Be Careful with Averages (Especially with Compensation)

The Department of Labor put together this chart that compares the average amount spent on compensation and benefits between private and public sector employees.  At first glance, you might think that those interested in high paying jobs should look to public sector employment, or that public sector employees are overpaid.  However, drawing such conclusions from a simple average is premature.  In this case, the problem is that we aren’t looking at pay for the “average employee” across these two dimensions; we’re looking at averages calculated from entire groups of very diverse people.  Nancy Folbre, an economics professor at University of Massachusetts breaks these numbers down into a distribution of earnings in an effort to discredit initial interpretations of these averages, and to come up with some meaningful takeaways from the data.   

Comp is much more polarized in the private sector, where private sector employees are over-represented in lower and higher income brackets, while most public sector employees fall in the middle ranges.  43% of private sector workers earned less than $25k per year and more of them are part time (26%).  More public sector employees are college educated (45% of public sector workers have a college degree v.s. 29% of private sector workers).  The data suggests that employees performing similar jobs in the upper end are paid significantly more in the private sector than they are in the public sector.  And if you’ve got a lower skilled job, then it’s probably better for you to work for your local municipality.

Averages often offer poor and sometimes misleading insight when it comes to compensation reporting.  Too much is lost when data is aggregated.  The fact that the average salary for a US subsidiary is lower than a Mexican one may or may not be a problem; if they are the same, it may or may not be a problem; or, a problem may exist when the average salary in the US is higher than it is in Mexico.  Then you ask yourself, who cares about salary averages broken out by country, or business unit, etc..  I see too many compensation reports that just offer these higher end aggregates and don’t allow someone to look deeper into the numbers to draw meaning.  If you’re going to show an average, then be sure to allow someone to cut that average across multiple dimensions to get to some level of granularity; otherwise, an average is just a tease.

The answer is 42

For those familiar with Douglas Adam’s The Hitchhikers Guide to the Galaxy, you may recognize the number 42 as “The Answer to the Great Question of Life, the Universe and Everything” given by Deep Thought after seven and half million years of computational analysis; and, as I’m sure you will recall, not everyone was happy with the answer. Poor Phouchg (probably the VP of HR) grasped the seriousness of the situation right away, “We’re going to get lynched, aren’t we?” While Loonquawl (I’m guessing he was the CIO) was sure the problem lay with Deep Thought (and by association the software vendor who supplied its programming), “Is that all you’ve got to show for seven and half million years’ work?”  But the problem, as Deep Thought explains, was not with the answer: “I checked it very thoroughly and that quite definitely is the answer. I think the problem, to be quiet honest with you, is that you’ve never actually known what the question is.”

Like those who were present on the great day of The Answer, many of us look to our software applications to answer the really hard questions around performance, potential, risk-of-loss, and succession. The promise of predictive analytics and the possibilities associated with data mining lead many to the false hope that the answers to these difficult questions lie buried deep within their data warehouses. Many C-level executives believe it is possible to quantify a persons potential or risk-of-loss in the same way a mathematician uses a predefined formula to discover an unknown variable. They long to replace the personal (subjective) aspects of the appraisal process with a dispassionate (objective) analytic tool. But the human experience is anything but objective. Our experiences, relationships, thoughts and feelings are as unique to each of us as our fingerprints; and the practice of measuring qualities like job satisfaction, potential, and performance requires a distinctly human touch.

Now before I get escorted from the building, let me clarify what I’m saying. Well defined competency models, clear organizational goals, and well integrated talent management applications are critical tools, which every manager should utilize, especially those who are new to their role. But managers must not abandon their responsibility in bridging the gap between the objective statistics generated from a data warehouse and the subjective nature of the human experience. As a colleague of mine is fond of saying, “managers need to have some skin in the game.” Calculating and calibrating a person’s performance and potential should be the natural outcome of a manager’s relationship with their employee and not a task to be completed once annually. Manager’s need to provide clear, honest, sincere feedback well before the appraisal period begins. This means meeting regularly with the employee, getting to know them, understanding what they like and dislike about their jobs, and helping them play to their strengths. These are tasks that can only be done by a person. Analytic tools may provide a good starting point for the evaluation, but they cannot replace the relationship between the manager and employee; because it is the manager, and not the application, who will understand that getting the right answer means asking the right question.

HR Transformation — are we sick of it yet?

I’ve been thinking about HR Transformation for quite some time and I’m starting to wonder how we can move on from HR transformation to “Beyond HR” when we never actually transformed in the first place. 

I have some concern that maybe we are just distracting ourselves to avoid actual measurement and accountability.  Are we witnessing a real desire to change the role of HR or are we just a manifestation of Corporate ADD?

It’s an OD problem, no it’s a recruitment (excuse me talent acquisition) problem, no it’s a performance management problem, wait it’s a succession planning problem, oh no I think it’s a web.20/community problem.  And don’t even get me started on the idea that it might be an analytics problem!

The more I study this market and talk to companies attempting to truly transform their organizations I come to realize that it is, and always was, a leadership problem.  I know I risk a good ducking here, but I believe that chasing the latest software fad without real vision and leadership will fail.  Not dissimilar to how a weight loss program that doesn’t involve diet and exercise  will ultimately fail for you (it might work for someone else, but it will not work for you, trust me on this one!).

So where to start and what to do?  First and foremost you need to find leadership.  Hopefully you can find that leadership in yourself but if not there, find someone who has it first.  Once you have acquired the will to lead then you can begin to benefit from the flywheel effect and realize results. 

If you cannot find the will to lead then I suggest you stop now before you spend important resources and energies on the hard part of a transformation (the starting) and never actually receive the benefits of the work.  At the risk of stating the obvious, I also suggest you use the same philosophy for your holiday (or post holiday) diet plan. 

Quit spending your time trying to find the silver bullet out there, you know that it doesn’t exist.  Instead, first analyze your own capabilities and then look to see how you can use technology to implement your vision.