Category: Management (Page 2 of 3)

Why There Is No Science in Your Salary @ WSJ

A look at how one company has aimed for more logic in its pay structure

Matt Toeller at the GoDaddy offices in Chandler, Ariz. He arrived at the company in July 2015 to set policies to steer pay decisions for the company’s 5,000 employees.

Here is the truth about your salary: When it comes to pay, most companies are making things up as they go.

Only 38% of employers have a formal compensation structure or philosophy guiding their pay decisions, according to PayScale Inc., which examined data from some 7,600 firms, mainly from the U.S., Canada and United Kingdom. The issue is especially acute in salaried roles, say compensation experts, because managers have more leeway to put a figure on an employee’s skill, experience and performance than they do with hourly positions.

Yet as the labor market improves, and as fair-pay laws in California and elsewhere put a spotlight on corporate pay practices, firms are starting to rethink the way they set salaries. Among employers with no formal strategy in place, PayScale found that 34% are developing one.

Some companies are taking a hard look at their pay practices, partly because they realize employees “want to trust the organization and that someone is looking out for their interests,” said Steve Gross, a senior compensation expert at human-resources consulting firm Mercer. When pay decisions rely on imperfect data and gut instincts, gender bias and other ills creep into compensation decisions, human-resources managers say.

Salesforce.com Inc. has committed to reviewing salaries regularly to excise gender disparities, and Mission Produce Inc., one of the world’s largest producers of avocados, earlier this year implemented a pay structure in response to young employees’ requests to “take the mystery out of compensation,” said HR chief Tracy Malmos.

A look at how one company, web-services firmGoDaddy Inc., overhauled its pay structure illustrates how and why employers are trying to bring greater transparency and logic to compensation.

Until recently, GoDaddy, which has headquarters in Scottsdale, Ariz., and offices in Kirkland, Wash., Silicon Valley and several other U.S. locations, was like many companies when it came to pay decisions.

“The process was, ‘what did we pay the last person? Let’s pay the new person what the last person was making,’ ” said Matt Toeller, who arrived at the company in July 2015 to set policies to steer pay decisions for GoDaddy’s 5,000 employees. Some employees were paid too little, while others earned too much based on their location or experience.

Companies that do have pay guidelines typically aim to pay at the 50th percentile, or median, of the range that similar employers pay for a given role, with a spread of, say, 20% on either side based on a new hire’s experience and skills, according to Mr. Gross. Companies purchase salary-benchmarking data from firms like Mercer, PayScale and Willis Towers Watson.

GoDaddy managers weren’t using outside pay data until shortly before Mr. Toeller joined. The company now pegs pay at the 70th percentile of the market rate for engineering roles, he said. To better match GoDaddy’s workforce to the broader benchmarking data, his team spent nearly four months mapping out job descriptions, which they used to create levels for each title—such as software development engineer—to reflect the range of workers’ skills and responsibilities.

Each level has a pay grade with a wide salary range. For example, a Software Developer III in GoDaddy’s Sunnyvale, Calif., office could earn $101,000 to $165,000 a year, depending on factors like performance and depth of skills. Under the new system, some 6% of GoDaddy’s workforce got automatic raises to bring them into the correct pay grade.

Before the structure, pay “was really fast and loose,” said Leslie Phillips, a senior communications manager who started at GoDaddy in 2006 in tech support. “Now it makes a lot more sense, and I wonder why we didn’t do it sooner.” She got a raise of about 15% at her last performance review, the result of a promotion, a merit increase and an adjustment into the new pay scales.

One challenge: determining the right degree of transparency. Mr. Toeller and other HR staffers canvassed a swath of employees, and received suggestions that ran the gamut from total secrecy to total disclosure. Ultimately, the company decided to include level and salary range on employees’ annual pay statements, so they know where they stand.

The changes have eased conversations about pay between managers and employees, saidArleen Hess, a manager in the company’s digital crimes unit. “It’s an emotional and personal conversation, and this lets us have that conversation constructively.”

Elsewhere, a hot job market is forcing some employers to adjust pay more often than before. New hires at Threshold Group, a Seattle-based wealth manager with about 50 employees, sometimes outearn employees hired when the market was cooler. To retain veterans, the firm now adjusts salaries upward to reflect the market and ensure parity with newcomers.

“A lot of companies get stuck in, ‘we’re paying this person what we brought them in at and they’re fine,’ so they don’t make those adjustments,” said Chelsea Giusti, who designed Threshold’s compensation strategy last year.

WSJ

Why Management By Objectives is an Oxymoron

 

 

How a popular management approach introduced by business guru Peter Drucker can create conflict, contradiction and cynicism.

The system of Management by Objectives (MBO) was structured by Peter Drucker in the 1950s. Plentiful and diverse organizations have used the technique, many to this day.

The MBO process involves an employee and his organizational superior agreeing on objectives to be accomplished by the employee, occasionally discussing the means for doing so. This process is executed for every employee under the theory that objectives clarify roles and responsibilities.

Unfortunately, this process rarely provides coordination and focuses individual efforts on sub-optimizing over organizational best interest. Consider this example:

The football coach wants to win games. That is his objective. He believes, based on his experience, that winning teams score at least 21 points per game, and do that by completing at least one pass for a touchdown, running for over 150 yards, and creating a turnover that is turned into points.

The objective of the CEO is profitable growth. He believes, based on his experience, that flexible operations, broad product offerings, and low costs are keys to success.

The football coach and his position coaches then agree on the objectives. The offensive coordinator must ensure the team scores 21 or more points .The receivers coach must ensure that his group scores at least one touchdown. The running backs coach must ensure his players run for over 150 yards. The defensive coach must focus his players on creating turnovers and scoring on them.

The CEO and his executive team agree on the objectives. Operations must provide same-day shipment and marketing will offer at least 10 variations of every product at a gross margin of 40%.

There are now two minutes left in the game. The football team has 18 points and the ball. The receivers have not scored a touchdown and the running backs have combined for 140 yards. The defense has not yet created a turnover.

The big industry show is just 9 months away. Marketing wants to introduce several new products with multiple variations, engineering has not finalized the design, and supply chain wants to source in low-labor-rate countries to assure the margin.

We now have three very different approaches to moving forward: a run, a pass, or a turnover to the other team so the defense can create a turnover and score. Neither the opposing team nor the score matter to those trying to obtain their objectives. Nor do the objectives of their peers.

Marketing contends the date of the show has been known for over a year and insists on moving forward with the introduction there. Engineering wants to delay six months until the next show to execute parts rationalization and modular design. They insist that will reduce costs and increase flexibility. Supply chain needs the final drawings now to negotiate price with potential suppliers and ensure availability.

Where is the management in this?

One can argue that all of them would focus on winning the game over their individual goals, but there is no reason to believe any are not convinced their option is most likely to accomplish that. One could argue that the recommendation of the defensive coach is higher risk, but tell that to the Super Bowl champion Denver Broncos who won because of their defense. If a pass seems safest, ask Russell Wilson whose last second interception by the New England Patriots confirmed the Patriots as Super Bowl 49 champions. The list goes on.

Depending on the score and the number of opponent time-outs remaining, the best option may be the quarterback taking a knee three times. That unfortunately, helps only the head coach reach his goals at the expense of his subordinates. No matter what play he chooses to call, he is reducing the opportunity for some to attain their objectives. Feel the resentment grow.

Being early to market is proven to increase profits over product life cycle. Both parts rationalization and modular design enable flexibility, reduced inventory and product costs, and lowers complexity. In some cases, but certainly not all, sourcing to low-labor-rate countries reduces costs. Supply chain believes this is one of those cases. Finger-pointing thrives.

So MBO creates objectives that seem to make sense at the time, but don’t facilitate optimal decisions as circumstances evolve. MBO appears to provide management, but more often delivers abdication. MBO feeds conflict, contradiction, and cynicism. In an effort to meet individual objectives, we can all find reasons and examples to support why our plan is best.

Each executive objective makes sense. Each executive is trying to do what is best for the company while meeting personal objectives.

True success requires organizational agreement on priorities, understanding of trade-offs and work to eliminate those trade-offs, and cooperative assistance in eliminating either/or constructs in decision-making.

Too often metrics drive behavior. An excellent organization breathes a culture of behavior that provides desired results.
INDUSTRYWEEK

What Sending After-Hours Emails Does To Your Productivity

Even if you aren’t working nights and weekends, the expectation of constant availability can cause you to burn out.

It’s 9 p.m. and you suddenly remember that you wanted to ask your employee about an upcoming project. Before you fire off an email, ask yourself, “Is this urgent?” If you’re sending the email simply because you don’t want to forget, your employee may not know your response expectations, and this can cause stress that negatively impacts your staff’s productivity and performance.

In a new report called “Exhausted But Unable to Disconnect,” professors from Lehigh University, Virginia Tech, and Colorado State University found that an “always on” culture may prevent employees from fully disengaging from work, causing stress.

“It’s easy to depersonalize people when you’re using email, because you don’t see the effect you’re having,” says coauthor William Becker, associate professor of management at Virginia Tech. “When boundaries are blurred, it can create all kinds of problems. A lot of companies see the good parts of using email, and don’t think beyond that.”

 

In the study, participants reported spending an average of eight hours a week doing company-related emails after hours. The greater the amount of time spent on after-hours work, the less successful the employees were at detaching from work. This translated into poorer work-family balance, and even contributed to emotional exhaustion, which Becker says has been shown by prior research to negatively affect job performance.

“What we saw over time was that it’s the expectation that makes you exhausted,” says Becker. “It wasn’t about the time spent on email; it was assumed availability. Having an anticipation of work created a constant stressor.”

WHAT TO DO INSTEAD

The authors of the study, which is being presented at the upcoming annual meeting of the Academy of Management, call on leaders to create formal practices that establish expectations that can mitigate the negative effects of an always-on culture. Some companies instill a strict ban on after-hours emails, while others simply state that emails after hours don’t have to be returned until work hours the next day.

“Having a policy means the employee doesn’t have to interpret the expectation on their own,” says Becker. “It goes a long way toward setting what is okay, and relieves the employee of the feeling that they have to always be available. It also serves as a signal of organizational caring and support.”

If your company doesn’t have a policy, managers can help employees know expectations by creating their own departmental policy or at the least by being clear in the subject line or beginning of the email message.

“You can say, ‘I don’t want you to work on this now, but please do this tomorrow,’” says Becker. “It could go a long way. Maybe your company doesn’t need a policy, but you should always be thinking about the impact of sending an email at 10 p.m.”

Becker says that some companies have already realized that after-hours emails hurt a company’s bottom line. For example, management consultants Boston Consulting Group guarantees one email-free evening a week, while health care consultancy Vynamic prohibits correspondence after 10 p.m. and on weekends.

“European firms have been ahead of those in the U.S. in this regard,” says Becker. In May, France passed a labor reform law that makes weekend emails illegal.

“All the studies show there is far more work-related stress today than there used to be, and that the stress is constant,” Benoit Hamon of the French National Assembly said in an interview with the BBC. “Employees physically leave the office, but they do not leave their work. They remain attached by a kind of electronic leash—like a dog. The texts, the messages, the emails—they colonize the life of the individual to the point where he or she eventually breaks down.”

While France has taken a step in the right direction, there is still a long way to go on both sides of the Atlantic, says Becker. “Perhaps by revealing the damage these expectations can cause, our research will improve matters, as this is a problem that should be relatively amenable to solution,” he says.

 

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