It's Comp Time Again
Updated: Jul 25, 2019
It’s Comp time. Your Board has just signed off on the “pool recommendations” for merit, bonus, and stock. Great numbers despite the continuous “doom and gloom” you’ve heard all year long from upper management.
On top of the pool information, you have also received “guidance” on how your organizations’ performance ratings “should” appear from a distribution perspective.
The Basic Truth
In my experience, there is nothing more disruptive to an organization other than a layoff, than the annual compensation cycle. “Comp time as we called it.”
Your ability as an HR pro to take the emotion out of the process through proactive management “calibration” sessions will allow you to get from A-Z quicker.
By being proactive you’ll build your credibility as an HR partner.
This will not be a straight path, but the zigs and zags can be addressed if managed properly and professionally.
Every organization will deny that they have any “hard and fast” rules regarding performance distributions, however, the opposite is generally true.
The “bell-shaped” curve is not dead. An idea with origins from 1718 based on the contributions of three mathematicians lives on. Praise be!
The creative work of Abraham De Moivre, Pierre Laplace and Carl Frederick Gauss were still alive and firmly in place.
Money, Money, Money
So, when you have “finite” pools you know you will spend all the money/stock/bonus, but are you going to be able to “spend” that in the most effective way possible? And will you be able to do that according to “guidance?”
On top of all this you know it’s going to be tough when you hear the following from your leadership teams:
“My team is all high performing. We don’t fit into that guidance model!”
“Look at the OT they put it. Look what they delivered. The business loves it.”
“Bob, Carol, Ted, and Alice are our go-to resources. If we don’t share the ‘love’ with them, they’ll walk.”
And, of course, my favorite, “We don’t have any ‘2s or 1s’ because our management processes are so tight and proactive that there just isn’t room for performers at those levels to survive on our teams.” That still makes me laugh…because I can picture the manager who said it. What an A-hole.
Foundational Work You Need to Do
Engage upper management in a basic Change Management 101 refresh,
Ditto-Compensation 101 with a sprinkle of tough love,
Create a common language about comp. Let this language flow throughout the organization,
Model your workforce-look at your distributions/pending.
Your Engagement Approach
Host Calibration Meetings with your teams. Calibrate, Calibrate, Calibrate. Calibration Meetings allow you to sort out all the misunderstandings and mis-guided interpretations of the work to be done. It ensures that your Team Leads and Upper Management are engaged in the process.
Review the common language already out on the floor. Review their organizational modeling based on their preliminary rating suggestions/your input.
Share, review, adjust.
Reality Sets In
All organizations have 5s as well as 1s. I’d venture to say that any HR pro worth their salt could sort those ratings out fairly accurately with a high degree of confidence on the first pass.
The real managerial angst will start to occur when 5s and 4s get sorted out, when 3s become 2s, and 2s become 1s. Those changes impact awards in a tangible way.
The majority of the work will and should focus on how to appropriately address your population of 3s. The 3s are the largest rating group. The 3s are what makes every organization go and it’s this population that should require the most time.
There will be pain here. There will be unpleasant conversations.
In the end, there should be clarity on decisions made.
The Tool Design
Look at your models. You can’t afford to give all your 3s the same $$.
It’s a fact that all the resources rated 3 don’t impact the org the same way.
What are those items that might be unique in the culture that differentiate 3 performers? Is it coming up with cost-saving ideas? The display of leadership in a non-leadership role? Are they a technical “go-to person?” Are they collaborative?
You get the idea.
We looked at our culture and decided that besides a performance rating, there was more to the performance. It was not just a “What,” it was also a “How.”
We used three cultural values (see common language) in addition to the performance rating as additional items we would consider in our model.
All four components were not weighted equally, but all four equaled 100%.
We had an Excel wiz build us a tool that allowed us to calculate an aggregated value. A performance rating (whole number, no decimal points) as well as a differentiator rating (whole number, no decimals) for our three additional cultural components.
So whole numbers X weightings = total for each resource.
3.00, 3.01, up through 3.99.
The End Result
We used this tool to drive every calibration meeting.
Every employee had an aggregated value consisting of a performance rating and three cultural values that totaled a resulting value to two decimal places. We had a common language to describe our ratings.
We could look at the entire population (inclusive of all ratings 5, 4, 3, 2, 1 if desired) to ensure that we spent our money appropriately based on the differentiators we selected.
We supported IT. Our audience, primarily ST in nature, appreciated the work we brought to the table to support tough decisions.
Our tools and processes allowed us to achieve our goal:
Achieve meaningful compensation reward differentiation while remaining within pay guidance and pool spend.
Sharing is Caring
If these concepts interest you, let’s talk more!
Contact First Line Consulting