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Compensation Management in the Limelight

Of the many technical work streams housed under the umbrella of Human Resources one in particular, compensation management, seems to get a disproportionate share of public air time given the spectrum of emotions it stirs. There are annual publishing rituals like the Sunshine List or 100 Top-Earning CEOs which now appear to be more about shaming and bragging respectively. There are also policy related articles (e.g. Bill 148 – Fair Workplaces, Better Jobs Act) that generally entice animosity between government and business group designates as part of the age-old battle between fairness and cost management. Finally, there are current event articles which typically showcase frustration and despair around a specific topic. The third type is useful for compensation professionals as they provide opportunities to step back and take note of how our craft is perceived as either default solutions to (or causes of) organizational problems. Some criticism is deserving, some not.

Compensation Management in Government

A recent article[1] suggests that introducing bonus programs within government services would save taxpayer dollars by reducing wasteful spending. The author implies that leadership operates under a “if we don’t spend our budget it gets cut next year” mentality.  The presumption that bonus programs will solve wasteful spending is short-sighted. Bonus programs were never intended to replace effective management or leadership efforts. What’s missing within government operations is not financial incentives, but accountability[2]. Accountability for job requirements/outcomes falls into the performance management arena.  Also, if it’s an established practice within government services to spend budgets for fear of getting less funds in the next fiscal period – that’s sounds like a leadership culture issue. Neither management nor leadership challenges can be resolved through compensation solutions. To put another way, effective compensation programs are premised on effective management and leadership outcomes.

Compensation Management in Private Sector

Compensation professionals use rigorous methodologies in applying their craft – whether designing base or bonus programs. A key reason why these programs fail is because of poor implementation planning as illustrated by the current Amazon employee compensation fiasco[3]. The company is increasing its minimum hourly wage but taking away its employee bonus programs during the time of year when the earnings potential through the bonus program doubles. Timing is everything. In this case Amazon’s leadership got it wrong. The optics of this move shows a tremendous lack of sensitivity to thousands of employees that have presumably contributed to Amazon being only one of two companies to hover around the one trillion valuation mark (Apple being the other)[4]

So while these current events articles give a voice to absent or faulty compensation practices they are actually speaking to management and leadership challenges. Does this mean that compensation professionals don’t make mistakes – of course not. What the articles highlight rather are the manifest outcomes of latent management and leadership challenges – those are harder to address in front of your VP, your Board or the media.

[1] Toronto Star, Sunday, October 7, 2018, A16.
[2] http://www.occ.ca/mediareleases/accountability-and-transparency-required-in-government-planning/
[3] https://www.recode.net/2018/10/9/17955844/amazon-15-dollar-minimum-wage-some-workers-make-less
[4] https://www.cnbc.com/2018/09/04/amazon-hits-1-trillion-in-market-value.html


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