The most challenging and rewarding aspect of providing advice in the area of human resources is that there are rarely pat answers and most "solutions" have a high risk of creating unintended consequences. I was reminded of this the other day working with a client on structuring an offer for a high-potential mid-level executive. On the one hand, the client needed the new blood and the hire offered the potential of jump-starting growth. On the other hand, paying what was needed to bring the new hire on board might put at risk the the fragile fabric of team work and collegiality that made this firm historically successful.
On the one hand....On the other hand. Call it Tevye syndrome after the protagonist in Fiddler on the Roof who dealt with life's major decisions by contemplating his hands as he carefully weighed the alternatives. An organizational consultant might create a nice chart showing the "OTOH-OTOH" set of solutions.
What are the compensation issues with the highest OTOH quotient? That is, what are the issues where an approach creates significant opportunity for organizational improvement but also has a high risk of blowing things up. In no particular order, I list my choices below.
- We need to bring in new talent. OTOH, we want this candidate - he/she can help us grow. On the other hand, what kind of message does this send to other high performing individuals at a similar level (and they all feel that they are high performing) who are invariably paid less than the new hire? Are they underpaid? Should they be looking to switch jobs for a big bump up in pay?
- Sharply differentiate pay in a high performance organization. OTOH, we need to differentiate compensation and pay increases to reward and motivate our strongest performers without busting our compensation budget. OTOH, most of our workforce does not consist of superstars and we need teamwork for success. Providing a lot of 0% and 1% pay increases can be pretty demotivating after a while.
- We never counter-offer. OTOH, we need to retain our strongest performers and have told all our employees we provide competitive compensation. If one of our top performers threatens to leave for a competitor offering significantly more compensation, we may have to come up with a counter offer to keep him/her and demonstrate competitive pay. OTOH, what does that tell the rest of our employees - you need to interview and threaten to quit to get paid competitively?
- Goals need to be transparent and not retroactive. OTOH, employees need to understand how their performance will be measured - preferably on paper - and they need to feel that they have a chance to exceed their goals (e.g, don't find out about them at the end of the year). OTOH, we need to have flexibility during the year around performance metrics. Goals set at the beginning of the year are not necessarily going to be valid throughout the year as priorities change. But changing goals and metrics mid-stream creates a high demotivational risk.
- We pay for performance. OTOH, we want to compensate for results. Without results, we have no business and no pay. OTOH, results do not always appear during a performance year and they are often due to somewhat subtle team dynamics. Also, even the strongest performers may have an off year. Do we reduce their pay with the risk that they see an opportunity somewhere else or do we pay for anticipated performance? After all, if we are purely compensating for past performance we run the risk of killing our business based on policy. As the old Jerry Seinfeld joke goes when the satisfied restaurant diner peruses the check after a huge meal. "I'm not hungry, why am I paying for all this food?"
