Articles from May 2012



Lifting Boeing’s Pay Grade

At this week’s Total Rewards 2012 conference in Orlando, speakers from Boeing reminded attendees that there often is more than one way to read a piece of data.

During a session titled “Compensation, Fix Employee Pay! When Compensation Professionals are Asked to Address Low Scores on Employee Surveys,” two Boeing comp professionals—Senior Compensation Specialist Cindy Jorgensen and Compensation Specialist Ron Steele Jr.—talked about their efforts to get to bottom of why employees at Boeing’s South Carolina facility had a low opinion of the company’s pay practices.

Steele told those in the room that Boeing’s pay is extremely competitive in South Carolina—where the company employs about 6,000 workers who are dedicated to the building of its 787 (pictured here). But apparently that wasn’t the consensus among Boeing employees there.

Asked to rate the fairness of pay during a 2011 employee survey, workers at the South Carolina operation gave Boeing low marks. (The survey was conducted with the help of Kenexa.)

At first glance, Steele said, the data pointed to a pay system that needed fixing.  But a closer look suggested there might be other factors at work here.

To figure out what those factors might be,  the comp folks began to drill deeper into the data, looking at (among other things) how the South Carolina findings compared to those found at other Boeing operations and in other industries; and by reading through page after page of verbatim comments from the employee surveys. (Boeing employees “aren’t shy,” Steele said.)

This was followed by a series of employee focus groups, which eventually shed some much-needed light on the issue.

In the end, the group’s persistence paid off.

Jorgensen and Steele concluded that the low scores had less to do with what employees were being paid and more to do with employees who didn’t really understand the pay system at Boeing.

That, in turn, led to a much more meaningful response (my words) focusing on initiatives that could have a positive impact, such as managerial training and employee education.

HRE Freelancer Wins Top Honor for Drug-Coupon Story

Carol Patton stands by the plaque, also at right, displaying her winning story.

Longtime Human Resource Executive® freelance feature writer Carol Patton took a top Print Journalism Award Monday night at the 18th Annual National Institute for Health Care Management Awards Dinner for her story on the pharmaceutical industry’s questionable use of co-pay drug coupons.

The story, published in the June 2 issue of HRE, examines how drug companies, through heavy marketing campaigns, have manipulated customers’ use of drug coupons and driven up drug costs by encouraging the use of brand-name prescriptions.

In accepting her award in the Trade Publications category for her winning piece, “Coupon Overdose,” Patton spoke of her own personal experience with medical manipulations as the wife of a heart-disease patient who had to contend with insurance coverage that arbitrarily ended.

“I could relate to the man mentioned in the story who had exhausted his entire family’s drug benefits because he didn’t understand how drug coupons worked behind the scene,” Patton said. “I’m so grateful to everyone here tonight for recognizing the hidden dangers of drug coupons. This is a serious issue that can cause serious problems for many families.”

Reinforcing the importance of human beings in all health and benefits coverage was Bill Coffin, the Honorable Mention Award winner in Patton’s category, whose Nov. 11 piece for National Underwriter Life & Health, “Tragic Tale,” has received national recognition for its daring exposé of the heart-wrenching neglect and disappearance from the national stage of American comic-book writer Bill Mantlo.

Coffin’s work uncovered the devastating, life-altering blows to Mantlo, an award-winning writer for Marvel Comics who has been in institutional care ever since a hit-and-run car accident in 1992 crippled him mentally and physically. His tragedy, as told by Coffin, was made far worse by an insurance company’s decision to eventually stop coverage after his recovery and improvement ceased.

“The response this story got, even from many in the insurance industry,” said Coffin, “reinforces my belief that the humanity behind all these stories is undeniable. Yes, these are business decisions, based on numbers and data; but bottom line, each and every one of them affects human beings.”

Also a winner of the top Television & Radio Journalism Award were the makers and producers of “Autism: Coming of Age,” which aired recently on public television. Telling the story of what happens to coverage for the care of autistic patients when they turn 22 years of age, the documentary video is now up for an Emmy Award.

As Coffin put it at the podium, he and his fellow winners – and the event celebrating them, held at the House of Sweden in Washington — served as “resounding confirmation that, through journalism, we really can make a difference and touch people’s lives.”

What Have You Done For Me Lately?

There is an “unbelievable focus on today” that hampers too many HR leaders and their organizations, says Mike Burniston, leader of the human capital practice in the Americas for Mercer.

Just imagine the employee turmoil at Facebook, he says. “They started out thinking Friday they were set for life and on Tuesday, they already have you six feet under. … I mean how shortsighted” can some people be, he asked.

“This fixation on the now, unfortunately, does permeate corporate walls and how organizations conduct themselves,” and it leads to budget slashing for R&D, new venture groups and strategic development – “all to focus on the next quarter.”

Adding to the difficulty is the inability in many organizations to even discern their long-term strategic goals — and if the organization as a whole can’t do that, he asks, how can HR effectively contribute?

One way some HR leaders are contributing, Burniston says, is by ensuring managers and business-unit leaders are aware  of the importance of people strategies — and that they know how to act on that awareness  to become better leaders of people.

For some reason, he says, it’s easier for business-unit leaders to think like CFOs or chief marketing or sales executives than it is to think like a CHRO.

“For some reason, it’s a blind spot for too many leaders of the organization,” Burniston says, “and I think it will increasingly be a more important capability to fulfill.”

Burniston was co-presenting a session on Tuesday afternoon with Romita Ghanara, director of compensation at American Express, on simplifying global pay management infrastructures at WorldatWork’s Total Rewards 2012 conference.

Simplifying Executive Comp

Executives from the Center on Executive Compensation of the HR Policy Association headed a session at WorldatWork’s Total Rewards 2012 conference on Tuesday to offer some insights into best ways to structure pay-for-performance strategies — and how to best tell their story to investors.

Nearly all companies this year received approval on their say-on-pay votes — about 89 percent — but seven have failed so far, said Timothy Bartl, president of the Center, but he noted: “No company that failed in 2011 has failed in 2012.” That indicates the companies learned from the experience and were able to not only tell their stories better but to have better stories to tell.

Common reasons for a lack of support, he said, were the comparison of CEO pay to a company’s performance, poor pay practices, significant changes in the structure of CEO pay and poor disclosure.

Most companies just don’t explain their compensation strategies very well, said Charles Tharp, CEO of the Center. “The question is why do we overcomplicate it?”

One issue that can be misunderstood — and needs to be better communicated — is the issue of  “board discretion,” he said. Many investors see that as a way for companies to increase compensation, when, he says, it is more often used used to decrease it.

Bartl says it’s important to understand that the primary audience for executive-comp disclosures are the company’s largest institutional investors, proxy advisory firms (But Tharp notes, remember to design your comp strategies for your organization’s goals, not for the advisers, but “be sensitive to how they read these” and know their “hot spots.”), the media, regulators, competitors and employees.

The template for any effective pay summary, Bartl says, is to outline the company strategy, performance objectives and results, how pay varies with performance outcomes, actual pay vs. performance and changes going forward.

“Truly it’s two stories,” Tharp said. Companies need to validate they have a good executive comp strategy and they need to show what their plans are for the future. “It’s two pieces of the pie.”

 

Linking Compensation to People Strategies

“When you think about how you are going to draw talent into the organizations … rewards is going to be at least first or second on the list for most people,” said Jack Wiley, president of the Kenexa High Performance Institute, during a panel session on the importance of compensation to “a great people strategy” during WorldatWork’s Total Rewards 2012 conference in Orlando, Fla.

Joining him on the panel were Frank Wagner, director of compensation at Google; Ken Abosch, compensation practice leader at Aon Hewitt; and Emma Mon, manager for compensation in North America for Dow Chemical.

Compensation is not only going to be one of the top motivators for potential employees, but it is also one of the top costs of doing business, Abosch said.

So it’s necessary, he said, to have an articulated, written statement of the company’s compensation strategy; to have a “vision around compensation is critical.”

But, Mon said, “what works at the plant level is very different than what works at the engineering level.” Her organization uses an employee survey to gauge sentiment from the workforce as well as to communicate to the company’s leaders about compensation as well as growth opportunities.

“And people talk,” she said, so when Dow does take action to align compensation to the market, the message gets around the company.

Since Google has “all knowledge workers,” Wagner said, compensation is a way the company “communicates the value of what they are doing … [It] is really key to our value proposition of how we operate as an employer.” Key to that communication is the manager-employee relationship and the dialogue between them, he said.

“We have lots of conversations between employees and their managers,” Wagner said, although he notes some managers are better than others at communicating the value of the employee’s work and the compensation strategy.

Abosch said there needs to be “line of sight” — that employees must be able to see a direct relationship between the work they do, the impact on the company’s goals and the rewards they get back. Organizations need to review the way they set goals and make sure employee contributions align with employee compensation.

It may not be equal pay, he said, but it will be “equitable pay.”

Research has shown, Wiley said, that employees who feel they are fairly paid are three times more likely to be engaged, to feel they have a promising future and to stay at that employer.

 

Giving Data Its Due

HR leaders are increasingly using metrics and analytics to more effectively drive their talent decisions. But can the same be said of those specializing in comp?

At this year’s Total Rewards 2012 in Orlando, executives from Mercer and WorldatWork previewed key data from a recent study that suggests something of a disconnect between how comp leaders view their analytical skill levels and the kinds of intelligence that they’re presently generating.

Not surprisingly, most of the comp professionals surveyed indicated they were using techniques such as internal and external benchmarks (95 percent and 90 percent respectively) and ongoing reporting (87 percent) to help drive their decision making in their organizations. But the percentage of those using more sophisticated methods, such as projections, simulations and predictive modeling, was noticeably lower—at 80 percent, 64 percent and 43 percent, respectively.

Despite this, those in the comp profession believe they have adequate skill levels to effectively use analytics, with roughly 67 percent of the respondents saying they possess the skills to use more advanced analytics.

Though not entirely surprised by the findings, Mercer Partner Brian Kelly says the percentage of comp professionals using more sophisticated techniques was lower than he’d like to see.

“They’re saying they have the skills,” Kelly says, “but they’re still not doing it.”

Mercer Senor Partner Haig Nalbantian says he considers it somewhat ironic that a data-rich function like comp would run the risk of being “left behind” when it comes to analytics.

Mercer and WorldatWork plan to release a more complete report on the study’s findings in the next week or two. But it seems safe to conclude that a first glance at the data already suggests the profession clearly has some work ahead of it.

Taking Back Bonuses Based on ‘Erroneous Data’

Following the $2 billion trading loss at JPMorgan Chase, the issue of clawbacks has “caught the public’s attention,” said Mike Melbinger, partner and global head of employee benefits and executive compensation, during a session at the WorldatWork conference.

And, he says, “When something catches fire like this, it’s almost always bad news.”

The current discussion of whether the lender will attempt to take back bonuses that were paid to executives may have a substantial impact because the U.S. Securities and Exchange Commission is still in the midst of writing regulations to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

That law requires the implementation of clawback policies when bonuses or compensation paid to executive officers is based on “erroneous data,” Melbinger said. Previously, the law said companies “may” clawback such compensation; now it says they “must.”

“There is a history of … bad facts making bad law,” in this area, said Melbinger, noting that Dodd-Frank is “very short and open ended, so all of the real action will be in the rules.”

The issue requires organizations to revisit their pay-for-performance philosophy, said Daniel P. Moynihan, a principal at Hay Group who focuses on executive compensation. Companies should also consider providing documented statements of their clawback policies and key design attributes to employees.

Another issue, of course, is how to get that money back, he said. A $100,000 employee who got a $10,000 bonus may no longer even have that money anymore, so one potential solution is to have a policy that allows the company to recoup that money from future incentives.

Even more problematic, he said, will be trying to clawback bonuses from employees who no longer work at the company. Since clawbacks can go back three years, employers may want to have departing employees sign an acknowledgement that a clawback could be a possibility.

The fallout of the JPMorgan Chase case will be interesting, said Irv Becker, national practice leader on executive compensation at Hay Group.

Unlike some previous clawback dramas, this wasn’t an issue of a “rogue trader,” but was instead an investment strategy that “wasn’t sufficiently safeguarded or implemented.”

Doing More With Less

“The problem with trying to do more with less is we all focus too much on the ‘less’ part, don’t we?” asked Mike Ryan, senior vice president of marketing and strategy at Madison Performance Group during a session at the WorldatWork Top Rewards 2012 Conference.

In creating a business case for recognition programs, HR leaders need to not only position such initiatives so they are more effective and efficient, but also so they are more strategic — linking to the business goals of the organization.

An Aon Hewitt survey, he said, found that most employees want to know how their work aligns with the overall business goals and “to be recognized for what they do” — as long as the compensation is at market rate.  

Managers are also extremely important in making sure employees feel their work is recognized, Ryan said. And the reason that doesn’t happen enough, is because “many organizations do not have systems that help people do that.”

Ryan’s co-presenter, Susan Brown, senior director of compensation at Siemens Corp., said helping managers reward and empower employees was a big part of her organization’s employee-recognition initiative.

The effort really began, she said, with a global rebranding campaign — that led to organization reorganizing its “hodgepodge” of internal branding and recognition programs that varied significantly among various parts of its company.

Her business case for the initiative focused on the lack of knowledge about what was actually being spent on recognition. There was a lack of financial control and the HR department had little insight or oversight of the various programs, she said. The new program would focus on getting the maximum impact of the dollars spent, as well as focus on compliance, control, consistency and context.

Starting with a customized technological system, the new recognition program, which includes cash and non-cash rewards, was designed to unite all of Siemens’ multiple entities. It was designed to focus on values and key goals — including innovation, collaboration and customer service, Brown said.

The number of approvals were decreased, but HR was put into the loop so there could be more oversight. Efforts were also made, she said, to make it as intuitive as possible for managers.

As a result, engagement scores in 2011 increased 3 percent, to 93 percent, while retention increased 5 percent, to 71 percent, she said.

 

 

Signs of Postive Growth?

Compensation surveys done by Pearl Meyer & Partners indicate “the rebound you hear about is actually starting to occur,” says Ken Cardinal, managing director in the firm’s Southborough, Mass. office.

In his work, he focuses exclusively on surveys and just released a book, Conducting Compensation & Benefits Surveys, which he co-authored with Beth Florin, also a managing director at the firm as well as president of its employee compensation and survey practices. The book was published by WorldatWork, which opened its Total Rewards 2012 Conference at the Gaylord Palms Resort in Kissimmee, Fla.

For years, Cardinal says, merit increases have been in the vicinity of 3 percent, but “now it appears they are moving north. I wouldn’t be surprised to see 4 percent or more. … It appears that hiring bonuses are picking up too.”

He bases his view on the many “club surveys” his firm does, in which competing companies provide compensation and benefits data, which is then used for benchmarking by all of them.

The areas most “poised for rebound,” he says, are Washington, D.C., Houston and Silicon Valley. It may also occur in Boston and New York City. Lagging behind are areas in the Rust Belt, although he notes Michigan has seen some positive growth from Ford and GM.

Much Ado about Monday’s NLRB Election-Rule Reversal

The fallout is still flying from Monday’s court decision striking down a recent rule by the National Labor Relations Board governing union elections.

Judge James Boasberg of the U.S. District Court for the District of Columbia invalidated the rule — which would have made it easier and quicker for unions to hold organizing elections — on the grounds that the NLRB did not have a required quorum at the time it was made.

In this Wall Street Journal account of Boasberg’s decision (subscription required), the Obama-appointed judge is quoted as saying, “ ‘According to Woody Allen, 80 percent of life is just showing up [a variation on the well-known comedian's line]. When it comes to satisfying a quorum requirement, though, showing up is even more important than that.’ ”

In response to his decision, the NLRB announced today that it is temporarily suspending the implementation of changes to its representation process, which had taken effect April 30. Board Chairman Mark Gaston Pearce said in a statement that the NLRB is reviewing the court decision and is considering its response.

“We continue to believe that the amendments represent a significant improvement in our process and serve the public interest by eliminating unnecessary litigation,” he said. “We are determined to move forward.”

Meanwhile, NLRB Acting General Counsel Lafe Solomon withdrew today the guidance to regional offices he issued prior to the effective date and advised regional directors to revert to their previous practices for election petitions starting today. (To read that guidance and for a bit more history on all this, here is my Leader Board blog post from April 27.)

Even before the guidance’s withdrawal was announced, employment lawyer Fito Agraz, a shareholder with Ogletree Deakins in its Dallas office, said the judge’s decision, “combined with a decision earlier this year by a federal district court judge in South Carolina – finding the NLRB lacked the statutory authority to require employers to post notices regarding employee rights under the NLRA (here is my blog post about that) – leaves the NLRB in a position of having to table some of its proactive initiatives.” No kidding!

Not surprisingly, the National Association of Manufacturers — which refers to the NLRB rule as the “ambush-elections” rule — had this to say last night:

“Overturning the ambush-elections rule is a key victory for job creators and the 12 million men and women working in manufacturing. The NLRB has consistently overstepped its authority and attempted to enforce unnecessary and damaging rules that threaten workplace relations by creating hostile work environments where none exist. In invalidating the ambush-elections rule, the court rightly rejected one of the board’s most misguided policies. The NAM will continue to lead the way in opposing rules and regulations that stand in the way of job creation and economic growth.”

Employment attorney Michael Lotito, who just this week left Jackson Lewis to join San Francisco-based Littler, was a little less one-sided:

“The judge’s decision is a setback for the NLRB, but it is also an incentive for the board to consider the rule in its entirety and not piecemeal as it did. If it does, the legality of the president’s recess appointees will be critical to whether the NLRB has the power to act. In sum, this debate is far from over.”

I think Lotito’s last line says it all.