My wife and I like to work together to solve the Telegraph quick crossword on my ipad, we are not good enough yet to attempt the cryptic crossword. We like crosswords as they test our knowledge but also because you can go off down the wrong path very easily and not realise it until that last clue where you know the answer but it does not fit in the grid because of an earlier wrong answer.
Reward is like this in many ways. It is moving from being the quick puzzle to being a very cryptic crossword where mistakes can be made and not discovered until a long way in to the process or product design. It has become apparent to me that Reward is at a crossroads, in the middle of a maze. There are now so many stakeholders involved, employees, management, compensation committees, regulators shareholder advocacy groups, trade unions and politicians it is difficult to know which way to turn. They all have different viewpoints, different agendas different understandings and different needs.
There is a lack of common ground, common language and common definitions. What, after all is high pay or low pay for that matter? Are we looking at absolute or relative levels of pay? Are we comparing with some mystery average or mean? As a result what looks fair and reasonable to a Compensation Committee looks like highway robbery to a trade union. The area is fought with paradox. We can see these paradoxes at work in the controversy over BBC pay for talent. Because the BBC is funded by licence payers there is the application of a different standard for, say Jeremy Clarkson, than there would be if he worked for a privately funded broadcaster. Yet the labour market in which he operates is exactly the same. Is he supposed to be happy to earn less because he works for the BBC? Would we be happy to be paid less because we work in the public sector, and judging by the latest earning statistics for those in the public sector vs. the private sector the answer to that is a clear no.
What we and others are paid is very important; yet there is no overarching theory on pay and reward. There are attempts such as the excellent tournament theory or expectation theory for example. Labour market economists will talk about supply and demand – but that is not the entire story. Behavioural economics are increasing playing a part in pay theory. Yet, like Steven Hawkins attempt at a grand unifying theory we are really nowhere near achieving a consensus on what is fair pay.
So reward specialist have the issue of not only undertaking complex work on pensions, share options, taxation, total reward, flexible benefits, accounting standards, compensation disclosure rules and the like but we have to be able to justify our recommendations before the court of public opinion, political scrutiny and regulatory microscopes. Often with the benefit of 20 20 hindsight.
There are two concerns around the complexity. The first is that there are very few individuals who can move between the technically complex and the “public relations” facets of current reward activities. Second, only the larger companies have the resources and time to fully fulfil the requirements, demands and disclosures needed by the stakeholders, Reward normally sits in HR, yet it has strong interfaces with Finance, investor relation, Risk and Compliance, to name but a few.
Perhaps a new breed of expert will appear phoenix like from the current ashes of the shareholder spring; but somehow I think we will just muddle along as always, relying on expensive consultancies