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Are your managers making good pay decisions?

21 January, 2015

Be honest. Of all your managers, how many are actually good at making pay decisions? Are you hand-holding your managers with Salary Increase Guidelines, compa-ratio guidelines, and rigid rules about when and how salary adjustments can be made? In this tightly controlled approach, is it even possible for managers to learn to think about market competitiveness, internal equity, motivation or the total rewards approach?

I think oKeep calm and follow the rulesur profession (compensation or total rewards) has gotten to the point where the pendulum has swung as far as it can, in the direction of central control, consistency, calibration, and rules in general. Are we now headed the other direction, where managers are expected to manage people effectively, looking to HR for “tools, not rules?” I think so.

In the last year, I had two client requests for line manager training on compensation. One a large MNC, another a major Singapore-based company. I have a third client asking about line manager training as well. Why is this? (for more on my training offerings, click here.)

The following factors may lie behind this shift:

  1. Lean C&B resources–in Asia, most organisations have a full-time dedicated C&B resource only if their total headcount exceeds about 1,000 employees. In many organizations (or regions our countries thereof) it is the HR Manager who handles C&B, with help from payroll.
  2. Overconfident managers–senior managers in many organisations feel they can make pay decisions well, because they “don’t know what they don’t know.” With little or no market data, and little consideration of internal equity, managers make pay decisions based on the immediate challenge. Offer is not good enough? Raise it. Someone doesn’t want to transfer to another country? The manager tells them they will be no worse off, then hand it off to HR. Nearsighted pay decisions are being made every day, and few of us–including HR business partners–are telling managers their decisions are bad ones. In Asia, this is partly due to hierarchical, “laoban” or boss-centred cultures. There is a fear of confrontation, especially to challenge one’s boss or a senior leader, even if it is your role in HR to advise them. Part of this reluctance is due as well to HR’s lack of training and understanding (hence, confidence) in the area of rewards. We know when a manager has made a poor decision (offering a rich counter-offer, when the person is not leaving for pay reasons, for example), but we feel afraid or unequipped to express our concern to the manager.
  3. Poor selection of people managers–again, HR is dropping the ball. We continue to support promotion of managers who are poor people managers, because the decision has already been made. Technically brilliant or high-performing individual contributors are being promoted because they are good at their current roles. So, we promote them, then watch them flounder trying to manage people, only to see them fail. But such people may still have strong support from above and feel confident that pay is not rocket science… so they become overconfident managers.

There is another factor, and this is for us in the HR profession: we are rule freaks. For us, consistency is the mother of all corporate values. NO ONE gets special treatment, if we could have our way. Salary offers must conform to the salary range and avoid internal equity issues. Promotional increases are 10-12%. Salary increases must occur on 1 April. Sign-on bonuses are not allowed except for VP and above. The list goes on.

May I suggest a solution?

Let managers be managers. When I got my degree in business, with a concentration in Human Resources, the HR programme was under the business school’s Department of Management. Let’s remember, HR is inherently a management function, it is not part of the HR function. Good HR management is the job of a manager! We exist to provide tools and advice, full stop. Rules and restraints exist for the same reason labour unions exist: there are bad or incompetent managers out there, hurting their business and hurting people every day. The solution: have better managers, and get rid of the bad ones.

Equip your current and new managers to understand pay and how it fits within total rewards. Teach them what a good pay decision is, and what a bad pay decision is. And help them learn to talk with their people about pay in a way their people respect, understand and trust.

Give managers tools (knowledge, information and guidance), not rules and watch what happens. What’s in it for you? Less damage control, better decisions, fewer pay issues to deal with, and you look a lot smarter than you do holding a rule book.

 

 

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