Hacking HR to Build an Adaptability Advantage

Less "IS", More "COULD BE" Compensation

By Sean Schofield on June 13, 2022

So you arrive for a job, and you are told, "this is how we compensate you." Here are all the pieces, and how, in theory, they work.

Each enterprise has a position based on their industry, market share, profitability, etc...that amounts to "we can give you x."  However, instead of allowing for choice, it is a mostly or entirely prescribed model.

This is a HUGE missed opportunity for personal relevance, and by way of, engagement. I would argue it would be much more attractive, after negotiating the total value of "x", to have a conversation about what it could look like.

For all the compensation models, I think there are basically three variables.

  1. Money: cash vs. "cash in kind"
  2. Time: interval or immediate
  3. Contigency: given or "given if"

Enterprises can articulate their constraints. E.g., a certain percentage of "x" has to be contigent on whatever (individual, group, department, org performance for example) or, a certain percentage has to be interval (e.g., weekly monthly) vs immediate (e.g., lumpsum). These constraints would have to be appropriately limited, or again, it defeats the purpose.

However, the rest can be designed with the employee. What do they prefer? What balance of cash and benefits?

Better, imagine if it could be shifted on an annual or bi-annual basis. This means employees are compensated in the way most personally meaningful to them, and companies are still controlling their compensation costs (perhaps they might even save money in some cases).

I think moving from "has to be" to "could be", from "closed" to "collaborative", is the appropriate direction for many topics, and compensation is no exception.

HR process being hacked:Compensation

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greg-stevenson's picture

I think that meritocracy is not all that it is cracked up to be. At least not how it is practiced in business. See de Botton TED talk. I also think the one part of Edwards Deming's philosophy that was never followed was his view on compensation. If it had, there would be a greater element of " could be " in the process now.

andy-lippok's picture

Never make compensation contingent - it will drive the wrong behaviour. Read Dan Pink and Alfie Kohn.

Hi Andy,

I appreciate the reference to Kohn. From what I recall, Dan talks a lot about contextual contigency. That for certain contexts, it (contigency based pay) is effective whereas in others, it isn't. I agree, complex, creative challenges require careful thought about what monetary levers are used.

My point was more about increasing the personal relevance and meaning of compensation. In essence, to facilitate creating the most meaningful set of compensation options. I think that some companies are up against a wall in terms of the limits of their resources. One way of squeezing more value out of this limit may be to offer new/different combinations which amount to the same sum.

perry-timms_1's picture

I am more and more fascinated by reward mechanics Sean as they seem to be driving us in the wrong direction at the moment. Don't get me started on what I believe to be a monstrosity that is the Civil Service's performance related pay.

Anyway, you rightly say there should be ultra personalisation and flexible ways to cut and slice the reward cake I agree. Rigid pay scales and points and spines and the likes creates more hassle, confusion and queries to helpdesks in HR than anything. Scrap the lot and start again.

Thanks for a great mini-Hack.
Perry

Hi Perry,

Thank you for the feedback :)

As you mention, the way pay for performance is realized is often disappointing.

I think the language seems to be shifting from "performance" to "contribution" (even if it's really about the same stuff). Simultaneously, contribution is increasingly collaborative. E.g., many physical work spaces (will) largely exist because there is a need to collaborate together in person (otherwise if you can work elsewhere, why be in the office?).

At some level, this may mean that fully individualized compensation may make less sense over time, and perhaps we will see a split between individual and group level compensation.

Either way, or in any event, I just think that if we can explore how and what people "receive" with the goal being to render it as individually meaningful as possible, it feels like a win.