Wednesday, May 9, 2012

Compensation: Numbers or a Head Game?


Is compensation a numbers or a head game?  I think it is a little bit of both, and here is why.  My story with comp starts when I was just in high school and college.  I really wanted to go into accounting because I thought that numbers were fascinating.  I had taken every single business class in high school and had intended to earn a Business Administration degree because I really didn’t know what I wanted to do with my life back then.  My dream was to be business women wearing suits, making decisions, and managing people.  What that actually looked like in terms of industry of specific field in business, I had no idea.

While in college I had to take intermediate accounting, statistics and calculus as well as higher level classes.  Intermediate Accounting was just not fun and I ended up stopping at that point and changing my major.  I had finished my statistics class and my calculus but I didn’t move on to the higher level math courses because at that point I thought, “I can’t stand anymore math”.
After college I went on with my career in Human Resources and about ten years into my HR career I was offered the position of managing the compensation department, at that point I already had the employment department and the company policy and procedures department so I thought compensation, which sounds interesting and exciting.  This job would be a promotion, but unfortunately I hated math to the point that I was afraid to take the position.  So I went into talk to my boss about my concerns.  I told him I was flattered that he was looking at me for this position but at the same point I am very nervous about managing a compensation department. 

In this particular company the compensation department actually had the entire payroll process and had compensation analysts that looked at pay.  I then told my boss I don’t know what I’m going to do?  That is when I was told don’t worry about it you’ll be fine, your managing the department, you’re not going to be doing the work.  I said, how can I manage the department of something I don’t feel comfortable doing?  He said I’ll teach you, don’t worry about it. I heeded his advice and took the position, which was a great basis for my career as I proceeded into owning my own business and am now am doing compensation studies for clients on a regular basis and love it.

The point behind this is, first of all I was managing a department and not actually doing the work, although I learned to do the work, which is really different, and the point about compensation is that it is numbers but not entirely.  Going back to the title of this post, yes maybe it is a numbers game but it really has a great deal to do with psychology (Industrial Psychology [IO] as my peers would say). The more I worked with everything that ran through our compensation department, the more I learned.  I even took a couple of classes by the organization, at the time, called American Compensation Association, which is now World at Work.  

The most intriguing thing about compensation was that it is kind of a head game.  There is a lot of psychology in the numbers when you really look at them and you really analyze what’s going on in the organization.  So at that point I was an executive in a larger organization that had over 1500 employee’s total and we had to do compensation studies and consider the compensation triangle. We looked at internal equity, external equity and job performance.  As I was looking at these numbers I could tell, after doing the research, there was a story behind the numbers.

So let’s say you ended up having an employee who had been with the company for 20 years, another employee who has been there for ten years and another who has been there for two years.  The two year salary was higher than the other two people but the 20 year salary was higher than the ten year person.  What story are the numbers actually telling?  Basically, “Okay we need to look at the research here”, because if you look at a normal compensation grid there is a graph which makes actual logical sense.   In this case logic is not a factor and you have to investigate why.  One possibility is to review performance evaluations.  Sometimes the numbers game and the head games match and sometimes they don’t and when the numbers and head games don’t match then that is usually when there is a possible issue.  The department that uses to freak me out now is one of my favorite to work in because most of it is about problem solving, investigation, and research.

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