A rewarding conversation

I read a lot of blogs from the HR community, both here in the UK and in other less developed countries….like the US. I read good, bad and indifferent posts about a range of subjects. I read about engagement, resourcing, learning, strategy (pause for theatrical laughter) but I seldom read about reward.

The very essence of employment is reward. We might try to shy away from it, we might try to avoid it, but put simply, work is undertaken only for reward. Whether it is the exchange of goods, the promise of salary or of course the contentious bonus.

We work for return.

So why is it that we talk so much about so many other areas of our remit, but so little about reward?

Is it too hard? Is it too sensitive? Or have we forgotten the essential element that underpins our existence as HR people, because we would rather focus on the froth?

Reward has been the driver behind so much of our corporate success and corporate failure over the last gazillion decades. It has taken more mainstream column inches than any engagement initiative or recruitment technology. Yet for all the creative thinking that the blogosphere offers, so little of it is dedicated to the biggest prize of all.

When I’ve written about reward in the past it has had a mixed reaction.

My mind boggles, I need to address these topics, I need to think about these things more clearly. I don’t have the answers, I’m not even sure I have the questions, but I know that as a profession we need to be thinking about this topic in so much more detail.

So…..why aren’t we?

How little are you worth? Pay, the economy and a living wage

It is very rare that I hear something on the radio in the morning that makes my blood boil. Mainly because it is normally so early that I’m still half asleep and more interested on getting to the train on time than getting aggrieved at an inanimate object.  I made an exception this morning to the views being expressed by Mark Littlewood from the Institute of Economic Affairs on the National Minimum Wage.

The argument goes, and I should add that it isn’t only Mr. Littlewood that makes this argument; the minimum wage is stifling job creation. Put simply if it was lowered then people would hire more, there are bosses out there who have work that needs doing but don’t think it is worth £6.08 per hour to get it done.  It is, in his mind and many others, a simple economic argument: business will pay the least for labour that it can.  He even went on in the interview to connect the level of the minimum wage with the youth unemployment figures.

The argument is infuriating in its simplicity and appeal. It is also completely facile and ill-conceived.

So what is the problem with this?

Before we deal with the moral arguments (which are a matter of opinion) let us have a look at the more practical business arguments.  First the argument assumes a homogeneity of skills and ability, that labour is universally transferable therefore the only market determinant is price. And of course this just isn’t true.  There isn’t one labour market, there are several interlinking labour markets and massive differentials in skills and abilities.  Companies compete with one another for labour and that is why there are wage differentials.  John Lewis will pay vastly different wage rates to the likes of Argos for example, but they are both employing retail workers.  If businesses only employed at the lowest possible level, then this simply wouldn’t happen, they would all pay at the £6.08 level.

Next let us look at the youth unemployment argument.  Unless I am massively mistaken and there has been emergency legislation over night, the 16-17 year old rate and the 18-20 year old rate of the National Minimum wage are lower (at £3.68 and £4.98). So IF businesses have all of these jobs that need doing but don’t think that they are worth £6.08 an hour and IF the labour market is purely financially driven, then surely we should be seeing unemployment in these age groups dropping? Of course a flick through the recent unemployment statistics shows that not to be the case.  Tuition fees, education and skills gaps? No. The reason these guys are unemployed is the adult  national minimum wage rate being set too high.

I worked in the business services sector before the National Minimum Wage.  We employed a lot of people in very labour intensive low skilled roles for a variety of clients from big private sector names to government departments.  I can tell you that the hourly rates that were paid by some of these businesses were shocking (less than a pound an hour in some cases).  And this is where we come to the root of Littlewood’s argument, because in this labour market there is a homogeneity of skills and transferability of labour and very often there is greater supply than demand.  This is where wage rates can be pushed down.

But this is also exactly why the National Minimum Wage was introduced back in 1999, to protect the most vulnerable and to afford everyone the right to a living wage.  We’re talking about £6 per hour here – for a forty hour week that would equate to less than £12,500 before tax and National Insurance. Does that sound too much to pay someone to clean your floors, to pick your fruit, to bring you your Caramel Macchiato?

We are living in difficult times, every time we switch on the television, turn on the radio, open a newspaper or flip the cover on our iPad, there are forecasts of doom and gloom. And in these times there are people who will push ideological messages under the cover of economic messages. Littlewood has his views and I have mine, that is the wonderful thing about a democracy. But when you hear people talking about the removal of this right or that right, the reform of this or that and basing it on an economic imperative, take a moment to look under the surface of the argument and examine whether it really is as simple as it seems, or whether there is something else lurking within.

UPDATE: In the UK, you can now listen to the original interview here (the interview starts at 28m 15s in).

It’s your money I’m after baby

So most of us go to work because we need the money.  We can put lots of wonderfully worded, good intentioned arguments together about how money is not the motivator, but let’s be honest job satisfaction doesn’t cut it when it comes to paying the mortgage.  We may choose one job or one type of work because we prefer it and trade-off some money, but essentially we are all there because we have something that we need to pay; food, shelter, energy bills, addiction to Coco Pops etc.

Which is why pay is such a sensitive issue within organisations.  Ask any compensation related questions in a survey and you will get significantly lower results than for environment or leadership for example.  I’ve worked in organisations with very defined pay structures, I’ve worked in organisations with broad pay bands and I’ve worked in organisations where there was little if any structure at all.  And I’ve heard the dissatisfaction from employees in each different scenario.

But there are two specific things that are on my mind at the moment, which I think are interrelated: negotiating salary increases on internal moves and counter offering to defend against poaching. Both are event-based situations that occur outside of the normal salary management process and require both a strategic and tactical approach, because invariably they also involve your organisational talent.

I know that decisions in either case will depend on a number of factors, the employee’s current salary, their “demands”, internal comparators, affordability etc. However, those are the mechanisms, I’m interested more in the moral/emotional arguments that are expressed in these circumstances. Is it ok to negotiate a bigger increase when you are promoted internally or should you just get what you’re given? Is it right to counter offer or should you accept that people will leave and move on?

I’ve worked in cultures where if you were being offered a promotion and you tried to argue for more money it would be seen as a black mark on your career.  You were expected to answer the call of duty and THEN get rewarded when you delivered (although funnily enough, that was always after the next milestone….). But I know in other organisations it is run of the mill stuff.  Similarly, I know organisations that see resignations as the quick route to ex-communication, with no thought for trying to retain people, and others that will fight tooth and nail for their “talent” regardless of whether they are really…..talented.

So, more questions than answers I guess. Am I making too much of this and getting confused? I know the theory, but does anyone really operate like that or are we all in the quagmire of uncertainty when it comes to pay and talent.  Is it fair game for employees to use their skills to negotiate more if they can? After all they need to feed their families and over the past few years we have hardly done much as organisations to bolster the psychological contract.

Do we need to accept as employers that this is fair game? Work is part of a transaction for money and any opportunity that arises to improve your lot, you’re in your right to take.

Fair pay, fair play

I read this article at the weekend by Will Hutton talking about his work on public sector pay.  I had a meeting with Will a few weeks ago, alongside with a couple of other private sector HR people, to discuss the issues of fairness in pay and particularly the use of performance related pay in his work for the coalition government.

Unlike the comic stereotypes that get bandied around in the press, the general consensus was that the Government should not look to performance related pay as the silver bullet that would solve all of the ills.  And that is certainly shouldn’t be a replacement for a living wage.  At the end of the session I made the point that you couldn’t look at pay structures in isolation.  That pay only becomes a media topic, when people feel it doesn’t equate to worth.

There was hardly ever any discussion of Sir Terry Leahy’s remuneration, although it was of a magnitude that a cashier or shelf stacker would find hard to imagine, but what about Andy Hornby?   No-one would discuss the level of financial reward that Sir Alex Ferguson receives, but compare that to their reaction to Fabio Capello?

People will accept top people being paid good money, even in the public sector, if they can see it is justified

Perhaps unsurprisingly then, Will’s comments really resonate with me.  Levels of pay in the public and private sector are sensitive issues, but only when they feel out of proportion to the experience of the end-user.  But of course that is easier to do in some circumstances than others, a Head Teacher’s pay could be linked to the performance of a school and that would be visible and arguable to the public. But would that be as easy for the Head of the Environment Agency?

Will’s conclusion is a bonus-malus system could and should be introduced for certain senior roles. It is brave thinking and likely to be hugely unpopular with those senior individuals and the management associations, but constructed properly it could go a long way to convincing a sceptical public that reward is earned. 

Every small business person knows that if they do well they get the benefits, but if they don’t it hits them directly in the pocket.  As a principle, that can’t be bad.