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Push for $15 Pay Raise Increases Employee “Relative Pay” Tensions

WSJ

I know as compensation professionals we are always keeping up with industry trends and best practices.

In my role at eeStrategy, my goal is to apply those processes to help compensation professionals implement strategies that successfully achieve their employee engagement, retention and business goals.

I would like to share an article by The Wall Street Journal – Push for $15 Raises Pay – and Tensions.  It focuses on the “relative pay” and “pay injustice” tensions caused by the recent push to increase the minimum wage.  The focus of this article is mostly on retail, however, relative pay tensions are increasingly being heightened when employees find out that the new hires are coming on board at higher salaries . This can be  especially prevalent with critical skill employees and competitive situations make the primary focus current competitive/market driven compensation.

After reading it, I reflected on how our compensation strategy and solution focuses on ensuring that in these changing times employee satisfaction and engagement is not compromised.

I am sure the article will make you reflect upon your own workplace environment and relative pay issues.  I would appreciate hearing your thoughts.

guido.digregorio@eestrategy.com

How Your Business Can Go Further with Workforce Segmentation

There are two ends of the spectrum when it comes to compensation strategy.  There is the ‘peanut butter approach’ where everyone gets the same treatment – the same pay increases and benefits for the same job.  On the other end, there is completely personalized compensation in which each employee is analyzed and given a compensation package tailored to them.  The trick is working out where your organization’s compensation strategy should sit on that spectrum.

Until recently, technology hasn’t allowed organizations to reach the latter end of that spectrum in any effective way.  Today’s solutions allow businesses to have a completely bespoke compensation strategy for every person in the organization, if that’s the optimum approach.  The days of ‘one size fits all’ approaches is over.  Just as marketing systematically segments customers to target investments strategically, HR needs to segment talent to figure out what the optimum approach is and deploy human capital strategically.

We already segment the employee base in certain ways; most role categorization could be defined as segmentation – there is a difference between exempt and nonexempt, high-performance, engineers, salespeople, and managers.  Segmentation is being done to the extent that it can be done in an Excel spreadsheet, i.e. it’s being done far too broadly.  The broader your segments, the more you adhere to a ‘peanut butter approach’, the more waste you have in your organization.  In order to optimize our talent and compensation spend, we need more specific segments, and segments within segments.  We need to go further with how we define and understand our employee base.

For some companies, this means grouping employees according to their needs, and tailoring everything from terms of employment to incentives for different segments.  Often organizations use workforce segmentation to help identify critical sections of the workforce, aligned with company strategy, taking into account long-term talent trends, external market influences, and company plans.  In all cases, workforce segmentation empowers companies to improve financial performance, customer service and employee satisfaction, become more proactive, and develop a comprehensive understanding of their workforce.  Most importantly, it provides a critical link between business strategy and HR, resulting in an aligned workforce and business success.

For one fast food retail company, the goal was to get a better understanding of their employee’s needs.  The company needed to get an idea of what the market looked like and figure out the best way to make it work for their company.  Conducting surveys on lifestyles, behaviors, and attitudes – as they would do with their customers – the company was able to create a view of their workforce consisting of five different segments.  The segments included the social student (single, no kids), practical individualist (work is just a job to support other pursuits), transitional college graduate, community builder (inspired by the company’s charitable work) and the career enthusiast (a lifelong employee).  These segments did not fall into age groups, racial groups, or regional groups; rather they fell into lifestyle groups.  With this knowledge, HR leaders were able to adjust talent management tactics and processes to deliver the best results for their employees and for the organization.  The logic is simple: people are motivated by different factors, need different things, and have different interests and segmenting your organization along superficial demographic lines won’t tell you these things.  Each role must have an Employment Value Proposition that includes a mix of tangibles and intangibles, delivering a custom mix that motivates each group in the best way possible.

Workforce Segments

Using workforce segmentation to identify critical workforces is also vital.  Your organization has portions of the population that are pivotal to creating value and are vital to its success.  There are some jobs where resources and improvement are going to pay off a lot more and without which the organization would find itself at a strategic and operational risk.  Hence, significant efforts must be made to recruit, retain, and develop top performers, without neglecting other populations.  Segmenting and prioritizing can result in a 10% to 20% increase in your business impacts, without any additional budget.  It is a matter of segmenting and modelling the workforce to find these employee groups, allocating resources where they are most useful, and focusing on opportunities that can produce the greatest business results.

Mickey Mouse vs. Sweepers Grayscal

John Boudreau uses the example of Disney’s street sweepers to demonstrate how prioritization of critical workforces, and a focus on how they are managed, is vital to talent strategy.  Disney has obviously recognized the importance of Mickey Mouse, and their other characters, to their brand experience.  They are the most recognizable faces of the company.  Hence, Disney has controlled the role of Mickey Mouse to the point where the variation between good and bad performance is negligible.  Street Sweepers, on the other hand, have the potential to make a huge difference to the customer experience and the variation between a good sweeper and a bad sweeper is substantial.  When it comes to customer support, the street sweepers are the most accessible members of staff and it is they, not Mickey Mouse, that are directing people to the bathroom, identifying and resolving issues before they become issues.  The sweepers are faced with customer interaction on a day-by-day, minute-by-minute basis, and how they respond to guests can make a much bigger difference to customer experience than Mickey Mouse, even though Mickey is more important than the sweeper position, in terms of average value.

We don’t need to tell you that the advantages of workforce segmentation are clear.  Different employees do the same job different ways and different roles produce more value for different businesses.  The more you can understand our workforce and its contribution to business success, the more you can tailor the way you treat and motivate these workforces, the better off your organization will be.  Developing customized adaptable programs will benefit employees, customers and the company as a whole.  Workforce segmentation must go deeper and further than it currently does.  Rather than approaching workforce segmentation as simply a way to view current workforce demographics, use it as a method by which to comprehensively understand and address your organizations workforce and put in place strategies to optimize it.  Chances are that in your organization today, there is either a huge latent capacity you are missing, or a wastage of resources.  Look deep enough in your business with workforce segmentation and you’ll discover these opportunities to increase efficiency, optimize your workforce, and make a difference to your company and your employees.

e-HRM 2014

ImageThe 5th International e-HRM is a two day conference (July 30-31st 2014) that brings together international scholars and HR Information Technology business leaders and consultants to present research on how organizations are (should be) deriving value through their e-HRM technology.

The conference features keynote speakers Peter Cappelli (George W. Taylor Professor of Management at The Wharton Business School), Jake Krakauer (Senior Director, Business Analytics, Oracle Corporation) and Lexy Martin (Senior Vice President, CedarCrestone).

We’re particularly excited for the Wednesday afternoon, which includes:

  • Lexy Martin and Dr. Janet Marler (University of Albany) on ‘Proving the Value of HR Technologies: History, Current Directions, and Welcoming Academics into Our Conversation’
  • A panel on ‘Big Data for HR: After the Hype Dies’ with Roy Altman (HRIS Manager of Analytics, Memorial Sloan-Kettering Cancer Center), David Bernstein (Vice President eQuest), Jeremy Shapiro (Executive Director at Morgan Stanley Talent Analytics) and Dr. John Boudreau (University of Southern California and Center for Effective Leadership)
  • A networking dinner at the Oyster Bar

The conference is a brilliant way to bring together scholars and practitioners to share insights on the constantly evolving landscape of e-HRM.

Find out more about the conference here.

Are you attending the 5th International e-HRM conference?

Return on Investment with HR Software – Not a Pipe Dream

Are you a leader or a laggard?Early last month, Rob Scott wrote an article chiding vendors and buyers alike for the shift in the climate of HR software that has customers buying into software solutions that do little to realize change in their HR environment.

The right HR software provides both a tactical ROI and potential for a strategic ROI. While a tactical ROI can be quantified and realized early, it is the extra piece that allows organizations to take on the long-term change that delivers strategic ROI.

Over the last year, we have seen many organizations buy technology to automate their existing processes without making any significant changes to their thinking or practice.  While these organizations may not be experiencing long-term business success as a result of this technology, they are seeing fairly immediate bottom line impacts – a reason to be very happy with their solutions. Most organizations can realise a real, tangible tactical ROI from most software solutions, and that’s a completely valid result.

On the other hand, there are organizations looking for technology that supports a transformation. A move towards a more effective HR environment and a new way of doing business requires technology that aids and fortifies such a change. To say that those organizations buying a transactional solution with a strategy-based ROI are silly or are being ‘suckered into believing that a software implementation would improve HR services’ is to do them a disservice. It’s no secret that getting transactional processing under control and fully realizing strategic ROI is a multi-year process, involving significant change management considerations beyond just dropping in some magic technology. HR professionals and business leaders understand this.

It’s exactly why three or five year contracts make sense. They are sensible, responsible and required if an organization is to make a commitment to achieving a great strategic ROI. If, in the worst-case scenario, at the end of those three years, the organization has only realized a transactional ROI, they’ve still achieved more than they would have without the technology. Small to medium sized companies typically spend around 0.15% of total payroll running their annual remuneration review process, no matter what the final remuneration decisions are.  For these same organizations, the cost with technology drops significantly.  What’s important is that the investment made in technology is delivering an appropriate return – which it will, even if that’s only a transactional return.  If that alone isn’t enough to justify addressing such a universally hated practice as remuneration reviews, remember that this is just the minimum benefit.  The right technology will also set you up for greater returns with strategic enablement.

Many solutions, like eeStrategy’s, offer both a transactional and strategic ROI. In fact, eeStrategy sees this kind of successful change in our customers year after year. With technology and workforces that are in alignment with their organization’s long-term goals and strategy, our customers are able to evolve and refine their approach to managing talent while still seeing immediate transactional benefits.

While Scott suggests an increase of advisory capability from vendors to deal with disillusioned customers who have not realized their desired ROI, the real shift should be towards a realization within companies that there is latent capacity resident in their talent. An increased effort to unlock that capacity using technology solutions that offer both transactional and strategic ROI will enable organizations to achieve successful outcomes. The sooner the enabling platforms are in place, the sooner you can accomplish great things.

Implementing technology and achieving a transactional ROI is not a bad outcome. Obviously, achieving a better ROI or an ROI in a shorter time is the ultimate goal. eeStrategy automates your processes and improves operational efficiency to deliver a transactional ROI in mere months.  With our revolutionary technology suite, eeStrategy’s sophisticated capabilities facilitate an even greater strategic ROI on top of that.

The question is: do you want to be a leader or a laggard?

Contact us at eeStrategy to become a leader and realize transactional and strategic ROI.

Have Your Say!

HR Tech Survey

The 4th Annual Australian HR Technology survey by Navigo Research has just been launched.

The survey examines the local HR Technology landscape and specifically focuses on vendors/solutions used, satisfaction, expenditure and future trends. Have your say and together we can contribute to the Australian marketplace.

The survey will take around 15 minutes to complete, with the results available for you in July.

All respondents who complete the full survey will go in the draw for one of five Double Movie Passes, drawn by Navigo Research.

Take the survey now!

http://NavigoResearch.com.au/HRTechSurvey

You can also download previous reports at NavigoResearch.com.au – last year’s report had over 1000 downloads.

Applying Military Principles to Win the War for Talent

Military leaders are trained to plan and execute strategies that win battles.  HR professionals face a similar battle; this one is enduring, experts predicted it 15 years ago, and it is in full swing for 2014.  Yet, HR professionals still find themselves unequipped to fight the war for talent.  Military strategists recognize that winning requires effective, adaptable processes for planning, intelligence, speed, and the right technologies to execute the resulting plan.  Your HR can gain similar competitive advantage through effective execution of those same four military principles.

Planning:  In our case, Workforce Planning.  With everything constantly changing: economic conditions, laws and regulations, market opportunities, etc., you will not win the war for talent with a workforce plan developed at the beginning of the year, and brought out only occasionally to check against goals.  With workforce plans made using accurate real-time data, you can adapt to your needs at any given time.  You are then much more likely to have the right people in the right place at the right time.  When it comes down to it, that’s what the war for talent is all about.

Management teams must practice continuous workforce planning utilizing relevant and truthful talent data.  Workforce data combined with external information, such as labor and salary market data, and data from operation systems, such as point-of-sale and CRM, enables HR professionals to answer the big talent planning questions more effectively.  The right HR system, a system in which you can combine data and analyze it directly, is the key to satisfying this goal.

Intelligence:  As USC’s John Boudreau pointed out, a major failing of many organizations is that they keep detailed records of material assets, yet lack the actionable intelligence to know when they are in danger of losing high-performing employees.  A HR system that is fine for housing workforce data but can’t engage employees for effective communication on performance or career goals isn’t the right system.  For business leaders to understand talent capabilities on a complex level across the workforce they need a system that intuitively takes into account all the possible anomalies and details.

After-action review:  The after-action review (AAR) is a fact-driven and effective process used to ensure the correction of errors and continuous improvement.  After every major initiative is launched and allowed to settle, key stakeholders must gather to give and receive feedback on the project.  Examples of this process include post-compensation planning, where the entire plan is introduced to management, and they are given the chance to provide feedback to the HR team, which HR integrates into a revised plan.

As soon as the review process is completed, there is another opportunity to review what worked and what can be improved upon.  Many organizations don’t do this effectively because it takes time, and most teams are busy with the next project.  Military organizations always plan this time into every project, and it is kept sacred.

Technology:  Technology is an enabler of intelligence.  The military has state of the art technology, which acts as a force multiplier, effectively augmenting teams.  Think of your HR technology as a force multiplier.  It should add capacity to your team.  It should free up time for better strategic thinking, planning, and after-action review.  It should provide you with mission critical data, heads-up displays, and aerial views of your business, your talent, and your competitor’s talent.  The challenge is to assemble the best technology available to you, whether you achieve that by building your own, buying more, or repurposing what you have.  The right technology is vital to executing your strategic processes effectively.

Lessons learned from the military can be applicable to your HR challenges, and with the right tools, technologies and enabling processes, you will be in a position to win against your relentless enemies in The Talent War.

If you are looking to weaponize your HR processes and systems, then contact us at eeStrategy so we can talk to you about our proven, unique solutions to help you win the fight.

Joining HR and Finance Strategically

Finance is an integral part of every business.  It’s how we keep score.  Finance permeates almost every area of a business, from operations, supply, and delivery, to sales and marketing.  It’s a necessary part of making sure the business is remains viable and strategically aligned.

The only area of business that finance doesn’t penetrate, at least in many companies, is HR.  Despite the fact that up to 80% of organizational costs are related to a business’ workforce, many companies continue to ignore the need for finance and HR to work together.  A large reason for that negligence is due to the fact that informal structures in HR result in decision-makers treating it as a cost center, rather than an investment.

Businesses must realize the value of their workforce and individual employees.  Evidence-based HR is the key to providing the transparency needed for that insight.  Evidence-based HR means using real data to place a value on each role.  It’s only in the last 10 years or so that the right data to model the workforce in this way has become obtainable.  Today, payroll and HRMIS are pervasive and that data is readily available.  Plant maintenance crews manage data on every nut, bolt, and screw in the area they are responsible for, literally.  They know the lifespan, location, and ROI for every part of their plant.  HR can have this kind of detail.  HR has access to the same tools and evidence but they’re not using it with anything like the same degree of sophistication.  HR knows who is in the workforce, they know how many days of annual leave they have outstanding, and they know what they’re paying them, but they don’t know the ROI on that, nor do they even know the ROI they should expect.

HR have the evidence and have access to the theories to manage workforces with a similar degree of sophistication.  Moreover, HR technology is progressing in leaps and bounds, and while many simple transactional solutions are available, there are those ahead of the pack who are producing technology suites designed specifically for handling the complexity and sophistication of evidence-based HR strategy, like eeStrategy.

Using evidence-based HR to place a value on each role provides clarity to the business (especially finance), and furthermore, provides clarity to the employees in those roles.  It allows employees to understand what success really looks like and how they can maximize their value to the company, and subsequently themselves.  It’s a win-win.  There are those who have already achieved this integration, are using current technology, and are realizing substantial, recurring, compounded value.  The only real impediment to widespread evidence-based HR now is the unwillingness of finance and HR to integrate their models and data properly.  This is the final piece of the puzzle.

Everything is available, there’s no more excuses and it is past time for finance and HR to start working closely together.  Take the initiative; talk to us about joining HR and finance strategically.

Respecting Your Employees

Just before Christmas, Tess C. Taylor (The HR Writer) published an article with PayScale on ‘7 tips for hiring and retention of top performing employees’. These seven points are broadly correct but ultimately are left wanting; unfortunately, they miss the key points around hiring and retention.

1. Hire Quality People

This is always a good idea and mandatory/vital in key roles – but it’s not always practical. Of course, you make every effort to hire the best possible person for the head of a department. However, do you really want to pay a premium for your toilet cleaners? Expending exorbitant time and money on commodity resources just isn’t smart.

A good assessment, screening and interviewing process is also important; one cannot forget reference checking though; knowing how a prospective employee has worked with others in the past is vital to knowing if they are a good fit for your business. However, success in their last role is worth little, if you haven’t communicated the requirements of the job. Even more importantly, you must communicate how they can be successful in the role. That goes for every employee – even your toilet cleaners.

2. Offer Generous Compensation and Benefits

The title of this tip is going the right direction, but the explanation is way off the mark. Market-based compensation is, by definition, what everyone else is paying! It hardly qualifies as ‘generous compensation and benefits’ if everyone else is getting it too.

Again, there must be both clarification and quantification of generous compensation for key roles. Understanding the value provided by a role allows you to offer an appropriately generous compensation package with justification and substantiation. A value-based compensation plan that directly ties compensation and benefits to the amount of value the employee is producing for your company is much more effective and efficient.

3. Give Them a Great Work Culture

This point is important, and we can summarise it down to one thing it – ‘respect’. Respect covers pretty much everything you need to understand about fantastic work culture.

4. Make Learning a Priority

Learning is a mechanism for advancement and being more successful.  No one learns anything for the sake of it, and if they do, they soon forget it.  Learning and development programs are the transaction – the actual strategy is committing to your employees’ success. This point should actually be ‘Make Investing in People a Priority’. We want people to learn so they can unlock the doors to greater personal (and by inference, company) success.

5. Progressive Performance for Pay

Pay-for-performance is a buzzword in compensation now, but what is described here is neither progressive nor pay-for-performance. Performance reviews, in the sense it is used, are not pay for performance either – they are more akin to performance management.  It’s important to note that performance management and performance measurement are different.  Pay-for-performance is linked to the successes and outcomes of employees, not their efforts. Pay-for-performance does increase productivity, employee morale, and loyalty, but only when performance is closely aligned with value attribution. That’s often not the case.

6. Transform Work Norms

Yes, being aware of changes in the workforce and transforming to meet the needs of a new generation of workers is important. Shuffling the deck chairs on the Titanic never did anything for anyone though. Continual transformation is bad for companies, especially when it is just for the sake of it. This links back to having respect for your employees (see point 3). Providing people with a work environment in which they are respected and have the opportunity to be successful in life, and at work, is the key.  If you don’t have that already, transform to fix the problem, and then get back to business.

7. Communicate Core Values

Having core values that you believe in and that the company stands for, whatever that is, is vital. Communicating those core values and making sure that your employees and your clients and customers know what those values are, and believe in them too, is even more important.  Success is not all about outcomes; the journey is also important. Core values are the foundation of a company, without them everything else falls down.

 

At eeStrategy, we have a cohesive view of what makes a business successful – respecting and recognizing all employees, and especially top performers – and we have the technology and expertise to do that. If you want a progressive, respectful, high-performing, well-paid organization that lives and breathes its values – contact us.

Stack ranking and Yahoo!

Pebble stackYahoo CEO, Marissa Mayer, made HR news again this month when the firm announced that they were implementing stack ranking, following news from Microsoft that they were abandoning the practice the day before. Company employees and the wider business community met the news with understandable criticism. Nevertheless, let’s assume that a very smart CEO has it right this time.

Let’s jump back a year when Mayer announced she was going to eliminate 20% of her workforce. There has been a year of planning and research into the most effective and strategic way to achieve that. The people at Yahoo are most likely quite educated on stack-ranking, the benefits and risks associated, and ways to ensure success.

The strategy could be successful, if she and her HR team have asked, “What are we trying to achieve with this approach, and why are we doing it?”, and aligned themselves with the answer. The team should understand the outcomes they are trying for – they chose a proven technique that will drive out the bottom performers, as well as people who are not buying into the One Yahoo! concept. Yahoo will have estimated that there will be collateral damage, including the regrettable losses of high performing talent. Yahoo would have identified and quantified the value of all roles within the organization, and can align rewards to those roles based on the true value they bring to the organization.

Marissa Mayer has most likely identified the best opportunities throughout all of the business units to drive increased value, and has developed compensation plans that align that strategy to the rewards she will confer upon relevant employees for delivering the goals.

Yahoo has also demonstrated they can make a plan and then commit to acting on that plan at pace. They probably set the go-live for the initiative to start in 90-120 days, just as Microsoft’s new acquisition, Nokia, did when they implemented their new talent strategy. It is also unlikely that Yahoo sees stacked ranking as a viable long-term practice. It is a short-term measure designed to cut the earlier mentioned 20% of their workforce, a 20% that is underperforming and needs removing if Yahoo is going to succeed.

Some thoughts on Marissa’s talent strategy:

  1. Stack ranking works, but you have to have great performance measurement.
  2. Stack ranking can have unwanted consequences – regrettable losses, lower employee engagement, risk-aversion, less innovation, less cross-functional collaboration and other bad behavior.
  3. Stack ranking fails if you cannot accurately value specific roles and identify how high performing employees maximize those roles.
  4. You have to know what success looks like, tell your people what great looks like, and then let them get on with it.
  5. Make sure you don’t get rid of technically low-level performers who in reality enable and foster high performance within the teams they serve.

Stack-ranking is a proven, yet blunt instrument which will likely achieve the goals that Yahoo are trying to achieve in the short-term, but there are refined approaches that can leverage and analyze complex data to deliver the outcomes you want, while mitigating collateral damage.  It is also important to note that while many may be breathing a sigh of relief over Microsoft’s new approach, it remains to be seen whether Microsoft will become a more effective competitor as a result. Let us assume, that Microsoft has done the same or deeper due diligence, changed their performance management system to something that better aligns with their strategic goals.

Strategically aligned HR uses the evidence available to identify problems and deliver the best solutions. Yahoo and Marissa Mayer believe their solution is stack ranking. Microsoft thinks it is something different. Know; don’t guess what the  best solution is for your particular situation and how that  achieves the desired results.

Executive Briefing with John Boudreau

2013 Executive Briefing with Professor John Boudreau

For lunch on August 20, 2013, Professor John Boudreau addressed an audience of senior HR and Finance executives from Australia’s leading companies.

John is quite rightly described as the leading HR academic of his generation. His presentation includes a number of real world examples from globally successful companies and makes for very interesting viewing.

eeStrategy provides technology for Evidence based HR practices such as those described in this presentation and would be excited to hear from companies as they adopt Evidence based HR in their own organizations.

eeStrategy is ready to roll out Evidence based HR at your organization. Connect with us to find out more.