As I start to write, I'm humming the Beatles tune of a similar title in my head. Their lyrics were  poetic and prophetic, even when it comes to matters of the heart at work, because money can't buy workplace love.

That's not to say that many a manager and employer haven't tried to use money to counter other deficiencies in treating/managing/leading/recognizing/rewarding their workforces, but it rarely works as intended. In today's world of commonplace mass layoffs, "doing more with less" and "working smarter, not harder" a few extra bucks isn't going to buy a Whole Lotta Love (I'm starting to hear another classic coming on..., but I digress).

Don't get me wrong; people work for money, and so market competitiveness, especially for base pay, is critical to the ubiquitous "attract, motivate and retain" objective we often hear mentioned. (Base pay is mostly for the "attract" part, and to a slightly lesser degree the "retain" element; not so much for the "motivate" part, but that's a post for another day). Because cash compensation is so important, it's critical to make sure the cash elements of your rewards programs are competitive with the relevant external labor markets in which you compete for talent.

But if you think you can buy workplace love, engagement, loyalty, or commitment, you're mostly dead wrong. Some people can be bought psychologically, but not that many (excluding politicians, of course!).

Substantial research confirms the disconnect between money and commitment or engagement at work. For instance, a recent study conducted by WorldatWork (membership may be required to view study results), in collaboration with the  Hay Group and others, confirms that indeed, non-pay elements of the total work experience are the key drivers of employee commitment and engagement.

The study, a survey of hundreds of compensation/rewards professionals, reports that organizations realized better outcomes in their efforts to "engage" employees if non-HR employees were also involved in the development of reward and engagement efforts.  Regarding key reward elements, "non-financial rewards, as opposed to financial rewards, are viewed as having more impact on employee engagement," says Tom McMullen of the Hay Group.  He goes onto say that "quality of work, career development, organizational climate, and work-life balance have a greater perceived impact on employee engagement than financial rewards." 

The perceived quality of managers and top leaders are also more important than financial rewards on impacting engagement.  "Quality of leadership has a profound impact on employee engagement and motivation" says Paul Rowson of WorldatWork, who also says that "organizations must think it terms of total rewards and not just financial rewards if they are to enhance employee involvement, commitment, job satisfaction - and performance."

Assuming your compensation levels are already competitive, the next time a weak manager seeks approval to use increased pay to enhance retention or morale, maybe we should be thinking about fixing the manager, rather than throwing money down the drain of worker discontent, especially with their management and/or leadership.

You may have heard the phrase that employees join companies, but they leave their managers - this is so true (just think about the last really bad manager you worked for).  Of course, some will leave for more money or opportunity elsewhere, for sure, but when people are poorly treated and/or managed, virtually all of them want to leave!

Once your workforce is paid fully competitively, additional reward dollars would be better spent on programs and actions that enhance culture, employee commitment and engagement, and ones that strengthen your management and leadership.

Don't try to buy employee love and loyalty; earn it instead.  It's cheaper, and more effective.

Doug Sayed is principal and founder of Applied HR Strategies, Inc., a Seattle-based compensation consultancy, and developer of the StrategicPay Series, a series of hands on, "do it yourself" guides for developing your own strategic compensation programs.

This guest post was written by Shannon Swift of Swift HR Solutions.  Thank you for your contribution Shannon!

You are the CEO, COO,CFO  or VP of Finance, or VP of Operations. You have a full plate, but you are also responsible for Human Resources.  Am I right?

As a VP of Operations you have projects to implement and an office to run.  As the CFO or VP of Finance you have a top line to watch and a bottom line to manage.  As the COO you have everything already mentioned and more than likely a sales organization to oversee.  And as the CEO you have it all and much, much more, as the buck stops with you.  So who has time for Human Resources?  Who has time for all that touchy, feely stuff?  Heck, who even has time to think about any of it today as we are all trying to do more with less?
 
You do, and you have to.  Why? Because, as the VP of Operations, you need strong, competent people to implement and manage those projects.  As the CFO or VP of Finance, you need a critical eye to examine ways to cut costs related to things like benefits and insurance without damaging morale, and someone to keep you compliant to avoid costly litigation and fines.  If you are the COO, you need everything already mentioned along with a solid strategic partner to help you with organizational design to put  the right people in the right places to ensure all are successful and, in turn, the Company.   And if you are the CEO, you need an experienced confidant and candid partner to help you through everything from layoffs to acquisitions and board meetings to executive coaching.  You need to know that every issue related to the success of your company that involves your people (which is nearly every one) is covered.

So, has your view of the value and need for Human Resources changed?  Been updated?  Been confirmed?  What do you need to know to put the right Human Resource program in place for your company?  Well, let's start with the stage of your company and go from there.

Top 5 things you need to know about Human Resources if your company is between 2 and 20 employees:

1.       Implementing best practices and philosophies early is the key to growing your company the right way.  What we mean here are things like foundational areas such as hiring practices, compensation and benefits philosophies, culture and values, etc.

2.       Ensure your benefits are in place and fit your company culture and budget.  A good Human Resource professional can help you do everything from implementing your first benefit package to evaluating an existing one to ensure you are getting the best value for the benefits you are providing and offering.

3.       Compensation is key to attracting and retaining the right people. Having a strategically thought out plan that fits your company's stage of growth, funding, and product stage, and is also competitive with the market, is key to keeping the team happy, as well as your investors.

4.       You never get a second chance to make a first impression.  Be sure that you have an orientation program that helps people quickly come up to speed on all the things they need to know to get started successfully.

5.       Have solid tools in place and an experienced resource to reach out to when you are in need of Human Resource support.  Attorneys are expensive, and don't necessarily fit your culture.  Accountants are not normally well versed in Human Resource requirements, so you need someone on your team who is focused on Human Resources and has the best tools to support you.  Utilizing a product like SwiftHR®-in-a-box affords the appropriate level of HR tools and resources needed in a cost-effective way for even the earliest stage employer

The Top 5 things you will want to consider if your company has more than 20 employees:

1.       If you currently have someone internally managing Human Resource ask yourself if they are tactical, strategic, or both.  If you have an Office Manager, for example, focused simply on tactical execution of the HR function, you likely are missing out on a number of important issues around such areas as compensation (including equity), benefits design, organizational design, leadership and executive coaching.  You may find that adding senior level Human Resource expertise leads to HR practices that more fully support business objectives and facilitate effective organizational growth.  This is a position ripe for outsourcing if you're not ready to absorb the cost of a full time professional.

2.       Make sure all of your executives and management are on the same page.  A good way to test this is to ask each what the mission of the Company is, along with the foundational values that drive the Company's behavior.  Will the answers be the same?  Ask them what the key business initiatives today are and what their role is in ensuring they are met.  Will they know?  Strategic Human Resources can help to ensure that these are clearly articulated and that all parts of the organization are aligning in the same direction.  Having everyone on the same page will allow the company to move toward success much faster and easier, and with fewer hiccups.

3.       Evaluate your compensation and benefits practices to make sure you have a defensible structure with strong evidence of internal equity.  Ensure that your capitalization table is up-to-date and that your underlying compensation philosophies are resulting in consistent hiring and merit procedures and outcomes.  Compensation is an emotionally charged area and one ripe for compliance and litigation problems.

4.       Review your Organizational Chart.  Look for areas that no longer make sense, or may indicate potential problems are looming.  Common problems include too many direct reports (i.e. > 5-7), a strong individual contributor who has somehow managed to build a large base of direct reports but has no leadership or management skills, functional sub-groups under the wrong group, "holes" in a department, or "equal partners" with no clearly defined authority points.  Keeping an eye on the organizational chart of a rapidly growing business and making corrections before they're needed is essential to effective execution.

5.       Know what your people care about. When you started out, the team was all young, single, and didn't care about things like health benefits or EAPs or even having a 401(k) plan.  Does the group still look the same now, 2 or 3 or 4 years down the road?  As demographics of the team change, the package offered should reflect the members you're trying to keep on board, and also those you're trying to recruit.

So where do you start in regards to getting your Human Resource initiatives on track or in place?  The best place to start, if you are an established company, is with a complete Human Resource Assessment.  This process and resulting document will help you determine and address areas of non-compliance, both state and federal, and will also identify areas of deficiency in best practices and gaps in your HR program.  Another consideration in your evaluation of how you're doing as an employer is to invest in a culture assessment.  What aspects of the Company and their job are important to your employees?  What do they say outside the company walls about the company? What would they do differently if they were in charge?  The answers to these questions are all things that help you as an executive anticipate and proactively avoid issues that could slow your company's progress down, or in the worst case scenario, bring it to a halt.
 
Tell us what you are doing to ensure Human Resources is a priority in your company.  What are you doing creatively that you can share with other executives?  What questions do you have that we might be able to answer?

Shannon Swift is the Founder and CEO of Swift HR Solutions, an HR Consulting firm that supports early and mid-stage companies in the Northwest through its talented Human Resource consultants and its SwiftHR® in-a-box product and surrounding services.  For more information contact Shannon at Shannon@swifthrsolutions.com or via phone at 888-768-5920  X701.

Is it crucial to maintain a competitive pay posture to attract and retain high quality talent?  We think so (that why we spent over a year writing a book about how to do it!), and most HR and rewards professionals believe that as well.  But does paying competitively make your people happy, engaged and/or driven to perform?  Generally not, unless you're using a well-designed incentive program to drive certain behaviors (but that only addressees the behavior component).

Competitive base pay is absolutely critical to attract talent, and to maintain a basic level of satisfaction with the compensation that employees receive for voluntarily sharing their skills with your organization.  Beyond base pay though, what really drives motivation, worker engagement and the desire to stay with an organization are how you manage and treat them.

See the table below and tell me what you think of the difference is between an employee who is willing to stay with your organization because they are basically satisfied (but not terribly engaged) vs. an employee who really wants to stay with your organization and believes in it (i.e. is engaged).

Source: Employee Hold'em, 2009

The data above is from a large study done every two years or so by by an organization that focuses on employee engagement, and the results are clear: it's not just about the money!  In fact, we would argue that how you manage and treat your employees is more important than the money, assuming the money is about where it should be (you're paying at least close to or better than competitively).

With dollars scare these days (over 50% of employers gave 0% - or less - pay increases last year, and 2010 pay increase budgets are south of 3% for now), how you treat your employees is even more critical.  Hence, there is a growing movement towards more qualitative rewards (feedback/communication, appreciation, training, etc.) , as opposed to just quantitative ones (mostly pay and benefits)

We'll continue to bring you more information and data on this large topic of worker psychology, qualitative rewards and employee engagement in the coming months.

Don't miss an opportunity to sign up and participate in these upcoming events:

Compensation, Rewards & Employee Engagement Trends - 2010 and Beyond (approved for 3.5 HRCI Credits)
Date: May 13th, 2010 8:00 AM to noon
Location: Bellevue Harbor Club
Cost: $295.00
Register for this Event

Organizations are struggling to keep up with changes in salary and compensation trends. As the economy recovers, what is the future of pay and employment? What can employers do to retain and re-engage talented employees? In this half-day session, participants will explore 1) the latest compensation trends and future rewards thinking and 2) the elements of a successful employee engagement and recognition strategy. Participants will take away low-cost tools, ideas and resources to build a culture of appreciation within their teams and organizations. Workshop instructors include StrategicPay Series creator, Doug Sayed and Chief Motivation Officer, Theresa Chambers of Recognition Works. The program will be held at the Harbor Club in Bellevue from 8am to noon. The program includes a continental breakfast, parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone, if interested.

 
Utilizing Market Data & Conducting a Competitive Pay Analysis (approved for 3.5 HRCI Credits)
Date: June 10th, 2010 8:00 AM to noon
Location: Bellevue Harbor Club
Cost: $295.00
Register for this Event

This half-day program will focus on how to conduct a market-based pay analysis, including selecting and using pay data sources, grading jobs into a salary structure and evaluating how the company measures up.  This is an advanced, in-depth course.  Participants will walk away with a working knowledge of the subject matter, as well as the tools and templates to execute in their company.  The cost includes a continental breakfast and parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone.

There have been so many fundamental shifts in the workplace and the employee-employer relationship in the past two decades that it's not only time for workers to reconsider how they manage themselves and their careers, but also time for us, as HR and rewards professionals, to relook at how we face today's workplace realities, which include:

• The death of job security as we (and especially our parents) once knew it.
• Fundamental shifts in loyalties, and in some case of trust, in the employee-employer relationship.
• The realization that all employees are responsible for their own career and are in effect, the CEOs of  "Me, Inc." (In other words, employees are responsible for managing their own career and professional development, not their employer).
• The job description for CEO of Me, Inc., includes a line that job security is primarily the CEO's responsibility, not their employer's (see Ann Bares' recent post "A Fundamental Shift in Talent Management: Will 'Active Job Security' Replace 'Passive Job Security'?").
• That employers now, more than ever, are responsible for creating an environment where their Me, Inc. employees will choose to keep their skill sets and performance focus.

Since Me, Inc. employees are primarily concerned about "Me" (that's you, not me!), most Me incumbents want to know details on the fundamental question of "What's in it for Me?" in their employment relationship. (I call it the "WIFM question").

In the "old days," employees worked for employers, and employers controlled virtually all aspects of the employment relationship.  In return, employees showed up to work nearly every day, did their jobs and generally enjoyed high levels of jobs security. That was the implicit contract: I take care of you, and you take care of me...

Today, employees must take care of themselves (and hopefully most labor force participants have figured this out by now), which means that most insightful workers are now working for Me, Inc., even if they are doing so at an employer's place of business.  Today, it's far more important than in the "old days" for employers to provide the favorable set of conditions for Me, Inc. incumbents, and to do so in a way that is productive and fruitful for both sides of the employment relationship.  With most of the implicit loyalty out the window, the dynamics of the employment relationship have changed significantly. Employers need to provide a reason (and hopefully several of them) for high-performing Me, Inc. employees to stay with them.

Translating these shifts into newer ways of doing business as HR and rewards professionals means, among other things, that your mode of communications must be enhanced to address the WIFM questions and the win-win relationship between employers and Me, Inc. workers. For instance:

• Instead of just informing employees about your compensation and rewards philosophy,  communicate it from a partnership perspective and explain why and/or how your philosophy benefits them too (back to the WIFM question).
• Rather than just expecting performance, clearly define what performance means for each individual, and how it is important and beneficial for the business and the employee to perform well.  Create a "win-win" strategy.
• Explain the performance-benefit linkage (the performance WIFM) between how high levels of performance benefit the employee as well as the organization.
• Continue to communicate the employer-employee value proposition, addressing the WIFM questions and how the employment "deal" is a beneficial one for both employers and their Me, Inc. employees.

As we're discussed recently on the StrategicPay Blog, there are not going to be a lot of extra fixed payroll dollars to throw around in the next few years, and so it will be especially important to focus more on the psychological and qualitative benefits of working for your organization.  These include developing and supporting a culture of appreciation and accountability; having a well trained, high quality, appreciation and performance-oriented management team, and providing learning and growth opportunities for your Me, Inc. employees in residence. Training and coaching managers to utilize the right skills and mind-set for this type of management style (communicative, supportive, collaborative, and yet accountability-driven) will be critical to successfully managing in the era of Me, Inc.

Another way employers can help create a positive partnership is to recognize and value the inherent stresses impacting workers these days. In today's hectic world, with working parents and crammed schedules, workplace flexibility is an especially valuable workplace benefit that costs little to offer. Those employers that can provide a trusting but accountable environment and that can manage to job expectations, rather than managing to specific times on a clock, will likely see benefits in lower turnover and greater loyalty and engagement among their professional and managerial staff.   (Yes, you'll still have to manage to the clock for your non-exempt employees).

Of course, offering a competitive compensation and benefits package is still very important in the "attract, retain and motivate" equation.  More important than the minimal extra dollars that most employers will be adding to their payroll budgets in the next few years, however, is the way your employees are treated and managed. The days of the "we own you" approach to management are numbered. The days of "we work together for mutual benefit" is where the world of work is heading for high-performing organizations.

Doug Sayed is principal for Applied HR Strategies, Inc. and developer of the StrategicPay Series, a series of "do it yourself" toolkits designed to assist HR and compensation professionals to develop strategic compensation programs on their own.

The StrategicPay Series authors and selected expert guest presenters are offering several intensive half-day workshops for HR and compensation professionals/managers. For certified professionals, HRCI credit is pending for the upcoming events.

The cost of each session is $295, but there is a $50 discount (per session!) for those signing up for two or more. In addition, participants receive a coupon code for 20% off on the purchase of the Base Pay Toolkit, worth half cost of attending alone!

Compensation, Rewards & Employee Engagement Trends - 2010 and Beyond

With Doug Sayed, and Theresa Chambers of Recognition Works

Note: approved for 3.5 hours of HRCI credits!

Date: May 13th, 2010 8:00 AM
Location: Bellevue Harbor Club
Cost: $295.00

Register for this Event

Organizations are struggling to keep up with changes in salary and compensation trends. As the economy recovers, what is the future of pay and employment? What can employers do to retain and re-engage talented employees? In this half-day session, participants will explore 1) the latest compensation trends and future rewards thinking and 2) the elements of a successful employee engagement and recognition strategy. Participants will take away low-cost tools, ideas and resources to build a culture of appreciation within their teams and organizations. Workshop instructors include StrategicPay Series creator, Doug Sayed and Chief Motivation Officer, Theresa Chambers of Recognition Works. The program will be held at the Harbor Club in Bellevue from 8am to noon. The program includes a continental breakfast, parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone.


Utilizing Market Data & Conducting a Competitive Pay Analysis

Note: approved for 3.5 hours of HRCI credits!
Date: June 10th, 2010  8:00 AM
Location: Bellevue Harbor Club
Cost: $295.00

Register for this Event

This half-day program will focus on how to conduct a market-based pay analysis, including selecting and using pay data sources, grading jobs into a salary structure and evaluating how the company measures up.  This is an advanced, in-depth course.  Participants will walk away with a working knowledge of the subject matter, as well as
the tools and templates to execute in their company.  The cost includes a continental breakfast and parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone.
 

Compensation Trends & Salary Planning

Note: HRCI credits anticipated. We will apply for them as the date gets closer
Date: September 23rd, 2010 08:00 AM
Location: Bellevue Harbor Club
Cost: $295.00

Register for this Event

This program will provide an update on current market trends, including merit increase budgets, salary structure movement, etc., and instruction on salary planning, budgeting and merit plan design.  Participants will walk away with a good picture of the current market conditions and several ideas for merit plan design, as well as the tools and templates to develop, model and implement in their companies.  The cost includes a continental breakfast and parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone.

Thank you to my "guest posters" for sitting in while I was away!  I'm back, but will have a few more guest posts, because so many colleagues were nice enough to contribute.  Getting back to my own work though, temporarily at least, the following post is a from my recent post at the Compensation Cafe.

The days of near-guaranteed base pay increases and growing employer contributions to ever-increasing benefits costs are slowly (but surely) dwindling.

No, base pay isn't going away, nor are periodic pay increases, but the battle against the growth in fixed compensation costs (base pay, health care costs, etc.) is gaining strength, even as the economic recovery starts to take hold.

Most employers are willing to pay out increased compensation, but today much of those pay increase budget dollars are going into variable pay, which typically flexes with organizational performance and ability to pay. The trend toward increased variable pay has been going on for two decades, but it seems to have hit a "tipping point" in recent years, as organizations struggle to absorb a never-ending battle with health care cost increases (crowding out merit budgets in the process), while trying to get more "bang for their buck" with their compensation dollars.

While organizations try to keep a lid on fixed costs, more enlightened employers realize that there's more to the "attract, motivate and retain" equation than just base pay and benefit dollars. But before going on, let's look at some general reward trends over the last few decades, and how we ended up where we are at today.

• The 1970's and 1980's: plain-vanilla base pay and benefits; defined benefit (DB) pension plans were common in larger, manufacturing and/or unionized organizations. Variable pay is confined largely to executives and sometimes middle management.
• The 1990's: many employers add variable pay (or push variable pay into lower levels of the organization) and other reward elements into the mix, such as stock option programs. Many employers freeze or eliminate DB pension programs and retiree medical as just too costly to maintain. Health care cost sharing is increasingly pushed down to employees. The 401(K) is the new pension program.
• The 2000's: a greater movement towards "total rewards," including variable pay for the masses and a greater recognition of the need to pay more attention to qualitative vs. purely quantitative (dollar dominated) rewards. Employers continue efforts to contain fixed costs, especially in the form of sharing increased health care costs with the employee base.
• The 2010's: as we enter a new decade, we see a greater focus on comprehensive or "holistic" rewards, including a movement away from purely quantitative rewards to qualitative and work-life rewards. Qualitative rewards include career/job growth and development opportunities, increased focus on organization culture and communication, work flexibility options, work-life "fit"options, and  creating a culture of appreciation/recognition.

Decades ago, Herzberg's work on motivation and job enrichment theorized that that pay is a more of a "satisfier" (it can meet basic needs and satisfy, but cannot make employees "happy" about their employment).  Confirming this, many studies have shown that pay is generally not the reason employees leave organizations (unless pay is noticeably below what's available in the relevant labor market); it was considered more of a "hygiene" (in Herzberg's terminology) or satisfaction factor. I believe this is an accurate characterization of base pay's role in job satisfaction, even today.

In reality, it's how managers treat and manage their staff, and how leaders lead their organizations that has the greatest impact on retention, job satisfaction and the propensity to turnover.  This is where rewards are headed; not just dollars (there are so few to spread around these days), but with qualitative or psychological rewards that can help to engage and retain employees (or to dis-engage and repel workers when not provided, or provided poorly or disingenuously).

Qualitative or psychological rewards focus more on genuine management/leadership, honest communication and regard for employees; building a culture of respect and appreciation, providing honest and constructive performance feedback, offering career and professional development opportunities, offering work flexibility and work-life balance fit options.

With the limited merit budgets of today and (predicted) for the future, there is just not enough "oomph" in the dollars that employers can offer to assist too much with the critical ideal of "attract, motivate and retain." Variable pay will help, but most of the rest will have to come from other types of rewards.

It's time to start thinking beyond dollars...


Doug Sayed is principal at Applied HR Strategies, a Seattle-area compensation consultancy and author of the StrategicPay Series Base Pay Toolkit, and hands-on, "do-it-yourself" (DIY) guide to developing a strategic market-based compensation program, complete with dozens of pre-built tools and templates, ready for use.

The StrategicPay Blog would like to welcome two new guest bloggers: Robert Spencer has worked on change programs achieving more than $1B in savings for clients.  The information in this blog is based on a book he is writing, Change Made Simple; he can be reached at r.spencer@comcast.net.  He is joined in this series by Christy Martin who is a compensation consultant in Seattle, Washington.  She can be reached at christymartin@mindspring.com.

Be More Successful Making Changes to HR Programs

Two underlying factors cause change programs to fail:
•    Too much stress or
•    Too little attention to internal politics, or
•    Both.  

While the mistakes can differ, organizations with failed changes often end up generating significant stress for those who need to change their behaviors. 

At other times, organizations ignore the social networks that exist, and serve to articulate and promulgate the real values of the organization. 

Together, stress and social networks serve to empower the anti-change agenda and undermine the desired change.

The reason why these factors (and several of the mistakes) are so difficult to manage is that they are often counter-intuitive, driven by the fact that the reality of the person driving the change is usually very different from that of the people expected to change.  But importantly, together they also constitute both a practical and moral imperative for any change agent or sponsor.

Figure 1, below, illustrates the change process as it is experienced by most project and change managers.  For them, change will unfold in a logical manner as the project is begun, then user capabilities go through a transition, and ultimately the change is completed.  There is nothing surprising about this … except that it is wrong!

Figure 1 Logical Model of the Change Process

Why is the logical model wrong?  It is wrong because change is an emotional, not a logical process that is not complete until emotional adjustments have been made.  Figure 2 below provides a view of this.  The process becomes emotional as people who are expected to change experience a loss of the way things used to be and wrestle with all of the insecurities or concerns that arise as they attempt to master something very different.  Figure 2 clarifies this process.

Figure 2 Emotional Model of the Change Process

How does this insight about emotions relate to the issues of stress and social networks?  First, the change process itself is very stressful and intensifies the emotional impacts experienced by those expected to change.  And as stress increases, the power and influence of informal social networks in the organization are increased.  Importantly, since these social networks define how work is actually accomplished within the organization, they can easily undermine the change and thwart expected results, especially over time.   Figure 3 illustrates some of the common factors that come to play and how they undermine productivity.

Figure 3 Factors that Erode Productivity

The implications?  HR professionals who make controlling stress and engaging social networks a priority in their organizations will contribute significantly to improved performance.  This is something that will otherwise be difficult for project managers and executives to master on their own, and points to a important strategic role HR professionals have to play in the creation of high performing organizations.

Robert Spencer has identified 6 mistakes organizations need to avoid for more successful change.  He will share 2 of the 6 mistakes in upcoming guest posts with his collaborator, Christy Martin, for this StrategicPay Series.

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!