Category Archives: rewards and recognition

Googlers Pass on Massive Payouts

Can you have too much of a good thing?

A handful of Googlers working on the company’s self-driving car project seem to think so.

The Mountain View, Calif.-based tech giant’s car unit—which in December 2016 spun off into a standalone business known as Waymo—has seen staffers exiting in noteworthy numbers, and walking away from potentially huge paydays in the process, as Bloomberg reports this week.

The unit “has been a talent sieve” for at least the past year, according to Bloomberg, “thanks to leadership changes, strategy doubts, new start-up dreams and rivals luring self-driving technology experts.”

But the business’s “unusual compensation system that awarded supersized payouts based on the project’s value” has helped contribute to its retention struggles, notes Bloomberg. “By late 2015, the numbers were so big that several veteran members didn’t need the job security anymore, making them more open to other opportunities, according to people familiar with the situation. Two people called it ‘F-you money.’ ”

Indeed, “a large multiplier” was applied to compensation packages toward the end of that year, “resulting in multimillion-dollar payments in some cases,” Bloomberg reports, adding that one member of the team had a multiplier of 16 applied to bonuses and equity amassed over four years, for example.

The same article points out that the system was revamped when the autonomous car unit morphed into Waymo late last year, and replaced with a more uniform pay structure that treats all employees equally. By that time, however, “the original program got so costly that a top executive at parent Alphabet Inc. highlighted it last year to explain a jump in expenses.

“The payouts contributed to a talent exodus at a time when the company was trying to turn the project into a real business,” the article continues, “and emerging rivals were recruiting heavily.”

Part of the issue at Waymo “was that payouts snowballed after key milestones were reached, even though the ultimate goal of the project—fully autonomous vehicles provided to the public through commercial services—remained years away.”

While reports have underscored rumblings within the car division, ranging from questions surrounding the unit’s leadership and strategy to engineers’ designs on starting their own self-driving vehicle companies, “the big payouts exacerbated the [turnover] situation because team members had less financial incentive to stay,” according to Bloomberg.

Ironic, isn’t it, that the company would start losing talent by paying them too much? When was the last time your organization had this problem? If there’s a lesson here for HR and compensation professionals, it might be that over-the-top rewards might end up having unintended consequences, and that massive lumps of cash don’t necessarily guarantee employee loyalty.

Gaming the Gainsharing System

This is just a guess, but I’m going to say the mood throughout Whole Foods break rooms is less than festive this holiday season.

And if the claims made in a new lawsuit prove to be true, you couldn’t really blame the grocery store chain’s employees for not getting into the spirit this year.

Last week, one current and one former employee from a Whole Foods store in Washington, D.C. filed a federal class-action lawsuit claiming the Austin, Texas-based company “engaged in a nationwide scheme to strip hard-working employees of earned bonuses in order to maximize [its] own profit.”

More specifically, plaintiffs Michael Molock and Randal Kuczor assert that a group of managers gamed Whole Foods’ gainsharing program to avoid paying automatic bonuses to departments that came in under budget for the year, as reported by the Washington Post.

According to the lawsuit, the gainsharing program is intended to enable employees in such departments to share in surpluses. The plaintiffs claim, however, that Whole Foods avoided paying by shifting labor costs to other departments without properly accounting for it, as well as by creating “fast teams” comprised of employees who float from one department to another.

The complaint also alleges that company executives knew of the “illicit practice of shifting costs,” which the suit says has impacted as many as 20,000 past and present Whole Foods employees.

In a statement, Whole Foods acknowledges that some sort of bonus program manipulation took place, while maintaining that it was confined to a relatively small number of its stores. Nevertheless, Whole Foods says it is investigating the matter. And, as the Post reports, the organization has already terminated the nine managers known to have been involved.

The plaintiffs are asking for more than to see a few managers fired. The suit seeks $200 million in punitive damages and triple unpaid wages, among other relief, according to the Post.

“Defendants intentionally manipulated the program and illicitly engaged in a nationwide corporate practice of ‘shifting labor costs’ in order to pad its profits,” the suit claims, alleging that this “unlawful” maneuvering effectively wiped out surpluses in certain departments, “thereby robbing hard-working employees of earned bonuses.”

What Drives Retention Rates?

Around the world, pay matters most to workers. But other factors that keep them loyal vary quite a lot, a new study finds. And they’re changing as the nature of work evolves.

The results are part of the 2016 Global Talent Management and Rewards Survey by Willis Towers Watson. Every other year the company surveys workers around the globe to see what rewards and conditions keep them happy or attract them to new jobs.

This year’s survey, conducted in April and May, included 31,000 employees in 29 markets. In studying retention factors, the London-based consulting firm ranked eight countries, including the United States. (See the full results at the bottom of this post.)

Pay was the top priority in each, says Laura Sejen, managing director for talent and rewards at Willis Towers Watson.  After that, the No. 2 retention driver in most countries, including the U.S., was career advancement opportunities.

For multinational companies, those two factors are fundamental to attracting and retaining workers, Sejen says. Workers want clear expectations not only for their current job, but also for what they need to move up.

For a global employer, “If I could only do two things right, I would focus on those,” Sejen says.

Career advancement opportunities wasn’t the No. 2 retention driver everywhere, however. In China it was the physical work environment. In Brazil it was the length of the commute. In India it was job security.

Sejen notes that work environment has been moving up in the list of priorities globally. She thinks longer hours and a trend toward open offices and shared workspaces may have increased employee awareness of the physical environment as a factor in their job satisfaction.

“That, I think, is just a reflection of how the work environment has changed,” Sejen says. “It’s important. We spend a lot of time at work.”

Among the eight countries studied, job security was No. 2 only in India. But it’s slowly rising in importance around the world, Sejen says.

How workers define job security varies, however. Few workers expect a job for life. But many worry about losing financial security, and others worry about their jobs changing.

Sometimes mundane local conditions like traffic congestion influence the rankings. It makes sense that commute times would be important in Brazil, because cities there tend to be dense, sprawling and challenging to navigate, Sejen notes. “If you’ve ever been to Sao Paulo, you can appreciate that.”

Retention drivers Globally Brazil Canada China Germany India Mexico U.K. U.S.
Base pay/salary 1 1 1 1 1 1 1 1 1
Career advancement opportunities 2 3 2 3 2 3 2 2 2
Physical work environment 3 4 2 5 3
Job security 4 7 3 3 2 6 3 3
Work-related stress 5 6 4 5 6 7
Trust in senior leadership 6 5 4 4
Relationship with supervisor 7 5 7 7 6 7
Length of commute 2 4 4 4 5 6
Retirement benefits 6 6 4 5
Flexible work environments 5
Challenging work 6
Opportunity to learn new skills 7 7 7 5
Source: 2016 Global Talent Management and Rewards Survey by Willis Towers Watson

Flying High with Employee Motivation

ThinkstockPhotos-186381804You could fill the Grand Canyon with all the studies researchers have produced on ways to motivate employees. But one published this summer stands out. It’s an elegantly simple illustration of how the most effective strategies may also be the cheapest.

Three economists from the University of Chicago and London School of Economics worked with Virgin Atlantic Airways to try several ways of persuading pilots to save fuel. (It turns out that airliners in some ways are like cars — if you drive with a heavy foot, you use more gas.) Along the way they saved the airline more than $5 million, cut carbon emissions by 21,500 metric tons — and learned a thing or two about human behavior.

A working paper on the study was published in June by the National Bureau of Economic Research. The authors — Robert  Metcalfe, Greer Gosnell and John List — highlight their findings this week in a piece published online by the Harvard Business Review.

In a nutshell, the study confirms that you can work wonders simply by telling employees you’re watching them and providing targets to hit. This simple strategy may even work better than offering incentives.

Here’s how the study worked: In January 2014, Virgin Atlantic told pilots that their fuel-saving performance would be monitored for the next eight months.

To test different motivational strategies, the researchers divided the pilots randomly into four groups. Group No. 1, a control group, received no further attention. Pilots in group No. 2 got a monthly summary of how well they carried out specific company suggestions for saving fuel. That report — and I think this is important — was delivered by mail to their home.

The third group got those reports, plus individualized targets set at 25 percent above their pre-experiment performance. And group No. 4 got all of that plus a small incentive: £10 donated to the cause of their choice for each target they hit.

When results were tallied, it turned out that pilots in all four groups improved their practices and saved fuel. The study authors note this confirms a well-known principle called the “Hawthorne effect” — namely, that people act better when they know someone is watching. Those that received reports by mail at home got an especially strong reminder that the company was paying attention to their performance.

The more interesting effect was that both groups 3 and 4 did much better than the others, improving their fuel-saving practices by up to 20 percent. The fact that the improvement was similar for both groups, regardless of whether an incentive was offered, is telling, the study authors say. It suggests that in such a situation, setting targets alone is the most cost-effective strategy for getting employees to do the right thing.

It’s worth noting that Group No. 4 did distinguish itself in another way: In anonymous surveys after the experiment, pilots who had been offered incentives reported significantly higher job satisfaction. This suggests that while incentives may not mean better results, they can improve morale.

Why is setting targets so effective? The study authors think that set a higher expectation for job performance, and “captains successfully adjusted their habits to meet it.”

Writing about the study in his Financial Times column, economist Tim Harford put it succinctly: “If you want people to do a good job, tell them what success looks like to you — and that you’ve noticed when they’ve achieved it.”

Intuitively, we also can imagine that setting targets also helped by activating competitive instincts, the way “gamification” strategies do — who can resist a challenge to hit a target? I also have a hunch about why the incentive didn’t make much difference in fuel-saving behavior: I think it implicitly told the pilots that improving performance was optional. Why would the company offer an incentive if it could make improvement mandatory?

This points to how easily employers can go astray if incentives aren’t part of a broader strategy to recognize success. Among those who have studied this is Stanford University management professor Jeffrey Pfeffer, who wrote in 2007 about how financial rewards can backfire, incentivizing the short-sighted or otherwise harmful behavior.  Focusing on executive compensation, he notes that “financial incentives offer the mirage of a quick fix.”

Billionaire Busts Out Big Bonuses (Again)

When your company — the largest privately held oil and gas producer in the country — also makes frequent appearances on Fortune’s 100 Best Companies to Work For list, chances are good that you’re doing something right when it comes to keeping your workers happy.

So maybe it shouldn’t have come as a surprise when, late last week, news broke that  billionaire Jeffery Hildebrand, owner of Hilcorp Energy, just blew the curve on holiday bonuses this year with a staggering, six-figure sum for each employee.

According to this post from Forbes’ site, Hildebrand’s year-end generosity has already been well-documented:

Five years ago, when Hilcorp achieved its goal of doubling its oil and gas production, Hildebrand gave every employee the choice of $35,000 cash or $50,000 towards a new car. This year, despite the downturn, Hilcorp doubled its output again, to more than 150,000 barrels per day. So Hildebrand doubled the bonus — to $100,000.

With about 1,400 employees, Forbes notes, “Hildebrand’s largesse will total more than $100 million (amounts are said to be prorated depending on how much of the past five years a worker was with the company).”

But no matter what the ultimate amount on the check actually is, Hildebrand’s bonuses have a tremendous effect on how employees view their work, as evidenced by this quote from Amanda Thompson, a Hilcorp receptionist (provided to Fox 4 News in Houston):

“It’s just a true gift, and I think myself, along with everyone, is not going to give less than 100 percent each day,” she said.

In this age of constant self-promotion and 24/7 branding, it’s especially refreshing to read that “Hildebrand has declined all of [Forbes’] interview requests over the years; a spokesperson did not return calls for comment about the bonuses.”

Indeed, holiday season or not, money always talks louder than words.

Promotions on the Rise

If this isn’t a sure sign of an ascendant economy, then I’m not sure what one is: The percentage of employees receiving a promotion on an annual basis has increased from 7 percent to 9 percent since 2010.

This is according to a new survey titled “Promotional Guidelines” conducted by WorldatWork, a nonprofit human resources association and leading compensation authority based in Scottsdale, Ariz.

The association conducted the 2014 survey — its fourth such survey — of its membership to better understand the trends in promotional guidelines.

The survey focuses on a variety of practices and policies including what employers consider to be a promotion as well as the standard pay increases that often accompany promotions. WorldatWork conducted similar compensation practices surveys in 2012, 2010 and 2006.

“The steady upward trend of employee promotions mirroring the economic recovery is further evidence that organizations are relaxing their budget purse strings,” says Kerry Chou, WorldatWork senior practice leader. “While the gradual trend is good news, the data also suggests that employee vacancies are helping employers foot the bill for these promotions.”

Additional highlights from the 2014 survey include:

  • Less than half (42 percent) of responding organizations budget separately for promotional activity.
  • In order to define employee movement as a “promotion,” 77 percent of responding organizations require higher-level responsibilities and 75% require an increase in pay grade, band or level.
  • 63 percent of respondents said their organization does not feature or market promotional opportunities or activities as a key employee benefit when attempting to attract new employees.
  • More than 60 percent of workforces consider their organization’s promotional opportunities to have a positive effect on employee engagement and employee motivation.

Putting Talent at the Top of Your Company’s Agenda

The latest post from HR guru Ed Lawler, titled What Should HR Leaders Focus On in 2014, cites talent management and talent development as the top concerns — specifically, the managerial and technical roles that are “difference makers,” he writes. Lawler, distinguished professor of business at the University of Southern California and founder/director of its Center for Effective Organizations, writes that focusing on talent “is a great way to get the HR function into a broader discussion about what is next for the organization and what the business strategy should be. ”

He elaborates further:

The most important thing that HR should focus on in talent management is assessing the skills the organization needs to implement its strategy and the plan for recruiting and managing that critical talent. It is important to understand what the organization can do to add the right talent: Whether it is best recruited or internally developed, and whether it is even possible to develop the right talent in order to implement the business strategy. … Often, the reasons why business strategies fail is that they mistakenly assume that the organization can get the right talent in order to perform the way the strategy calls for. All too often organizations cannot attract or develop it, and as a result, the strategy is not feasible.”

Lawler goes on to cite Google as a good example of a company that’s done an “exceptional” job of recruiting and managing people who have critical knowledge skills, noting the tech firm’s practice of letting its people set aside certain times of the week to devote specifically to projects that interest them. This has proved not only to be a great way for Google to come up with new business ideas, he writes, but to also develop and attract the critical talent it needs. (We’ve been reporting on Google’s talent-development processes for a while here at HRE; here is a recent story on how it strengthened its corporate culture and here’s a piece on its recognition-and-rewards strategy.)

Of course, not all business leaders are sold on the importance of talent, writes Lawler. Some think they can get by without top talent while others—lacking a background in talent management—may see functions such as engineering and finance as far more important to the business strategy than recruiting and developing talent, he notes. HR’s challenge is to show that link between talent and the business strategy, he concludes. I can’t help but think that last week’s announcement by the Conference Board that CEOs consider human capital the No. 1 challenge for 2014 should give HR leaders a bit of a boost in this department.

Google Tackles Incentives and Rewards

If there’s one thing you must know about Google, it’s that the Mountain View, Calif.-based tech firm is obsessed with data — gathering it, analyzing it and using it as the basis for every decision it makes. It even has a function within its HR department — or People Operations, as it’s called there — called People Analytics, which applies that data-intensive methodology to workforce-related matters. People Analytics recently took the lead in a project at Google to make its incentives-and-rewards program more “meaningful” to its 36,000 Googlers, as explained in a session on Monday at the WorldatWork conference in Philadelphia.

“Focusing on the user is a big tenet for Google,” said Kathryn Dekas, people analytics manager. “Within HR, our users are Googlers — and we want to provide them with the most unique user experience.”

Google avoids benchmarking and best practices, preferring to do its own data-gathering and research instead, said Dekas. First, the People Analytics team did a “deep dive” into the available research on employee recognition–a hallmark of Google’s approach, she said.

“First, you want to ensure you’re not overlooking good external research, that you’re starting on a solid foundation and that you’re not duplicating work that’s already been done,” said Dekas.

Next, the team turned to internal data-gathering. It added some questions to “Googlegeist,” Google’s employee engagement survey, to find out how employees perceived the company’s existing recognition programs. It followed that up with employee focus groups and in-depth interviews of selected Googlers.

Through its external research, the team came across the book “Nudge,” by Richard Thaler and Cass Sunstein, which examines the concept of using data and behavioral science to “nudge” people into making better decisions, said Dekas. The team ultimately incorporated some of what it learned from the book into the design of Google’s new recognition and reward system by adding “nudges” that encourage managers to put some thought into selecting a reward for an employee that will resonate the most with him or her.

“We want to nudge managers into remembering to take every opportunity to explain to the employee why he or she is valuable, and to select rewards that are thoughtful, that demonstrate that you understand what’s important to them,” said Dekas. “On the flip side, the system also nudges managers to ‘be real’ — to consider whether they really know the employee that well, and if they don’t, encourage them to offer a selection of rewards instead.”

The system also “nudges” recognition recipients to select rewards wisely, said Dekas. For example, the team’s external research found that experiential rewards — such as trips employees can take with loved ones — are much more satisfying than material items and that people are much more likely to regret selecting or spending cash rewards on “practical” items than on “indulgences,” she said. Meanwhile, spending money on others “is a win/win,” she added.

Prior to rolling out the system, the team engaged in a “user experience study” to ensure that Googlers liked the system, that it was easily usable and it fit the company’s culture, said Stephanie Tietbohl, Google’s compensation manager. “We got some really great insights from the user experience study,” she said. “They really liked the one-stop nature of the system. The concept of point delivery through a catalog system did not resonate, however — they said it felt more like a shopping experience than a recognition experience.”

After making some tweaks to the new system (which the company decided to build in-house), Google plans to roll it out very shortly, said Tietbohl. “We’re very excited,” she said.

Heading for the Exits?

I was reminded more than a few times at this year’s SHRM that employers are clearly worried about losing their top talent.

Yesterday, I stumbled across further proof: an overflow area, where audio and PPT for a session titled “Succession Management and High Potentials: How to Connect Your Most Critical Leadership Programs” were “streamed” to attendees sitting outside the packed workshop room. Best for HR professionals to be prepared, no?

Then, later in the day, I sat down with executives from Aflac, who shared with me the findings of their most recent workforce study, the 2012 Aflac WorkForces Report.

In the survey of 6,100 employees, Aflac found that nearly half of the workers (49 percent) questioned said they were  somewhat likely to look for a new job in the next 12 months; 27 percent indicated they were very or extremely likely.

The findings raise the question, “What are employers doing to retain workers?” says Audrey Boone Tillman, executive vice president of corporate services for Aflac.

Not surprisingly—especially when you consider Aflac happens to be in the business of providing group benefits—the study also shows a clear correlation between satisfaction with benefits and satisfaction overall. Seventy-three percent of the respondents who indicated they were extremely or very satisfied with their benefits were very satisfied with their jobs.

When employees were asked what their employers could do to retain them, nearly half (49 percent) said “improve my benefits,” according to Tillman.

Despite this, employee benefits hasn’t really budged all that much since the economy went south late last decade. Proof of that could be found in SHRM’s 2012 Employee Benefits Survey, which was released yesterday. The study of 550 HR professionals revealed that employer spending remained pretty much stable this year. Organizations spent 19 percent of an employee’s annual salary on voluntary benefits, 18 percent on mandatory benefits and 10 percent on pay for time employees didn’t work.

Companies, however, are apparently making an investment when it comes to initiatives aimed at promoting healthier behaviors among its employees, the SHRM survey found. For example, the percent of employers offering health and lifestyle coaching jumped from 33 percent in 2008 to 45 percent in 2012. Rewards and bonuses for completing a health and wellness program, meanwhile, increased from 23 percent to 35 percent over that same period. No question these are pretty significant changes.

Of course, no one knows what might lie ahead. But it’s safe to assume we’ll begin to see more movement on other benefit fronts as employers start to see more of their talent head for the doors.

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.