Current situation and the best Christmas gift for Comp & Ben - Comp&Ben Talks #4

In this episode we would like to take a relaxed view of what is happening in the Comp & Ben world and what would be a perfect gift for a Comp & Ben manager.

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Transcription

Bartek Podolski: Hi! This is Bartek Podolski and...

Magdalena Tur: ...Magda Tur.

Bartek Podolski: Welcome to the fourth episode of the Comp & Ben Talks. Today we are going to discuss current trends in the Compensation and Benefits area. What is more, this podcast will be held in an easy-going tone as we all still are in the Christmas mood.

Magda, I would like to start with a quotation from the Business Insider article that was published recently. In the article, we are reading that 1000 Microsoft employees shared compensation data and revealed their salaries. It is an interesting case because it did not happen because of company errors and omissions or employee mistakes, when somebody put data in the wrong folder. This time it happened because people gathered data in a spreadsheet and shared them with the outside world. It seems like a completely new situation in the Compensation and Benefits world. What do you think about it?

Magdalena Tur: Hello everyone. First, let me wish you Merry Christmas. Bartek, thank you for sharing information about the article - it is a very interesting case. When the salary data leak appeared, I got an alarm in my head that something was wrong. But you are right, this situation is different. People deliberately shared their salary data with colleagues. It is something unusual and new. I think that such situations might appear more often in the future. From the internal perspective, it was only a push on the company’s top-level managers to be more transparent regarding remunerations.

Bartek Podolski: It also seems like a difficult situation for the company to handle, especially because such a push is being made by different parties. Regulations also begin to require full transparency in showing aggregated data. It seems like organizations are under attack from many different angles and their position is pretty hard right now. On one hand, companies should reveal information about remunerations because of internal and external pressure. But on the other hand, entrepreneurs do not know how people would react to the information about salaries. In Microsoft, only 1000 people revealed their salaries. The question is what other 100 000 employees think about the situation.

Magdalena Tur: You are right. It was only a small group of Microsoft employees involved in this case. The interesting part is that they did it quite spontaneously. Of course, we can think about preparing better regulations that will force better transparency, for example, by introducing Comp & Ben data reporting. But the bottom line of this case is to have control over the salary regulations and to keep consistent and transparent communication within the company about it. Showing data position by position is challenging but it might solve problems. However, it is much harder to prepare, especially because in reports everything is shown in aggregated form. On the contrary, when you give detailed information, it also makes it easier to explain to people why salaries are at a particular level. In Microsoft’s case, it was a small sample and, as you said, they decided to share the data about earnings because they were not happy with them. They obviously had a reason to complain. They wanted to show off something.

Bartek Podolski: So you have a sample of data of frustrated people, right?

Magdalena Tur: Exactly. Probably we encounter the lowest quartile of salaries. What is also important, while the newspaper published it, they calculated the median as well as minimum and maximum salaries. Journalists made a simple Comp & Ben statement. But it is not a full report because we do not know the exact salaries in Microsoft. Such a small sample is not representative of the whole company. But such comments may happen when you have a salary data leak and you do not have control over this process.

Bartek Podolski: Before recording this podcast we were talking about this situation and you mentioned that it should not have happened in a company where all Comp & Ben processes are set up properly. And if in such a company the salary leak appears, you have an explanation for the situation. It means that you have nothing to worry about because you should be able to explain and justify why there are differences in salaries. I think that good preparation for conversations about remunerations is one of the invisible jobs that must be made by the Comp & Ben department. At a critical moment, it may save the company’s reputation.

Magdalena Tur: It is worth mentioning that you are not able to control everything. Some things are up to people. They have to decide if they want to share information about remuneration or not.

Bartek Podolski: You are right. However, I know a few cases when people shared data from other people, but it was done by mistake. In Cracow, there was a famous case lately when somebody put data in the wrong folder and everyone could see it. I have never heard of a situation when people made it on purpose. It was a situation that changed the world of Compensation and Benefits.

Magdalena Tur: I have a feeling that similar situations will happen and we should expect them or, at least, be prepared for them in the Compensation and Benefits departments. This is the reason why you should have well-protected data, good justification for remuneration brackets, and control over all processes related to compensation and benefits in the company.

Bartek Podolski: How can Comp & Ben be prepared for such situations?

Magdalena Tur: Two things need to be mentioned. Firstly, companies should set up a remuneration structure. They should introduce policies and rules which will regulate employees’ earnings. There is no doubt that salaries will differ, but people need to understand why. They must know the reason behind certain numbers. It would be great if a company has, for example, a grade structure. With such a tool it will be easier to justify why somebody’s salary is lower or higher.

Bartek Podolski: I know you mentioned two factors, but I have a question here: what if the remuneration of one employee was agreed under pressure? I am talking about the situation when it is pretty hard to find a good explanation for the employee salary. Let’s say that a company had to hire someone who asked for high compensation but it turned out at some point, that the person is a liar. What then? When you know you cannot explain the decision very well, how can you defend yourself?

Magdalena Tur: Probably every salary review should be focused on such cases to find a proper justification. In the beginning, I would recommend defining the minimum and maximum salary for particular grades. In such a situation I would leave those outliers just like they are (especially if they fit into the brackets). We should focus on the second group of employees and look for a way to give pay rises to employees who actually did a good job. The key is to be as consistent as possible in terms of giving raises to people at the same grade. Such decisions should be made during salary reviews though. Sometimes it might be a long process, but the goal will be achieved by taking one step at a time. In the meantime, we should make employees aware that we are working on the case. It might be a very difficult situation when somebody not only finds out that his or her colleague has a very high remuneration but also is sure that Comp & Ben does nothing to change the discrepancy in salaries. If people know that the case has been handled, but more time is needed to solve the problem, it would be easier for them to accept the situation.

The second thing that needs to be mentioned is awareness. Just to remind you, the first crucial point is to set up clear processes, policies, and regulations and the second important factor is an awareness of salary management.

Bartek Podolski: You mean an understanding of why things work in a certain way in a company, right?

Magdalena Tur: Yes, it is also included in this term. But it is not enough. People need to be aware of what the Comp & Ben department is doing as well as why and when such actions are taken. Even if not everything is perfect, it is better to inform others what is actually happening.

Bartek Podolski: When people have awareness, it also should be easier to explain why there are almost any exceptions within the process.

Magdalena Tur: Exceptions are not good in the remuneration process at all.

Bartek Podolski: But they happen, right?

Magdalena Tur: Yes, they sometimes happen. But if there are people who earn a very high salary, the company managers should think of promoting other employees and give a pay rise to them.

Bartek Podolski: Indeed, it makes sense - instead of breaking rules, the reality must be accepted and payments must be adjusted. Right now I have in mind the IT market, which is the hottest market in terms of compensation and benefits. In this sector everything is crazy and Microsoft is only one of the examples. The interesting fact is that published salaries were not the lowest ones in the company. When people from other industries look at this data, they would say that people are paid well.

I also wanted to touch on the future regulations in our Comp & Ben talk. As I already mentioned there is not only an internal push for transparency but also external pressure from regulators. I know that Germany introduced some laws already. According to them, companies need to share information about the aggregated compensation or salaries in certain positions once it is requested by the employee. I think the European Commission wants to do the same for all companies. I read an article about plans to introduce similar laws in the whole European Union. What is more, companies that hire more than 250 employees will have an obligation to publish anonymous remuneration reports and make them more transparent. But on the other hand, there is competition on the market, a shortage of experts in many areas, and so on. How to match all those factors and build a strong company in the market?

Magdalena Tur: It is quite a big challenge. To sum up, there are two different forces: the first one is about the push for better transparency and internal consistency of salaries and the second one is about the push for creating a competitive advantage on the market, especially in the IT sector, where companies need to acquire talents. I think it all means a lot of work for Comp & Ben specialists, especially in bigger organizations where more than 250 people are hired. What is more, the task is not easy, because every step needs to be well-planned. A company should have a good strategy and ability to justify each decision about the salary raise or the payment brackets for newcomers. If a company does not have established all these things at the beginning, it will become more and more difficult in the future.

Bartek Podolski: Do you think that Comp & Ben will increase its relevance within a company? Will it have more meaningful responsibilities and play a bigger role in the organization? Will those changes and pressures shift the position of Comp & Ben in the company?

Magdalena Tur: Yes. It is all connected with other HR processes. For example, there is a competence matrix, a performance management process, succession planning, and so on… All HR processes should be combined with the policy that is describing job architecture, its structure, and grades within certain positions. Everything needs to make sense as it is linked. It will also help people to understand what is the HR environment in which they live. Once they get an awareness of the Comp & Ben world, it will be easier to justify many decisions regarding promotions and salary increases. More importantly, they need to understand, for example, that right now they do not get a promotion because their competencies are not good enough yet.

Bartek Podolski: Then it would be easier to show steps that need to be taken to improve qualifications. We can say to an employee which training he or she should take, which responsibility must be taken over. Actually, I think that in today’s world taking responsibility is crucial. Sometimes people do not feel that they need to do something. If somebody takes the initiative and feels obligated to have something under control, he or she gains extra points easily. Maybe I have old-school thinking but I like this way of thinking, meaning, the more you do, the better employee you are and the better company is being created.

Magdalena Tur: You are right. It still works that way. Of course, the salary increase goes together with responsibility.

Bartek Podolski: In the end, it is all about employees who are creating a value to the company that can be sold. It is one of the simplest ways how money gets into the company. If a company does not have such an approach, it would not survive in a long-term perspective. I would even say that it is a suicidal strategy for the company. On the other hand, as you already mentioned, all that means more work and bigger challenges to the Compensation and Benefits department. But then there is another problem. As far as I know, those departments are rather small even in big organizations. Usually, we have a group of up to 5 people working there. But, in general, they are not big departments. What is more, when I wanted to learn more about Comp & Ben, I logged into the World that Work organization and I noticed the poor quality of their courses. Most of them were about preparing Excel files for the Comp & Ben needs. I was really surprised because I was not aware that people in Comp & Ben need to concentrate so much on how the Excel formula should work. Frankly speaking, it is a very technical issue and people working in Compensation and Benefits should not dedicate 50% of their time to it. They should just know how to use it or have a system for it. Employees from the Comp & Ben department should do more intellectual thinking rather than solving technical issues. But that is only my impression. What do you think about it?

Magdalena Tur: Yes, again you are right. Especially because you need to have two different skill sets to work in the Comp & Ben. It is different from the HR department. I think that the Comp & Ben function will be very needed in the future. Probably, nobody from HR can take full responsibility for remuneration strategy and all processes related to Compensation and Benefits, its internal consistency, transparency, and competitiveness.

Bartek Podolski: Sounds like the Comp & Ben has hands full of work.

Magdalena Tur: This is the reason why organizations need it.

Bartek Podolski: I think that challenging times are coming. Probably there will be more and more pressure in this area due to the internal tensions and external regulations. More and more reports will be required as well as data transparency. Comp & Ben will be forced to use more statistics and data processing to make everything consistent and justified not only to the employees but also external authorities. Definitely, there will be more tasks for people who are already very busy. In your opinion, what would be the best Christmas or New Year’s gift for Comp & Ben?

Magdalena Tur: You mean only this year or every year?

Bartek Podolski: Let’s talk about this year.

Magdalena Tur: I would say that one of the best gifts would be a lot of energy to Comp & Ben employees so that they would be able to implement changes such as IT systems and other supporting tools. As you already mentioned, the Comp & Ben team is very small, so I hope they will get a chance to automate some of the processes. Another good gift could be related to visibility in the company. Comp & Ben is not a well-recognized function; therefore, it would be great if others get the opportunity to learn more about the responsibilities of the Compensation and Benefits department. To sum up, Comp & Ben needs energy, visibility, and good IT systems.

Bartek Podolski: It is a non-visible department in the organization as long as there is no data leak. After that, it is very well visible to everyone. And if you ask about my opinion, I will share information that for the third time I am reading a book about how to stop worrying and start living. I would recommend this book to everyone from the Comp & Ben department. It is all about focusing on the present and what can we make better by taking one step at a time. Once we start working on something at this very moment, great results will be seen in the future. I think this is my recommendation for the New Year,

Magdalena Tur: Small steps can go a long way, right?

Bartek Podolski: Indeed, a long way is made of small steps.

Magdalena Tur: True. At least, we should set a goal and make a strategy on how to get there.

Bartek Podolski: I hope that the world for Comp & Ben will be better in three months.

Magdalena Tur: I hope so. Right now we have the hardest part of the year for Comp & Ben.

Bartek Podolski: Exactly. So we send you all the best wishes.

Magdalena Tur: Thank you and wish you all the best.

Bartek Podolski: Thank you for a great conversation and see you in two weeks!