Vince and the fat cats – executive pay

So Vince cable wants to put the spotlight on executive fat cats and proposes (or at least proposes to discuss) various controls, checks and balances on their salaries and bonuses. And now Parliament seems to want to micromanage the pay of the boss of RBS.

At the end of the day, what persuades appointment and remuneration committees to set the very high salaries in FTSE100-sized companies and government-owned banks is the same motivation behind Wayne Rooney’s megabucks from Manchester United. It is the belief that the individual concerned will earn you far more profit or income than other candidates who would work for a package that is more publicly-acceptable. This is coupled with the knowledge that these individuals really can go somewhere else (another club, another bank, another country) for the level of reward in question.

And only so much of any package can be made conditional. OK, you can set targets for share price, dividends, market share, etc, but none of these are totally controllable by the executive in question and in many cases the final bonus is subject to a committee’s judgement. So just like a Wayne Rooney the more in demand you are the more of your potential earnings you are going to negotiate into the guaranteed part of the package.

High Pay – did the Comission get it right?

Last week’s report by the High Pay Commission focuses on the differential between senior boardroom pay and that for the average employee. To my mind its analysis is somewhat simplistic and its suggested solutions of greater transparency and a more ‘democratic’ approach to setting senior pay certainly are. In this post I’m going to look at some of the influences that have got us where we are and some factors come into play in trying to change things.

Please not again – training boards

I was horrified to read that “ministers are looking at a number of measures to establish how businesses can take on more responsibility for skills training, including proposals to extend training levies and licence-to-practice schemes”. Hopefully, the various protests from the CBI and others will stop this in its tracks.

I started my career not long after the introduction of Industrial Training Boards by the Labour Government in the sixties. It was a costly bureaucratic nightmare. The current Government frequently talks of the need to reduce central control across many aspects of life, remove surplus red tape and get police away from form-filling and back on the streets. These suggestions go in the opposite direction – creating a series of industrial Ofsteds.

Back in the sixties and early seventies Industrial Training Boards were set up on an industry by industry basis. Even if the basic idea had been sound the difficulties of defining an industry (somehow local and national government were also seen as ‘industries’) led to much duplication and confusion. A sector-based approach is being considered again!

Most ITBs chose to adopt levy and grant systems. Each employer was liable to pay a levy which with luck, and a great deal of form-filling and creative writing, could be recovered if sufficient training of an approved nature was carried out and recorded. Naturally extensive teams of inspectors needed to be set up (plus, of course, head offices and management teams). The theory was that this would transfer money from those companies that did very little training to those, usually larger businesses, that did.

The only ITBs that really made a significant difference were  concerned with those industries with lots of small businesses and transient workforces (Road Transport, Construction and Hotel and Catering). They took an approach of running their own practical training centres with lots of short courses on offer.

English as she is spoke

It’s a while since I posted anything that might be called a writing tip (or more likely a writing moan) but a couple of really cringe-making examples of nouns used as verbs mean that I feel compelled to write something somewhere.

Visiting a restaurant in Edinburgh the other day I was faced with a notice on the door saying that, for evening dining they will insist on “cloakrooming” outer coats.

There is, at the time of writing, a large traveller-occupied site where the travellers are resiting removal by the local authority. I heard a BBC newsreader say that …further action would be taken if the travellers did not “evict” by a certain date.

Ugh!!

Being something of a literalist I regularly groan when I here people in a shop, bar, or the like ask “can I get a …” rather than can I have. I keep trying to persuade my local landlord to respond with “no but I’ll get it for you”. To date he has not taken my campaign seriously.

Tell it like it is – get the pay & benefits message across

In a press release last week the CIPD said that Government and public sector employers can undermine the case for strike action by better communicating the public sector benefits. This is certainly true. Some of the aguments for generous treatment, put forward by union leaders last week, were approaching level of reality of the Greek public sector workers.

But the import of the CIPD’s message applies in all sectors. Some organisations use total remuneration systems to get over the problem of staff not really understanding their full range of benefits but in most cases people are not aware of the full cost of their employment, nor of the real-life competitiveness of their package. In general it would be better if they were.

Of course getting the message across is not easy. Apart from the time and effort involved in collecting the facts it is difficult to strike the right balance between a) appearing to boast (possibly OK if you are absolutely sure you have something to boast about), b) not being believed (the gentleman doth protest too much) or c) confirming their suspicions that your package is, at best, just run of the mill (which is the right thing for many organisations – not everyone can be above average).

One of the hardest messages to get across, particularly in the case of professionally-qualified staff is the extent to which the pay of similarly qualified people varies as careers develop. There is a reasonable degree of consistency in the starting pay for newly qualified maths and science graduates and the Government’s plan to pay extra to recruit, into teaching, those with firsts in these subjects will probably be achievable. But 10 years on? The pay of the contempories of those graduates will vary widely. Some will have gone into City dealing rooms and get paid a fortune, others into industry but, for all sorts of reasons, never got much beyond their first promotion, some will be working in jobs that have no relation to their original qualification. But guess which end of that spectrum those teachers will want to be compared to.

Why work for nothing? – unpaid overtime

Each year the TUC analyse official statistics to assess the amount of extra, unpaid overtime. This year they estimated this to be worth some £23 billion. They claim that of those who do put in extra time average just over seven hours a week; or £4,800 per year at the average wage. Naturally, being the TUC they see this as exploitation.

No doubt some of those unpaid hours will be claimed by people in jobs where a certain amount of additional hours is really covered within the basic salary. Teachers, for example, where some activities (marking, lesson planning, parents evenings, etc) will always have to be done outside standard hours.

Of course, there are jobs where attendance does equals work. These include most client-facing roles such as retail, call centre and the like where an essential part of the job is simply to be in place awaiting the next customer or phone call and additional hours are probably not unpaid. In most staff jobs this is not the case and it is wrong to see the employment contract purely in terms of the attended hours written in the terms and conditions statement.

There is all the, greater or lesser, detail written in the job description. Or targeted in the annual appraisal. Not to mention the implicit assumption that, within the nature of your role, you will help the organisation achieve its purpose. Obviously, that doesn’t mean you should be put upon by an aggressive boss who waits till five o’clock to give you an urgent task. But it does mean that there should be give and take on both sides and individuals should take a realistic view of how effectively they organise the discretionary elements of their role. I wonder how many ‘unpaid hours’ were needed to catch up following the next morning’s discussions of the royal wedding?

Rate your ratings – appraisal systems reviews

I have posted before about the need to review what it is you are trying to measure through your appraisal/performance management system and to ensure that this is achieved in a consistent way. I have a more detailed article on this topic archived on my website. The article discusses how to review a system. A recent survey by Sibson Consulting and WorldatWork provides some additional background data to this topic.

The survey covered some 750 senior HR staff across a number of industries and countries. I guess a predominately private sector population. Among many other aspects it covered what was done to evaluate consistency of ratings. It found:

• In only 37% of cases were ratings audited by HR department. That is sloppy. If HR is not even doing that it really does deserve to be thought of as a paper-pushing function.
• 30% specify a ratings distribution and 12% used forced rankings. This goes to the heart of the most common reason for ineffective systems: not being clear as to whether you are measuring comparative (within the company) or absolute performance (across the population of people in the marketplace). If absolute then, in theory, everyone can earn the top rating. This is a frequent confusion; often compounded by the wording used for the rating categories.
• In 29% managers calibrate their ratings (this does tend to need a largish department) and only 46% circulate overall distribution ratings to their managers. If you don’t do that how do managers know they are being realistic in their own ratings?
• Saddest of all only 30% of employees were thought to trust the system. And this, remember, is in the view of the senior HR staff!

SMEs fear the public sector work ethic

A survey of SME employers has found a distinct reluctance to take on ex-public sector workers. The survey, by utility price comparison website uSwitch (no I cannot see the connection either), found that SMEs saw public sector staff as ‘over-indulged with unrealistic expectations of the work place’. Not only did they think that public sector workers would have unrealistic ideas about pay but also about holidays and employment terms; and generally be less productive.

In a way pay expectations are the least of the problem since the pay level offered will be accepted or the job offer refused. It is probably the employment terms and general attitude to work and conditions that worries the average SME. In some parts of the country where there are large public sector workforces small companies find that, even if they compete on pay, they are seen as employers of last resort because of hygiene factors such as holidays, lunch facilities and the like. Most, if not all, public sector employees work in large organisations with well-staffed HR and other employee-focussed support functions; they are probably widely unionised. Most SMEs have none of this.

All these things have their place in a large organisation but small company employers worry that a new recruit from the public sector will be a disruptive element who may not become reconciled to the less employee-centred ethos of the small firm. Compounding this worry is the, not always true, perception that public sector organisations tend not have the hard targets and deadlines of the commercial world.

Of course, there are many public sector workers who feel they are very harshly managed and see their working environment as anything but employee-friendly. But the problem is not whether SME’s views are correct but how to overcome them. Sadly the only solution is through time and experience (provided, of course, their fears are not realised). Perhaps any public sector body offering redundancy counselling should include a discussion of this survey.

New year, new laws – some of this April’s new rules

Some HR initiatives that might have been found in today’s media (posted 1/4/2011):

• All Cabinet and Shadow Cabinet appointments will in future have to be advertised in the national and European media and the recruitment process subjected to comprehensive equality monitoring.
• Future changes of government will be subject to full TUPE consultation and employment protection rules.
• Following complaints that the new MPs’ expenses system is too onerous, all members’ administration and support (including staff) will be outsourced to CAPITA.
• In future all public sector jobs will be slotted into a 20-band grade structure with salary points expressed in mpms. [1000 mpms (mini pm’s salary) = 1pms (pm’s salary). By definition the maximum point on the highest salary band is 1pms.
• To avoid falling foul of the new Bribery Act all those who stand for parliament will have to be able to show that none of their pre-election promises could be shown to offer any financial inducement to prospective voters. Bribery lawyers say that it will not be an adequate defence to argue that none of the promises were actually kept.

Fair Pay? – The Hutton Report

So the Hutton report into fair pay came out last week and was warmly welcomed by the CIPD in their press release. The aspects the CIPD particularly welcomed were the recommendation for greater alignment of senior public sector pay to an assessment of individual and organisational performance and the abandonment of any concept of maximum pay ratios (CEO pay to lowest or median pay) or the artificial benchmark of the Prime Minister’s pay.