Salary.com HRVoice

Market Pricing in the Time of Say on Pay

With so many companies embarking on their first year of a say-on-pay vote, it is important to be thinking now about the things that may trip up a vote. Aside from best practices in compensation, the most important thing to focus on is effectively conveying your process. Effective communication encompasses how well you explain your process, as well as how and when you deliver the message to shareholders, not just in the proxy but, if possible, by creating opportunities to interact well in advance of the annual meeting.

Aside from pay for performance, the types of things that Occidental Petroleum, Motorola and Keycorp reportedly got voted down on include tax gross ups, lack of succession planning and the rate of increases and stock grants relative to company performance. In my recent conversations with many compensation professionals, it seems that trying to predict equity grant values is like staring into a crystal ball.

Now more than ever, properly market pricing can help. Conversations with peers at other organizations can be anecdotal and certainly not the most scientific process to explain in a proxy. In such volatile times, the combination of solid timely surveys, a good compensation consultant and comparison to a well-selected peer group that utilizes proxy data certainly seems the best way forward, rather than trying to reuse established plans that perhaps are not working out so well lately.

Stop Waiting for a Seat at the Table, Call the Bloody Meeting!

My favorite moment from a keynote presentation from WorldatWork President Anne Ruddy was her passionate plea to the HR and compensation professionals in the room.

Stop waiting for a seat at the table and call the bloody meeting!

So often we hear HR professionals discuss the struggles with “getting a seat at the table” to be a true strategic partner to the organization. Anne challenges us to take charge and own our own destiny. Our profession has evolved, and it is up to us to stay abreast of the issues that plague our organization and affect our human capital.

Human resources is more than the profession to choose because you like to work with people. In order to sustain and grow our organizations in a challenging economic environment, we need metrics, efficiency, and strategic thinking to align our total rewards strategy with the goals and direction of our organization.

Are you thinking big?

Be a Champion for Market Pricing Automation

I do a lot of public speaking, which gives me the pleasure of getting to meet all levels and experience of compensation professionals. What never ceases to amaze me is the amount of companies that use antiquated methods for market pricing – hundreds of spreadsheets, printouts, binders, even rudimentary homegrown databases. Sometimes we get so stuck in the process that we forget to take a step back and notice that we are all doing the same thing, at the same time, with the same data every year.

There has to be a better way.

And there is. There are many software options for compensation professionals to take advantage of to help revolutionize the way they do market pricing so they can stop wasting time recreating the wheel every year. That isn’t news.

I realize that budget has a huge impact on what comp departments can choose to adopt, but I find that budget isn’t always the issue. Fear of change or of new technology and our own inability to champion the needs of HR often get in the way.

Market pricing seems to be the final frontier for HR technology. This may be because we as comp professionals are the ones who see the real value in what automation can provide, because we wouldn’t accept such manual work in other parts of our department.

Do you have someone sitting and writing out each individual paycheck? No, you go to ADP. So why are we so willing to accept having a spreadsheet for each job or a database that no one knows how to run a query against?

Workforce Management in a Shifting Economy

As the recession lingers on, the number one topic of discussion is a U.S. unemployment rate that refuses to dip much below 10 percent. There are several reasons for this persistent, higher rate of unemployment, but the most worrisome one is a fundamental shift in employment economics. The recession has put significant pressure on employers to cut costs, and many have responded by outsourcing as many jobs as possible to Asia. Apple, for example, keeps only a core group of 25,000 employees in the United States, while Foxconn, the Chinese company that assembles iMacs and iPhones, employs 250,000 people, resulting in the creation of 10 manufacturing jobs in China for every Apple employee in the United States.

While one can easily argue that this mass exodus of jobs is hampering the economic recovery, the bigger threat to recovery may be the types of jobs that companies are now willing to outsource. It is not just lower paying jobs such as call center positions anymore. Information technology, finance, back-office staffing, and manufacturing firms are setting up shop in lower cost countries. Companies have slashed millions of domestic middle-skill, middle-wage jobs, which has created a glut of people who can't qualify for highly skilled jobs but have a hard time adjusting to lower-skill, low-wage work.

For U.S. workers who are still among the employed, life hasn’t been all that easy either. Weary of consistently being asked to do more with less, worker productivity actually fell in July for the first time in 18 months. This may be a sign that employees have finally gotten to the point where they are simply stretched too thin.

Law Firms Rethinking Pay Philosophy

Last week the Boston Globe examined a trend that is a little late catching on in the marble floored hallway of some of Boston’s biggest law firms: pay for performance. You're likely familiar with the practice, and some of you may have even instituted pay for performance at your own organization.

My first thought was that there must be a lot of consulting dollars to be made in guiding the firms through these changes.  But before I could start knocking on the doors of these firms and offering myself up as a consultant, a second, more philosophical took hold; what would happen if we did away with the practice of “lockstep” or “tenure-based pay” in other industries? 

Education - Do you think the American public school system would be in the disarray that it currently is if there was a performance based pay program?  What if teacher and administrator pay was contingent on the progress that students made throughout the year? A USA Today report on pay-for-performance in schools noted that the pay for performance has been a topic in education since the 1950s, but lost momentum due to teachers “not buying into the idea.”

Some cities like Chicago and Central Falls, RI, have gone to the end of the spectrum, eliminating tenure all together and making employment contingent on performance.

Reflecting on the First Year of Salary.com HRVoice

It's a birthday of sorts for us, as we're marking the one-year anniversary of this blog, Salary.com HRVoice. It's a privilege to engage in conversations that may ultimately help HR and compensation professionals, and we hope you've found some bits of insights and best practices along the way.

We're grateful for the opportunity to be partners and advocates in your success. While we deliver software and data to power your pay-for-performance programs, we want to empower your success most of all. And that means sharing anecdotes and lessons learned, relaying the impacts of news and legislative initiatives on your careers, and giving you early and easy access to the results and trends of recent surveys and research.

Take the Time to Establish a Job Hierarchy

While technology has changed the very nature of human resource management, some concepts continue to be the foundation on which everything else is built.

The concept of a “job” may seem outdated in the day of combined roles and all-hands-on-deck style management, but still, the "job" is the critical reference point for most HR organizations. But while the job concept is generally understood and broadly applied, a job hierarchy, also known as a job-leveling framework, is applied less consistently, with many organizations not having formally defined or documented their job hierarchy.

A job hierarchy provides the framework for grouping jobs and relating jobs to one another. The hierarchy is defined by levels or bands with defining criteria for jobs. The levels and bands are often created based on jobs within the organization, but an industry-benchmark structure or generalized structure can also be used as a starting point. Once defined, the job hierarchy can serve many purposes, including defining the internal levels of management and governance and providing reference points for compensation surveys and competency models.

Is Your Company’s Salary Structure Due for a Check-Up?

Given the low to non-existent salary increases and tremendous job losses that have characterized the recession, most employers have felt little need to focus on their salary structures. Many have even forgone the 2-3 percent annual structure increases that were typical before the economy collapsed.

But there is more to maintaining effectively salary structures than simply tweaking the ranges by a couple of percent. Like a lot of projects that have a big ramp-up, salary structures tend to be put aside after they are created and implemented. However, if structures are to remain an effective means for distributing salary dollars, they need to be audited and realigned periodically.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The U.S. Senate ended debate this week on the Dodd-Frank financial reform bill, also known as the Restoring American Financial Stability Act of 2010, which was approved by the House last month. This pushes the bill one step closer toward review by President Obama. (Editor's note: Obama signed the legislation into law on July 21, 2010.)

As we’ve covered here previously, hidden away in this 2,000 page bill are mandates for say on pay and golden-parachute advisory votes by shareholders, along with how often they will be held, as well as further tightening the rules surrounding compensation committee independence and clawback policies. What is new in this bill is provisions for the disclosure of internal pay equity. These disclosure, originally introduce in the Corporate Executive Accountability Act of 2010, is to be a ratio comparing CEO annual total compensation to that of the median annual total compensation of the average worker worldwide. 

There have been many articles written in the last few years about how CEO pay at U.S. public companies has risen from a multiple in the 1950s of about 30 times to 300 times the average worker. Articles have also sized these ratios in other countries, where the multiple is not so extreme.

Optimism Beyond the Downturn

Are you feeling optimistic about growth and hiring? Attendees of our recent webinar Beyond the Downturn: 2010 HR Strategies Revealed seem to be.

We asked if they were planning a salary increase program in 2010 and more than half said they were or already had implemented one.

Are you planning a salary increase program in 2010?




While our 92 respondents may not represent a statistically-significant poll, the optimism is palpable.