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Our compensation committee doesn’t like that our bonuses are not aligned – What can we do?

Ever have that conversation with your compensation committee that ended with “I’m sure all of what you’re doing is fantastic, we don’t have any questions, so let’s get together again next year”?

I did not think so. 

As you know, the compensation committee is not formed to just let things shape on their own.  Shareholders look to company boards, particularly the compensation committee, as their stewards to review and approve executive pay.  Boards in turn work closely with executive leaders in matters relating to employees, operations, partners, customers and overall financial performance.  Some compensation committees dig deeper and wider to not only review executive pay but review and question broader key HR practices. 

The fact that most directors on the compensation committee are independent, have diverse experiences and exposures, and are held to significant standards, rules, and laws, make their influence levels stronger across the HR spectrum.  The board is chartered to champion responsible corporate governance and be morally responsible.  The board and the compensation committee are further challenged to cultivate an image to be more inclusive and responsive to stockholder concerns.  In turn, most compensation-related projects that I’ve been chartered to deliver were stemmed from a compensation committee’s specific request to address a perceived gap or issue.

The most common compensation committee request that I have received, centers on bonus plan design and performance metrics.  What worked for a company for years may suddenly be subject to a challenge when a new compensation committee member asks a simple question, “why does this plan have so much discretion?”  Ever hear questions like that?  I’m sure you have or you will soon.

As company’s grow, pay design and delivery need to be reviewed.  The CEO at one point may have known every single employee.  The delivery of the bonus awards in those days may have been motivational, relevant, and directly performance related.  At some point, though, with continued growth and hiring, the additional layers of leadership and delegation of authority begins to shape new opinions, ideas, and thoughts about how pay is designed and delivered.  The level of ‘discretionary’ awards may turn or feel like favoritism and create images of disparity.  The compensation committee therefore looks for more predictable, unbiased, and relevant bonus plan designs and aligned performance metrics.

With diversity, growth, and layers of leadership, companies find the need to document their compensation philosophy, review their pay design and structures, and communicate and train leaders and educate employees.  Make sure your pay practices are written well enough that all leaders can read the document and then understand it well enough to communicate the intention and delivery process. 

Remember, nothing is true until it is written. 

8 Things to Consider Regarding Minimum Wage

2020 was a very difficult year for the majority of Americans. The COVID pandemic has impacted the lives of every American, through financial hardship, disruption of normal activity, and loss of loved ones. 2020 was also an election year and a common political campaign talking point resurfaced. This talking point is the idea of raising the federal minimum wage from $7.25 to $15 an hour. This idea may seem great to those working minimum wage jobs, but there are some things to consider prior to legislation passing. Whether or not legislation around the minimum wage is passed, MorganHR can help your business have the compensation planning answers before the questions are asked. Your employee compensation planning committee will love you.

  1. People look at paying a person when, in fact, it is paying for a position or job
    • Those working in minimum wage jobs are likely salivating at the idea of a ~100% raise in their wage, as most of us would, too. However, something to consider is the devastating impact a move like that would make to small businesses and even their own employment opportunities.
    • With a 6.3% unemployment rate, there are more people than jobs available. To a business, a job taking orders or bagging groceries is not worth $15.00; it doesn’t matter who is doing the job.  
    • Some business owners would not pay $10/hr for a job that another completely qualified person is willing to do for $9/hr.
  2. Minimum wage jobs are meant to be a great stepping stone to gain experience and make some money as teenagers or young adults. They were never meant to sustain a family of four.
    • After working a minimum wage job, workers should obtain skills to apply and qualify for higher-paying jobs.
    • Most people working in these jobs for more than a year or two with strong performance records should be applying for higher-paying jobs or even salaried positions. As a compensation professional, I keep hearing that recruiters cannot find the perfect talent for a job.
  3. Perhaps companies need to loosen their hiring requirements or direct their recruiters to hire capable applicants as opposed to only perfect candidates. That is what the salary range is for.
    • If the applicant doesn’t quite meet the requirements for a job but is otherwise a hard worker with a strong work ethic, start them at the 40th percentile and provide them the chance to succeed.
  4. Businesses will have to choose between two options: raising prices or reducing payroll expenses. Furthermore:
    • In this case, the best outcome for the business and workers would be to raise prices. However, this would have significant negative effects on the economy and start a vicious cycle of raising prices and raising wages.
    • If a business chooses to raise their prices and their competitor chooses to reduce staff instead, they will lose business to the cheaper costs. It is reminiscent of game theory.
    • However, if one company raises prices and the other lowers payroll expenses, the second company will make more money. If they both reduce payroll expenses, the worker loses.
  5. Low-skill workers will experience the worst impact. Businesses will be forced to hire employees with more skills to be worth the $15 or they will resort to automation, robots, or outsourcing to other countries.
    • Large corporations, like shoe companies, already use extremely low-paid workers in China to make their products which are sold here at a premium.
    • Large companies will spend a lot of money on R&D to automate processes needed for their jobs.
    • The pandemic has shown that cashiers at restaurants are becoming obsolete, as we can order from our phones or touch screens at the location. Many low-skill jobs will disappear and the unemployment rate will skyrocket.
  6. The financial impact of raising the minimum wage for a company does not end with the lowest level employees.
    • When a company is forced to double the pay rates of their lowest level employees, a domino effect will happen which will see pay increases (at least a demand for it) for most, if not all employee levels.
    • Many companies with employees earning minimum wage, have a large comparative employee population earning wages between $7.25 and $15.
    • Workers will all need to see a proportional increase to maintain the appropriate differential between levels which makes promotions and merit increases worth it.
  7. In the United States, the cost of living is drastically different when you compare places like downtown San Francisco to the rural villages of the Great Plains. The minimum wage should not be a federal government decision due to this discrepancy.
    • It should be left up to the states, so that differences in cost of living can be appropriately accounted for.
    • When every state is forced to have at least a $15 minimum wage, it will either lead those cities already at that level or close to it to increase their state/local minimum wage higher, or it will incentivize people to leave cities and migrate to other areas causing a significant change to the local area.
  8. Perhaps one of the motivations to raise the federal minimum wage so drastically is that higher average income comes more taxes.

When considering a serious increase to minimum wage, politicians, voters, workers, and business owners should consider and determine all effects, both positive and negative, and weigh them to make a fully informed decision. MorganHR’s services can help your business with compensation planning, Job Descriptions, and Title Alignment. They are there to help you have the compensation planning answers you need before the questions are asked.

It’s Time to Spring Clean the Titles in your Job Closet

During the winter process of conducting performance and merit reviews, your employees may have also received promotions with new titles.  Perhaps over the year, your company acquired or merged with another, and your company held on to the employees’ legacy titles to make the integration process move faster.  You may have noticed that some locations of your company are using different titles for what you thought were the same job at your site.  In recent surveys, your managers and employees may have shared comments about their confusion about the difference between manager versus senior manager titles. You may have wondered if it was vital to add that specific technology to a job title. You may have noticed the Director jobs are similar but used in different ways – for example, “Marketing Director”, “Director Marketing”, “Director of Marketing”, “Director, Marketing” – are there secret values placed on the comma or word ‘of’?  Maybe your company has 425 unique job titles, and your company only has 450 positions.

If any of these examples sound familiar – perhaps it’s time for a job title clean-up!

The number of positions for a company correlates with company growth and its respective increased amount of work required to deliver on commitments.  Think of positions as the boxes on an organization chart.  Positions are filled by employees or vacant, waiting for the hiring of candidates.  Each position is assigned a job that describes the body of work that the position’s incumbent is responsible for delivering.

The number of jobs a company creates correlates with the company’s needs in a few ways.

Let’s say your company needs another position to support the demands falling on the Inside Sales team.  It is essential to distinguish the job’s level of complexity, authority, and accountability.  Yet, there are other questions to consider: 

What level of experience and education would the ideal candidate have? 

How will your company’s internal experience and exposures shape an employee’s career trajectory with this job? 

What is the typical career path for employees in this job? 

What level of talent does your company need to appropriately and affordably fulfill its demands?

We’ve heard how leaders feel titles are free and make employees feel good.  A job’s title is a shortened description that quickly identifies the type of work and responsibilities.  It should also align with a shared understanding of its level of authority and accountability within the company. For example, there may be multiple positions assigned with the same job, such as an Inside Sale Representative II.  Here we see it is a job in the Inside Sales job family or group of jobs that require similar experience and education.  It also quickly shows that it is a level higher than an entry-level job by the “II.” 

A job title is less confusing when aligned well to an internal structure while somewhat mirroring similar expectations externally.

When implementing a career hierarchy, consider what jobs to include now versus down the road a bit.  A company may assign a range of minimum requirements that aligns with the growth stages for an employee in that job’s specialty (e.g., Inside Sales Representative Levels I, II, III).  Imagine if all Inside Sales Representatives were at the lowest level and learning their jobs?  That may cause harm to the performance of that functional area.  At the same time, imagine if all Inside Sales Representatives were at the highest, most senior level that may cause that function to be high performance, yet high in talent costs.  It would be best to determine what jobs should be open for use today to support business goals and budgets.

Redefining Employee Engagement in a Post-Pandemic World

As 2020 winds down, many of us are hoping the old adage about finding strength in adversity is true. To say it’s been a whirlwind would be putting it mildly. The personal, professional, and financial impact of COVID and socioeconomic upheaval will reverberate into 2021 and beyond. From my vantage point, it’s a critical moment for business and HR leaders to reevaluate employee benefits and engagement strategies. Here are a few suggestions of places to start.

Going Back to the Basics

In times of uncertainty and stress, healthcare emerges as the essential element in the benefits package. As is expected—and as it should be—our research into employee benefits (request your copy below) confirms the most commonly promoted are medical insurance, dental insurance, vision insurance, paid time off, and 401(k) plans. As the personal and economic fallout of COVID continues, job security and medical benefits take precedence over salary increases and cultural considerations.

Even tech-savvy younger generations who “… hold a dissatisfaction with corporate systems and traditional hierarchies” (according to a LinkedIn article by Anita Lettink) are absorbing the lessons of their parents’ decimated retirement plans and inadequate savings accounts. Where fun and quirky perks were all the rage a few years ago, now we expect more emphasis on core health offerings.

A New Definition of Wellness

Additionally, we anticipate job candidates will increasingly seek out firms who offer life insurance, long-term disability, and mental health support. As the Kaiser Family Foundation reports, “the coronavirus pandemic and resulting economic downturn have taken a toll on mental health for many people, with over 30% of adults in the U.S. now reporting symptoms consistent with anxiety or depressive disorder.”

This reality coincides with a shift towards a more holistic view of employees, who may be struggling with remote learning, Zoom fatigue, and job dissatisfaction. Rebalancing the benefits portfolio in this context is more than just virtue signaling, it could have a very real positive impact on the livelihood of your employees and their entire families. It could also keep them from jumping ship.

Redefining Employee Engagement

According to a survey from careers website iHire, 62% of job seekers are considering a major career change in the coming year, and many of those predict a change is very likely. Although it may seem counterintuitive during a slowdown, investing in meaningful employee engagement may be the difference between strong retention and mass exodus when business picks back up.

What do I mean by meaningful employee engagement? It goes well beyond sponsored memberships to development platforms like Lynda or MasterClass. It requires an individualized approach to explore what makes someone tick, and what’s going to take them from a clock-watcher to a hungry chicken, as I like to call them.

Managers don’t have time or energy—or I would even argue, the responsibility—to ensure every direct report feels that they are in the right job at the right time. That’s why at Auxin Group we’ve developed an engagement model that provides on demand access to a curated team of outside experts. These vetted professionals provide targeted experiential learning and coaching to establish needed personal connections to guide a rewarding career path. I hear complaints from leaders that their employees are entitled, but what if they’re just bored and searching for an opportunity to channel their passions into their work?

The Advantage of a TCO Approach

In IT, total cost of ownership (TCO) includes the purchase price of a particular asset, plus operating costs over the asset’s lifespan. Looking at the total cost of ownership is a way of assessing the long-term value of an investment. A similar approach to employee benefits and engagement would serve businesses well in the post-pandemic world. 

The time is right to revisit the ROI on the considerable benefits expense—representing on average more than $20,000 annually per employee, according to BenefitsPro research. The time is also right to commit to full transparency of the employer’s cost of benefits over an employee’s tenure. If your core medical benefits don’t measure up, you’re creating churn and hampering future growth. Unless and until your employees can validate that you have their best interests in mind, they’re likely to be on the lookout for another job that will.

Let’s continue the conversation! Connect with us to explore next-generation employee engagement and HR strategies.

Now available: MorganHR’s comprehensive benefits report! MorganHR takes a look at how total talent and rewards strategies are evolving in light of unprecedented diversity initiatives, COVID-19, shifting demographics, and more. Download the report.

The Diversity-Compensation Link

If your organization hastily composed or revived a diversity statement in recent months, you’re not alone. In recent months, we’ve observed a proliferation of commitments to fight institutional racism, both within corporate entities and in the world at large.

But one of the best tools to promote diversity, equity and inclusion (DEI) is also one of the most underutilized and underappreciated: compensation strategy. We’re out to change that. 

The business leaders we work with inherently understand that employee morale, retention, and performance can all improve when workers believe their employer cares about and ensures pay equity. But they often don’t recognize that actions to address pay gaps and inconsistencies can elevate broader diversity initiatives and expose barriers at different stages of the employee life cycle.

Common misperceptions 

When it comes to pay equity, it’s all too easy to succumb to a philosophy of ‘what we don’t know can’t hurt us.’ HR and C-suite executives may think: 

  • Exceptions are normal and necessary. After all, we really can’t afford to lose that “perfect” candidate who’s going to blow away our sales targets. 
  • The risks outweigh the rewards. It’s a litigious world out there. If our team uncovers systemic inequities, we’ll be forced into costly remediation or legal exposure—or both. 
  • Issues have to be fixed overnight. We’re struggling to make payroll due to COVID business declines. This is not high priority right now, especially if we can’t afford to finish what we start. 

The good news is, with proper analysis and infrastructure, all of these concerns can be overcome. 

Committing to continuous improvement 

The big connection between diversity and compensation is a carefully-considered strategy, one that we label as being fair, relevant, and right. Let’s take a look at these terms. 

Fair is a loaded term; in fact, one CEO we work with refuses to use that word at all when talking about pay. All too often the best negotiators command the best salaries, but where does that leave the quietly competent employees who don’t want to rock the boat? (Hint: it leaves them more likely to hunt for a new job on their lunch break.) 

Shifting priorities and busy schedules often prevent companies from regularly and consistently evaluating the fairness of their pay structures. However, the cumulative impact of the hundreds of micro-decisions can quickly hit critical mass. Without unbiased monitoring, you may be surprised to realize that one manager in Chicago hasn’t promoted a minority candidate in 15 years and another in Atlanta puts through performance bonuses for women that average 8% less than those for men. 

Relevance depends on the availability and clarity of market data. When setting compensation guidelines, leaders fall into the trap of thinking relevant comparative data comes from firms they are competing with for business. But really, it’s who you’re competing with for talent. Outside the C-suite, local market benchmarks will have more relevance to the talent acquisition team than functional ones. 

Opening lines of communication

Finally, the right compensation strategy is the one that gets you to the close and paves the way for an effective employer-employee relationship. Transparency is key. When companies override direct manager input, they leave those leaders ill equipped to explain to employees why they didn’t get their expected bonus. That raises the specter of playing favorites or outright discrimination. 

It’s hard enough to outpace your competitors, why let unease and infighting about pay inequity take away your external focus? 

Elevating your environment

So how do you make sure your compensation strategy supports your DEI initiatives, rather than undermines them? It takes a powerful combination: 

  • a long-term approach, rather than periodic fire drills intended to be magic bullet fixes
  • a true pay-for-performance environment, with clear and consistent guidelines
  • an unwavering commitment to calling out and eradicating explicit and implicit bias

While there is no one-size-fits-all solution, an outside accountability partner can give you a fresh and neutral perspective on disparities, trends, outliers, and opportunities within your compensation environment. If you have questions, reach out. We love what we do and are happy to brainstorm about DEI-friendly analysis and compensation strategies that might work best for your situation. Now available: MorganHR’s comprehensive benefits report! MorganHR takes a look at how total talent and rewards strategies are evolving in light of unprecedented diversity initiatives, COVID-19, shifting demographics, and more.

Download the report.

Coaching Managers Leads to High-Performance Companies

Based on the article below, employers need more effective ways of coaching managers in order to increase company performance. Some may say it is from a lack of coaching skills, and others may say there is no coaching present. Either way, coaching is more important now than ever due to COVID-19. Companies can start by encouraging HR and business leaders to expect daily feedback. This simple request can lead to valuable conversation and constructive criticism. Although most companies are remote, there are several ways to continue to coach; however, it is critical that managers link those skills back to day-to-day work. 

At MorganHR, we implement HR strategies that work. We are team players and coaches who are invested in supplying the tools employers need to succeed. It is especially important through the COVID-19 work transformations that communication is clear, and that we build a foundation remotely to ensure coaching is being translated directly to help with employee relations. MorganHR is equipped to engage with our clients and create more strategic ways of coaching in order to ensure our solution is long-lasting.

Read more about the effect of coaching managers by following the link below:

https://www.hrdive.com/news/teach-managers-to-be-coaches-accountability-obstacle/585674/

What does the future of work mean for HR professionals?

It’s all about trying to predict what jobs will be needed in the near future. In the next 5, 10, and 20 years, we may see jobs we never thought of before. We will need new skills, we will see new technology, and we will feel a new sense of purpose and drive as we welcome more Generation Z workers into our world.

https://www.hrexchangenetwork.com/employee-engagement/articles/the-definitive-guide-to-the-future-of-work

Emerging Leadership Competencies

This emerging competencies chart is sourced from a survey that asked HR Professionals what they think will be the most prevalent leadership competencies in a multigenerational workforce. The three major traits were innovative thinking, technology knowledge, and multigenerational organizational skills. “These three traits, and the others chosen by respondents, define what HR should expect from future workers in terms of ability […] The key is to find the balance between these competencies and then maintain that balance at all times.”

https://www.hrexchangenetwork.com/hr-talent-management/articles/emerging-leadership-competencies-and-hr