When we think about tools like Expedia and Yelp, we realize the value of transparency in the marketplace. The
underlying issue is information asymmetry – when one party has more information than the other, that party
has additional leverage in a discussion or negotiation. Leveling the playing field between two parties in an
exchange helps both to feel like they got a fair deal, which is essential in an employment situation. This
specifically applies to compensation as well. There is value in openness, and companies that find the right
balance can reap the benefits of pay transparency

Research Supports an Open Approach: Research points out that companies where employees understand the pay philosophy are more likely to see engagement from employees. A sense of trust and openness at work can create bottom-line business results. On the other end of the spectrum, pay secrecy has proven to limit business impact. This combination of factors clearly makes the case that businesses need to seek transparency at some level.

Trends in Transparency: A wide variety of trends have contributed to this increased demand for compensation transparency. From the deep insights offered by tools like Charity Navigator (and other online transparency sites) to the media sharing stories of corporate corruption and scandal, many drivers have created an environment that is ripe for additional openness.

Delivering a High-Quality Employee Experience: The good news is that any organization can improve pay transparency. Using tools like transparency audits and frameworks, companies can deliver a culturally-appropriate level of openness that improves the employee experience. These methods help organizations to make decisions (both big and small) in search of the right balance of transparency.

The Business Case for Transparency

Several years ago, Dan Ariely, a behavioral economist and professor at Duke University, performed an analysis of country-specific organ donation rates. His findings showed that countries like Austria and Poland had higher than 99 percent donation rates, but countries like Denmark had dismal rates in the single digits. He wanted to find out what made each group different, because Denmark is very similar to its neighbors in terms of culture, religion, and other socioeconomic factors.

It turned out that the key influencer was not an intrinsic one at all. Each country’s Department of Motor Vehicles actually used a different method for enrolling someone in organ donation. For Austria and Poland, the enrollment form’s default was to participate in the program. For countries like Denmark, the enrollment form required them to opt into the program. That small difference led to significant impacts on organ donation and availability, and it offers a compelling lesson on how our default reactions can shape outcomes.

The lesson here is, given the choice, we should default to transparency. For some business leaders, it is reflexive to protect information, keeping it secret unless they have a good reason to share. While working as an HR leader, I performed plenty of coaching with my executive team focused on the concepts of pay transparency and business transparency in general. I always told them their default should be to share openly unless there are specific reasons not to. The benefits of this approach include greater awareness and engagement in the employee population.

If you’re interested in reading and learning more about compensation transparency, be sure to check out our free eBook on the topic underwritten by the great team at Salary.com, where this content was pulled from. I’d love to hear your thoughts on the topic!

If you missed the news this last week, a pair of researchers have published a report showing that Uber drivers are gaming the system in order to earn more money, reduce pickups, and fight back against what they see as a tyrannical algorithm. Here’s a blurb from PBS:

As University of Warwick researchers Mareike Möhlmann and Ola Henfridsson and Lior Zalmanson of New York University say in their best academese: “We identify a series of mechanisms that drivers use to regain their autonomy when faced with the power asymmetry imposed by algorithmic management, including guessing, resisting, switching and gaming the Uber system.”

Algorithmic management is, of course, the software Uber uses to control its drivers. As Mareike Möhlmann puts it: “Uber uses software algorithms for oversight, governance and to control drivers, who are tracked and their performance constantly evaluated.”

A joint statement from the authors elaborated: “Under constant surveillance through their phones and customer reviews, drivers’ behavior is ranked automatically and any anomalies reported for further review, with automatic bans for not obeying orders or low grades. Drivers receive different commission rates and bonus targets, being left in the dark as to how it is all calculated. Plus drivers believe they are not given rides when they near reaching a bonus.

Small wonder then that, according to Lior Zalmanson, “The drivers have the feeling of working for a system rather than a company, and have little, if any interaction with an actual Uber employee.”

So what are the drivers doing in response? Gaming the system by tricking the algorithm.

The researchers report that drivers organize mass “switch-offs.” The dearth of drivers in a given area then triggers the surge pricing mechanism.

The authors conclude by summarizing their findings, pretty much as formally as they began: “We found that [the drivers] actively tried to regain some of their lost control and sense of autonomy. We reported four observed driver behaviors. We found that drivers tried to guess and make sense of the system’s intentions. They utilized forums such as UberPeople to share these stories and gain social support. In many cases, these stories were echoed by other drivers, creating an urge to act. This resulted in a range of practices to resist the system, by switching to alternative systems and even gaming the system to their advantage.”

While the rest of us aren’t switching out our managers for an algorithm any time soon, it’s important to note some of the key statements in this piece that relate to all of us as employers.

The drivers have the feeling of working for a system rather than a company, and have little, if any interaction with an actual Uber employeePeople want to interact with people. That’s not Uber’s business model, but we’re seeing now yet another strain on the company based on a fundamental fact that humans are social creatures.

When you work for a nameless, faceless system (or algorithm), it becomes much easier to cheat the system and fight back. It’s different if you’re having weekly conversations with real people who care about you and your success. Remember this idea when you’re trying to find out how to connect your remote employees.

We found that [the drivers] actively tried to regain some of their lost control and sense of autonomy. Is it any surprise that workers would like some sense of control or autonomy in their work? It’s a foundational management and leadership premise to provide autonomy to workers, yet Uber tries to treat its drivers like nothing more than the robots that power its algorithm and platform.

Do we really have to have a newsflash that reminds this company that people are, um, people? They have hopes. Dreams. Desires. And they will find a way to get them if they feel like they are not appreciated or supported appropriately.

Drivers receive different commission rates and bonus targets, being left in the dark as to how it is all calculated. Plus drivers believe they are not given rides when they near reaching a bonus. One of the first lessons you learn in HR? Don’t screw with someone’s pay. Whatever you do, be transparent and don’t make people guess about how their compensation works, or you run the risk of creating a black hole of negativity and gossip that will swallow the company whole.

In a previous job a big part of my compensation was a quarterly bonus that my family depended on. It never failed that each and every quarter the deadline for payment would pass, I would raise the question, and eventually it would get paid. But why make me or any other employee have to go through those hoops for that? It makes me wonder if I would have ever been paid ANY of it if I hadn’t brought it to their attention. When it comes to how pay is structured, be clear about the expectations, be transparent about the process, and for goodness’ sake pay people when you say you will.

Okay, that’s enough from me. What are your thoughts on this specific issue or these general issues? Am I on point? Off the mark? 

evidence based approach to hr

Last week I had the pleasure of presenting a workshop based on metrics, evidence-based HR, and change management. The session was a lot of fun, because we were able to tie the three topics together in a variety of ways to help reiterate not only why each of them matters, but how each of them can really build value when used in conjunction with one another. HR is often using anecdotal information (if any at all), conjecture, and pure hope to make decisions, but we can do better. Today I want to go a little deeper than my post last week on “keeping up with the Joneses,” focusing more heavily on the evidence-based HR piece.

If you’re not familiar with evidence-based HR, here’s a primer:

Evidence-based human resources is the practice of identifying solutions and approaches that have a strong empirical basis.

In other words, we don’t just use gut instinct, an interesting anecdote, or anyone’s opinion to make our point. We use data and other solid evidence to support our decisions at every possible turn. But where does that evidence come from?

Sources for Evidence-Based Decisions

Here is a list of sources I offered the audience as credible options for finding research materials:

  • Management journals (scholar.google.com)
  • HBR
  • SHRM Foundation
  • Deloitte/Bersin
  • i4cp
  • CEB
  • ATD
  • CIPD

If you just do a quick Google search for one of these organizations and the topic you need to research, you’ll more often than not find something to help make your case. I actually had participants do this during the session, focusing on areas like recognition’s impact on productivity (definite linkage), using talent pools for faster hiring (no data we could find), and other relevant HR activities.

Be careful not to just grab a story of a company that is doing neat things and grabbing headlines, because that’s not enough to warrant good evidence. You want to find information from a study or some other data-backed approach that helps to lend credibility to your eventual decision. If it’s just a neat anecdote, then you’re really not improving the process any more than just making a decision based on gut instinct.

Making an Evidence-Based HR Decision

There are six key steps to making an evidence-based decision in the workplace.

  1. Asking: translating a practical issue or problem into an answerable question
  2. Acquiring: systematically searching for and retrieving the evidence
  3. Appraising: critically judging the trustworthiness and relevance of the evidence
  4. Aggregating: weighing and pulling together the evidence
  5. Applying: incorporating the evidence into the decision-making process
  6. Assessing: evaluating the outcome of the decision taken

Using this approach can help you to not only leverage evidence, but think critically about how valuable the evidence might be relative to other sources of data and information about your problem. Instead of going with the normal approach of “Bob said this worked at his last company,” we can use more credible sources of information to frame and resolve the issue.

Examples of Evidence-Based HR

Seeing this practice in action is the most powerful way to really “get” the value it can offer. I originally was turned off by the idea of having to research everything HR does on a daily basis, but in reality we make relatively few key decisions like those an evidence-based approach to HR would help with. For instance, New York spent more than $75 million on teachers to help increase student performance and teacher satisfaction. The result? No improvement. There is already data available that could have shown that this kind of approach has not yet been proven to deliver strong results (this examination of multiple studies still came away inconclusive, or “cautiously optimistic,” calling for additional research). Despite the lack of evidence, someone went ahead with the program anyway.

Here are a few examples of how it works in practice.

  • Selection Techniques-Your hiring managers are often used to creating high pressure interview situations to “see how candidates will respond.” They also like using tools like application data and GPA to filter out candidates. You find research that demonstrates the validity of their methods is in some cases no better than performing a coin flip to make a hiring decision, helping to sway them into using more structured methods and assessments for hiring decisions.
  • Employee Recognition-One of your managers is resistant to using recognition because “everyone can’t get a trophy” and she doesn’t want to “coddle” her workers. You find some existing research that points to the value of recognition not just in increasing worker satisfaction, but in increasing productivity as well, helping the manager to see the benefit to her and the team by improving her recognition skills and practices.
  • Performance Management-One of the trends in the US is “disposing” of the traditional approach and taking a different avenue for rating and assessing performance. You want to make this move with your company because you feel like your existing process is not adding organizational value. There isn’t much data, if any, available to support the different approach, but there is some data showing that collaborative environments support better teamwork and cultures than those focused on forced ranking and distribution of employees.

Leveraging research can drive immense value across the board, even for organizations outside the private sector. For instance, the Warner Robins Air Logistics Center, which repairs military aircraft for the US Air Force, used new research methods to speed repair processes for C-5 aircraft, allowing reductions in working capital of approximately $50 million (source: Deloitte).

While many of us aren’t working hands-on with aircraft, we still have the company’s largest budget item, its people, under our purview. Isn’t it time we started treating them like the valuable assets they are, managing them to the best of our abilities with the most relevant research and information available?

In every company, there comes a time when someone makes an offer to a candidate to come and work for them. What is interesting is the wide variety of advice in the marketplace that advises candidates on how to handle that critical negotiation.

Years ago I got my start in blogging by sharing career advice with job seekers looking for an edge in the hiring process. My peers constantly told people that for the strongest negotiating position, they should hold out as long as possible. In other words, it followed the old adage “the first one to speak in the negotiation loses.”

But that’s not necessarily true.

salary negotiationWhen I was recruiting, I wanted to find out from the candidate early on, whether through a job application question or through an informal conversation, what sort of salary range they were looking for. If it wasn’t offered, I would share the range of the opening early in the process. Was I showing my cards? Yes. But I was also attempting to conserve a valuable resource: time. Continue reading

One of the benefits that has received growing attention in the last year is unlimited vacation time. It is positioned as the “ultimate” in paid time away from work, and many of the people who have read the news articles about the plans have wondered what it would be like to implement such a plan. I’m here to tell you: avoid the hype. It’s not all it has been touted to be, and like with all decisions, there are unintended consequences to consider.

The Prevalence of Unlimited PTO Plans

The 2015 SHRM Benefits Study, an annual report examining the nitty gritty details of benefit plans, pointed out that between >1% and 2% of employers are offering unlimited paid leave plans. So while we get bombarded by the media talking about these revolutionary companies, in reality less than two out of a hundred organizations are even in the discussion.

What that means for me as a researcher is that there is too small of a sample size to accurately judge the efficacy of these kinds of plans. Who knows if they really work to help employees manage their lives better? We simply need more data on adoption to make that call.

What Companies Know About Offering Unlimited Vacation Time

Often the first thought, especially for HR folks, is something like, “I know who would take advantage of that. Their PTO balance is already in the red…” But the companies putting these systems in place aren’t worried about that. Often times they have generous leave policies already.

But people aren’t taking advantage of the existing benefits.

I wrote last year about a nonprofit organization that was created to help people take more vacation time, because they aren’t even using everything that is available.

In case you weren’t aware, March 31st 2015 is being cast as Vacation Commitment Day, brought to you by the Take Back Your Time nonprofit. The organization is devoted to helping workers across America focus on taking more of the vacation that they have available, because we are notorious for accruing, but not using, our leave.

This sounds like a great idea, but the timing is interesting.

This is an intriguing coincidence because just last week I was reading a new study from Accountemps about the top benefits employees are asking for in 2015. Want to know what topped the list?

More vacation time.

So what gives? We want more vacation time, but we also don’t use all of the time that we accrue.

As if that wasn’t enough, the federal government is now attempting to introduce legislation that will force small companies to offer paid leave to employees.

The Big Picture

With all of these pieces in play, it’s an interesting time to be working in the benefits side of the human resources profession. I would use this reminder as an opportunity to review your company’s offerings in terms of paid leave. More importantly, look into the usage of the benefits.

The first thing we do when benchmarking benefit offerings is to consider what we’re doing relative to the market. However, smart HR leaders also look at the benefits adoption and usage to determine how employees are utilizing the offerings. For instance, if you offer a health reimbursement arrangement but only two employees sign up, it probably wasn’t worth the effort to establish and market the program.

That also applies to vacation time. The reality is while many workers accrue paid time off, there may be circumstances that prevent them from using the leave. For instance, they may have work projects that necessitate their presence or there might even be a cultural norm of foregoing vacation days to demonstrate “dedication” in some organizations.

Analyze the accruals against the usage of the benefit. If you have a substantial amount of accrued time, consider what implications that has for your organization and why your people might be saving that time. Also keep in mind that this could be seasonal: employees may save up time for summer trips or winter breaks. It’s important to dig into the “why” behind the numbers, because it could signify underlying issues or opportunities.

Source: Do we really need more vacation time?

http://www.brandonhall.com/blogs/do-people-really-need-more-vacation-time/

The Other Problem with “Unlimited” Leave

There’s a famous study on choice that helps to illustrate this point. People were given options from a large set of choices, and few made purchases (analysis paralysis). Other people were given options from a small set of choices, and more of them made purchases because it was easier to evaluate the few choices against one another.

It all began with jam. In 2000, psychologists Sheena Iyengar and Mark Lepper published a remarkable study. On one day, shoppers at an upscale food market saw a display table with 24 varieties of gourmet jam. Those who sampled the spreads received a coupon for $1 off any jam. On another day, shoppers saw a similar table, except that only six varieties of the jam were on display. The large display attracted more interest than the small one. But when the time came to purchase, people who saw the large display were one-tenth as likely to buy as people who saw the small display. (Source)

What this means for leave is that without some sort of reference, people will often use less of a good. Here’s an example: if I handed you a plate of cookies and told you to take what you wanted, you might take one, two, or three (hey, I’m hungry and like cookies). But if I handed it to you and said, “Take a cookie,” then you would probably get just one. Hopefully you’re starting to see what this means for paid leave.

The Typical Work Environment of Unlimited PTO Adopters

There’s one other thing that people often forget as well about these high-profile companies. If you’re working somewhere like Netflix or LinkedIn, two of the organizations offering this paid leave benefit, you are working many hours. Many, many hours. And the work itself doesn’t lend itself to a three-month vacation at the employee’s whim.

Which is why offering unlimited paid time is a great idea for the employer, and not the other way around..

What competitive, driven, career-minded employee is going to take advantage of this? Do you mean to tell me that the guy who just became a father is going to tell the rest of the team working on that big project that he’s going to take the next 11 months off to “stay at home and spend time with my baby.” Really? Sure, he now has that option. But who’s going to pull that trigger? And who’s going to risk suddenly disappearing from the office for months on end, travelling to Australia or kicking back with a cold one on the beach while the rest of his co-workers are working away on deadline? And what happens a year later when evaluation time comes? Who gets that promotion, that salary increase, that corner office–the guy who’s been working day and night on that product launch or the other guy who’s been taking full advantage of the company’s “paid time off” policy and working on his golf swing. (Source)

So, I encourage you to avoid the hype. Unlimited paid time off is a publicity stunt for these larger organizations, and they have cultures that can force/coerce people to work even though the carrot of unlimited PTO is hanging right out there in front of them. What you should do instead is make sure your work environment is supportive of people that take any vacation that you do offer. Too often I’ve heard snide remarks and rude comments about an employee using vacation time, a benefit the company freely makes available to all employees! That is the battle we should be fighting, not one to request this latest fad in employee leave benefits.

 

Recently I asked for some help in preparing for a local session on HR compensation challenges. I had some good responses and wanted to share some of the insights and advice with everyone. I’ll be sharing two blogs on the topic: determining what to offer employees and how to get managers on board. 

The second most cited HR compensation challenge faced is how to keep managers in line and/or get managers on board with decisions. In the video below I discuss some of the ways to accomplish that. A few ideas:

  • Do you have a written compensation policy or process? When I started putting things in writing with clear instructions it helped to reduce issues.
  • Also, it helps to explain the structure/process because not all managers understand how compensation “works.”
  • Give them a sense of the budget, what decisions are made, how a single change affects others, and what your responsibilities are to ensure accurate information across the company.
  • Above all else, be a partner, not just a gatekeeper. Explain how the guidelines aren’t there to give them a hard time–they’re there to protect them, the budget, and the company.

Continue reading

Recently I asked for some help in preparing for a local session on employee compensation challenges. I had some good responses and wanted to share some of the insights and advice with everyone. I’ll be sharing two blogs on the topic: determining what to offer employees and how to get managers on board

The number one response that HR professionals said was most difficult was figuring out what to offer. In the video I talk about some of the key ways to determine that information, including using local salary surveys for the cheapest and most accurate information. I would encourage companies to avoid using free, unverified tools like salary.com for building compensation structures. In addition, I discuss the importance of having an overarching compensation strategy to drive decisions from a high level. Check it out!

Employee compensation challenges video

(email subscribers click through to view) Continue reading