Looking to 2014 – Trends in Compensation Planning

Writing an article on 2014 compensation trends in the midst of a government shutdown and its potential devastating impact on the economy is risky. The possibility of slipping into another recession in early 2014 is real, which would alter all current projections dramatically.  However, organizations cannot face the coming year “on hold.”  As such, we consider the future with a cautious eye to the news.
 

In planning for 2014, many data sources are available.  To facilitate our readers’ 2014 strategy development, the following is an executive summary of research, reprinted with permission, conducted by Diane Lustenader, SPHR of Lake Associates, Inc.

2013 Actual Data

US Bureau of Labor Statistics reports actual wage increases over prior 12 months of +2.5%; Surveys report actual 2013 merit increases averaged 2.8-2.9%, all industries.  Inflation YTD = 1.5% so real effect of wages for most employees = +1.0%; +0.7% for hourly workers.  Average structure increase in 2013 was + 2.0% based on review of surveys.  Merit differentiation in 2013 (raises based on performance) ranged from 0% to 9.0%.  The typical differentiation for top performers compared to average performers is a factor of 150% - 200% (i.e. if average raise = 2.9%, top performer average raise = 4.35%-5.8%).  The use of variable pay programs continues to trend upward as a tool in talent acquisition and retention.

2014 Merit Increase Average Forecasts

All Employee Groups, All Industries (merit + non-promotional increases) = 3.0%

Projections by Employee Classification - Production = 2.92%; Office, Clerical + Technical = 2.93%; Exempt = 2.96%; Management + Executives = 3.08%

Merit Differentiation for performance forecast from 0% to 4.6%, similar to 2013 forecast; note actual 2013 data trended higher for top performers

Hot Industries 2014 – Oil & Gas 4.1%, Energy 3.5%, Entertainment 3.4%

Hot Jobs 2014 – medical, information technology

Lagging Industries 2014 – Not-for-Profit 2.4-2.8%, Public Administration 2.6%; Transportation & Warehousing 2.6%, Education 2.5%

2014 Promotional Pool Budget = 1.0-1.3%; average promotional raise forecast = +8.0%

2014 Salary Structure Adjustment = 2.1%

2 years, 2013 + 2014 combo adjustment = 4.1%

2013 Competitive Positioning – Most surveys predict that 2014 will be a year of significant flight risk for all employees, especially for top talent.  Approximately 86% of companies target the 50^th percentile (P50) of the market for the competitive midpoint of their grades and ranges.  For officers/executives that number is 76% with 11% targeting the 75^th percentile (P75).  Less than 5% of companies do not have a competitive positioning philosophy.

2014 CPI Forecast = +1.4%

Unemployment Forecast = 6.8% (much speculation abounds re. impact of government shutdown and debt ceiling debate on this number)

Let’s put this data into perspective.  The following tables are from the Congressional Budget Office, on budget surpluses and deficits since the year 2000, and the Consumer Price Index:

Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2018
(in millions of dollars)
Year	Total			On-Budget			Off-Budget
	Receipts	Outlays	Surplus or Deficit (–)	Receipts	Outlays	Surplus or Deficit (–)	Receipts	Outlays	Surplus or Deficit (–)
2000	2,025,191	1,788,950	236,241	1,544,607	1,458,185	86,422	480,584	330,765	149,819
2001	1,991,082	1,862,846	128,236	1,483,563	1,516,008	-32,445	507,519	346,838	160,681
2002	1,853,136	2,010,894	-157,758	1,337,815	1,655,232	-317,417	515,321	355,662	159,659
2003	1,782,314	2,159,899	-377,585	1,258,472	1,796,890	-538,418	523,842	363,009	160,833
2004	1,880,114	2,292,841	-412,727	1,345,369	1,913,330	-567,961	534,745	379,511	155,234
2005	2,153,611	2,471,957	-318,346	1,576,135	2,069,746	-493,611	577,476	402,211	175,265
2006	2,406,869	2,655,050	-248,181	1,798,487	2,232,981	-434,494	608,382	422,069	186,313
2007	2,567,985	2,728,686	-160,701	1,932,896	2,275,049	-342,153	635,089	453,637	181,452
2008	2,523,991	2,982,544	-458,553	1,865,945	2,507,793	-641,848	658,046	474,751	183,295
2009	2,104,989	3,517,677	-1,412,688	1,450,980	3,000,661	-1,549,681	654,009	517,016	136,993
2010	2,162,706	3,457,079	-1,294,373	1,531,019	2,902,397	-1,371,378	631,687	554,682	77,005
2011	2,303,466	3,603,059	-1,299,593	1,737,678	3,104,453	-1,366,775	565,788	498,606	67,182
2012	2,450,164	3,537,127	-1,086,963	1,880,663	3,029,539	-1,148,876	569,501	507,588	61,913
2013 estimate	2,712,045	3,684,947	-972,902	2,038,558	3,044,916	-1,006,358	673,487	640,031	33,456
2014 estimate	3,033,618	3,777,807	-744,189	2,294,478	3,062,692	-768,214	739,140	715,115	24,025
2015 estimate	3,331,685	3,908,157	-576,472	2,553,429	3,137,025	-583,596	778,256	771,132	7,124
2016 estimate	3,561,451	4,089,836	-528,385	2,735,891	3,260,397	-524,506	825,560	829,439	-3,879
2017 estimate	3,760,542	4,247,448	-486,906	2,891,827	3,370,159	-478,332	868,715	877,289	-8,574
2018 estimate	3,973,974	4,449,240	-475,266	3,056,516	3,516,155	-459,639	917,458	933,085	-15,627

The national deficit will continue to grow, placing more pressure on the need to increase government revenues.  Yet unemployment will continue to hover around 7%, meaning less tax revenue for the government to count on.  As we have heard in the news the past few weeks, “something has got to give.”  Inflation is holding steady at 2% during 2013 and is predicted to remain as such, or even drop in 2014.  The earlier fears of “hyper-inflation” in 2014 have dissipated. This leads us to a reality check against the data provided by the major consulting firms and compiled by Lake Associates.  Based on discussions with Astron Solutions clients across the country, from differing industry segments, the following can be said as we begin planning for 2014:

• ·         Clients are focusing on a range of 2.8% - 3.2% in their 2014 compensation budget planning, with an average of 3%.  This includes all adjustments to compensation, such as general increases, as well as merit, promotional, and market adjustments.
• ·         Clients are taking a hard look at their centralized compensation systems and moving towards more decentralized models. Such models allow them to make budget decisions based on families of jobs, and prioritize based on the mission critical nature of the positions. This can result in some positions having pay being frozen while others receive adjustments.  This also means increased pressure on developing alternative rewards programs for positions not included in the adjustment.
• ·         Clients are starting to take a hard line in holding pay to the established maximum of the pay range with no adjustment, even a flat dollar amount, until the employee’s pay is below the maximum.  This requires establishing programs to better recognize the long-term employees beyond just a pin or recognition certificate, as this population will be most impacted.
• ·         Clients are also aggressively establishing career progression programs that allow them to reduce the actual start rate below the market going rate.  The organizations then shift these dollars to fund training programs and recognition rewards for those who have mastered their job and exhibit high levels of competency and the ability to take on highly complex job tasks.

Compensation planning for the coming year is always a delicate balance. With the current economic uncertainty, however, formulating a strategy is difficult.  Employers effective at attracting and retaining key talent, however, will utilize multiple approaches that enable them to provide fiscally conservative total rewards packages while still engaging the human capital that drives the organization forward.

The Astron Road Show: October 15, 2013

The Astron Road Show draws to a close with the arrival of October.  We have a few remaining events before putting away our suitcases until next spring, however!

First, Mike Maciekowich will exhibit at the annual Nonprofit Human Resources Conference.  This year’s event, slated for October 20^th – 22^nd, will be held in National Harbor, MD.

Rounding out our Road Show activities for the year, Jennifer Loftus will present at the GNOSHHRA monthly chapter meeting, slated for October 24^th in New Orleans, LA.  The chapter’s annual salary survey, administered by Astron Solutions, is the topic of the meeting.

These two events will close out our 2013 Road Show.  We look forward to seeing you again in 2014, in cities including and not limited to Orlando and Nashville!  If you have a conference that you think would be a good fit for Astron Solutions, please let us know!  We love to hear your recommendations.

Changing The Bonus Structure

We talk a lot here at the Astron World of HR blog about rewards and compensation--and a lot of times we try to bring up something other than a straight monetary reward. Sure, cash is great but it's not always in great abundance (especially in this economic environment) and even it if is, it's not always the best tool to motivate for future performance. So what else is there? Well Harvard Business School's blog (and one of the researchers is a former classmate of mine) takes a look at the bonus they say that employees really want--even if they don't know it yet.

Instead of just giving a nice paycheck to employees when they do well, the article suggests, instead that you take that money, give it to the employee, but give the sole caveat that they spend it on prosocial actions towards charities and co-workers. It sounds a little out there (especially since the money is obviously there and the employees may find it strange they have to use it on others if they "earned" it), but there is case evidence to back it up and the article concludes:

Nowadays, people spend more and more time at work, yet less than half of working Americans report being happy with their jobs. Maybe it is time to be creative with the rewards and switch from a self-centered to an altruistic paradigm. Rather than spending a significant amount of time wondering about the big holiday bonus, what if your employees spent some time figuring out how their donations can impact the world, or what kind of gift will make their co-workers happy? 

Maybe then money can be a path to spreading happiness and productivity in the workplace.

Think about it in your organization. If you're not getting the results you desire from a purely traditional bonus compensation standpoint, maybe it's time to look outside the box and see if an altruistic approach to bonuses may be a way to change the culture and the mindset of your employees

Making E-Learning Work for You

As technology advances, e-learning continues to be a topic of discussion with respect to developing employees.  Have you and your organization considered including e-learning tools in your training and development mix?  This issue of Astronology considers e-learning and whether it’s worth the investment by your organization.

                
Elearn magazine conducted a survey in 2005 on the future of workplace e-learning.  At that time, they noted the following:

• ·    “25% of respondents to this survey indicated that in 2004 e-learning was already the dominant form of training in their organization, while another 50% predicted that e-learning would become the dominant form of training within their organization by 2010."
•      “30% of respondents felt that their organization would primarily focus on the delivery of e-learning.” 
•       “80% of those surveyed responded that they were using e-learning or blended learning (face to face training combined with e-learning) to train their employees.” 
•      “60% of those surveyed responded that their organization had a strategic plan for e-learning."

Fast forward almost 10 years, and it seems that these predictions haven’t quite come to fruition. E-learning is still growing in popularity.

With the promise e-learning holds, does this mean no more intimidating ice breakers and uncomfortable training rooms for face to face training? Are we approaching an era where training will be strictly done at your office desk or computer lab? Perhaps not. Note that, even almost a decade ago, the survey found that 80% respondents used a combined effort of e-learning and face to face training. Why this blend? There are some aspects to face to face training, crucial to the learner’s development, that e-learning simply cannot replicate. For instance, face to face training allows room for socializing, as well as trains employees to learn from each other, creating a team building environment.  While not insurmountable, these goals are more challenging to achieve in a strictly on-line environment.

              
E-Learning has its benefits and disadvantages. E-learning tools can track an employee’s progress, allowing management to see areas of weakness and to provide in-time feedback to foster growth.  In addition, e-learning can be quite cost effective as employees will not have to travel.  E-learning is usually flexible, to accommodate changes in workflow.

             

Some disadvantages of e-learning include motivation issues with learners who are conditioned to be more passive with online learning. Feelings of isolation during training can also result in lowered motivation. In addition, technology is a growing field, and as a result, when using e-learning tools, one runs the risk of dealing with technology issues. Poor internet connections, lost flash drives & forgotten data, and long software updates are but some of the issues you may experience with e-learning.  While some of these problems can be avoided, there’s always room for something odd to occur when using technology.

In addition, one most also consider the impact on the instructor when using e-learning tools.  For a prepackaged course, the “instructor” keeps track of course completions and pass rates.  If using social networking and educational tools in a synchronous or asynchronous environment, however, the class dynamics change.  As National Director Jennifer Loftus explains, “when using a tool such as BlackBoard or ZohoNotebook, it’s critical that the instructor read all the student posts or contributions, and engage the learners in on-line discussion.  Sometimes this can be more work than managing face to face class interactions.  To ensure the best learning environment for our course enrollees, however, instructors cannot use e-learning as an excuse for passivity.”

So what are some things you may have to consider if you’re thinking about including e-learning in your training? Trainingzone offers these suggestions:

• ·     Equipment: How many employees do you plan to train simultaneously?  Do you have sufficient computers and internet bandwidth to support them? 
•      Staff Computer Skills: Will employees need to spend time learning how to use the e-learning software? How long will this take? 
•      Organization: When scheduling time for training, it’s important to include the time to set up the system, the running time of the e-learning, and then system shut down. This will leave room to make sure adequate resources are available.

E-learning is an exciting and growing human resources tool.  We here at Astronology would love to hear your success stories – or not so successful experiences – with e-learning!  Please share your stories with us!  And for those new to the e-learning world, why not consider mixing up both face to face training with e-learning to reap the benefits of both!

Astron Road Show: October

The Astron Road Show draws to a close with the arrival of October.  It will be a busy month, however!  Where will our team be over the next few weeks?

On October 3, National Director Jennifer Loftus will partner with Elizabeth Moore, PHR of the Holmes Corporation, to lead a webcast entitled How to Prep for the PHR/SPHR Exam with the SHRM Learning System.  Attendees will receive tips on preparing for the HR Certification Institute’s PHR and SPHR exams, as well as find out how the SHRM Learning System can boost test preparation efforts. Note: This webcast does not qualify for recertification credit. To register for the webinar, which is free to SHRM members, visit this website.

October signals the Astron team’s return to upstate New York, for the New York State SHRM Diversity Conference.  Astron Solutions will be exhibiting at and sponsoring the event October 6^th and 7^th in Verona, NY.  Be sure to stop by and say hello to National Director Mike Maciekowich!

If it’s October, it must be time for the Wisconsin State SHRM conference!  Mike Maciekowich will be exhibiting again this year.  The conference will be held October 9^th – 11^th in LaCrosse.

Later this month, Mike Maciekowich will exhibit at the annual Nonprofit Human Resources Conference.  This year’s event, slated for October 20^th – 22^nd, will be held in National Harbor, MD.

Rounding out our Road Show activities for the year, Jennifer Loftus will present at the GNOSHHRA monthly chapter meeting, slated for October 24^th in New Orleans, LA.  The chapter’s annual salary survey, administered by Astron Solutions, is the topic of the meeting.

These events will close out our 2013 Road Show.  We look forward to seeing you again in 2014, in cities including and not limited to Orlando and Nashville!  If you have a conference that you think would be a good fit for Astron Solutions, please let us know!  We love to hear your recommendations.

Talking to Your Boss (and how to awesomely say "I Quit")

There's a way to speak to your friends and family. Then there's a way to speak to your co-workers. And then there's a way to speak to your boss. And there are things that you should never say to your boss. Well Dave Kerpen writes for LinkedIn about 17 of them with some help from the Young Entrepreneur Council. Some are gems (like "That Takes Too Much Time" or "I Don't Have an Opinion") but the sad part is that most of them are not ones that you haven't heard around the office--some that have even been said to the boss.

The best feeling in speaking to your boss sometimes is on the way out. Well one young woman did just that in an awesome way, posted below, courtesy of Jezebel (H/T Melissa):

Giving Constructive Criticism

It’s a fact of life we can’t avoid. Whether it’s working in a professional environment, learning in the educational realm, or interacting with friends or family, at some point in time we all have to face criticism.  How we may perceive that criticism depends on whether we are on the giving or receiving end.  When done right, constructive criticism is not meant to hurt or humiliate a person.  Rather, constructive criticism is meant to build a person and push them to reach the next level of success. Learning how to give constructive criticism makes a difference in regards to how others view an individual and also how he or she demonstrates leadership.  This issue of Astronology takes a deeper look into how to give constructive criticism in the workplace.

The Fundamentals of Giving Effective Constructive Criticism

If someone needs to give constructive criticism to an individual, it is highly important to find an instrumental time to share this feedback. Changing Minds.org, a web site dedicated to the book, Changing Minds in Detail by David Straker, advises, “When criticism is needed, do not avoid it, although you should pick your moment.”  Other tips include the following:

• Do not criticize in public

There’s nothing worse than being publicly embarrassed, even if the mistake is small.   It is better to give the recipient his or her dignity and due privacy.

• Be specific

Explain exactly where the person can improve.  Specifics can help the person receiving the constructive criticism to understand that he or she is not incompetent, and can make some adjustments in a specific area to become better.

• Check for understanding

Ensure that the criticism is understood clearly to help erase any doubts the person may have that he or she is being singled out as a target.  Rather the feedback is for his or her benefit.

• Check that the individual knows the positive future change focus

Part of making sure that the criticism is understood includes checking to make certain that the individual perceives the feedback is for positive future change.

• Discuss what happens next…support the person in moving forward

Make the discussion a positive dialogue by addressing what happens next. This includes creating goals or steps to move forward.  This step also allows the individual to feel confident he or she has the support needed, and to view the criticism positively.

Psychotherapist Dr. Barton Goldsmith Ph. D. also noted that tone of voice and eye contact are also essential when giving criticism.  Both communicate sincerity, which demonstrates to the recipient that he or she is receiving positive council. 

The Top Three Ways to Give Bad Constructive Criticism

Usnews.com published an article entitled, “7 Mistakes Bosses Make When Giving Criticism.”  Three of these critical mistakes include the following:

o   Not Putting The Criticism in Context

By not putting the criticism in context, the individual can become confused as to how the criticism fits with his or her goals within the organization. This may also lead to the person to ignore the feedback.

o   Not Explaining Consequences

By not explaining the consequences for not taking action as a result of the constructive criticism, the person provided the feedback leaves himself open to misunderstanding and unnecessary “office drama” between workers who did not understand the possible consequences sooner.

o   Not Having Consequences

Just as bad as not explaining consequences is not having them at all. The goal is not to “scare” employees into changing.  Rather, it’s imperative to communicate that change is necessary in order to help motivate.  Having some consequences helps to remind employees that they play important roles in the success of their organizations…and that they must continue to make progress in order to help build their organizations.

Criticism, even when it’s constructive, can sometimes hurt. In the workplace, it is highly important that the person tasked with giving constructive criticism do so in such a manner that gives the receiver of the feedback due respect and dignity. Sharing feedback privately, making sure the information is clear and helpful, and provided in a positive and supportive manner are all important steps in making a potentially challenging conversation a positive one.

Astron Road Show

The Astron Road Show continues strong as we move into October!  Where will our team be over the next few weeks?

October signals the Astron team’s return to upstate New York, for the New York State SHRM Diversity Conference.  Astron Solutions will be exhibiting at and sponsoring the event October 6^th and 7^th in Verona, NY.  Be sure to stop by and say hello to National Director Mike Maciekowich!

If it’s October, it must be time for the Wisconsin State SHRM conference!  Mike Maciekowich will be exhibiting again this year.  The conference will be held October 9^th – 11^th in LaCrosse.

               

We’ll see you on the road!

The Astron Road Show

With fall knocking on the door, it’s time for the next stop on the Astron Road Show!  National Director Mike Maciekowich and Statistical Analyst Mike Canterino will be on hand to meet with current and new clients and friends of the firm at the New York State SHRM Conference, September 15 – 17 in Buffalo, NY.  Our games of chance were a hit at the national SHRM conference earlier this year.  Will you be our next winner?  Please stop by our booth in Buffalo to see!  Let us know you’ll be attending the conference and we’ll have a special gift waiting for you!

Redefinition of Leadership

Ralph Stogdill noted, “There are almost as many definitions of leadership as there are persons who have attempted to define the concept.” How true he is! The word “Leader” has been defined and redefined so many times, it can be hard to keep track with, let alone demonstrate in our respective places of work. In previous years leadership has been described as a process as well as a property. In process, leadership is being able to indirectly or directly influence and coordinate an organization’s attempt to fulfill a group goal. As a property, leadership is described as possessing the qualities and characteristics needed to help an organization to succeed.

In this day and age, good leadership is needed in organizations across the globe in order to grow, and to be successful. Why? Simply because as the world changes, organizations in various capacities are in the need to adapt to the changes. When organizations don’t perform well, one of the #1 comments that are stated in reference to its failure is: “They had bad leadership”

However, to place a company’s failures on one individual is somewhat erroneous. An organization is made up of people and so it is the organization as a whole, or its, people, that determine whether all will succeed.

Understanding this key issue leads to the discussion of leadership not just from individuals, but from the entire organization. This “broad-based leadership” means in every nook and cranny of an organization, a leader can be found. It is up to every individual to decide for themselves whether they will go beyond just minimal work…and be a leader.

Traditionally, within organizations, the word “leader” sparks the position: “Management”, or “Supervisor”. However, are these words really related? In examination, the very answer may be no. One article in the Australian newspaper, The Age noted, “Managers feel comfortable with hierarchies and a command-and-control type of environment where orders come from above and those who receive those orders get paid for executing them.”

In comparison supervisors, typically influence an organization’s sub-group through formal rewards (perhaps promotion) and punishment (write-up) under contractual agreement. Both positions seem very structured, and leave no room for growth ---which is a dire need in today’s organizations.

Leaders, however, according to the same article are comfortable in horizontal (“pancake”) organizational structures. They are not “a person in charge,” but, rather, a coach…part of the network in the organization in order to support everyone.

Are organizations really trying to cultivate leaders within their organizations? Yes. Another article from The Age entitled, “First It Was Teamwork,--Now it’s the leadership industry; Just Managing” reported that in the year 2000, 50 billion dollars were spent in leadership development within organizations. Yet, not all companies seem to be reaping the benefits from the investment.

Ranked #5 on Business Week’s list of the World’s Top 10 Management Gurus,  Leadership expert Jay Conger noted in The Age that some organizations sabotage their own efforts to gain leadership. He noted that many corporations have an internal culture of “conservatism and risk-aversion.” This causes an organization to look great face-wise, but internally, there isn’t any growth, or internal success. He states that traditionally, “You could argue that organizations, although they say they want leadership, actually they don’t want too much leadership. They want the leadership of the CEO, not the leadership from the ranks below.”

So how do organizations get past this traditional internal culture? First the organization must realize that they need two kinds of leadership. The first kind deals with the entrepreneurial aspect of an organization. The second kind involves crisis and/or turnaround situations. If members in an organization learn how to cultivate both types of leadership capabilities, success is sure to follow.

Organizations also need to be able to focus on building a leadership culture. Some attributes include the following: 

• Learning 
• Coaching 
• Team Building 
• Regular Appraisal

Leadership from all levels has to be promoted not as an executive position, but as a privilege and an obligation to the organization. Former CEO of Telstra Corporation Limited, and current CEO of JI Ventures, Inc., Frank Blount once highlighted five "ingredients" that any CEO can use to generate the right environment for leadership. Here are three main ingredients: 

• Public knowledge that status quo behavior is dissatisfactory 
• Creating a widespread shared vision across the organization 
• Leaving room for growth due to changes externally and internally

Leadership development is a worthy investment for any organization. It is important, however, that we make sure the organization is properly prepared for and anticipating the changes due to the organization’s new leadership culture. It is not up to just a handful of people to make an organization successful. It takeseveryone to make it successful.

How Not To Apply and How To Deal With a Meltdown

Here at the Astron blog we like to go with one positive and one negative to balance out the coverage. So when we talk about a boneheaded thing that one person or company does, we talk about a good way that people or a company handle a situation. Today we'll do the same as we look at one job candidate who makes a name for himself...in the wrong way. And then we'll talk about one company who took an internet meltdown...and turned it into some good PR.

The first is from Above the Law which talks about a class of 2009 graduate who begs for a job via mass e-mail. Well "beg" may be generous here--this job "candidate" mass e-mails every practicing attorney that he can find to try to find a job. I know that the job market isn't great and the lawyer job market is even worse, but this is not the way to go about it. Furthermore, the two pictures that Above the Law could find of him are showing off his biceps and, well, trying to convince us he doesn't want to be an escort. If you want to show someone the way NOT to get hired, this is a good start.

On the other hand, if you want to see a company take a "bad" situation and make it positive, Social Media Today looks at Shake Shack which took a look at its fans' displeasure over a change to its fries and decided to respond in the best way possible. Some companies (like Netflix, as the article points out), take fan outrage and just continue to fuel it. Others, like Shake Shack, take the fans displeasure and take it as a chance to get some good public relations around the new fries.

Social Media Today gives us the great final thoughts: "So what does that mean for all the community managers and brands out there that have new introductions coming up in the pipeline? No need to take notes, this one is easy to remember. Maintain your messaging and stand by your decision, because in the end, that will aid in dictating how consumers receive your change."