We’re on the last vacation of the summer. It hasn’t been our favorite so far, but it’s nice to have a change of pace. I’ve been on the golf course a couple of times, we’ve been out on the water a bunch, and the girls are relatively well behaved. Not much more you can ask for. While I don’t have time to push out new material during this vacation, I still like to keep the ideas flowing. In that spirit, here’s one from the vacation archives…originally published back in October 2009.
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So I have this idea about how we set base compensation every year – I’ve floated it in front of Execs and HR pros alike. More often than not, my idea is met with some question about how much crack I smoked before I came into the office that day. I usually take this as a good sign, though. So here it is:
What if we asked our people to tell us what THEY THOUGHT THEY SHOULD BE PAID as another data point in our comp planning process every year? Now give me a chance on this one…
1) The compensation planning process is already perceived to be a smokey back room exercise to begin with; more transparency is good; this level of transparency might be great.
2) You still run the normal analysis re: market, banding, performance, company projections/budgets, economics, etc. You still come up with a recommendation by employee, but…
3) You compare your recommendation directly to what the respective employee thinks they should be paid.
4) If the employee thinks they should be paid more than what you’re recommending, then it requires further investigation – if it’s off by a bunch, you either reach the conclusion that the employee is delusional or you understand what it is you’re missing. At the very least, you’re in a better position to then explain to the employee why it is you came in under their expectations.
5) If the employee thinks they should be paid equal to or less than your recommendation, then you know you’re going to have a happy customer on the other end. I’m not suggesting that you would lower your recommendation to their’s (and that’s something they’d have to trust you on).
6) This allows you to identify that population that’s going to need a bit more hand-holding and thoughtful communication when compensation is announced. It may also identify those people who need to set their expectations more appropriately – maybe they aren’t getting the right feedback on their performance or on their value to the organization.
Might every employee “high ball” their input – sure. Might you piss some people off because you didn’t give them what they want – sure. But that would have happened anyway – at least now you’re out in front of it. Ultimately this approach allows you to heighten transparency, level set expectations, and involve your people more directly in the decisions that effect them. That’s all good stuff…right? At the end of the day, all of our employees are free-agents. Why not treat them that way when it comes to planning their compensation?
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