This is a little different to our usual ‘new year’ blog. As we thought through what to cover, a clear theme emerged. It’s what I’m calling ‘bold goals’.
It’s fair to say that for some years now, our reward strategies have been getting a bit ‘generic’. Usually along these lines:
Reward at X is fair and competitive in order to attract, engage and retain the talent required for business success.
I’m not saying this isn’t a good intention, especially where organisations are putting in pay and reward foundations. But I am saying that it is generic and could apply to pretty much any organisation.
Because of this, it does not give clear direction or real commitment to your reward agenda. I believe this is why many common pay activities work against these goals.
For example, we promise ‘fair pay’ but cannot implement it well as it is subjective and means something different to different employees. We rely on market data to deliver 'fairness' but the data itself is full of inherent bias. We talk of attracting talent but then obsess with matching the pay and benefits of our competitors rather than looking for differentiators. And we try and retain talent with a 2.5% annual pay increase when they're likely to get 10% if they left (Resolution Foundation).
But a great pay strategy isn’t just about being really clear. As the world around us changes with incredible pace, 2019 brings opportunity for bold, ambitious goals.
By this I mean goals that help tackle bigger social issues and business challenges such as in-work poverty, excessive pay and unfair pay gaps, supporting agile workforces, enabling continuous performance management and establishing a culture of trust and engagement.
This might all sound very noble, so here’s some practical pay activities I’ve seen that contribute to these bigger goals:
- Raising your pay bar – there will be companies where achieving the 'real' Living Wage is harder than others, but this shouldn’t stop ambition. For example, one of our clients openly commits to an affordable premium over and above the National Living Wage. Each year this 'bar' is reviewed to see how much closer they can realistically get to the 'real' Living Wage.
- Letting go of the market median - 70% of us say market rate is the most important factor in determining base pay (CIPD). But I fear it’s gone too far and we interpret the data as the answer when it comes deciding pay (see our separate blog on this). In reality market data is just a collections of decisions made by other people so of course it is impacted by discriminatory views and poor judgement. Treat with caution and where possible combine roles into job families to minimise the error. We find market data is best used to develop reasonable pay ranges to guide pay decisions that take account other factors such as internal job classification, skills development and performance.
- Having transparent pay & grading – I’m surprised by how many organisations are still fearful of openly sharing pay ranges due to concerns about the conversations it might encourage, manager capability, and risk of equal pay claims. However, this transparency is essential for trust and engagement: “Employees’ perceptions about pay fairness and transparency are 5x more impactful on engagement than actual compensation” (Payscale). And to be effective it requires clear internal job levels (i.e. based on a classification framework that is shared rather than a secret points system), clear pay drivers (i.e. is pay about the role value, external market rate, individual growth or individual performance?), and empowered line managers.
- Rewarding performance without ratings – we know traditional performance management is just not fit for purpose. But many organisations are reluctant to change to a more effective ‘continuous’ approach because their reward processes require an annual appraisal rating. Isn’t it time we took these ‘shackles’ off and implemented performance reward without ratings? There’s essentially three options: more consistent reward decisions with little variation based on individual performance, using a measure of individual contribution to guide pay that is distinct and separate to the performance management process, or taking a holistic approach to pay (more on each of these in our separate blog)
- Taking a holistic approach to pay - as business and roles transform at an ever increasing rate, HR can no longer have all the answers when it comes to reward. Who better to make these decisions than line managers who are closer to the work and the people? Research shows that managers already know what they want to give and have to retrofit their desired outcome into whatever process hurdle HR has put in their way (Pulakos et al). Some organisations are empowering managers to make multi-faceted reward decisions that take account of many aspects relating to the role, individual and organisation
- Authentic pay reporting – despite the wealth of evidence that diversity delivers significant strategic advantage, many organisations are still treating pay reporting as a regulatory hurdle. The government may have rejected the BEIS gender pay recommendations relating to lowering the 250 threshold, compulsory narratives, and including partners, but that shouldn’t stop organisations committed to gender equality from doing it anyway. And narratives that provide additional data to highlight the underlying issues, rather than additional data to justify the gap, will be more authentic and less about PR (see our blog on this)
This isn’t an exhaustive list by any means. But they are all activities that could be part of a bigger reward strategy that makes the difference to organisations surviving and thriving.
Isn’t it time we crafted reward strategies that approach pay in a way that delivers results on some critical issues? Perhaps it’s time we found that superhero within us that’s prepared to be a little bolder.
Image courtesy of JD Hancock