Compensation Mythbusters: How to Improve Satisfaction with Rewards

Transcription

1 Compensation Mythbusters: How to Improve Satisfaction with Rewards October 2014 resented by: Robin Kegerise Sibson Consulting Maureen Querey Duke University Copyright 2014 by The Segal Group, Inc. All rights reserved.

2 1. Compensation Myths 2. The Four Compensation Mythbusters erceptions atterns layers ay Understanding 3. Sharing Examples: What articipants are Doing to Improve Satisfaction 1

3 These Are Typical Statements We Hear About Compensation We can t fix compensation satisfaction without a budget Our structure can t be changed so we can t satisfy employees Surveying for opinions on compensation will make the somewhat happy unhappy Leaders and managers aren t capable of / willing to discuss compensation This institution is too unique to define a comparison group. Managers only use the top ratings on the scale to ensure the highest increases we can t fix that. Are they true, or are they myths? 2

4 What Drives Satisfaction / Dissatisfaction With ay? The myth is that erfectly Designed rograms DRIVE Satisfaction With Compensation The truth is that Well-Designed rograms DRIVE Employee Expectations Leadership rogram Execution + Outcomes Aligned with Expectations DRIVE Satisfaction With Compensation 3

5 The 4 Framework Improving Compensation Satisfaction Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 4

6 How Does Your Institution Handle Compensation erceptions? Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 5

7 What are Compensation erceptions, and Why Do Institutions Avoid Listening? Definition How individuals regard, interpret or understand compensation Often based upon individual sources of information and personal biases Why Some Institutions Don t Listen No money to fix the problems, so why highlight them! Focus group participants yell at me rather than the problem. Listening raises expectations for a solution! It might cause the moderately happy to realize they are unhappy! When leaders see the results, they expect improvement the following year, but give us no tools ($$) to make changes. 6

8 Sometimes Acknowledging and Understanding erceptions Helps to Solve the roblem The New Yorker, 9/18/2006 7

9 Leverage Your Resources Understand the Elephant in the Room! High Level of Understanding Focus Groups Individual Interviews Low / Incomplete Level of Understanding Do Nothing Listen When They Call On Demand Survey Rating Only Surveys Open- Ended Survey Exit Interviews Ongoing ulse Survey Focus Groups w/ Unhappy Employees Low Time Requirement High Time Requirement 8

10 Use of Open-Ended Questions, Focus Groups, Interviews For surveys, interviews, and focus groups: Ask MECE questions Ensure representative sample of input manage discussion dominators Avoid bias, avoid answering questions When assessing results, consider coding answers: One point per person per issue = clearer view of magnitude Removes emotion focuses on issue Helps you to identify highest priority / magnitude issues In summary of results: Remove emotion and focus on issue Quantify level of satisfaction / dissatisfaction with specific elements Identify perceptions which need further testing Be aware of negativity bias in surveys these days 60 70% positive / neutral is a strong result 9

11 Discussion How does your institution assess and track perceptions (and realities) regarding compensation? 10

12 What Types of atterns Do Compensation Experts Look For? Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 11

13 What are Compensation atterns? Definition Trends in data which highlight a potential strength / issue Generally based on consistent, reliable data sources Why Some Institutions Don t Assess We can t get our leadership to agree on a comparison group in higher education! We can t get survey data for all of our jobs! eople don t get the statistics. We were competitive at the 50 th but they thought we were paying 50% of market. If we don t officially know there is an issue, we can t get in as much trouble for not solving it. 12

14 Types of Data Assessments Market Compensation Competitiveness Individual Job Division Salary Level Aggregate Spend vs. Market CAUTION: Make sure to define desired market positioning and comparison markets prior to analysis. Internal ay dispersion and inversion erformance and merit differentiation ay compression Equity regression analysis CAUTION: Internal data quality is key to these analyses. You may need to drill down to find rationale behind an apparent inequity. Equity regression analyses can be extremely complex due to statistical analysis required. 13

15 Compensation credibility starts with credible market data. 14

16 External Competitiveness Aggregate Compensation Spend / Individual Competitiveness AGGREGATE ERCENT TO MARKET MEDIAN ($000) DISTRIBUTION OF INDIVIDUAL COMETITIVENESS COMARED WITH MARKET MEDIAN Base Aggregate Market Data ($000 s) 215,605 Aggregate Organization Data ($000 s) 215,438 Aggregate % to Market 100% Incumbents 3,752 Approximately 72% of incumbents were benchmarked to the market. ercent of Employees 31% 33% 36% Base ay More than 110% of market median Within 10% of market median Less than 90% of market median What would you want to assess next? 15

17 External Analysis By Job vs Market Median Base Average ercent of Market Median 81% 84% 80% 87% 93% 92% 95% 87% 93% 96% 100% 95% 97% 97% 108% 110% 111% 98% 105% 89% 89% A B C D E F G H I J K L M N O Q R S T U Job You need to know the relationship of jobs (especially multi-incumbent jobs) to market ay actions should differ depending on position relative to market and the desired positioning It may take several years to get to the desired positioning Variation within jobs is desirable in order to pay for performance What other information does this chart need to be useful? 16

18 External Analysis Competitive Analysis By Area ercent of Employees 46% 44% 46% 8% 38% 35% 47% 19% 18% EXAMLE DELIVERABLE Less than 90% of.50 Within 10% of.50 More than 110% of.50 18% 73% 29% 57% 9% 14% Area Finance HR IT Research Clinical Trials Sales Marketing R N: Aggregate % to Market: 113% 107% 99% 101% 100% 100% 103% 84% 20% 40% 40% 17% 67% 17% 40% 60% This analysis can be done by unit, grade, location, and function. 17

19 Internal Sample Compression Analysis vs Supervisor DISTRIBUTION OF EMLOYEE SALARY 1 AS ERCENT OF SUERVISOR SALARY Select Non-Exempt Grades ercent of Incumbents 1% 4% 2% 2% 7% 3% 17% 92% 96% 95% 80% 6% 11% 23% 8% 22% 21% 67% 56% 86% 16% 19% 65% 2% 2% 8% 18% 90% 80% 33% 22% 7% 39% 60% 39% 4% 4% 91% 32% 8% 13% 92% 55% 5% 3% 16% 30% 80% 67% 13% 11% 14% 64% 24% 22% 23% 33% 18% 67% 63% 54% 18% 59% 18% H 37H H 83H 85H 86H Grade Less than 80% of Supervisor 80%-95% of Supervisor Greater than 95% of Supervisor n= Base salary only; other pay not included. 18

20 Internal Frequency of ay Changes Defined as Reclassifications 1 20% RECLASSIFICATIONS AS ERCENTAGE OF OULATION BY UNIT 2 18% 17.5% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2.7% 2.2% Group A (n=332) Group B (n=99) 8.6% Group C (n=418) 7.2% 7.2% Group D (n=39) Group E (n=87) 6.3% 9.6% 13.6% Group Group G Group H F(n=325) (n=73) (n=161) 9.9% Group I (n=88) 4.3% 0.4% Group Group K J(n=117) (n=275) 10.0% Group L (n=120) 7.4% Group M (n=340) Group N (n=92) 10.3% Group O (n=97) 1.5% 2.2% Group (n=221) Group Q (n=315) 5.7% All (n=3423) 1 This chart details pay changes identified as reclassifications (from June 2011-Julne 2012) as a percentage of the total population within each unit. 2 Units not shown did not have any reclassifications between these dates and represent 98 employees. 19

21 Discussion How are you analyzing data? What trends do you track, and how regularly? 20

22 Case Study: erception vs. Reality erception Large group of hospitals in an urban area with other hospital groups competing for talent Significant turnover at all levels in nursing population. erception that turnover was due to compensation opportunities elsewhere HR brought Sibson in to validate that salary increase needed to retain nurses Assessments Written survey of nurse population, including those who had left Focus groups and interviews; review of exit interview notes Market competitiveness assessment using segmented local data based on experience level 21

23 Case Study: erception vs. Reality continued Results Compensation and Benefits in Line With Market: No significant pay opportunity difference at competing hospital systems in the area Exit Interviews Indicate Departures to Same Job Not for Compensation: Some departures had resulted in a pay change, generally due to a promotional opportunity Written Survey Ranked ay Opportunity as Second Lowest Reason for Departure: Ranking higher were work environment change, promotional opportunity, managerial change Interviews and Focus Groups Indicated Work Relationships Were Core Issue: Specifically, nurses cited doctors who did not respect / listen / were verbally rude as key issue for planned departure Next Steps Training for Doctors: Interpersonal behavior training for doctors; written standards implemented Conflict Resolution rocess Enhanced: Training provided for nurses and doctors on conflict resolution. Resource moved from remote location to onsite location 22

24 Who Are Your Key layers, And How Do You Leverage Them? Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 23

25 Which layers Does Compensation Information Come From? Should It Stay That Way? Definition At most institutions, the players are: HR: Often key source of information, especially when decisions are unpopular Employees: Share watercooler information Managers: Some address compensation questions, many say Ask HR Leaders: May or may not model compensation discussion Why Managers Resist Compensation Talk I am unsure of the answers, so better for the experts to give them! I have more important things to discuss with them. I m not sure I trust the market data anyway, so how can I defend it? I don t want to open it up because employees might start asking for raises, and we don t have the budget. 24

26 You Have to Leverage Leaders and Managers to Ensure Compensation Understanding Leader eer Manager HR Employees 25

27 To Increase ay Satisfaction, HR Can t Be The Only Group Talking About Compensation Impact of manager communication on employee performance and intent to stay* Communications from the manager are four times as likely to positively impact employees belief in the fairness of pay processes than communication from the HR Compensation function Manager communication drives 50% of employees belief in the fairness of pay processes The belief that pay processes are fair increases employee loyalty by 25% and employee effort by 10% Managers need to be willing and able to talk about pay. * Based on responses from more than 30,000 managers and their direct reports; analysis conducted by the Compensation Roundtable. Washington, DC. 26

28 Train Managers to Talk About Rewards Training managers to talk accurately about rewards is a key step in increasing reward satisfaction. Train managers in: The expectation that they communicate about rewards Setting accurate expectations about performance Setting accurate expectations about rewards How rewards really work: Starting pay Base pay increases romotions Other rewards What won't get rewarded ractice how to have a dialog without just saying what employees want to hear 27

29 Strategies to Enhance Manager Confidence When Discussing ay Information Dissemination Videos Including Role lays ractice / Confidence Building Q and A Brainstorming and ractice Blog Entries by Other Managers Trainings with Role lays Calibration Sessions for Merit resentations with HR Shadow Online Resources for Complex Questions airing with Mentor What other examples do you have from your institution? 28

30 Discussion How do you build a broader team of individuals who can speak about compensation issues? 29

31 How Does Your Institution Share and resent Compensation Data? Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 30

32 What Steps Lead to Strong ay Understanding? Definition Strong pay understanding is driven by the messenger (leader/manager) and degree of openness / information provided Consistent level / type of information also increases understanding Why Some HR Efforts Fail No one understands compensation-speak anyway so why share? Different HR people give different pieces of data. Others wonder if the answers might also be different? There s no way to get the big picture from year to year. ublicly available data is confusing, and HR shares little to explain it. 31

33 What Degree of Openness Does Your Institution Want? DEGREE OF OENNESS Closed Limited data sharing only to back up decisions HR provides decisions, rather than working through potential solutions Answers brought to the table; limited conversation before and after Drives perception that compensation decisions are black and white Managers not empowered to own compensation Open Data shared openly. Available to managers to facilitate decisionmaking HR and Managers work together to identify problem, research needed data and define solution options Builds trusting relationship and limits need for gaming Allows managers to explain rationale behind decisions and own them 32

34 rovide Managers With Data to Explain Good Compensation Decisions LOW LEVEL OF INFORMATION Minimum Midpoint Maximum HIGH LEVEL OF INFORMATION Minimum Midpoint Market for a Job Internal Average Salary for a Job Maximum The information provided should be the same, no matter what the source in HR. 33

35 Use of a ublic Scorecard Helps You to Assess Compensation Health From Year to Year Department Department erformance (Low to High) SAMLE COMENSATION SCORECARD Average erformance Rating (1 5) Average Merit Increase (3% Budget) romotion Rate Compa Ratio New Hire Compa- Ratio A Moderate % 3% 101% 100% B Moderate % 0% 119% 110% C Low % 12% 118% 109% D Moderate % 8% 99% 108% E High % 17% 88% 95% F Low % 20% 105% 95% G Moderate % 5% 103% 97% H High % 20% 112% 109% What issues jump out at you? 34

36 How Can You Apply The 4 Framework To Improve Compensation Satisfaction at Your Institution? Listen to erceptions Ensure ay Understanding Improved Level of Compensation Satisfaction Test and Adapt for atterns Understand / Ally with layers 35

37 Contact Information Robin Kegerise Senior Consultant Maureen Querey Manager, Rewards and Recognition (919)