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PERCEPTION IS REALITYTHE IMPORTANCE OF PAY TRANSPARENCY
TO EMPLOYEES AND ORGANIZATIONS
Rena Rasch, PhDLena Bottos, CCP
To us, business is personal
Copyright Kenexa®,an IBM Company, 2013 2Copyright Kenexa®, 2013 2
WORKTRENDSTM REPORT
Download your free copy from Kenexa.com
Copyright Kenexa®,an IBM Company, 2013 3Copyright Kenexa®, 2013 3
SPEAKERS
Rena Rasch, Ph.D.Research ManagerHigh Performance Institute by Kenexa, an IBM company
Rena Rasch is the manager of the High Performance Institute’s Minneapolis team, which she joined in 2008. She also manages the Institute’s WorkTrends™ study, an annual employee opinion survey of over 33,000 workers in 28 countries around the world. Rena strives to provide empirically-based solutions to HR practitioners’ biggest questions. Topics of interest include employee engagement, generational differences in the workplace, trust in leadership, work-life balance and work stress, unionization intent, why employees join and leave their organizations, and many others. Rena received her Ph.D. in I/O psychology from the University of Minnesota.
Copyright Kenexa®,an IBM Company, 2013 4Copyright Kenexa®, 2013 4
SPEAKERS
Lena BottosVice President, Compensation
to research on trends in compensation practice and spends time meeting with customers and other compensation professionals to understand the challenges that HR professionals face in today’s market. In addition to numerous interviews with media outlets such as NPR, CBS MarketWatch, and the Christian Science Monitor, Lena has contributed to several books and has spoken at conferences for World at Work and the Society for Human Resource Management.
As Vice President of Compensation at Kenexa, Lena is responsible for managing client relationships and assuring accurate and timely delivery of services. Leveraging more than ten years experience in compensation and benefits consulting, she contributes
Copyright Kenexa®,an IBM Company, 2013 5Copyright Kenexa®, 2013 5
HOW DO YOU KNOW IF PAY IS “FAIR”?
• Objective measures– Market alignment– Internal equity
• Subjective measures– Perceptions
Do I feel valued? Do they respect me?
• Which matters more?
Copyright Kenexa®,an IBM Company, 2013 6Copyright Kenexa®, 2013 6
A FEW QUESTIONS…
Do you believe your employees are paid fairly?
Do you believe you are paid fairly?
Copyright Kenexa®,an IBM Company, 2013 7Copyright Kenexa®, 2013 7
REALITY PERCEPTION
corporate culture
coworkers
friends & family
articles/publications
the internet
• Aligned to the market (median)
• Equitable across similarly situated employees
• Compliant with relevant statutes
• I’m not paid enough for the work I do
• I don’t know why they pay me what they do
• My co-workers who do the same thing make more than I do
Copyright Kenexa®,an IBM Company, 2013 8Copyright Kenexa®, 2013 8
KENEXA’S WORKTRENDSTM SURVEY
• Administered annually or bi-annually since 1984• In 2012, taken online by 33,000 employees in 28 different countries• Representative sample of workers across the globe• > 200 questions about:
– Employee opinions and attitudes– Manager and leadership behaviors– Organizational practices– Demographic variables– Compensation practices
Copyright Kenexa®,an IBM Company, 2013 9Copyright Kenexa®, 2013 9
PERCEPTIONS OF “FAIR” PAY OVER TIME
51%
55% 55% 54% 54%
49%
57%59% 58%
53%50%
20%
30%
40%
50%
60%
70%
2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012
Copyright Kenexa®,an IBM Company, 2013 10Copyright Kenexa®, 2013 10
PERCEPTION MATTERS
33%
64%
70%
49%
54%
78%
85%
85%
15%
17%
% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Employee Engagement
Mental/Physical Health
Personal Life Satisfaction
Turnover Intentions
Unreasonable Work Stress
Percent Agree
Fair Pay Unfair Pay
Copyright Kenexa®,an IBM Company, 2013 11Copyright Kenexa®, 2013 11
DRIVERS OF BELIEF IN PAY FAIRNESS
Understanding how pay is determined
Knowing how to maximize pay
Believing pay is related to performance
Copyright Kenexa®,an IBM Company, 2013 12Copyright Kenexa®, 2013 12
DRIVERS OF BELIEF IN PAY FAIRNESS
15% 18%
31%
62%67%
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Understand How PayDetermined
Know How to Maximize Pay Pay Related to Performance
Perc
ent B
elie
ving
Pay
is F
air
Unfavorable Favorable
Copyright Kenexa®,an IBM Company, 2013 13Copyright Kenexa®, 2013 13
BUILDING BELIEF IN PAY FAIRNESS
Pay isrelated to
performance36%
Know howto maximize
compensation28%
Actualpay level
10%
Understandhow pay isdetermined
26%
Copyright Kenexa®,an IBM Company, 2013 14Copyright Kenexa®, 2013 14
PAY FAIRNESS AND ENGAGEMENT
32% 33%40%
67%73%
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Understand How PayDetermined
Know How to MaximizePay
Pay Related toPerformance
EEI S
core
Unfavorable Favorable
Copyright Kenexa®,an IBM Company, 2013 15Copyright Kenexa®, 2013 15
CURRENT PERCEPTIONS
Copyright Kenexa®,an IBM Company, 2013 16Copyright Kenexa®, 2013 16
COMMUNICATIONBREAKDOWN?
69% 72% 73%
86%
53%60% 63%
78%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IndividualContributor
Front-Line Supervisor Mid-Level Manager Executive/SeniorManager
Understand How Pay Determined Know How to Maximize Pay
Copyright Kenexa®,an IBM Company, 2013 17Copyright Kenexa®, 2013 17
REALITY PERCEPTIONREALITY
DRIVESPERCEPTION
Copyright Kenexa®,an IBM Company, 2013 18Copyright Kenexa®, 2013 18
TRANSPARENCY
Copyright Kenexa®,an IBM Company, 2013 19Copyright Kenexa®, 2013 19
BUILDING BELIEF IN PAY FAIRNESS
• Address the key drivers
– Understanding how pay is determined
– Knowing how to maximize pay
– Believing pay is related to performance
Copyright Kenexa®,an IBM Company, 2013 20Copyright Kenexa®, 2013 20
FACT: THEY WILL SELF-EDUCATE
• Understand their sources• Recognize the
opportunity for dialogue• Don’t be defensive• Silence does not equal
understanding
Copyright Kenexa®,an IBM Company, 2013 21Copyright Kenexa®, 2013 21
INSTITUTIONALIZE TRANSPARENCY
• Field HR visibility• Manager training• Employee education
• Go beyond base pay
• Respect your organizational culture!
Copyright Kenexa®,an IBM Company, 2013 22Copyright Kenexa®, 2013 22
PAY FOR PERFORMANCE
• Define what high performance looks like
• “Pay for Performance” vs. “Increase for Performance”
• Merit matrix
Copyright Kenexa®,an IBM Company, 2013 23Copyright Kenexa®, 2013 23
PAY TRANSPARENCY AND COMMUNICATION CULTURE
56%
37%
81%72%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
I have a good understanding of how mypay is determined.
I know specifically what I need to do tomaximize my compensation.
Perc
ent F
avor
able
In my organization, there is open, honest two-way communication.
Unfavorable Favorable
Copyright Kenexa®,an IBM Company, 2013 24Copyright Kenexa®, 2013 24
Copyright Kenexa®,an IBM Company, 2013 25Copyright Kenexa®, 2013 25
BELIEF IN PAY FAIRNESS…
• Impacts engagement (which impacts business results)
• Can make or break our programs
• Susceptible to external forces
• Driven by transparency• Is within our control
Copyright Kenexa®,an IBM Company, 2013 26Copyright Kenexa®, 2013 26
QUESTIONS?