to HR and compensation professionals. Their latest survey, "Effect of the Economic Crisis on HR Programs" (October 2009) has just been published, and below is a brief overview of some key data points. Follow the link above for the full report summary.

Employers are finally beginning to loosen the strings on the large number of salary freezes, executive pay freezes and/or cuts, and even beginning to reverse some of the cuts and freezes that were imposed during the highly uncertain times in late 2008.

For instance, of the companies that had implemented salary freezes:

• 54% say they plan to eliminate the pay freeze in the next six months
• a further 24% plan to eliminate the pay freeze in the next 12 months

Of companies that have implemented salary reductions, over 75% say they will reverse those in the next 12 months.

All of this is good news for employees and employers (less uncertainty; greater confidence). Furthermore, over 90% of responding employers have made employment offers in the past three months, and over 90% anticipate doing so in the next few months as well.  These are all good signs for the recovery, but real employment growth is likely still a ways off.

All the news is not good though, as about one-fifth of employers still anticipate making layoffs in late 2009 or in 2010. This is hardly the data you would typically see in a solid economic rebound, but we believe that these percentages will decline in the months ahead.

Despite the weak labor market, almost two-thirds (65%) of employers report that they are concerned about the retention of critical skilled employees. (For a detailed discussion on this topic, request an article from StrategicPay Series manager, Doug Sayed, at doug@StrategicPaySeries.com).

Clearly, the worst is over, but we are not fully in the clear yet. The economic recovery is fragile, and many employers have yet to find their footing.

Most HR professionals would agree that happy (or at least satisfied) employees generally make better employees overall.  They tend to complain less, show up more, and make for a better work all-around environment.  Most HR professionals would also likely agree that more satisfied employees are also generally are more engaged and better performers overall.  For these reasons alone, it's worth it to try to build and maintain a happy/satisfied workforce.

But assuming increased job satisfaction automatically leads to increased job performance is a false assumption.  Many HR professionals believe that if we can just increase job satisfaction/happiness, that this will increase job/organizational performance in the process, but this is where the relationship breaks down.  Just because more satisfied employees tend to be better performers, does not mean that increased satisfaction causes increased job performance.

In reality, the satisfaction = performance equation should be reversed. If employees are successful at work, they tend to be more happy.  They tend to feel better about themselves, their work, and are more engaged and invested in what they do.  As a manager, if you can teach and lead employees towards improved job performance, you will also end up with more satisfied and happy employees in the process, and fantastic "two-fer" to have as a manager (better performance and morale).

A recent discussion on the LinkedIn HR Executives Network and a great article on the the Street.com reminded me of this topic. I've wanted to write about it for some time, and these reminders finally got me going. 

The Street.com article started out by stating: "We've got a fundamental premise wrong. We believe that making employees satisfied will make them successful. That's not true. In fact, the relationship is reversed -- make people successful and they will be happy. Employees, at least those you want to keep, don't want to be indulged, they want to be successful." "Causality flows from success to satisfaction. We've got it backward." It then goes on to provide supporting studies and other evidence of this relationship.

So, if you want happy employees who are more engaged and less likely to become unwanted turnover, then help to make them successful, and you will be helping yourself, your organization, and your employees to be better off.

We need to stop trying to make people happy so they will perform better and/or turnover less.  Instead, help to make them successful in their jobs, and you'll get higher job performance, and several other beneficial outcomes in the process!

The StrategicPay Blog would like to thank  fellow Compensation Cafe' blogger Darcy Dees for her contribution of this excellent post.

Performance Reviews: Why Bother?

We've all seen the claims that performance reviews are (or at least should be) dead because
they don't do anything and no one likes giving or receiving them.  I have to admit that I'm
a bit old-school on this issue.  I think they're very important, and when done right, really
help.

Why are performance reviews important?  The biggest reason I still like performance reviews is because they give us a formal opportunity to celebrate success.  Good managers do this on an ongoing basis, but let's face it, not all managers are good managers.  While it is very important to say thank you and specifically praise good work as it occurs, there's also something powerful about listing all of the good work that's been done recently in one
setting.  It can really help to improve morale when someone looks at all they've accomplished.

I am a big believer in strengths-based performance management, so I think that celebrating successes should be the primary focus of the review.  Steve Roesler posted over at All Things Workplace about Peter Drucker and his thoughts on strengths-based performance management.  The following quote nicely sums up why I believe in this approach:

One should waste as little effort as possible on improving areas of low competence.  It
takes far more energy and work to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence.  And yet most people--especially most
teachers and most organizations--concentrate on making incompetent performers into mediocre ones.  Energy, resources, and time should go instead into making a competent person into a star performer.

Steve also posted a very important caution about applying this principle as a rule that I
think must be read hand-in-hand with any discussion about strengths-based performance
management. 

I also believe that reviews are still important from a documentation standpoint.  Again, not
all managers document things as they should.  If an issue arises later, at least you'll have
something indicating that the appropriate discussions took place.

I believe the ultimate goal of performance management is to recognize, encourage, and reward employee behaviors that drive positive business results.  Performance conversations should help team members to capitalize on their strengths and manage their weaknesses.  Of course the ongoing daily conversations that supervisors have with their employees are much more effective and helpful at accomplishing this, but since those don't always occur as they should, I'm still a believer in performance reviews.

Darcy Dees works as the Compensation Manager for Rock Bottom Restaurants, Inc.,
headquartered in Louisville, CO.  She has been working in Compensation for over 5 years now and recently attained her Certified Compensation Professional (CCP) designation.  She spends what little free time she has hiking and reading.

The StrategicPay Series blog is happy to welcome back guest Blogger Theresa Chambers of Recognition Works.  See below for additional contact information.  Thanks Theresa!

While leg warmers and feathered hair may be making a comeback, let's make sure your recognition programs aren't stuck in the 80s. Whether you are creating a program from the ground up or revamping an existing one, here are some tips to bring your recognition practices into the 21st century.

Employee of the Month programs are so 80s. We've heard all the jokes, "Whose turn is it this month?" or "Let's give it to Joe, he hasn't gotten it in a while." The impetus for recognizing great work doesn't happen because you turned the calendar from August to September. It needs to be deserving, for sure, but it also needs to be based on criteria that reinforces employee behaviors aligned with company values.

No surprises. Surprise awards are more about the shock value for those watching than truly honoring the person you're trying to recognize. If you are going to receive an award, wouldn't you like to know ahead of time? Some people love the fanfare and applause, while others prefer their recognition in private. When it comes to recognition, one size does not fit all, so it's always best to ask employees how they like to be recognized.

Don't show them the money. Harvard Business School's thought leader, Rosabeth Moss Kanter, captured it well, "Compensation is a right. Recognition is a gift." While 85% of employees surveyed say they want cash awards, only 9% actually spend it on a special personal treat for themselves. Cash disappears. Awards should serve as a tangible reminder of the achievement. It can be as simple as a framed certificate with signed accolades from coworkers or a retrofitted Oscar trophy with a superhero cape renamed FRED (friendly, resourceful, enthusiastic and dedicated).

Think strategy, not program. Recognition needs to be more than once a year celebration where only a small percentage of employees are honored and everyone else watches. A strategy is ongoing and multidimensional. The most important element is the day-to-day thank-you and acknowledgment. It's about creating a culture of appreciation where it's up to everyone to "notice out loud" when someone does something right for the company.

Involve employees in designing the recognition strategy. People own what they create and want to see it succeed. Committees should represent a diagonal cross section of your organization and its unique culture. Identify Recognition Ambassadors throughout the company who serve as the go-to person for ideas and resources.

Storytelling is one of the most powerful forms of recognition managers can use. People pay attention to who gets recognized and why. An effective presentation should tell the story about what the employee did, the positive impact it had, and how it was an example of one or more of the company values. Use multiple communication vehicles to share employee achievements, including the intranet, recognition bulletin boards and the company's Facebook page to post pictures and give coworkers an opportunity to add their congratulations. This works great for remote employees.

Maximize your managers. People join a company for the pay or benefits, but it's an employee's relationship with their manager that determines whether or not they stay and how engaged they are. Research suggests that employees need to receive recognition and praise for doing great work every seven days to stay actively engaged. Thankfully, giving effective recognition is a leadership skill that can be learned. In fact, training managers on recognition skills increases the occurrence of recognition by up to 50%.

As your business goals evolve, so should your employee recognition strategy. Your core values may remain the same, but it's always a good idea to take a fresh look at your recognition practices. Here's to keeping the ZING in recogniZING!

Theresa Chambers is the Chief Motivation Officer of Recognition Works and founder of the Puget Sound Recognition Roundtable. Visit www.recognitionworks.net for more info.

The Strategic Pay Blog is pleased to welcome Becky Regan as a guest blogger to the StrategicPay Blog.  Becky is the founder and President of Regan HR, Inc. and a fellow blogger on the Compensation Cafe'. See below for more contact information.  Thanks Becky!

Would you want to work for yourself?  Let's be honest here....to be effective as a manager, you know that your employees must trust and respect you. They need to believe that you'll handle their work issues fairly and consistently, yet maintain their confidential information when they seek your help. Repeatedly, studies have shown that employee retention is directly correlated to the quality of the relationship between a manager and his/her employee. Employees frequently look for another job when this relationship doesn't exist.

Years ago, I had a boss who believed that he should treat all three of his direct reports exactly the same in terms of salary. He believed that he was being "fair" by treating all of us the same. Yet we all had different areas of responsibility, work styles, and performance levels.

Treating us all the same simply didn't work, because we were all different.  He treated us like a parent treats his kids; he didn't want to show any favoritism to anyone in particular.  Good parenting practice; lousy management style.....

When I began working for him, I made significantly less money than my peers. I almost left that job out of sheer frustration over the lack of recognition for my efforts and the discrepancy in salaries. Instead, I decided to stay and see what would happen because I trusted my boss to "go the distance" for me. Though it took a longer than expected, he did come through with a title and 33% increase in base pay for me.

I'll never forget how he told me about the big raise and VP title. He took me out to an Italian  restaurant for a fancy lunch and truly made the occasion a celebration to remember!

What kind of a manager are you? Do your employees believe in your ability as a manager? Can they depend on you for your support and fair treatment? Do you recognize their individual efforts and contributions?

Take a minute to consider what you need from your manager in order to succeed in your job? Make a list of your "top 10" requirements. Chances are, your list is very similar to the one your employees would create for you! You can use it as a self-evaluation of your managerial effectiveness to determine how you can improve as a manager before the economy begins to recover in earnest.

How can you become a better manager? By caring enough to...

•     Build a professional yet warm relationship with each of your direct reports
•     Frequently ask them how their job is going and how you can help; be available when they need you
•     Commit to holding weekly staff meetings with everyone reporting on what they're working on in a round table setting; don't cancel or postpone scheduled meetings
•     Honor your commitments to employees; follow through!
•     Stand up for them as necessary to provide support, get salary increases, supplemental training, etc.
•     Do little things, like saying "hello" at the beginning of the day ; walk around & talk with your employees
•     Keep your door open; don't sit in your office with your door closed unless in meetings
•     Find out what their individual interests are and use them creatively when recognizing each employee for exceptional performance
•     Hold your employees accountable for work you expect them to do and timelines to be met
•     Manage performance problems as they arise; manage poor performers out of the workplace
•     Hire smart
•     Ask them how they want to be treated or what outcome they expect from a conflict at work
•     COMMUNICATE, LISTEN and EMPOWER!

Now is the time to become a better manager to enhance employee engagement.  Don't wait to use sound management practices for employees when the economy finally emerges from this "repression" and your turnover increases.  Train your managers now how to effectively manage and build that critical relationship between supervisor and employee.  It's your best insurance policy to implement now to protect your company from losing staff down the road.

Don't treat all of your employees the SAME, RECOGNIZE and build upon their differences to treat each individual FAIRLY.

Becky Regan is the founder and President of Regan HR, Inc., a human resources consulting firm specializing in compensation consulting for California employers and purveyor of online HR products. A former Corporate Human Resources Director (10,000+ employees) with more than 25 years of HR work experience in many industries, her team works with private, public and non-profit clients.  Becky is passionate about designing HR programs and compensation plans that build organizations.

Flickr photo courtesy of Reclassic2