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Why is compensation policy even a HR issue?

Compensation policy

Insofar as a company has a compensation policy aside from “pay the executives a lot and everyone else not as much,” why would such a policy be considered the domain of HR?

Let me explain this one clearly and quickly.

Article 1: Executives tend not to care about HR. They do care about money. Compensation policy is inherently a money issue, as salaries are typically your biggest expense going out. So why would a money issue (we care!) be the domain of a “be seen and not heard from” department?

Article 2: Here’s a Wharton interview with a lady who has written three scholarly papers on compensation (she probably knows what she’s talking about). The money quote is:

If there’s one takeaway we want from this research, it’s for people to recognize that these pay policies are not an HR policy. It’s really a strategic decision that firms need to make. As much as firms want to keep their pay under wraps, in today’s day and age, that’s increasingly unrealistic. It was unrealistic 10, 20, 30 years ago as well. And it does have major consequences for what firms can do and how they can compete. That is very important to account for.

So someone who’s written three major papers on salary? She believes this is the “one takeaway.”

Article 3: How can the same department that punishes/fires you also be the department you get to deal with around money? (Or “engagement?”) Does anyone think this shit through?

Couple of quick deals on compensation policy

The ecosystem this all resides in:

Incentive structures (bonuses, etc.) are also kinda fucked up at most companies, which is another brick in this messy wall.

So why does HR own compensation policy as opposed to it being part of strategy? 

“Because that’s the way it’s always been done.”

What would be a better system?

  • Decision-makers determine bands/ranges
  • They also work to determine objective qualifications for how you get advanced
  • Also: how many people can get advanced in a given year
  • They explain to the stakeholders the importance of rewarding people and how some more money is going into the salary pool
  • Hiring processes and 1-on-1s with managers are redone around the concept of explaining salary, bands, and potential advancement
  • We try to get females up to 95 cents on a male dollar
  • We even publicly post about salaries and how one can advance in 1, 3, and 5 years
  • Everything is open; it’s “radical transparency”

Could this ever happen?

Absolutely good Lord in heaven no. Not for 30 years or more, and by then compensation policy will be “Do these robots need money?”

Here’s the problem: guys who come to run companies think in a very specific way. That way:

  • Please my stakeholders
  • Get scratch for myself
  • Product product product process process process

What is usually missing:

  • Customers? Fuck ’em. They still buying?
  • Employees? We pay ’em enough for them to make rent, yea?
  • Why would people matter to what determines my bonus?

The whole concept of “customer experience,” in reality? It’s just putting numbers in a silo so the executives can nod at concepts 2-3 times a year. Somehow it became a whole industry with thought leaders. Chop my dick off and call me Sally. I dunno.

So anyway: we need changes to compensation policy, namely removing it from HR, but I don’t see much of that happening soon. You?

Ted Bauer

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