ARE YOU VIOLATING THE LAW, INCREASING UNION VULNERABILITY AND WASTING PAYROLL DOLLARS?

Most employers, even during this economic period, must pay a competitive rate relative to the market place in order to attract quality people. However, once they are your employee, their attitudes are affected by the fairness of pay among jobs within the company. Thus, the concept of internal equity of pay will affect the company's exposure to discrimination lawsuits, union vulnerability, and productivity.

Properly managing pay is not a new phenomenon. However, with the recently passed pay discrimination law called the Ledbetter Act and the proposed Fair Pay Act of 2009, companies need to assess their compensation plans to avoid more law suits. Such an assessment will also help counter employee complaints regarding favoritism relative to pay which often can spark a union organizing attempt. Furthermore, a sound compensation plan will save the company money and increase productivity by paying jobs what they are truly worth relative to one another.

Various types of assessments can be done, but one that should occur is an objective analysis of internal equity of pay. Such an assessment will help companies address whether:

• The Marketing Assistant's job should be in the same pay range as the Engineering Assistant's;
• The Assembler's job should be paid the same, more or less than the Fork Lift Operator's; or
• The Production Supervisor’s job should be in the same pay grade as a Warehouse Supervisor.
  

The most common objective method of assessment is the point system job evaluation process. This process determines if jobs are paid fairly based on the required skills, responsibilities and working conditions of the job. This is not an individual performance evaluation and it is sex, age, race, etc. neutral. We have assisted companies in all types of industries evaluate jobs using such a procedure. This course of action helps companies avoid pay discrimination issues addressed by the Ledbetter Act. Equally important, it will reduce union vulnerability and help control labor costs.

Where have you gone, Joe DiMaggio…..?

Is there a more recognizable set of lyrics then those from one of the most popular songs ever written by Simon and Garfunkel, “Mrs. Robinson”?

Where have you gone, Joe DiMaggio?

(A nation turns its lonely eyes to you )

What's that you say, Mrs. Robinson

Joltin' Joe has left and gone away

(Hey, hey, hey...hey, hey, hey)

We appear to be a nation in search of a leader we can look up to, whether it be in sports, politics, or business, as so many people did of Joe DiMaggio. Even going back to the 1970s, those of us old enough to remember still recall the leadership showed by Lee Iaccoca, the former head of Chrysler, who helped the company through some very though times by securing government loans and even agreeing to take an annual salary of one dollar.

Now, when I watch television, pick up the newspaper, or read something online about a misstep at a particular organization, whether it is a corporation, non-profit, politician, or public sector entity, I shake my head and ask myself, where has the leadership gone in this country? Our new President is doing his best to lead by example, but what will it take to develop a new set of leaders in this country and how are we going to achieve that goal?

The problem is too many organizations are cutting back on critical training needs. We keep hearing, “the training budget is being cut,” or “It’s not in the budget at all.”

There is a widely held view that training is “soft” and it doesn’t provide any real return to an organization. Nothing could be further from the truth.

Think about this:

· No money for supervisor training, diversity training, sexual harassment or discrimination training?
· Can’t afford to send someone to learn about the alphabet soup of laws and regulations affecting employees like ADA, FLSA, FMLA, OSHA, and many, many more?
· Can’t retain someone because there is no career development plan, succession plan, or his or her boss is dysfunctional?

Why do we still see corporations as the lead story in the newspaper, online, or on television under negative publicity? It costs those companies tens of millions of dollars in revenue fighting the negative publicity.

It is still hard to believe that we see adverse court decisions being issued because of discrimination or harassment convictions that it costs corporations millions, or worse yet.

At some point, one hopes the light bulb will go off and executives will realize that training isn’t “soft” at all and that a sound training program is one of the smartest investments an organization can make.

The perception of training is all wrong. It can’t be viewed as a luxury item for organizations to use only when times are good. If you think about the examples I have used, you would agree it is one of the wisest investments an organization can make in its employees. Would a corporation ever think about not investing its cash reserves, or not having the necessary D&O liability coverage? Would any organization want to see its best and brightest people leave because they cannot get the support needed to nurture and grow the people who work for them?

Organizations have never needed training more. There are way too many managers who fly off the handle at the smallest thing and berate their co-workers or subordinates. There are too many analytic types that barely show any emotion and who their co-workers or subordinates barely know are alive.

It is time we teach the proper balance between emotion and process, how to get organized in your day to day work activities, make a meeting on time, accept others who are different than us, communicate better, put together a business plan, conduct a meeting so people aren’t nodding off or reading their BlackBerrys, and most importantly, how to inspire others to be great.

Until organizations commit to these goals, we are going to keep hearing about the dysfunctional organization.

There is the view that leaders are born and cannot be taught. Sure, there are a few people so gifted that they don’t need any training, but the bulk of managers learn their skills from people they worked for and all that does is perpetuate a lot of very poor management skills and habits. Leaders learn to lead by being taught or mentored, not by happenstance.

It is time for the private and public sector organizations to wake up. Let’s not keep having our nation turn its lonely eyes to someone who doesn’t exist any longer. There is no Joltin’ Joe to save us.

What are “market based wages anyway?”

Whether you are negotiating a collective bargaining agreement with unions or conducting an annual review of compensation plans at your company or organization, one of the first things you hear is the phrase “market based wages.”

In a unionized environment, labor wants management to believe that market based wages mean wages higher than the most recent settlement reached for a particular work group. In other words, classic pattern bargaining. The relative cost of living where your employees live does not matter to the union. Neither does the company’s financial performance. It is all about an ever escalation of wages with little regard for internal or external conditions.

On the flip side, the conventional view of market based wages by management is far more complex than just looking at the most recent settlement. One factor that always comes into play is answering the question -- How much do I need to pay to attract and retain a qualified person to do the job being recruited for?

If I want to review a pay scale or a salary range for a teacher in Columbus, Ohio, will I look at what teachers are being paid in Los Angeles? Highly doubtful. Will I look at what other teachers in comparably sized cities are paid? Yes. Will I look at what increases other public sector employees received in the same city? Absolutely.

If I am considering pay increases for the accountants at my mid-sized firm in Louisville, Kentucky, will I be interested in knowing what KPMG is paying its accountants? I may be interested, but since I cannot compete for that talent, it is not very relevant.

Identifying the critical business characteristics for determining what can and should be paid is a key component in establishing your market based wages.

The bottom line is that companies and organizations cannot ignore competitive, market, and financial conditions. If companies allow themselves to be swayed by pattern bargaining or comparing themselves to jobs in other cities with different demographics or financial situations, they will be doomed to fail in having real market based wages.

The case for keeping bonus and retention plans

In the wake of recent disclosures about bonus and retention payments being made at AIG and other larger companies that have received financial assistance from the federal government, a number of corporate boards at public companies are reviewing the compensation plans they have in place for their own management teams.

Sound corporate governance dictates that boards should periodically review compensation programs to make sure they are reflective of the marketplace and competition.

Given all the negative publicity surrounding this issue, should companies be running scared? Absolutely not! The number one concern should always be to attract and retain your high achievers and future stars in an organization.

When determining whether someone should be receiving a bonus and/or retention payment, one needs to ask the following questions:

· How critical is this person to the success of the organization?
· Are other people dependent on this person for their own success?
· What would happen if this person leaves? Is there someone who can take his/her place?
· Is this person a serious risk to leave?
· Do you know if the person is satisfied in the job?
· Are you working on a realistic career development path with this person?

There are plenty of reasons not to want to let a valuable manager leave. That person has important institutional knowledge and could end up at a competitor. You make a big investment in this person’s success. And it can be very expensive to replace someone.

It can cost a company up to 100 percent of salary to replace a mid to senior level manager. Hiring an executive search firm is about 30 percent of the first year’s salary and bonus. Relocation of an executive can add another 10 to 20 percent of salary. Then, add a signing bonus and possibly a higher salary than the person they are replacing, and lo and behold, it cost you a fortune to replace the person you let leave. This doesn’t even take into account the time it takes for the new hire to “get up to speed.”

Of course, there are times when it is fine to let someone leave. But compensation structures that exist in American business are built on variable compensation. Base salary, short and long term incentive compensation plans, equity, and other forms of compensation are all part of the package. That is how managers and executives get paid.

The trick is to makes sure that your plans make sense and are not in such bad taste as to offend one’s sensibilities.

Come up with a well thought out plan to identify who is worth keeping and who you let leave. When you are trying to figure all of this out, ask yourself these two questions: Will my world end of this person is no longer with my organization, and how difficult will it be to replace them?

Design your compensation plan with enough flexibility in it to reward the solid achievers, but don’t be forced to dole out money to people who don’t deserve it.

Is your compensation program designed this way?

Be Careful, Or I May Shoot Myself!

A major airline and its pilots are in contract negotiations. The union is demanding increases of more than 50 percent. So it caught my attention when I read an article about how this airline’s pilots are telling the public that they don’t intend to shut down their company if they fail to get an agreement, but rather, they plan on canceling selected flights or delaying others by 3 or 4 hours at times and locations unknown to the passenger in what has been dubbed by another airline union as CHAOS (Create Havoc Around Our System).

This kind of rhetoric is nothing new in the airline industry. Airline unions call for the resignations of their CEOs. They tell passengers that it may not be safe to fly their airline. Informational picketing is quite common with leaflets saying unflattering things about their company and its executives. They even go as far as renting billboards that are designed to publicly embarrass the company and undermine customer confidence in them.

This type of behavior begs the question, what are these people thinking? Name another industry where unions go out of their way to drive customers away, all but daring them to travel on a competitor. Who pays the employee’s salaries? The passenger! And how does airline labor say thank you? They try to drive them to the competition.

Of course, this is all done in the name of creating leverage in contract negotiations so they can get their members more money, better working conditions, and improved benefits. How can they achieve those goals if their company is being hurt financially by union corporate campaigns? The only way to make sure employees can earn more money and have a secure future is for their company to have a growing stream of revenue and be profitable. If your union is driving away its customers, it is going to be pretty hard to increase your revenues. Their behavior is completely counterintuitive to the stated goals of the union. Make your company more profitable so you can get a bigger piece of the pie, don’t kill the goose that laid the golden egg.

Can you imagine the UAW telling the public not to buy one of their cars? Yeah, let’s get more people to buy Japanese or German cars. That will surely help our plight!!

How about nurse’s unions saying you don’t want to be in our hospital? How about a passenger railroad union telling its customers they’d be better off driving instead of riding the rails? Talk about cutting off your nose to spite your face!!

So what can management do in the face of these tactics? Well, the only sensible thing to do is to talk to your employees in a very straightforward way and get them to understand this isn’t a game of chicken. People’s livelihoods are at stake and behavior designed to drive any customers is just plain dumb as it has consequences on the business and the people who are employed by their company.

Unions have done some wonderful things for the American worker in the past, but if labor wants to be relevant in today’s tough economic environment, this sure isn’t the way to do it.

Give us your thoughts on this matter or any of the other postings we have made.