Compensation in the Crosshairs
By HCM-Oracle on Mar 07, 2014
By Chad Atwell
If you peruse the latest headlines, tweets and blogs on the topics of compensation, you will no doubt find a lot of bad press. There is a persistent drumbeat in the media railing against the unfair pay practices of corrupt corporations and malicious management. Once limited to launching criticisms at the ivory tower of executive pay, the public dialogue and controversy has now expanded to include many of the foundational strategies used by reward practitioners around the globe.
One of the most prolific debates in recent years started with an eighteen-minute TedTalk by Dan Pink in 2009 on the topic of motivation. The talk and subsequent book by Dan Pink entitled “Drive: The Surprising Truth About What Motivates Us” points to exhaustive academic and scientific research calling into question our reliance on 20th Century reward practices for a 21st Century workforce.
“These contingent motivators, ‘If you do this, then you get that,’ work in some circumstances, but for a lot of tasks, they actually either don't work or often they do harm. This is one of the most robust findings in social science and also one of the most ignored.”
Ultimately, Dan Pink proposes that modern businesses will achieve higher performance by quickly getting the issue of money off the table and motivate their workforces by more intrinsic means, namely autonomy, mastery and purpose.
Are the ideas of paying for performance or rewarding goal achievement really just remnants of a bygone era? When I was working as a Compensation Manager and then in the second stage of my career as a consultant, I certainly didn’t hear many employees asking for more purpose in place of pay. I also couldn’t seem to find very many situations where money was “off the table,” and the employee was focused entirely on intrinsic rewards. Fortunately, there is a substantial amount of research being done around what employees actually want from their employers.
One example of this research comes from Deloitte, a diamond-level partner of Oracle. In two separate Talent Edge 2020 surveys from 2011 and 2012 respondents from every generation ranked “additional compensation” and/or “additional bonuses or financial rewards” among the top three incentives for keeping them with their current employer. This same outcome was also substantiated across various countries in Mercer’s What’s Working Survey from 2011.
Another data point comes from Gerry Ledford, Senior Research Scientist at the Center for Effective Organizations. If you want to geek out over some really stellar research, read his working paper entitled, “Negative Effects of Extrinsic Rewards on Intrinsic Motivation: More Smoke Than Fire.” Mr. Ledford points to a number of studies, including his own, confirming that extrinsic or monetary incentives actually have a positive impact on employee intrinsic motivation, namely their feelings of competence and autonomy.
Finally, it’s worth taking into consideration what prominent employers are doing to address talent concerns. One very famous example was when Google, thought to be the very embodiment of this new era of workforce motivation, gave all of their employees a surprise $1,000 cash bonus and 10% raise in 2010. Was this just some knee-jerk response to competitive pressures in the labor market? Far from it. This initiative was the outcome of a very thorough conjoint survey where Googlers were asked to indicate which parts of their compensation elements were most important.
If the importance of pay isn’t changing in the 21st Century, what are companies to do? Allow me to offer a couple of slightly more subtle changes I see in the modern workforce and how HR should adjust its approach.
Employee Input: If you haven’t picked up on it so far, companies need to know what their employees value when it comes to rewards. This new openness of opinions about pay in the public dialogue has already begun to seep into your organization. The typically taboo topic of compensation in most companies now needs to be brought out into an open and moderated dialogue. While you may not need to do a full conjoint analysis similar to Google, you shouldn’t just listen to what someone else tells you Gen Yers and Millennials really value. Regularly reaching out to employees for their perceptions and opinions provides learning opportunities for both sides.
Real-Time Feedback: Opportunities for immediate feedback are now provided to us or solicited from us on a daily basis. From shopping surveys to the “Like” button on Facebook, we are swimming in a sea of feedback. It does seem strange, then, that so much feedback is held back at work for the big, annual sit-down discussion with a manager. This idea has obvious implications for Performance Management, but I don’t see very much discussion on the impacts to Compensation. Given most of us can ill afford to move salary increases to a quarterly schedule, I recommend rounding out a total reward toolbox for your organization. Give managers and employees alike the ability to recognize others’ contributions with a variety of real or symbolic currency. Even small denominations of this can go a long way towards fostering a culture of recognition and a personal sense of engagement.
Strategies that provide clarity and openness around the topic of compensation are the best way to fight back against the prevalent culture of suspicion and criticism. Feel free to leave a comment below on your experiences with these ideas.
Also, don’t forget the WorldatWork Total Rewards Conference in Dallas this May 19th through 21st. Oracle is a platinum sponsor of the conference this year, and Oracle’s Compensation Cloud will be on display at our booth.
Chad Atwell is a Director of HCM Product Strategy at Oracle. He works with customers of Oracle’s Compensation Cloud and uses his extensive background in compensation management to design innovative solutions for how the 21st Century workforce is rewarded. He believes in striking a balance between innovative workforce trends, enduring best practices and disciplined process improvements. Chad is also a faculty member of WorldatWork where he teaches courses to practitioners on the foundations of compensation management. You can follow him on Twitter: @chad_atwell