Reward and Rock and Roll

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Introduction

What have the worlds of David Bowie, Black Sabbath and reward have in common apart from dealing  in large amounts of money?  An outstanding book, “The business of music”,,(http://www.academy-of-rock.co.uk/readnow/ ) by the renaissance man, Peter Cook, innovation Guru and rock musician, gives the answers.   Issues of creativity, innovation, communication and leadership have always been important in the reward leader’s toolkit.  Peter’s book provides an amusing but erudite Hayes instruction manual on these key areas.

 

The author – Peter Cook

I met Peter on the creativity and innovation module of my MBA.     He was leading an impromptu jam session by a group of senior managers to illustrate the nature of innovation and leadership. He is a polymath who is a gifted musician, writer, educator, consultant and social media expert.  But, he is also the most unusual of men who works in several different domains, yet manages to bring together these worlds of music, business strategy, innovation practices and writing with high energy and infectious enthusiasm.   His gift for story telling laced with personal anecdotes, key writings from the likes of Charles Handy and powerful metaphors make reading this book a joyous and educational experience.

 

Creativity and innovation

Peter uses the multiple reinventions of Kylie Minogue and David Bowie as lessons in innovation.  We can draw parallels in reward.  We need to constantly reinvent our products; if only as a response to the every changing regulatory and political environment.  As Peter points out it is just not enough to keep doing the same thing time after time and expect a different result.  Innovation is the art of taking the existing and making it more. 

 

I have a personal view that it is time for reward to reinvent itself from being a semi passive technical function to be more assertive, to set agendas rather than respond to them and to be less of a backing singer and move more in to the spotlight.

 

Another excellent musical example that he quotes is a group of jazz musicians improvising.  Each member of the group picks up and builds on the rhythms of the other group members while still maintaining the coherent soundscape.  This is another key skill in reward leadership.  We must improvise both on our own but also as a part of the HR and business team, while maintaining a constant internal and external harmony with our customers and stakeholders.

 

Communication

The Music of Business draws out some excellent lessons in communication.  As Peter points out, this is the soul of music:  talking to an audience, often at a deep, almost spiritual level.  Who has not got a favourite piece of music that conjures up some important memory or emotion?  Yet musicians and their producers tightly target the music at a very specific demographic segment.  I have an acquaintance, Tom Robinson who was a very successful musician (2468 Motorway and Sing if you’r glad to be gay for example).  Last year I attended a concert by him as EMI had re-released a new anthology of his music.  When I entered the concert venue the vast majority of people there were clones of me!  Tom’s appeal was to a very specific demographic – he has also reinvented himself as an equally successful award winning radio presenter.

 

The lessons for reward are clear.  We must clearly design and market our products for specific demographic segments.  We must communicate to our customers at the level of feelings and meaning as well at perhaps more superficial levels of value delivered.  Peter’s book gives excellent insights as to what good communication means and perhaps some technical hints as to how to carry out this communication at a deeper level.

 

Leadership

Peter writes engagingly on the subject of leadership.  It, alongside business strategy are at the heart of this book.  He quotes multiple examples and tells fascinating stories of both good and poor leadership.  He reflects on the musical leadership and longevity of some of the world’s top musical acts.  As technologies and tastes change many in the world of music have disappeared without trace (and think of the many companies who have done the same, or like Kodak perhaps failed to change with the times) yet others have not only survived but prospered as we have moved from vinyl through MTV to MP3 and beyond.

 

The parallels for reward are all too clear.  We must provide leadership that evolves with changes in the technological and regulatory environments.   Sometime this will mean revolution and sometimes reinvention.  Going along with the status quo is to go along with the dinosaurs

 

Business strategy

.Business strategy is at the heart of “The music of business.”.  Peter’s discussion on business strategy issues like strong culture range from the music of AC/DC to Marks and Spencer, taking in the writings of Michael Porter, Mintzberg and Andrew Sentance.  Peter gives equal weight to both the design of business strategy and also its execution.  He note examples of both good and poor strategy and execution.  It is clear that perfection in both is a requirement for success in business – music or otherwise.

 

The application to reward is clear.  We need a well thought out, innovative strategy with excellent and well thought out execution.  Most reward leaders are good at execution – but perhaps lag in the development of good business strategy.

 

Conclusion

The Music of Business is an engaging and erudite discussion on business strategy, creativity and innovation painted on the canvas of rock music.  It is a book you can dip in to or devour from cover to cover as I did.  It is the type of book that gets you thinking and may well take you off on unexpected journeys.

 

For those of us in reward it has some powerful lessons from outside our normal comfort zone.    My experience of the best reward leaders are those who think outside the box, have imagination and a strong cognitive framework in which to exercise their daily activities.   This book will help develop a different way of thinking and viewing the world – if only by creating a different mind-set about The Music of Business.

 

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Rewarding Adaptability – Digital Freedom Challenge

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My idea (hack) for the Management Innovation Exchange, international  Digital Freedom Challenge has been shortlisted as a finalist.

It is called Rewarding Adaptability

The organizers said:

The Digital Freedom Challenge team evaluated contributions from innovators from around the world and from every kind of organization—looking for depth, boldness, originality, thoroughness, and the ability to inspire and instruct in equal measure. We certainly found those qualities in your contribution!

Summary

Crowd funding for adaptability: encourage an internal market in adapbatilbty activities by having employees with ideas to bid for resoruces and other employees to bet on the most succesful ideas

Recognition programmes: Directly and immeidatly rewarding those employees whose behavours support the design principles

Time awards: reward those who come up with innovative and creative suggestions supporting adaptability, specific time to develop their thinking and ideas.

Problem

In many organisations ideas are generated from the top of the organisation or from the “Research and Development” department.  There are complex management processes to turn ideas into projects.  As a  result the creativity of the workforce and their implicit knowledge is lost to the organisation

The problem the Hack addresses is outlined by  Doz and Kosenen’s work on strategic agility.  Managers hoard their resources rather than actively sharing with others.  This hack challenges the management orthodoxy that they control resources and workers utilise them at management command.

Solution

The approach is based on the concept of crowdfunding innovative ideas by creating and developing an internal market in adaptability.  This is achieved by each employee being able to propose a project idea and put it forward to all employees.  Individuals have a “bank” of hours – for example ten per month; that they can bid against individual projects.

The projects with the highest number of hours bid goes into process.

There is a parallel incentive plan that rewards employees who have come up with successful projects with a percentage of the hours bid as “free time” for them to use as they wish; either for holiday, or to work on the project or to be converted to cash.

This is a total break with the normal approach on idea generation and project management.  It puts power, in the form of resources, into the hands of employees rather than management.

Practical Impact

The hack is stunningly simple.  Here is an example of the approach:

This allows employees to make bids simply against a project and against their own budget.

Each employee will write a presentation for their project with a time and skills budget which will be shared with employees

Reward fights back – peashooters against tanks, some closing thoughts

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Introduction

Unless you have been living in a monastery then you will aware that HR in the UK has been under attack on a number of different fronts by the media and by politicians. 

 

     The mauling given to the former BBC Head of HR

     The criticism over the high pay of senior managers in the charity sector

     Attacks on zero hours contracts

     Complaints on police PPO’s overtime payments

 

Much of the criticism has been aimed at the area of reward.  The quantum  of the BBC termination payments,  sizeable remuneration in the third sector even the discussion on low pay and zero hours contracts are clearly in the orbit of reward.  What has puzzled and dismayed me as a seasoned reward manager is the lack of a robust response on these issues.  Fleet Street knives have been sharpened and deployed against HR practices with very little parry from the profession or its leaders.

 

The issues

Let’s breakdown what is behind the political and media rhetoric.  All big organisations have enhanced termination payments in place.   Why?  First, if it is a true redundancy where there is no replacement of role, the payback on a redundancy payment is very rapid.  If you pay two years pay you are probably only paying 15 months costs of employment (let us not forget that employment costs also include all the infrastructure costs of offices, IT, administration support and the like) so you are very quickly in “profit”.  I have only once seen this argument put forward in the attacks on BBC HR.  Second, making a settlement agreement with an employee avoids costly legal disputes and reputational damage for both the organisation and the individual.  Not to mention the management time costs.  I have had some involvement with legal cases involving very senior managers having to sit around for hours at a time at court being totally unproductive, not to mention many expensive hours of briefings and the like with highly charging  QC’s.  Paying enhanced redundancy is very often in the interests of the organisation the stakeholders and the former employees.  So, why does nobody stand up and explain this?  I guess the facts do not make such good headlines.

 

We have seen the offensive (in both meanings of the word) being taken by politicians and the media over senior management pay in the charity sector.  Why has nobody shown the politicians the salary surveys and the head-hunter advice on the costs of employing senior management?  And, as a fan of big data I have to ask if anyone has produced the figures to show the large difference to an organisation that good leaders make in terms of both profit and success.    

 

I also notice some attacks in the media recently against the overtime being paid to the Metropolitan Police Personal Protection Officers who look after the Royal Family, the Prime Minister and the like.  These are very highly trained people – experts in their field with many years’ experience and very great skills.  The do a very difficult job very well in the vast majority of cases.  They may be required to put their life on the line for the people they protect – yet there are complaints about their overtime.  There has been no discussion that I have seen of the enormous value of their work or the circumstances that led to the requirement for long hours.  Why not?

 

There has been a lot of talk of both zero hours and low pay of late.  No one would deny that low pay is an issue.  But, it is a function of the labour market.  Increasing low pay is a social good but comes at an economic cost.  Politicians should not on one hand bemoan the erosion of working families incomes in the UK while at the same time urging employers to increase pay.  Such increases can only be paid for by raising prices.

 

Conclusion

You will, by now, have perceived the common theme.  Much of what is done in reward may not meet the highest moral standards, (and since when have either politicians or the media ever met that requirement); but our work is essential, commercial and pragmatic.  The labour market is imperfect, ambiguous and messy.  No amount of editorials or political band-standing is going to change those facts. 

 

One Head of Reward did point out to me when I was researching for this article that the targets of these attacks, the BBC, the police and the big charities, are all out of favour with the government and thus may be seen as legitimate targets.  She may say so, I could not possibly comment.

 

What is needed is a data rich, fact based discussion on these important reward questions by those who know and understand the issues.  We need a very big pea shooter to take on the storm troopers of the Westminster village and the chattering classes.  But it is time for reward professionals to do what they do best, provide the data and the analytics to take the battle in to the enemy camp.  Let us have a proper intellectual debate on these issues rather than the glass house occupants driving their tanks over the green lawns of the HR and Reward profession. 

IN CLOSING

I would urge you to buy/read the best-selling (#1 Amazon HR books) HR book  “Humane, Resourced” a crowd sourced ebook by some 50 HR professionals providing a cutting edge view of HR today by those who fight in the trenches.  I have honoured to have been a contributor to this volume.  All the revenue from sales of the book go to charity.  A very worthwhile read.   

 

This is my last reward blog post for a while.  I hope you have enjoyed the variety of topics covered over the last couple of years

Why our benefits products need to be like the Sainsbury supermarket

Introduction

 I was undertaking my weekly grocery shop in my local Sainsbury supermarket in Brentwood. It struck me that I have always shopped in this place. Why, and what lessons could be learnt that applies to reward offerings? The store gives me good value, consistency and familiarity.

 

Too often employee benefits are seen as an afterthought, an “add-on” to our pay strategy.  We can do much better than that. Employee benefits are an important signpost of both our employee proposition and organisational culture.  

 

Strong branding, good value, consistency

Sainsbury prides itself on its strong branding, good value and consistency. This is exactly what our benefit portfolio should be offering.  Our benefit products should reflect our organisational culture and values. Employee benefits provide a signpost to both employees and external stakeholders of organisational values. 

 

Good value is important. By which I mean the benefit is valued by the employee and drives business value creation by supporting and sustaining value added employee behaviours.  Consistency is also important. Employees should know what they are getting and benefit costs should be stable unless a revision is taking place. Consistency should also extend to culture. Giving a consistent and congruent benefits message supports and sustains our cultural memes

 

Product placement – the irritation factor

If you do your shopping like me, you are on autopilot; you know what you want and where everything is. However, every so often a ball comes from left field. The supermarket has moved my favourite jam. Panic.  I have to look around to see where it has been placed.  More often than not I see something I have not noticed before. Perhaps I will try a new jam? This again is like our benefit offering. On occasion we should move things around, shake them up a bit.  Just to get our employees thinking a little differently. 

 

Big data is watching you

I use a loyalty card at the supermarket. It is not the most streamlined of user processes.  However, it does mean that Sainsbury knows what I buy and when.  It can offer me money off coupons on things I normally buy and even tempt me with offers of things which I have not tried.  It knows what brand of aspirin I take, the stages of my children growing up and even how often I entertain It does not, in my view, make full use of this data; but it will.  These are valuable approaches we can use to enhance the personalisation of our benefit offering.  We can use the HR data to offer changes in risk benefit levels or pension and financial advice. All this is available and value added. It moves employee benefits from something staid to a dynamic, interesting, value added process supporting business success.

 

Visualisation and info graphics

I do not know, but if I was a betting man, I would place a wager that Sainsbury marketers and merchandisers use visualisation and info graphics to better understand the very large amount of data they hold. I can see in my imagination maps of the UK stores, showing geographic variations in value added products, perhaps with an Acorn (consumer classification) overlay. 

 

This is exactly what we should be doing with our employee benefits. Collect the data. Turn it in to meaningful visualisations.  Use these both as analytical tools but also to inspire creativity and innovation.  After all, why not?

 

Conclusion

There is a great deal to be said to applying the Sainsbury or Wal-Mart approach to our benefit products, services, and communication. The supermarkets make a great deal of money out of offering their customers what they want when they want it, at the optimum price. No doubt we can apply some of these lessons to benefits to build value, add credibility and build business success. 

Pay reviews; the Compa ratio magic. Strong Analytics V

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Introduction

We are, in most organisations, in pay and bonus round season. I have been involved in running pay and bonus rounds for over fifteen years.  One of the most helpful ratios and presentation tools is the compa ratio.  It is an incredibly powerful analytical tool.  At its most simple the compa ratio is the role is the position salary divided by the market salary.  This gives a ratio.  The magic is the amount of information contained in that number.  A compa ratio of 1 indicates that the position is paid at the market rate.  A ratio of less than one show the position is paid at less than the market rate and by what percentage and a ratio of more than one shows the position is over paid against the market and by what percentage.

By building graphs and visualisations of the compa ratios you have a powerful tool to assist management in making decisions on where to spend the limited salary increase resource.  Compa ratios can also be derived from total cash or even total compensation figures; although please see the methodological warning below.

What is it?

Most of us have salary data information from salary surveys.  We use this data to see how various positions sit in our labour market.   If I work in an insurance company I may have the excellent Mercer survey on insurance pay; if I work in banking I may very well use the methodologically sound McLagan survey.  Provided the jobs or roles have been correctly matched we will have a mass of market data on most of the roles in our organisation.  We will also have the average salaries for the same roles in our own organisation.

Here are some examples of comp ratio calculation:

Position salary Market salary Comp ratio
100,000 100,000 1 (Salary at the market position)
100,000  90,000 1.1 (Salary 10% above the market)
100,000 110,000 0.9 (Salary 10% below the market)

By using the simple compa ratio we will be able to see how our roles fit to the market.  Here is an example from a data set:

Role Average of Current Base Salary Average of Salary Compa
Actuary

$370,000

1.03

Management   Team

$370,000

1.03

Analytics analyst

$36,000

1.03

Analytics

$36,000

1.03

Analytics Manager

$100,000

1.01

Analytics

$100,000

1.01

Asst Trader

$47,648

0.94

Commodities

$41,603

0.95

EM

$29,347

0.96

OTC

$57,696

0.93

Special   Sits

$44,335

1.02

Treasury

$31,333

0.63

Here we have roles categorised by department with the compa ratio.  We can immediate see that there is an issue with the Assistant Trader role in Treasury.  At 0.63 we are clearly paying well below the market.  At best this warrants further investigation; at worse we have an immediate problem that should be prioritised in the pay increase distribution.   The concept becomes more powerful when we convert the data in to a graph

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In this example I have produced a graph showing both compa ratio and the attrition rate.  There is a strong negative correlation between compa ratio and attrition rate.

Getting clever

Using compa ratios it is possible to compare departments against one another as well as roles within a department.

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This shows the compa ratio by department; again illustrating where our pay round fire power should be concentrated.

The analysis can be extended to looking at sex discrimination, for example.  In this graph we look at the differences between males and females by compa ratio.

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This chart again gives an indication of areas that will require to be considered when carrying out the pay review.

Making connections

Another very useful application of compa ratios is to compare department compa ratios against a range of business analytics.  So, in the table below I have compared compa ratio with return on risk capital.  The concept is to focus our pay increases on to those areas that give the best return for the business.

Department Average of Salary Compa Average of RORC
Political Risk

0.93

32.00%

M&A Advise

1.00

28.00%

Treasury

0.89

18.00%

EM Debt

0.99

14.00%

Special Sits

1.00

14.00%

Derivatives

0.97

12.20%

Swaps

0.95

8.20%

OTC

0.95

7.40%

FX

0.95

7.23%

EM

0.96

5.50%

Vanilla

0.94

3.50%

Grand Total

0.95

11.60%

This approach shows a low correlation between market position and return on capital of 32%.  Depending on our reward strategy we may wish to focus our pay budget on, for example, Political Risk which has the top return on capital but has a compa ratio below one, showing we are paying, on average, below the rate for the market.

Thinking bigger

A similar approach can be taken when using a compa ratio for “total cash” – that is salary plus annual cash bonus.

A word of warning

I will talk of some of the methodological issues later in the article; but of particular note is that great care must be taken when looking at total cash market survey results.  Survey organisations use different methodologies so be sure you are comparing like with like in terms of cash bonus definition and the timing of the payment of the bonus.

Combining data

One of the most powerful ways to use total cash compa is to compare base salary compa, total cash compa and, for example performance ranking or even better, a business KPI to ensure alignment of bonus payments with outcomes.

A common reward strategy is to place salary at the median of the market place but to pay bonuses at the upper quartile, or better, for upper quartile performance.

He is an example of a table of salary compa ratio, total cash ratio and return of risk capital.

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This is a very powerful analytic graphic.  It shows that there is a major mismatch between the areas achieving the best return on risk capital and the market position for both salary and total cash.  It further shows that two areas with very similar RoRC have different compa ratios for both salary and total cash.

We can carry on with this type of analysis with almost any business metric and any mixture of KPI’s and compa ratios.  It is a really powerful way to think about pay and bonus analysis.

Methodological warning

A major consideration when thinking about this type of analysis is that salary survey data relates to positions, not individuals.  Further, accurate job matching is essential to ensure a good “fit” to the data.  Salary surveys are best viewed as not absolute numbers but as indicating relativities in the marketplace.  It is more important to look at the relative position of a role than the absolute salary level.  This is because roles are different between organisations as are the people who fill them.

To use the compa ratio approach well requires a good understanding of the statistical methodology underlying the raw numbers, it advantages and its limitations.  We need to understand both the size of the data population and its stability.  Even quite large populations used for data can cause issues if that population changes year on year.  This applies both to the organisations taking part in the survey as well as the roles and the individuals within the roles.    Survey data is averages of samples; good statistical approaches can ensure that the samples closely resemble the total population; but in many cases there are no more or less than a sub-set.

This applies still further when looking at total cash survey data.  The definition of total cash and the age of the data are essential consideration when manipulating the analytical outputs.

Conclusion

When we are analysing data in preparation for the pay round the compa ratio is a very powerful analytical tool.  Used effectively it can give a great deal of data in a simplified format that is amenable to graphs, diagrams and info graphics.

Used in conjunction with business data it can create meaningful business insights that will shape and direct the nature of the pay and bonus round in your organisation.

If you would like to understand more about data analytics and the pay round please contact me at idavidson@rewardresources.net

Pay round visualisations – Strong analytics III

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Introduction

An important part of any pay review is reviewing pay.  That is looking at pay modelling, outputs and outcomes.  My experience says that the 80/20 rule applies.  80% of the pay round outcomes will be straightforward.  What will be of interest is the 20% of the population that comprises of exceptions and outliers.  So a good analysis will be layered to provide details on the total spend by department or area and the identification of outliers and exceptions.

The most effective way to provide this data is to do so using graphical data and info graphics.  Human beings assimilated graphical data far faster, in most cases, than vast spread sheets of data or even summary data in tabular form.  We like to look for patterns and at pictures when going through the sense making process.

The other very important piece of the presentational jigsaw is to show, wherever possible, the link to business metrics and key process indicators. (KPI’s).  It is very useful to show correlations between our reward outcomes and business metrics.  We must use the data to show our “bang for the buck”.  That we are spending shareholder money to best advantage.  This approach should be supported by reference back of the pay outcomes to our reward strategy.  So if our strategy is to pay our top performers at the upper quartile of our pay market we must show that correlation in our presentations.

Getting pay visualisation right saves time, effort and increases the credibility of the reward team.  It aligns the reward analysis with that of the organisation and its management.  Having a cohesive pay narrative, linked to business outcomes with make the “sell” of the pay round easier and faster.  Anticipating the questions of our stakeholders is both simple and powerful.

Exceptions and outliers

If the pay round is well structured management will have a focus on the exceptions and the outliers.  Identify the top and bottom ten per cent of your pay proposals.  Clearly identify those staff who are being rewarded outside the policy or in a different way to their peer group.  DO NOT provide pages of spread sheets or tabular summary data. (Unless specifically asked for by a stakeholder).  For most managers pages of data are difficult and time consuming to read and difficult to interpret.

This graph shows a correlation between revenue ranking and market position.  It is immediately oblivious that there is an outlier.  The reason for that person’s position on the graph can be explained and a recommendation made as to how to correct the anomaly and increase the correlation between revenue ranking and market position.  (The underlying assumption is that this is part of the pay strategy).
Revenue
 

Develop the pay narrative

As reward professionals, working closely with our HR business partner colleagues, we should have developed a coherent pay narrative.  A story of what our pay round is trying to achieve and what it has actually achieved.  The reason for this is that it makes explanation, presentations and data analysis much easier if we have started off with a basic, clearly expressed set of principles and assumptions.  This may include foreign exchange rate decisions, key metrics including the budgets and a clean set of data as a starting point.  Time spent cleaning pay data is never wasted and can save a vast amount of time and trouble later in the process.  Data is never perfect.  I have frequently come across situations where the headcount I was using for the pay review and the information in the Finance department was different.  Agree and reconcile the approaches and numbers before the pay round starts.

There is never enough time or resources to process a pay round perfectly.  By undertaking the data cleansing, agreeing the pay narrative and assumptions and any reconciliations in advance (and appreciating that is not always possible) will save time and lead to a better pay review process.

A picture is worth a thousand words, or ten spread sheets

Producing high quality, clear info graphics and visualisations of reward data is a very efficient use of resources.  Returning to the 80/20 rule it allows management to focus on the 20% of the pay review that is important or of interest to our stakeholders. Graphics such as the one below can be used to answer questions before they are even asked.  Using this approach highlights our exceptions and the extremes of our pay distribution.

The supporting data is of course available behind the graphics.  But, returning to the theme of a good pay narrative, we can illustrate and support both what we are hoping to achieve and what we have actually achieved.  A good graphic is a “smack in the face with the obvious”. A crude but accurate comment on what a good graphic should achieve.

Business metrics and KPI’s

It is no longer enough just to present raw pay data.  We have to put the information in to the business context.  We must illustrate the connections and correlations between our limited pay and bonus budget and business outcomes.  Reward the performers and the revenue generators.  Pay outcomes can be used to give a clear message as to what behaviours and activities will be reward and those which will not.   Many organisations, even those in financial services, are looking carefully at the “how” something is achieved as well as the “what”.  Balanced scorecard approaches are very common; it is still possible to focus on the financial outcomes by giving it a high scorecard weighting; but we can nuance the approach by giving smaller weightings to cultural, behaviour and approach.  A well-constructed balanced score card will be measurable and give another basis for our graphics to show appropriate correlations.
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In an earlier post (https://iandavidson.me/2013/08/23/pay-round-processes-a-big-data-approach-including-the-add-on-benefits-to-recruitment-training-and-development-and-succession-planning/) I showed how it is possible to run a pay round based almost entirely on those factors that lead to business success.  It is not easy and arguably it removes “discretion” from managers.  But, it is the use of that very discretion that often leads to upset and even legal challenge.  A robust process backed by robust data is the way forward.

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Conclusion

The pay round in the vast majority of organisations is resource and time constrained.  It can be made easier on all stakeholders by presenting a solid reward narrative illustrated and supported by appropriate and timely visualisations.  This allows the focus of the reviewing stakeholders, be they the Remuneration Committee, Executive management or line management, to be on the 20% of the population that requires attention rather than the 80% that does not.

A strong story, answering questions before they are asked and linkage with business metrics will be both appreciated as part of the alignment of HR and business strategy and as an efficient way to manage a pay round.  Providing good graphics saves time and increases focus when resources are, like high pay increases, very rare.

London Callling

 

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Introduction

I was listening to a radio program about the broadcasts to the French resistance during the  Second World War.  Coded messages were sent by the BBC to give instructions to the  resistance.  These included “The blackbirds have arrived.  Aunt Marie wants to visit.  It is going to rain in Paris”.  To those who understood the code it was perfectly clear; but if you did not understand the code the phrases were meaningless.

 

This is very similar to the language we use in executive reward.  We talk about TSR, LTIP’s and ESOPs.  These make perfect sense to those “in the know” but means very little to those not in the profession.  This is a problem.  It is important that there is a wider understanding of how reward metrics are measured and achieved.   Otherwise executive reward will continue to be a black box.  Given the scrutiny by the media and politicians it is important that we make reward as transparent as possible.    

 

Vocabulary  of reward

The language we use in reward is a mixture of finance,, economics and statistics.  To those in the know it makes perfect sense.  But, we are in danger of losing the understanding of an important group of our stakeholders.  Just as the Nazis during the Second World War, did not understand the messages and made incorrect tactical decisions based on their lack of knowledge, so the media and the public make incorrect assumptions  about the reasons and justification for executive reward.

 

The exclusive vocabulary used to serve a purpose.  It stood as a form of professional validation.  If you understood the language you understood the culture – the way we do things in reward.  Due to increased scrutiny of reward by the media and the growth of social media that makes executive pay discussions more easily accessed such exclusivity is no longer appropriate. 

 

Another lesson from the BBC

The BBC used to have its presenters talk in “Received Pronunciation” .  This was a very correct form of English pronunciation.  While it was not spoken by the majority of its listeners, it was clearly understood by most.  Sadly the BBC now encourages presenters with regional accents to promote inclusiveness; some of the presenters cannot be understood by the elderly, those who do not have English as a first language and upsets those who like English to be spoken properly.

 

In reward we have to develop our own “Received Pronunciation”.  That is a way to communicate the complexities of reward in a way that is clear but also precise.  That allows all our stakeholders to understand (perhaps with a little intellectual effort) the reasons, metrics and outcomes of our executive reward programs.  A better understanding is likely to lead to a higher level of acceptability

 

Conclusion

In reward and benefits we are involved in a struggle to get our sometimes complex messages across to an audience used to “soundbite” explanations.  We must develop the “Received Pronunciation” of our reward vocabulary to better persuade and convince our multitude of stakeholders of the value of our efforts in the complex and ever changing field.