Howard Risher

How Well Are Government Employees Paid

The budget shortfalls, layoffs and pressure for better performance have heightened the attention to government pay programs around the world. A thread that runs through every discussion is the question of how well public employees are paid relative to those working in other sectors. Although different methodologies have been developed, only one is practical and readily understood—the use of surveys make it possible to compare pay with the levels in other employers using benchmark, generic jobs. The public broadly is not willing to accept government salaries that exceed those in the private sector. This article discusses the strategies for developing market data and for planning new government salary programs.

Strategic Salary Planning

Traditional salary management methods are proving ineffective in meeting the needs of todays dynamic organizations. Heres a framework for linking the salary program to the firms business strategy and compensation philosophy.

Job Evaluation: Validity and Reliability

Until the courts establish standards for job evaluation systems, management should set objectives and establish criteria for systems that will meet the needs of their own organizations.

It’s Not That Simple Extrinsic Versus Intrinsic Rewards

This was prompted by a recent exchange with Gerry Ledford, one of the members of the Advisory Board. Our discussion focused on the critics and research claiming that financial rewards diminish intrinsic motivation and can cause problems. He and I agree that the research is, in my words, simplistic and ignores too many highly relevant factors. But it continues, and it reaches a large, apparently receptive, audience. My purpose in writing is to argue that the many blogs and columns repeating the criticism are undermining our credibility and our organizational influence. The most prominent of the current critics is Daniel Pink and his book, Drive: The Surprising Truth About What Motivates Us. A Google search on his name produced 47 million hits, with most repeating his argument as if it is gospel. He condemns financial rewards, arguing the practice kills creativity and can have a negative impact on overall performance. As is typical of the critics, he offers no practical alternatives. My concern is not that the critics will trigger the end of financial rewards in industry; that philosophy is deeply entrenched throughout the world. But the criticism affects the impact of compensation specialists and also feeds resistance to pay for performance in government at a time when agencies at all levels are being pressured to improve performance. Although I find reading research papers to be tedious, I had to dig out and read those relevant to this argument as background for a report I drafted for the Organisation for Economic Co-operation and Development, advocating pay for performance in government. The Organisation for Economic Co-operation and Development has 34 member countries and publishes reports on a variety of government issues. (The report is in editing.) The report will, I am certain, have its own critics. I have also worked as a consultant on pay for performance for the United Nation’s International Civil Service Commission. The people in those meetings were proponents of pay for performance. I mention that to support this statement, I have discussed pay for performance with representatives from countries as diverse as Russia, Sierra Leone, Mexico, and Japan. No one has opposed pay for performance for their government. The transition for public employers has been ongoing for almost 20 years, albeit slowly and with missteps. The Great Recession brought the changes to a temporary halt, although the contract for my report confirms that the interest continues. There have been problems in implementation, but there is virtually no evidence that public employers have dropped the idea. The continuing support is important because it repudiates the critics. As a former political speech writer, Daniel Pink has no credentials in this arena, but his argument is influencing far too many people. Another similarly prominent critic some years ago was Alfie Kohn. He had his 15 minutes but had virtually no impact and has been forgotten. Significantly, I am not aware of a critic whose experience would make him or her an “expert” or who has had meaningful experience managing people. Kohn displayed his naïveté and lack of experience in arguing that all extrinsic rewards are a problem. What he did not seem to realize is that every organization uses rewards of some type, if nothing more than praise from a supervisor. He also did not acknowledge that people like to be recognized for their contribution. Pink’s argument is better stated, although his answer on pay is also naive—“Pay more than average.” He claims that “higher wages could actually reduce a company’s costs.” That is his solution. He also lists “the seven deadly flaws” of “carrots and sticks” or extrinsic rewards. With each he is careful to always include the word can to suggest it’s only a possibility. Frankly there is some truth to each; problems can emerge, especially when financial rewards are large. He is correct, for example, that financial incentives “can foster short-term thinking” or “encourage cheating, shortcuts and unethical behavior.” His argument is based on the research of Dr. Edward Deci, who is credited with recognizing the importance of intrinsic satisfaction as a powerful source of motivation. His conclusions were based largely on student experiments but have been confirmed in hundreds of studies. The caveat is that the research where rewards are at issue has focused on simple tasks in artificial situations. That is best illustrated in the opening chapter of Pink’s book, which is largely devoted to a Deci experiment where students rearranged blocks—with their performance rewarded with what today is equivalent to

The Search for Pay Equity Is Now 50 Years Old

6. He also discusses an experiment with monkeys. Both the 485033 CBR45110.1177/0886368713485033Compensation & Benefits Review 45(1)Risher research-article2013

We Need to “Fix” Performance Management

The articles by Stanberry and by Kilgour on equal pay reminded me that the Equal Pay Act was enacted 50 years ago. I drafted an original version of this editorial in response and sent it to the members of the Advisory Board for comment. They suggested a few changes. Then I received a paper with a somewhat different point of view from Duncan Brown, expressing the view from the United Kingdom (which will appear in the next issue). His comments raise important issues about the management of compensation. His country along with the United States and others are increasingly concerned about the reality that is an economy with far too many low-pay jobs. Many of these jobs are female dominated. These are public policy issues but clearly worthy of discussion within the compensation community. The truth is that HR policies are at the heart of creating a work environment that is fair and gender neutral. This theme will be addressed in future articles. The articles published here made me think about how different the world of work was when the Equal Pay Act was enacted. Many women chose to stay home and raise their children. Those who worked were limited to “female” occupations—teacher, nurse, secretary, librarian and a number of service jobs. The career alternatives then available to women had low pay, well below that of male-dominated jobs. But Congress chose to limit the protection of the law to women working in jobs that are essentially identical to those performed by men. The U.S. Congress and the federal courts have thus far rejected the comparable worth/pay equity argument. Today women in the United States account for more than half of business school applicants and roughly two thirds of college graduates, and women account for more than half of the professional workforce in the United States and a number of countries. To borrow a phrase, women have come a long way. The equal pay issues today are very different, but the pay gap still exists. As someone who first worked on this problem more than three decades ago, I can say unequivocally that there are valid reasons why the gap has not been closed. Furthermore, at least a portion of the gap is unrelated to conscious gender discrimination. Finally—and this is from someone who feels very strongly that everyone should have equal opportunities—the changes in private sector practices needed to eliminate the gap would be detrimental to employer success. The gap calculations at the national level depend on “black box” multivariate statistical methods. It’s not that the statistical results and gap estimates are wrong; they are, however, misleading because key variables are frequently not included and/or they are based on data that do not accurately reflect the dynamics governing pay levels. For example, using “degree level” ignores the significant differences in market pay levels for education, liberal arts, business and engineering majors. Similarly, age is not an accurate proxy for experience. Perhaps the most important variable is the difference related to career choice. It is still true that women are more likely to choose comparatively low-paying occupations. (I am aware this is a chicken-and-egg argument.) Moreover, their career choice is also more likely to channel them into public sector jobs. It’s not possible to ignore the combination of supply-and-demand dynamics and political reality. In today’s environment, with government budget deficits, pay adjustment funds are not readily available. For employers, the comparable worth argument would require the installation of a defensible job evaluation system and having all employees paid under a single salary system. In the 1980s, women and unions pressured elected officials at all levels of government to enact legislation that would mandate employers to take that step. They succeeded in gaining acceptance for their argument for public employers in a few states—for example, Minnesota and Washington. There are similar requirements for selected employers in Canada and Australia. One of the barriers in the United States is the obvious fact that private sector employers maintain two (i.e., exempt and nonexempt) or more pay systems. That practice is not required, but it facilitates compliance with the Fair Labor Standards Act. It’s also increasingly common to rely on different pay strategies for different job families. 510992 CBRXXX10.1177/0886368713510992Risher research-article2013

Employers Need to Focus on Improving Performance Management

I find the frequent articles and columns critical of performance management (PM) disturbing. There are solid reasons not only to continue but also to actually give greater emphasis to this practice. It is clear that the practice is essential to effective people management. Furthermore, it is also clear that the problems can be solved or at least minimized. But what concerns me most is that we— HR—allow the problems to fester. The unfortunate reality is that HR is blamed for what is best understood as poor management. We should be shouting from the rooftops that managers need to be accountable for managing performance. We should also be working to convince senior management that when there are problems, simply adopting a new PM system is unlikely to be the solution. They also need to understand that making PM a priority is an essential step toward the solution. I have been responsible for managing the performance system in two large corporations and in hindsight as ineffective as anyone in that role. Of course, I made sure that managers were notified when appraisal forms were due and followed up if they were more than a week or two late. I reviewed the forms and kept track of the ratings. When managers or employees had questions, I responded. But I do not recall ever questioning a manager about ratings—I knew my place! Compliant administration does not add value. I’d very much like to erase references to “administration” in discussions of HR. From my perspective today, HR is remiss if it does not push for policies and practices that are known to contribute to high performance. There is a mountain of evidence confirming that people are capable of performing at higher levels. The management of performance is only one lever, among several, in a strategy to improve performance. Somehow, writing this editorial is like preaching to the choir. But I also do not find many defenders of PM systems. For reasons that are not clear, at least to me, the critics get far too much attention.

Getting Performance Management on Track

This issue of the CBR carries an important article summarizing research by Edward Lawler and two colleagues on the policies and practices that contribute to effective performance management systems. I consider Ed to be the foremost authority on the management of pay and performance. He was publishing books on these subjects while I was still in graduate school—and that was years ago. The article is important for two reasons. First, it focuses on what has been for decades the most controversial HR practice, and second, the research leads to recommendations that promise to improve performance systems. Their conclusions are consistent with my experience as a consultant. To highlight two key findings from the research:

Contractors, Comparable Worth and the New OFCCP: DéjàVu and More

Performance management practices have been the source of dissatisfaction and criticism for decades. New approaches and the adoption of technology have failed to quiet the critics. Despite the problems, the management of employee performance remains one of the basic responsibilities of managers and supervisors. Research by Gallup and others has highlighted the importance of managers in creating high-performance work groups. Edward Lawler summarized the ingredients for effective practices in his book Talent. More recent developments augment his conclusions. Performance management can be a valuable tool when systems are properly designed and implemented. The key is providing adequate preparation and support for managers.

Employers Need to Invest to Strengthen Performance Management

Recent federal government initiatives suggest that comparable worth is being resurrected as a major policy initiative. The Office of Federal Contract Compliance Programs has introduced the Equal Opportunity Survey, which requires government contractors to provide compensation data broken out by gender and race/ ethnicity for each of the nine equal employment opportunity (EEO) occupational classifications. The compensation data from the survey are already being used to target contractors for audits and represent a new and extended drive to impose comparable worth principles through federal regulations. This article focuses on the EEO Survey and its shortcomings as a source of data for analysis. Legitimate sources of male-female wage differentials are discussed, along with the difficulties that would be encountered in implementing a pay system that would meet traditional comparable worth standards. Methods contractors can use to carry out an internal audit to defend pay discrimination charges related to comparable worth are described.