Category Archives: compensation

Good News: I Quit

According to a new Reuters analysis of the latest monthly U.S. Labor Department labor data, Americans quit their jobs in September at the fastest rate in over six years, to the tune of 2 percent of U.S. job-holders, or about 2.8 million workers.

And while it may seem counterintuitive to think that a rise in the quits rate — or the number of people quitting their job in a given month — would actually be a good sign for the overall health of the economy, such is the case in the murky world of economic indicators.

But why is it a good thing when more people quit their jobs? Two reasons, according to Reuters:

One, the quits rate fell during the  recession and has been slower to recover than other labor market indicators because workers were hesitant to make any job changes in uncertain times.

Some analysts, the Reuters piece notes, believe this has helped keep wage gains stagnant even as the jobless rate has fallen because employers don’t have to raise wages as much to retain talent when there is less employee turnover.

Second, the report notes Federal Reserve Chair Janet Yellen has signaled the quits rate as an indicator she is following on her “dashboard” for assessing progress in the labor market’s recovery.

“It’s definitely good for wages,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. “Also, the chair of the Federal Reserve is looking at it, and if she’s looking at it, we have to as well.”

So if you happen to notice a rise in the quit rate of your own organization, you can either take solace in knowing it’s contributing to the overall health of the economy, or else reevaluate your compensation and retention programs to ensure your best talent doesn’t float out the door on the rising tide of the economy.

Just like with economic indicators, it’s all in how you look at it.

Twitter It!

Microsoft CEO Touts Equal Pay after Apology

Satya_NadellaIt seems Microsoft Chief Executive Officer Satya Nadella (at right) is still in apologetic mode after making some ill-advised comments at a recent conference that, in essence, discouraged female employees from asking for raises.

Apologizing immediately afterward, Nadella now says in this Oct. 20 Time magazine online article, that men and women at Microsoft are paid equally. Clearly, the need for more positive spin is still there.

Here, in case you missed it, is Josh Eidelson’s Oct. 13 post on Bloomberg Businessweek‘s Politics & Policy site about whether Microsoft’s female employees have grounds for a complaint with the National Labor Relations Board, based on what Nadella said onstage at the recent Grace Hopper Celebration of Women in Computing Conference in San Francisco.

The post also mentions that Nadella apologized and retracted what he said just hours later in a companywide email, calling his gaffe “completely wrong.” For the record and according to Eidelson, here was his egregious response to a question someone at the conference posed about what he would tell women who are hesitant to ask for a raise:

“It’s not really about asking for the raise, but knowing and having faith that the system will actually give you the right raises as you go along. And that, I think, might be one of the additional superpowers that quite frankly women who don’t ask for a raise have. Because that’s good karma. It’ll come back, because somebody’s going to know that’s the kind of person that I want to trust. That’s the kind of person that I want to really give more responsibility to.”

Wilma Liebman, who chaired the NLRB during President Obama’s first term and now lectures at Cornell University, says in the post, “You could make a very clear argument that [such a comment] means, ‘Don’t ask for a raise, and if you ask for a raise, you’re not going to be trusted.’ And ‘you’re not going to be trusted’ translates to ‘you could be in some jeopardy.’ ”

The issue raised in the Businessweek piece, of course — since it considers NLRB review and possible enforcement of Section 7 of the National Labor Relations Act — is whether Nadella’s message explicitly chills a protected concerted activity; i.e., a group of Microsoft women banding together in search of higher pay.

Lawyers are mixed on that one. “If a group of women said these comments chilled them from seeking together to get better pay in the workplace, they could file an unfair labor practice claim with the NLRB,” Paul Secunda, director of the Labor and Employment Law Program at Marquette University Law School, is quoted as saying in that story.

On the other hand, the story says, Samuel Bagenstos, a University of Michigan law professor and former Department of Justice official, doubts Nadella’s comments would merit NLRB review, considering he didn’t specifically address that kind of group activism. “Asking for a raise for oneself only would count as concerted activity if there was an argument that the employee was asserting a grievance that was or could be expected to be shared by others,” Bagenstos is quoted as saying.

Hope B. Eastman, principal at Bethesda, Md.-based Paley Rothman and co-chair of its employment law group, who I spoke with about this, concurs. “The fact that Nadella has apologized and retracted his statement, and the fact that his comment was in the context of an individual woman asking for a raise,” she says, “makes it unlikely that the NLRB would take this on … .”

That said, she adds, “there have been studies suggesting that women do not negotiate salaries as well as men; this is an issue that needs attention.” So the silver lining, I guess, is that this issue was given new light through Nadella’s comments.

The Businessweek piece also brings up another story we followed in 2011 on this blog, when the NLRB issued a complaint against Boeing, claiming executives’ public comments about striking employees in the state of Washington suggested they were to blame for the company’s intended move to a new South Carolina site at the time. (Here’s one other mention of that story on this blog.)

As Eidelson points out, that Boeing story establishes “precedent for investigating public comments from an executive as alleged discrimination.”

And — aside from staying on that apparently long, arduous road toward equal pay — what’s the message for HR in all this? I guess check with your C-suiters on absolutely everything they intend to say publicly before they take the podium or stage …

If that’s even possible.

Twitter It!

Hiking the ‘Living Wage’ in NYC

According to the New York Times, Mayor Bill de Blasio plans to sign an executive order today designed to “significantly expand” New York City’s living wage law, covering thousands of previously exempt workers and raising the hourly wage itself, to $13.13 from $11.90, for workers who do not receive benefits.

The executive order will immediately cover employees of commercial tenants on projects that receive more than $1 million in city subsidies going forward. Workers who receive benefits such as health insurance will earn $11.50 an hour, compared with $10.30 before, the paper notes.

And the current living wage law, passed in 2012, has applied to about 1,200 jobs, officials say, excusing many retailers and companies that lease space as part of city-subsidized projects, the paper reports.

The paper says the living-wage change is also intended to frame a looming debate in Albany, where Mr. de Blasio hopes to win the authority to set the citywide minimum wage at the same amount. If Mr. de Blasio succeeds in matching the minimum wage to the living wage, all hourly workers in the city would earn more than $15 by 2019, according to the city’s projections.

New York Gov. Andrew M. Cuomo, who in February said that allowing local governments to set their own minimum wages would yield “a chaotic situation,” seemed to have reversed himself months later. He said he would support a plan, advocated by the Working Families Party, that allowed municipalities with higher costs of living to set their own minimum wages.

As a result, the governor has endorsed an increase to $10.10 in the statewide minimum wage, with a provision allowing New York City and other areas to raise their minimums as much as 30 percent higher, to $13.13.

It will be interesting to see how — and if — New York City’s example is adopted elsewhere when it comes to setting a higher bar for a living wage for workers.

Regardless, HR leaders should keep an eye on this development to ensure they won’t be caught off guard when a living-wage boost may be introduced in their municipality or state.

Twitter It!

Employees: Pay Matters Most

payWe routinely feature, in our print edition and on our website, stories about the vital role played by leadership training, wellness programs, communication strategies and even office design in creating and sustaining employee engagement. But it shouldn’t obscure the fact that, for most employees, the bottom line is the bottom line — when it comes to engagement, pay is the most important factor.

The new Workforce 2020 survey, which queried more than 5,400 employees and executives in 27 countries and was conducted by Oxford Economics with the support of SAP, is the latest report to confirm this. The survey finds that two-thirds of the respondents cite competitive compensation as the most important attribute of a job. And it’s cross-generational: millennials and non-millennials alike cite comp as the most-important benefit, while 41 percent of millennials and 38 percent of non-millennials say higher compensation would increase their loyalty and engagement with the company.

This isn’t to undermine the importance of things like manager training and corporate culture: Studies have repeatedly shown that while competitive pay and benefits can lure employees to companies, having a positive work environment and a good boss play crucial roles in keeping them there. But if they feel under-compensated for the value they provide, it’s only a matter of time before greener pastures — or at least, the appearance of greener pastures — lure them elsewhere.

Do companies get this? The trucking industry doesn’t appear to. According to HREOnline columnist and Wharton School Professor Peter Cappelli, real wages for truck drivers apparently have fallen by almost 10 percent during the last 10 years — and even a critical shortage of truck drivers so severe that some trucking companies are unable to accommodate their customers’ needs hasn’t led to an increase in wages. Companies cite customers’ unwillingness to pay higher fees as a reason for not raising wages, Cappelli writes — and yet, trucking firms are perfectly willing to pass along higher fuel costs to their customers, he adds.

Cappelli ends his column on this provocative note: The trucking industry will either have to raise wages to attract the drivers it needs, or “we start hearing that we need to import more foreign drivers because ‘no Americans want to drive trucks.’ “

Twitter It!

Increasing Pay, Increasing Challenges

Not sure how you’ll read this, whether you’re the full-glass or half-glass sort, but this latest survey from Mercer shows pay raises are growing steadily … albeit in .1-percent increments.

180274674 -- pay raiseAccording to the New York-based global consulting firm’s 2014/2015 U.S. Compensation Planning Survey, the average raise in base pay is expected to be 3 percent in 2015, up slightly from 2.9 percent in 2014, 2.8 percent in 2013 and 2.7 percent in 2012.

No leaps and bounds, certainly, but indicative — we’d all have to agree — of a steadily improving economy and job market, no?

Granted, .1-percent increments may not give your employees the wow factors they’re looking for as they mull whether to stick around or try out greener-looking pastures. And this can be especially worrisome when you consider what it will take to keep your highest-performing workers on board and happy.

Which leads me to another survey finding: that the range between increases to high-performing employees and those given to lower-performing employees continues to widen. Specifically, the survey shows, the former received average base-pay increases of 4.8 percent in 2014, compared to 2.6 percent for average performers and 0.1 percent for the lower performers.

“Differentiating salary increases based on performance has become the norm,” says Rebecca Adractas, principal in Mercer’s rewards consulting business. “Investing in those employees [who] are driving organizational performance has become a necessity.”

So has making sure the good ones have more than one reason — pay — to stay.

Mary Ann Sardone, partner in the firm’s talent practice and regional leader of its rewards segment, says employers are also “continuing to provide rewards beyond compensation, in the form of training and career development.”

“Employee engagement and retention continue to be a top priority,” she says.

So, on the glass-half-empty end, if you’re not doing everything you can to figure out who your top performers are, what they want and how you can provide it, you will inevitably be caught with your proverbial pants down.

On the glass-half-full side, at least things are looking up … ever-so slowly but surely.

Twitter It!

Sharing the Wealth

sharing moneyWith the debate over minimum wage still swirling, one university president is taking it upon himself to see that his lowest-paid workers’ salaries get a boost.

The Lexington Herald-Leader reports that Raymond Burse, interim president at Kentucky State University, is giving up more than $90,000 of his annual salary in order to increase the salaries of 24 KSU employees—some of whom were earning as little as $7.25 hourly—to $10.25 an hour.

Burse—who served as KSU president from 1982 to 1989 and was an executive at GE for 17 years—told the Herald-Leader that he and the KSU Board of Regents discussed his potential pay cut before the board met to approve his contract in late July.

Burse’s annual salary had been set at $349,869. That number now sits at $259,745, which seems to sit just fine with Burse.

“My whole thing is I don’t need to work,” he told the paper. “This is not a hobby, but in terms of the people who do the hard work and heavy lifting, they are at the lower pay scale.”

He was also quick to point out that the move isn’t simply a publicity stunt.

“You don’t give up $90,000 for publicity. I did this for the people. This is something I’ve been thinking about from the very beginning,” he said, noting the raise in pay for the affected employees will remain in place after a new president is selected.

Burse is also under no illusion that his counterparts in academia will begin sharing their salaries with employees on the lower rungs of the pay scale, and says his largesse “is not a poke” at other university presidents to follow his example.

“I was in a position where I could do that,” he told the Herald-Leader. “That is not always the case.”

Fair enough. And it’s safe to say Burse probably hasn’t started a trend here. But, whatever his reasons, give Burse credit for taking steps to beef up the paychecks of some of his lowest-earning employees, and doing so at his own expense.

Twitter It!

A Study in Greed

CEOWhen top managers and executives pursue “extreme wealth,” it’s the company’s shareholders that often pay the price, according to new research.

In a study that recently appeared in the Journal of Management, a team of researchers conducted a statistical examination of 335 companies, analyzing stock market returns and dividends, and conducting interviews with top executives and an independent panel of experts from a variety of disciplines, including academic scholars and senior business executives.

The study looked at the size of CEOs’ perquisite packages, analyzed the difference between a CEO’s cash compensation and that of his or her No 2. executive, and performed an analysis of CEOs who were overpaid compared to a benchmark of their peers.

In the process, the authors—led by Katalin Takacs Haynes, assistant professor of strategic management at the University of Delaware—found the “pursuit of extreme wealth by top managers can lead to lower performance and loss of shareholder value,” according to a summary of the findings appearing at UDaily, the University of Delaware’s online news service.

“Self-interest is OK, but eventually it reaches a tipping point,” said Haynes. “When it is taken to the extreme—when it becomes greed—it is detrimental to firm value.”

There is somewhat of a silver lining in the findings, however. The researchers also concluded that a powerful board or long CEO tenure can “moderate the relationship between greed and shareholder return.”

Some CEOs “appear to direct more of the firm’s resources toward themselves than others, and this can occur more when managers have a lot of discretion or have a short tenure, or if the board is weak,” according to Haynes. “Interestingly, we found that the negative effects of executive greed on shareholder wealth decreases as CEOs experience more time in their role.”

HR can play a part in mitigating this effect, Haynes told HRE.

“There are some points for HR executives to consider when designing compensation packages, while keeping shareholders’ preferences in mind,” she says.

“”Encourage shareholders to actively participate in the compensation process,” for example. “SEC regulations allow for shareholders to express their opinions about compensation packages via the ‘say on pay’ regulations.”

While say-on-pay is non-binding, “ignoring shareholder no-votes invites public scrutiny and negative attention to the company,” adds Haynes, advising HR executives and compensation committees to pay close attention to shareholders who choose to actively participate in the executive compensation process via say-on-pay.

HR leaders must also look out for “the indicators of greed,” she says, such as excessive perquisite compensation in the “other annual” and “all other” categories; the ratio of the CEO’s total comp package to that of the organization’s second-in-command; and CEO pay at peer companies and industry benchmarks, which help identify possible overpayment of your organization’s chief executive.

“CEOs play a significant role in setting their own pay, and are not passive recipients of pay,” says Haynes, “as the term ‘overpayment’ implies.”

Twitter It!

Seattle OKs $15 Hourly Minimum Wage

Seattle’s city council unanimously approved an increase in the city’s minimum wage to $15 an hour yesterday afternoon, making it the nation’s highest by far, according to CNN Money.

The increase was formally proposed by Seattle Mayor Ed Murray, and his spokesman said he intends to sign the ordinance later today, according to the report, which adds that Washington already has the nation’s highest state-level minimum wage, at $9.32. That rate also applies to the city.

The current federal minimum wage is $7.25.

CNN reports the pay hike in Seattle will take place over several years, based on a scale that considers the size of and benefits offered by an employer, and it will apply first to many large businesses in 2017 and then to all businesses by 2021.

According to a piece in the Seattle Times, the pay hike now moves the region’s employers — and their workers — into terra incognita:

“No city or state has gone this far. We go into uncharted territory,” said Seattle City Council member Sally Clark before the council agreed to give workers a 61 percent wage increase over what is already the country’s highest state minimum wage.

While the move was cheered by various groups representing workers’ interests, USA Today reports the Seattle Chamber of Commerce initially pushed back against the plan, and in February released the results of a survey of 283 area employers that found there may be some negative repercussions stemming from the pay hike, including:

  • Small businesses will be greatly impacted: 37 percent of employers offering less than $15/hour in total compensation have 50 or fewer employees;
  • Most companies will make more than one change in response to the increase: 60 percent of companies will consider multiple changes (reduce/eliminate new positions, increase standards for entry level positions, reduce/eliminate benefits); and
  • Prices will go up: 50 percent of companies will increase prices for goods and services to offset a rise in the minimum wage.

The first increase will reportedly occur on April 1, 2015, and will bring the minimum wage to $10 for some businesses and $11 for others.

Twitter It!

A Few Takeaways from Total Rewards 2014

WorldatWork has expanded its focus in recent years to include “total-reward” issues such as healthcare, financial wellness and work/family as part of its overall mix. But as anyone who’s attended the association’s annual conference lately knows, no one can ever accuse the Scottsdale, Ariz.-based association of abandoning its roots in compensation. (Some of you will no doubt remember the days when WorldatWork was named the American Compensation Association — and pretty much exclusively focused its attention on comp.)

totalrewards2014-500x334Certainly, those roots were evident this week at WorldatWork’s Total Rewards 2014 Conference & Exposition at the Gaylord Resort in Dallas, which attracted around 1,500 attendees.

Comp-specific sessions at this year’s event ranged from the tactical “Compensation as a Career” to the more strategic “Executive Rewards Trends and Predictions,” which I tried to attend but was turned away from at the door because, I was told, every seat had been taken.

I was able find a seat at an earlier session on Monday titled “The Danger of One-Size-Fits-All Executive Compensation,”  which included as presenters Steve Harris, managing director of Frederic W. Cook & Co., and Brynn Evanson, executive vice president of HR at J.C. Penney. (Evanson previously headed comp, benefits and talent operations at JCP and replaced Dan Walker as its top HR leader in April 2013. Some of you may remember Walker earned a whopping $20 million during his first and only year as JCP’s top HR executive and departed soon after Ron Johnson was ousted as CEO in early 2013)

I was especially interested to hear how JCP was tackling executive comp these days, considering all its been through. (In what has to be described as perfect timing, JCP reported its first decent quarter in quite some time last week, suggesting that its turnaround might have entered a new phase.)

Harris suggested that employers would be making a mistake were they to let the forces at work today, such as increased government oversight and the efforts of proxy advisory firms, significantly influence what they do — and, more importantly, don’t do.  Considering no two companies have the same challenges and business objectives, he said, there’s a real danger of “falling into the trap” of “sameness” when it comes to exec comp.

Of course, he said, it’s not all bad to be formulaic, but it’s also not all good.

When you look at the pay-mix charts today, Harris said, you don’t see a whole lot of difference between your company and the median company.

True, he said, being somewhere in the middle goes a long way toward preventing scrutiny, but that doesn’t mean it’s the best approach.

Harris stressed the downside of formulaic incentive plans that emphasize pre-established goals and downplay comp-committee discretion and judgment in determining payouts. Following a herd mentality, he said, can often stifle innovation and undermine an organization’s ability to achieve its business’ objectives.

Instead, Harris said, employers need to be able to balance shareholder support for performance against proxy-adviser angst, use good business judgment and “manage the influence of peer comparisons.”

As Evanson made clear in her remarks, as far as executive comp is concerned, flexibility has been an important factor in JCP’s turnaround efforts.

As most of you are aware, JCP has seriously underperformed against its peers in recent years, with its stock price going from $36 in 2011 to around $8 today. During that period, the Plano, Texas-based retailer went from being a coupon- and discount-based retailer in 2011, with Mike Ullman at the helm; to a lowest-price retailer in 2012, with Ron Johnson in charge; back to being a coupon- and discount-based retailer in 2013 and 2014, again with Mike Ullman leading the firm.

Each phase required a very different strategy, Evanson told attendees.

As part of JCP’s turnaround efforts, Evanson said, JCP has recently been using spot awards for top talent, promotions, and learning and development to hold onto key talent.

(Before moving on, I probably should mention a story in the Dallas Morning News that reported  all of “the hiring and firing in 2011 and 2012 cost Penney $236 million in bonuses, stock awards, transition and termination pay: $171 million for officers and $65 million for other corporate executives.”)

I also had a chance to speak on Monday with Mercer Senior Partner Steven Gross and Partner Mary Ann Sardone prior to their session titled “Learnings from Managing Global Talent, Compensation and Benefits.”

On the global-comp front, Gross said, employers are focused on “segmentation” and “figuring out how money gets allocated, especially for many of the more critical positions.”

Recognizing critical workforce segments is a core component of a successful total-rewards strategy, Gross said.

He also said it’s no coincidence that the expo hall at WorldatWork has so many rewards-and-recognition vendors exhibiting, since compensation budgets aren’t expanding and companies are looking for other cost-effective ways to acknowledge the efforts of employees. (Achievers, BI Worldwide, Globoforce, O.C. Tanner, MTM and Michael C. Fina were among the dozens of exhibitors at the show in this space.)

In an effort to successfully align comp with business and talent strategies, Sardone said, she’s seeing more and more companies attempting to create “an eco system” across their organizations, where comp and talent management are more regularly talking to each other.

Mercer released this week its Total Rewards Survey, which suggested that companies still have a lot more work to do when it comes to aligning comp to business priorities. While more than half (56 percent) of organizations surveyed said they made a significant change to their total-rewards strategy in the past three years, less than one-third (32 percent) said their total rewards and business strategies were fully aligned.

It is critical that the rewards strategies of companies align with their business strategies to achieve overall success, Gross said.

On Tuesday, I also sat in on a session titled “An Insider’s Guide to Compensation Committee Meetings,” during which a panel of experts shared a few common-sense best practices HR and comp leaders might want to keep in mind as they work with their comp committees.

Robin Colman, vice president of compensation, benefits and HR operations at eBay, pointed out that it’s important for the comp person to know the preferences, biases and points of view of the people in the room and adjust his or her approach accordingly. Often, she said, that includes knowing what committee members might be seeing and hearing at other boards they may be sitting on.

John England, managing partner at Pay Governance LLC, a consulting firm that works with comp committees, advised those working with their comp committees not to be “another personality” in the room, since there are enough “personalities” in the room already.

If you have something to share, he advised, make sure no one is ever surprised.

Twitter It!

Yes, Money Still Matters

E000249For a few years now—especially since the 2008 financial meltdown that ushered in the Great Recession—we’ve heard how pay has become a smaller factor in determining employees’ overall happiness with their jobs.

But, in what could be seen as an indicator of order slowly being restored to the universe, it looks like the money matters most to workers once again.

That’s according to a just-released survey from the Alexandria, Va.-based Society for Human Resource Management. In a poll of 600 randomly selected employees at companies of all sizes, SHRM found 60 percent of respondents citing compensation/pay as the biggest contributor to job satisfaction. According to SHRM, compensation/pay last topped this list during the pre-recession period of 2006 and 2007.

In addition, 56 percent of employees reported receiving a raise in the last year, a six-percentage point increase from 2012. A smaller percentage, however (36 percent), indicated receiving a bonus in the last 12 months; a drop of three percentage points in comparison to 2012.

“Incomes have grown slowly since the recession, and that undoubtedly is having an impact on workers’ priorities and [is] one explanation for the leap to the forefront by compensation,” said Evren Esen, director of SHRM’s Survey Research Center, in a statement.

Esen pointed out that four generations of employees listed compensation/pay as either the first- or second-ranked aspect of job satisfaction. With the exception of executives, employees at all job levels ranked it as one of the top three contributors to overall job satisfaction. At 59 percent, the opportunity to use skills and abilities was the second-most cited factor, tied with job security.

Yes, cash may be king once again. But, as always, there are more variables in the job satisfaction equation. Overall, 81 percent of survey participants said they were satisfied with their current jobs, with many expressing optimism about the future. For example, 79 percent of respondents indicated they were determined to accomplish their work goals and were confident they could meet them. Further, 73 percent said they were satisfied with their relationships with their co-workers, and 70 percent were satisfied with their relationship with their immediate supervisor.

“While many employees emphasize compensation/pay when considering how happy they are in their jobs, a significant proportion also place importance on relationships with co-workers and supervisors,” according to Alex Alonso, vice president of research at SHRM.

“Fostering an environment that treats all employees equally and encourages communication among all levels of workers can be an effective way for employers to earn trust from employees and increase their satisfaction with their jobs.”

Twitter It!