An important antecedent of rock n roll was the so called “Chitlin’ Circuit” that began during the depression.  A walk down one of these streets in the segregated section of larger towns was referred to as the ‘stroll’.  It included row upon row of boisterous joints clamoring for one’s attention and hard earned dollar with outstanding music by yet to be famous musicians (B.B. King, Little Richard, Ray Charles, James Brown etc.); not at all unlike today’s trade shows.

As we prepare to exhibit at World at Work’s Total Rewards 2012, the premier event for all things compensation, we try to remember what it’s like on the aisle so to speak as we were all technology buyers once ourselves.  We encourage all the attendees as they are ‘strolling’ down the aisle to be on the lookout for those diamonds in the rough.

While many things change, technology deployment is still driven by a keen understanding of what can deliver value quickly while acutely targeting specific business needs.   But hearing through all the noise can be difficult.  I have learned several things over the years that can be applied in varying degrees to any trade show environment.  They include:

• Big isn’t always better – many smaller vendors have applicable or even more proficient technology
• Integrated is different than integratable – it is better to assemble some solutions as long as you understand their capability to be easily deployed in your business environment as they provide more targeted functionality, and they often have exceptional partners they can enlist.
• There is no exception to experience – find providers who share your discipline as they understand better your issues and how best to approach them.

One last thing; don’t be taken in by the bling of trade show giveaways.  However, if you are in need of an iPad™, stop by our booth, #233 and try your luck.  We’ll be happy to discuss your compensation needs as well.

So enjoy the walk and don’t be afraid to engage people just to get a clear understanding of any particular solution, but expect to be engaged just as thoroughly, if not more in discussing what your specific business needs are.  Otherwise, just keep strolling.

As a relative newcomer to the HR profession I am continually bemused by the amount of effort certain firms appear to invest in fighting transparency in compensation matters (it’s about time I worked in the name of our blog).

The latest occurrence is a recent piece in HR Magazine that espouses ‘best practice’ approaches to wage communication.   Communicating regularly with employees about compensation seems like a no-brainer for the obvious situations involving variable pay matters, clarifying misconceptions and misunderstandings about pay policies as well as getting ahead of increasing compliance regulations.

But what about the really important stuff, you know attracting and retaining the best talent?  Defensible compliant job descriptions increase employee alignment and improve job satisfaction.  Clear expectations help align employee values to company values.  The emphasis for strategic HR management should be on the company value chain.  Reducing risk and making clear compensation communication a standard operating process frees up valuable HR resources to focus on vital human capital management tasks.

My sense from clients is the desire to communicate is often outweighed by the lack of substance and specificity of many compensation and pay policies.  Many years ago at a large US automotive company we were regularly reminded to not divulge our compensation to anyone, lest some undefined, but certainly heinous consequence might befall us.  It seemed almost comical given that everyone in the department knew everyone’s’ business anyway.  Or so they thought.  The only harm I ever saw was to those few individuals who only thought they knew, but didn’t really.

I’m not advocating for full transparency necessarily, but we do believe that good compensation communication starts with a clear understanding of the position and its relative value to the organization.  The foundation is consistent and easily explained job descriptions.  The approach and process for establishing the relative value of each position to the firm leads to effective alignment with business objectives as well as establishing the core tenets of compensation policy.  From there you can have an intelligent conversation about competencies, personnel development and yes even salary and benefits, but within a logical and defensible framework.

People will always want to be paid more.  Who doesn’t?  The communication needs to start with the position and its place in the company value chain.

It is the nature of our market that we frequently engage with senior HR staff that understands the problem space extremely well.  We often find ourselves being asked to help them ‘sell the solution’ to decision makers in the organization, or even worse watching helplessly from the sideline while they attempt to do it.

Here’s a mildly radical suggestion; sell the problem not the solution.

Whoa, you say; isn’t that potentially career limiting?  I suppose there is always that chance.  There is a certain sub-culture of some senior management that often doesn’t realize there is a problem.  Could be their heads are blissfully in the sand, but more often it is just the dynamic nature of business that they need to be informed on the depth or breadth of organizational problems.

There is a simple way to combat the negative connotation.  No problem discussion should ever happen without hinting that there is a solution, especially one that other firms are using.  That’s where you should be leveraging your relationship with your solution provider, us.

We not only have the experience but the references.  Including your vendors in the conversation may also be a wise choice. We have (or better have) pretty thick skin.  We have been through these conversations many times, and we offer something else.  In another life at a large firm, I used to encourage my staff to make proposals to senior management.  An immediate concern was always what if they don’t like it?  I told them, “That’s what I’m here for; if they love it, it is your idea, if they hate it, I’ll just take responsibility”.

As solution providers we should and do take responsibility.  We like to think of ourselves as partners with our clients.  Let us be your partner for core compensation management solutions, job description solutions or HCM consulting.

Well yes and no.  At DBSquared we like to remind clients that our solutions are designed by HR professionals for HR professionals.  At this time of the year when every tax consultant I run into can only lament the loss of their personal time between now and April 15^th, I am reminded that we also can say that our flagship solution, DBCompensation™ was designed by consultants for consultants.

A little bit of history is probably worthwhile.  The original methodology was developed by our founder in the mid 80s to help him be a better compensation consultant to major industrial clients.  His sons enhanced and improved the methodology to help them address new developments in job classifications and compliance.  The computer application was originally designed to enable their consultancy to be more efficient.  We only decided to commercialize it when our clients began clamoring for it.

We are reminded of why we became consultants.  We were attracted by:

• The opportunity to bring a continually improving, process-driven approach to your craft
• The desire to bring best practices from one client to another, while leveraging your industry depth or functional expertise
• The freedom to “do the right thing by the client”, secure in the knowledge that “the rest will follow”, when you make solving the client’s problem your priority?

Look at almost any consultancy discipline and you will find an explosion of tools, some commercial and some home grown.  At DBSquared we have been fortunate to have our clients see the value in our tools.  As consultants we still have the opportunity to improve our expertise and ability to help clients.  We didn’t cede that advantage or opportunity.  In fact we would argue that the increase in accuracy, reliability and risk mitigation is alone worth our investment of time and expertise.  Our consulting business has increased even as we sell our solution to clients.

We would encourage any compensation consultant to explore making our solution part of their own tool chest.  It won’t mean you will have less opportunity.  But it could mean the difference between offering your clients the most effective service in the most efficient manner, and having a little time left over for yourself.

Whether you’re a Rodney Dangerfield or an Aretha Franklin fan, a little respect is a good thing. Recently I read a nice tribute to the difficult position job evaluators have within the HR hierarchy.  We would definitely agree that job evaluation can be difficult, and is certainly under-appreciated.  We would NOT agree that it has to be subjective, error-prone or biased by external influence.

Part of the problem is thinking of job evaluation in dated terms such as the notion of job evaluators as heartless (or worse yet intimidated) HR types toiling away with pencil and paper (or spreadsheet) and girding themselves to do battle with managers and employees that disagree with them, don’t understand the process and are constantly looking to game the system somehow.  Okay maybe that last one is a testament to man’s eternal desire to ‘succeed in business without really trying.’

Job evaluation like most any modern process can be substantially improved by judiciously applying appropriate technology.  Effective methods and software do exist.  DBCompensation™ provides a proven automated methodology that has enough flexibility to evaluate every job in your organization, from the lowest paying position up to executive management. Many companies, whether large or small, private or public, have used DBCompensation™ to rate thousands of jobs across a broad spectrum of industries.

The approach we use addresses common misconceptions and suspected failings traditionally associated with job evaluating:

• Evaluators don’t know the job intimately enough – The 15 factors in our system have been revised and vetted over time and through rigorous application to over 15,000 positions.
• Evaluation is subjective – Each constituent aspect or level of our factors is discrete enough to ensure an objective overall rating.
• External pressures negate objectivity – Collaboration is built in to the system to; 1. Obtain pertinent information from stakeholder parties (employees, managers, etc.), and 2. Provide a quantitative context for evaluating committees to weigh interested input.
• Job descriptions are not suitable starting points – Couldn’t agree more.  Our approach automatically creates the job description as a product of the evaluation process.

At DBSquared we developed our unique system specifically to address the issues of productivity, performance and fairness.  More importantly we incorporate it as part of a hybrid methodology that adds support for market survey data, and provides for a very rational way to allocate scarce compensation dollars to assure that pay is both internally fair and externally competitive.

So how about a little R-E-S-P-E-C-T, along with some modern technology?

Leonardo DaVinci observed that there were three aspects that vary with perspective; size, color and clarity.  If compensation strategy is aligned with achieving business goals, then attraction and retention of the best people is the fundamental objective.  Understanding your relationship to the market in your industry and your region is paramount in terms of providing size and coloration to your compensation strategies and policies.  Market survey data provides insight from your competitors on how they define and value similar positions.  Regional information deftly adds another layer of subtlety to your compensation picture.

Understanding the size and color correctly informs the decision-making process with the requisite amount of clarity to correctly factor those elements into effective policies that support major business goals.  The trick to any analysis is having good information.  The good news is there are lots of sources for salary survey data.  A significant issue with market salary surveys is that these different sources use different formats, different descriptions and different criteria for inclusion.  Ensuring an adequate match is difficult.

Back to our original consideration of CEO salaries; it is fair to assume that the role of CEO is typically at the highest end of our internal value line for the firm (whether that is ultimately true is a debate for another time and place).  Comparing market survey data for similar position titles helps flesh out our understanding of our internal assessments against the relative value of the position in our own industry and others, provided we can correctly correlate positions with similar or even the same title to our own internal rating.  Having a similar title does not guarantee similar scope of duties and responsibilities or impact within the responding companies surveyed (the CEO of Walmart versus the CEO of Ford again).

Additionally national data needs to be refined with regional insights in order to factor the worth and availability of talent.  At the CEO level regional variance may have more impact on the cost of living and base salary then availability (the cost of living in Arkansas versus living on either coast). But for most other positions it is critically important, for example there are a lot more IT Analysts in northern California then perhaps Northwest Arkansas, but due to a few key local firms, there is more IT talent in Northwest Arkansas than the other regions of the state.  And therefore talent attraction and retention will factor differently into compensation planning for those positions.

Compensation planning and execution needs to be both internally equitable and externally competitive.  A company’s business situation and culture along with their financial and organizational structure combines to fix one axis of the relative value of any position.  Market salary survey data helps complete the picture enabling assessment of local, regional and national markets correlating for economics and supply and demand for different segments.

With appropriate software tools and applied knowledge the ability to precisely triangulate job evaluation and market salary information into an artful and complete picture of real value is increasingly easier and more productive.

As most of us know or realize salary grades are convenient structuring mechanisms for sorting positions and associated compensation.  They can be easily defined, and should be used to ensure people are fairly compensated for their contributions to the firm.

The minimum attributes for a grade structure are:

• Naming convention (often just numerical)
• Salary minimum
• Salary mid-point
• Salary maximum.

They can be determined by formula and often have rules associated with the amount of overlap between the maximum of one grade and the minimum of the succeeding grade as well as the differential amount between successive grade mid-points.  The key element is the assigning of positions to salary grades.  Often the process begins with developing a grade structure and then assigning of positions.

A more precise and certainly more defensible process is to evaluate positions and then design a grade structure that is based on the value of positions within each grade.  This is the method we have designed into DBCompensation™.  Our process illustrated below allows our users to:

1. Determine the position ratings

2. Define an appropriate grade structure easily and quickly

3. Analyze the results for compliance, equity and compensation planning decision input.

Assignment of salary grades without a foundation of clear job evaluations heightens the tendency for the results to be interpreted as highly judgmental.  Their value must lie in being seen as the outcome of a fair and transparent process which improves communication and understanding.

Salary grades are in reality just another frame of reference for characterizing the relative value of a position to the firm.  They have the extra value of widespread usage and perceived understanding for communication.  Having the ability to easily design and validate grade structures in DBCompensation is a clear advantage for our hybrid core compensation planning and administration automated methodology.

Next we will examine our improved sore-thumbing capabilities.

Payscale.com recently published their “Fortune 50: Ratio of Pay, CEO to Worker”.  As you might imagine the numbers are interesting, staggering, amazing, or awesome; and I expect your exact adjective of choice will no doubt be determined by your perspective. By the way, to save you a click, the average ratio is 213:1 with the lowest 10:1, and the highest 1737:1

My intent isn’t to pour gasoline on any particular fire, but to ask ourselves; what is the best way to ascertain the value of any position to a company?  I am a great believer in the old adage; there are three kinds of lies; lies, damn lies and statistics.  So just examining a single ratio is fraught with peril, albeit amusing conversation.

Value can be defined as the relative worth or importance of something.  Pretty simple and straightforward, but often confused.  The key term may be ‘relative’ which ultimately determines our perspective.  The CEO of WalMart (ratio of 717:1) is not the same job or situation as the CEO of Ford Motor (ratio of 53:1), and neither are the numbers in their respective calculations.

This kind of comparison strikes me as similar to using only market studies to determine compensation structure.  It seems to me that defining a comprehensive structure that is fair, consistent and readily communicated is the foundation for any reasonable compensation strategy.  Using market data alone, it is difficult to know when you are comparing apples to apples.

How best to determine relative value then? Develop a solid internal frame of reference first.  This frame of reference is developed using tools and methodologies designed to determine the internal worth of a job using standard rating factors. The internal component of your firm’s salary structure is developed around a system of points that quantify the requirements of each position.

The result is a value spectrum that is internally equitable, and more importantly defensible to a court, the board and employees.  But that is only a sound starting point as it reflects a single internal company viewpoint.  In part 2, we’ll examine adding the external constituent to complete the picture and hopefully give us total perspective.

Tis the season…for top ten lists and prognostications!  Why that is, I’ve never really understood.  But as we were recently asked what trends we see in compensation, and just in keeping with the season, we at DBSquared would like to offer our hopefully insightful outlook for compensation matters in 2012 (or maybe it’s just our latest wish list for Santa).  As I write, I’m not sure how many items should be on our list, but rest assured that as we don’t quite fully understand why plans are almost always for 5 years, or lists are generally top 10, we will provide some interesting number of our choosing.

So what trends are we observing in the market at large and from our clients?  First and foremost, we sense a general optimism that has compensation professionals carefully considering how to prepare for the improved economic conditions.  This encompasses strategy, process, and technology considerations.

Strategic concerns center on evolving job structures and streamlined organizations primarily emphasizing improving individual productivity, elevated skill and knowledge requirements and increased hybridization of job duties and responsibilities. Managing budgets, as always remains a priority.

The resulting changes in job duties have also complicated business processes and technology application requirements both for the business and HR.  Slow or no growth conditions have increased time in position and the responsibilities associated with those positions which results in demand for increased training exposure and more effective technology applications.

The compensation-specific trends or needs that we see include:

• The need for a strong consistent job evaluation methodology that is the foundation of core compensation planning.  The methodology needs to enable rapid and accurate reflection of new position skills and responsibilities, required process and technology understanding and the consequent value in the new or realigned organization.
• A fully integrated market survey capability that drives better correlated matches to new or evolved job titles.
• Much higher focus on differentiated pay for performance.  This should reflect the need for increased variable compensation measures that directly support achievement of business objectives.
• Greater identification of pay equity issues and justification for variances
• And as always, control of compensation costs.

HR functions will be challenged to demonstrate or improve their ability to:

• Correlate compensation decisions to strategic business goals and objectives
• Standardize or make core compensation practices more consistent
• Provide precise decision-making inputs to the compensation and budget processes
• Answer to higher expectations for the design and implementation of compensation practices
• Clarify communications with staff
• Improve the integration of compensation tools and processes to allow uniform implementation by business management.

The confluence of these trends collectively indicates better integrated compensation systems and processes will be necessary.  And that translates into seamlessly incorporating technology point solutions with HRIS and payroll platform systems to enable the improved productivity and increased relevance of HR staffs.

Regardless of how you feel about holiday lists, we at DBSquared wish you a joyous holiday season, a very Merry Christmas and a happy and successful 2012!

On Tuesday, November 22^nd, Chuck Csizmar posted an insightful blog entry on the Compensation Café blog titled, “Is It Rocket Science Where You Work?”  Chuck was making a point that over analyzing market pay data may create survey “paralysis” and “analytic exactitude”.  He mentioned several reasons why the competitive “marketplace”- (market pay data surveys), is not “well defined” and is fraught with “numerous variations and interpretations”.  We agree with Chuck’s points that 1) surveys change from one year to the next, 2) job matching is not easy or precise, 3) surveys often represent a variety of company data (“industries and revenue size”) and reported wages are not “consistent” by definition of average wages.

For these reasons stated by Chuck and for several additional reasons, the compensation consultants with Johanson Group and DBSquared believe that depending on market pay data alone for analysis can cause discrepancies and holes in an organization’s compensation management planning and base pay structure.

The combination of Job Evaluation and Market Pay Analysis popularized by the Hay Group job evaluation system was the norm in the 60’s and 70’s.  It fell out of vogue as technology and other evolving job factors made this job evaluation process less comprehensive, more subjective and time-consuming.  At the same time, market pay data was being more quickly accumulated and offered via packaged databases so compensation and HR professionals could initiate and complete market pay analysis for benchmarked positions.

The balance between compensation science and art we believe is the combination of job evaluation and market pay analysis.  Integrating both internal and external analyses drives more precise compensation management planning outcomes and decisions.  Internal job evaluation is increasingly needed for more compensation compliance audits by the DOL and OFCCP where multi-factor job and pay analyses are utilized to identify and address systemic pay equity issues.  Improved methodologies and increased objectivity in defining and applying job evaluation factors coupled with the Software-as-a-Service (SaaS) technology architectures deliver integrated system capability that leverages both internal job valuing processes with external market pay analyses providing integrated and optimized compensation management decision making.

As illustrated below mapping precise job evaluation ratings (X axis) to employee pay (Y axis) graphically demonstrates your company’s compensation philosophy and equity.  Evaluating this internal analysis against multiple pay regression lines from market studies truly brings scientific analysis of both internal and external factors. With the more efficient and technologically advanced compensation management systems (Science), compensation and HR professionals are able to utilize their knowledge and skills (Art) to offer more precise and balanced compensation management analysis.

It is not necessary to employ a rocket scientist compensation analyst for your compensation management base pay structure and pay analysis as mentioned by Chuck.  Utilize a proven and automated internal job valuation process and a thorough external pay analysis to develop and maintain your fair and transparent compensation management program.