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Greg was worried about the upcoming vote. He was not sure why as things had gone pretty smoothly since democratic pay provisions had been introduced. Maybe it was the prospect of being judged by his peers and subordinates. He knew he was well regarded by most of the organization at least according to the surveys, and the board seemed to think that he was doing all the right things. The business was growing, continued to be profitable and more staff had been added during the last year.
Social behaviour was ahead of legislation and public opinion had achieved what the law, tax reform, and shareholders had all failed to do; moderate CEO pay. Not by causing a change in the law at least not yet, but by lobbying investment groups, the press, and anyone else that would listen, that employees should have a say. The CEO’s pay in Greg’s company was now subject to approval by employees.
The endless pursuit of the engaged workforce had some years ago, caused employers to bow to the demands of new generations of employees eager to stamp out any form of discrimination in the workplace and especially those related to pay. Controlled by a relative few HR folks who exercised what appeared to be completely subjective measures in determining pay, employees had expressed their dissatisfaction and lack of trust in the traditional systems and internal equity had completely overpowered the competitive imperative. The old ways worked when trust in employers was high and employee tenure was long. With work having become a commodity anything other than full transparency was considered unacceptable. Employers had therefore dropped any form of pay for performance in base salaries and reverted to time in role as an indicator of competency.
The transparency argument was fueled by the press who called for full disclosure of pay development by employers (likely a few disgruntled journos finally able to register their grievances with their own employers). Not many companies or their pay systems could withstand the glare of public disclosure. One of the big tech firms had conceded and everyone else fell like dominoes. With the shortage of talent that followed the exit of the last of the baby boomers the demands of new generations of employees were met. Employers really had no choice.
What was all the fuss about Greg wondered? At least in his company’s case the transition hadn’t been so bad in fact it had been much better than everyone feared. It dispensed with a whole pile of administration and HR was happy that they no longer had to manage the annual pay cycle with all of its pain and suffering. An annual employee survey on peer group pay level adjustments and it was done. Performance assessments for incentives and long term awards had taken a little longer but after a while management had begun to prefer the views of employees on who had performed and who was worth keeping. It maintained engagement and any influence from outside the team just upset the harmony. HR had become the talent attraction and retention group and retitled Employee Happiness. Without the ability to use pay as a tool we had to make sure we really were the best place to work so that we could continue to hire the best. Focus was now where it should be, and it all seemed to work well.
The CEO had not remained exempt from the process and employees now decided on what the head of the organization would receive as well. This had required some education but had naturally resulted in a moderation in the rate of increase. Over time a pattern emerged and low and behold employees had arrived at what CEO pay would be as a multiple of their own. Something academics, the market, and investors had failed to do and while this was only Greg’s view, a new type of CEO was emerging as a result. Less ego he thought was the trend with more attention on workforce well being.
The Compensation Committee of the Board now focused on talent planning and oversaw engagement. As the proponents had correctly predicted the whole system depended upon peer pressure and with the right people, the right results would follow. If not you quickly sank into mediocrity. People were the challenge now, getting them to work collaboratively and innovatively but wasn’t that always the case? Without pay obscuring the goal employer’s efforts were now far more focused.
There was far less reliance on the competitive marketplace and competitive surveys did not have the influence that they once had but no one felt too sorry for those poor consultants who had tried to corner the data market. The market had spoken.
We hope you enjoyed this irreverent look at how the compensation environment might evolve over the next few years. Some of it is more likely to happen than not and not too long from now. Are you ready? Call us if you would like to take a look at employee engagement and the impact it will have on pay and how it will affect your company.
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