Author: Bianca Valencia

RETHINKING MARKET COMPARISONS – A NEW DEFINITION FOR COMPA-RATIOS

Written by Bianca Valencia on . Posted in Resources.

Employers use salary surveys to measure the market and remain competitive.  But making such a comparison can be quite difficult, even misleading. Conventional wisdom tells us to compare average incumbent salary to survey data by the job.  This is commonly referred to as the compa-ratio.

Suppose your target market position is the 50th percentile value from your survey, say 110,000.  If your company’s incumbent value for the same job is 98,650, the compa-ratio is 89.7.  This means your compensation value is 89.7% of the target, or to put it another way, 10.3% below market.

Wait a minute!  Is this right?  What if there is more than one incumbent, say one earning 98,650, and another, earning 121,330.  We can just use the average, 109,990.  The compa-ratio has changed to 99.9.  So we’re right on target.  Phew!

You can see that as more data is introduced to the mix, the average will change and so will the compa-ratio.  It’s kind of misleading, isn’t it?

There is another way.  As we explained in a prior post in this series, about percentiles, your target market position is a range, not a single value.  In our example above, let’s try the comparison in a slightly different way.  Instead of looking at the average of all the incumbents in a particular job or grade, let’s compare your salary range to the market salary range.  That’s right.  Compare your minimum to the minimum in the survey, and the maximum to the maximum in the survey.  The graph below illustrates the concept.

The left column shows the employer’s salary range, while the right column illustrates the range found in the market.  The orange portion represents the upper portion of the range, from midpoint to maximum, while the rust portion represents the portion from the minimum to midpoint.  The employer range is symmetric, with the midpoint exactly in the middle of the range, while the market data is shows the incumbent average as the “midpoint”, not exactly in the middle of the range, but reflecting the actual practice in the market.

At first glance, it appears the employer’s range is just fine.  It is entirely within the market range at the 50th percentile, according to the company policy.  Let’s take a closer look.

The red lines in the second graph show how the employer range overlaps with the market.  The incumbent average in the market is clearly higher than the midpoint of the employer’s range, and the market span (distance from minimum to maximum) is wider.   This means that the employer is paying a bit more for new entrants, but their pay is capping out sooner than the market for experienced talent.  Each employer needs to decide if this is a desirable outcome for their unique situation.

How can the compa-ratio concept be applied to this comparison?  At Birches Group, we often do such a comparison as follows:

So, this indicates that the employer is very close to their target – just 0.8 above.  They are 8.2% above at the minimum, but trailing the market maximum by 6.6%.

What else does this sort of comparison tell us? First, it allows a comparison of your salary range spans to market spans.  Oftentimes, clients simply assume spans are the same in every country and at every level of the organization; our data shows that this is simply not true.

Second, you can understand the range penetration in the market – how close to the maximum is the incumbent average?  Is it around the middle of the market span, or closer to the minimum or maximum?  This provides additional insights to employers when updating their ranges.

Finally, you can start to use your salary structure as more than a compensation metering tool.  For example, if you align your spans to your organization structure properly, then for grades where you have jobs for which there is no path for upward mobility, you can deploy wider ranges to allow for pay growth over time without promotions.  Similarly, in grades where the expectation is up or out in a short period of time, a narrow span could work just fine.

In Summary

Relying strictly on incumbent average comparisons to market medians is a misleading approach which is subject to volatility when incumbent data shifts. Comparing salary ranges to market ranges is a powerful alternative (or supplement) which provides employers with additional market insights.

We hope you are realizing that our effort to rethink salary surveys is from top to bottom!  There’s a lot to consider when comparing yourself to the market.  But the most basic comparison – the compa-ratio – can be redefined in a very powerful way.

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

IN AFRICA, WATCH YOUR COMPENSATION A-B-C’S

Written by Bianca Valencia on . Posted in Resources.

My business is focused on advising employers on how best to structure their compensation and benefits programs in developing and high-growth markets. We have particular expertise in Africa, where our compensation and benefits surveys cover all 54 countries.

Recently, I helped conduct an employer roundtable for clients in South Africa, focused on fast growing African markets. It was a lively and informative discussion, but one of the charts we looked at stands out: A comparison of the pay mix across 20 different African markets.

You can see there is wide variation across the featured markets in how employers design their pay packages. Base salary is at least 60% of the total package in most countries, but the pattern is not uniform. That’s why it’s important to watch your A-B-C’s — Allowances, Benefits in-kind and Cash.

We are often asked by clients why the pay packages in Africa are so complicated? Why can’t they just pay cash and be done with it?

There are several reasons for the widespread use of cash allowances and benefits in-kind. Here are some to think about:

  • Benefits are provided for critical business reasons – for example, a commuter bus is needed to ensure workers can go to and from the office on time. In some countries, the lack of reliable public transportation, coupled with traffic congestion and the high price of shared taxis is a real hardship for workers. So the company steps in. Similarly, companies sometimes provide in-house medical clinics, free or subsidized meals, and even access to credit.
  • Historical reasons – many cash allowances used to be treated differently for tax purposes, providing a small advantage to staff through higher net income. Most of the special tax treatment is long gone, yet the practice of providing allowances such as 13th month or rep allowance persists.
  • Statutory requirements – certain allowances or benefits are mandated by local labor law, so there is no choice but to provide them.
  • Cultural reasons – a company car is a status symbol in many countries, and even if there is no advantage compared to cash, the car continues to be popular. Why? Well, your friends and neighbors can see the car in the driveway, but they cannot see the cash in your wallet!
  • To save the company money – Really? How can a company save money by providing extra allowances or benefits? If an allowance is paid just once a year at the end of the year, the company has essentially an interest-free loan from employees for the first 11 months of the year.

    We know employers benchmark their total compensation package against the market. The total compensation is a fixed pie that simply gets divided up according to each employer’s policies. Adding a new benefit or allowance usually means reducing other components, including cash, so that the total is still aligned to the market. It’s a zero-sum game, actually.

Our experience working with employers in developing markets in Africa and elsewhere around the world indicates that employers need to pay careful attention to their pay mix at all levels of the organization. If you focus just on cash, you will fall short in the eyes of your employees, even if the cash has been adjusted to “make-up” for benefits and allowances you decide not to offer.

Ironically, one of the most challenging aspects of compensation administration in these markets is reward communication. Many employees don’t fully understand what they get, why they get it and how the company calculates their packages.

So my advice is two-fold:

  • Be sure you have a competitive mix of cash, allowances and benefits in-kind, and that your “A-B-C’s” are aligned to the market and your internal policies and strategies.
  • Communicate, communicate, communicate. Make sure your staff understand their pay packages in total, not just their paycheck. Focus on total rewards in your explanations.

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

I HAVE A SALARY SURVEY – NOW WHAT?

Written by Bianca Valencia on . Posted in Resources.

As a data provider and as compensation consultants, clients often ask us for advice and guidance in formulating policies and processes for using market data to inform and manage their compensation program.  The questions range from “What percentile of the data should I use?” to “How should I take inflation into account?”

The answer is to refer to your remuneration framework (aka compensation policy).  Your framework should address the key issues you need to sort out, along with practical steps to move from market data to salary scale.  Here are some tips.

Top Ten Features of a Well-Designed Remuneration Framework

Here are the top ten things that form a solid basis for a well-designed remuneration framework:

  1. Cost of Labor vs. Cost of Living. Salary setting is essentially an application of supply and demand to the labor market.  While managers and employees like to think that inflation is important, data shows that there is little or no correlation between labor market increases and inflation.  So stick to cost of labor, not cost of living for your policy.
  2. Credible Market Sources. You need market data to assess your competitive position.  Use a professionally-conducted salary survey.  Resist the temptation to rely on internal mechanisms such as the “call around” to your peers to see what they’re paying. Not only is this time consuming and fraught with pitfalls, in many countries, it’s illegal to share salary information.  A neutral third-party survey provider will insulate you from these risks.
  3. Solid Job Classification. Despite reports to the contrary, job classification is alive and well, and good practice requires its use.  Comparing jobs is not like comparing a can of peas.  Each organization defines roles differently, so job comparisons are hard.  This is true when comparing jobs internally in your organization, and externally in your market.  Job classification is a systematic and objective way to determine which jobs are equivalent to which other ones, along with building a hierarchy of your organization.  There are many good ways to apply job classification, but before you think about that, be sure you have a robust classification standard in place.
  4. Know Your Market. Organizations should define their ideal comparator group to include peer organizations within their sector, and across all sectors, with whom you compete for talent.  Limiting your comparators to your own sector is unwise. In most developing countries, sectors are too small for meaningful sector cuts.  And even when they are possible, comparing across different market strata is a fool’s exercise.  Instead, focus on those employers in any sector, including the international public sector, that target the same strata as your organization.  If you are a leader, you should compare to other leaders. And remember, your sector is not an island.  Even if there is good sector data available, as you will find in more developed markets, it is useful to compare sector data to general market practices to understand the actual differences.
  5. Total Compensation Approach. There are many parts of total compensation, and there are wide variations within countries and from country to country.  The only practical way to determine your market position is to use total compensation.  If your total comp is right, then you can “unscramble the egg” into the components your company chooses to offer.  If you look at things component by component, it will be almost impossible to achieve your desired target.
  6. Annual Updates. Labor markets are dynamic.  In developing countries, where we do most of our work, the amount of change we see during the year is significant, so much so, that we update our survey data three times a year.  Even in more stable, slow growth, developed economies, it’s helpful to look at the market at least once per year.  Remember, markets are not static – there could be new competitors emerging in previously non-existent sectors, for example, which cause market disruption.  Or a big company could open a new facility and try to poach all the key talent from the market.  With access to current data, you are in a stronger position to know what’s happening and how best to react.
  7. Use Local Currency. With just a few exceptions around the world, such as distressed economies or countries where civil unrest is ongoing, staff compensation should be determined in local currency, without any hard links to foreign currency benchmarks (e.g., US dollars, Euros, British Pounds, etc.).  If you don’t believe me, we should talk so I can convince you.  And you should have a Special Measures Policy (see number 10 below).
  8. Go GLOCAL – Global Standards but Local Adaptation. Organizations often formulate policies on a global basis without enough consideration of local practices.  The world is a messy place and compensation practices vary according to many factors, including local culture, level of economic development, historical practices, and a host of other reasons. Reserve some flexibility to address the market differences that exist which require wider pay spans and variable increase percentages between grades depending on the market.  Pay curves are much steeper in developing markets than in more mature ones.  If you acknowledge this, then your global standard formulaic approach won’t deliver the results you need.  In these situations, trust your local experts – they usually know what’s common in their country.
  9. Ageing of Data. Survey data is always a snapshot in time, and always retrospective, not prospective.  There are many approaches to age data forward to anticipate some market movement that is not already reflected in the survey.  It’s a good practice to make these adjustments.
  10. Address Special Circumstances. We believe every employer should develop a policy outlining specifically what steps will be taken if an unforeseen or uncontrollable event occurs.  Whether it’s economic (inflation, devaluation) or non-economic (natural disaster, civil unrest, ongoing conflict, etc.), your managers and employees want to know, when something bad happens externally, what their employer will do. It’s a real competitive advantage to have a policy in place for such circumstances, to provide clear, transparent information to all those affected, and enable your organization to act quickly and lead the market in responding to the crisis.  Yet few employers have taken the time to develop a Special Measures Policy to do this.  You probably have a crisis management plan in place for other functions, but I bet it doesn’t address these fundamental issues that become especially important to staff when a crisis occurs.

So there you have it – our top ten features to include in your compensation policy to help manage it in a market-driven, cost-effective and professional manner.  It takes time and discipline to do this consistently, but don’t be afraid to try.  Of course, professional assistance could increase the capacity of your organization to deliver and fill in any technical gaps you may be experiencing.

Birches Group specializes in the study of work – how work works.  Our Community™ Platform includes job evaluation, labor market data, skills assessment and performance management.  Through a combination of consulting, simple to use software and our focus on jobs as the core element for every employer, we assist organizations in optimizing their workforce design and ensuring their competitive goals are achieved.

We conduct multisector market surveys in 155 developing country markets, including all of Africa.  In addition, we offer a specialized survey for international NGOs and those companies organizations involved in international development in approximately 85 countries.

Birches Group can assist clients through our consulting services in the areas of job evaluation, salary scale design, compensation policy development (including special measures), as well as support for skills development and performance management.

For more information, please contact us.

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

DO JOBS REALLY MATTER IN SALARY SURVEYS?

Written by Bianca Valencia on . Posted in Resources.

Compensation professionals all use salary surveys as inputs into the management of salaries in their respective organizations.  As we all know, surveys capture market data for benchmark jobs – representative positions that are commonly found across many employers – and this data is then used to inform about other (non-benchmark) roles.

As a survey provider for high-growth and developing markets, Birches Group is focused on countries with smaller markets, fewer employers, and a myriad of different jobs, often defined differently from employer to employer.  In our surveys, we capture occupationally-specific data as a reference, because our clients demand it.  But are these references really valid or meaningful?  Below is an example from Côte d’Ivoire:

You can see that the range of pay provided by job family (green columns) closely matches the overall data at the 50th percentile of the market (grey rectangle).  The incumbent average data also varies a bit by job family, but clusters within the market range.

We would argue that fewer jobs might serve clients better. Here’s why.

Let’s suppose you hire three new staff this week – one in finance, one in marketing and one in engineering.  All three are placed in the same salary band in your company, say band C.  The starting salary for each is determined in accordance with your policy, and takes into account several factors, such as experience, education, past salary history and scarcity in the market.  You might also consider internal equity and compression issues.  In the end, all three individuals are successfully recruited and placed at three different salaries in band C, all within the lower half of the range.

Fast forward to the first pay review for the same three individuals.  What factors are used to determine their pay movement?  Performance?  Budgets?  Compa-ratio? Relationships with the boss and peers? Internal equity?  Yes to all of these.  Now how does their specific job role or occupation factor into the calculation?  Not at all!  You treat all the band C employees the same when applying your merit pay policy, don’t you?

Companies typically have generic pay bands.  Jobs with comparable value to the organization are placed in the same band, regardless of occupation or role.  Pay movement for individuals within the band is based on many factors, but it is company parameters and individual characteristics, not job or occupation, that determine pay progression.

If you agree with this conclusion, then what follows is even more important.  The occupational differences reported by most surveys, while certainly interesting, do not actually mean that the reason for the difference is related to the occupation or the role.  Rather, it illustrates that for any job, there is a range of compensation that varies according to individual circumstances.

Companies build their generic pay ranges by carefully selecting representative benchmark jobs across each job family.  They look for multiple sources of data for each benchmark job and often create elaborate calculations, with weightings of various sorts, and using different percentiles of the market data, to establish the final going rate.  This is then used to build a structure for all of the jobs at that grade in the company.  By blending data into a single going rate, you are in effect, using generic data for your structure.

So, why not simplify your life, and use generic data to start with?  Our grade averages report (other providers refer to them as level reports or roll-ups) provides all of the information you need to build a structure.  Because all job data we collect is included, even those positions with insufficient data to be separately reported, the sample size is the largest and most reflective of the market practice.

Best of all, you no longer have to wring your hands about what to do if you cannot match enough specific jobs to the survey.  As long as you know how the survey provider levels map to your internal grades, you’re good to go.

It’s time to rethink how surveys are conducted and used, and admit that false precision and complex processes are misleading and wasteful.  De-emphasizing jobs is the first step.  We will share more ideas in future articles.

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

BENCHMARKING REGIONAL ROLES: WHAT WORKS?

Written by Bianca Valencia on . Posted in Resources.

More and more companies are consolidating operations into regional centers, using a base in one country to manage businesses in multiple markets. This makes good sense for several reasons:

  • Efficiency – regional offices eliminate duplicate resources and allow organizations to focus on customer-facing positions in smaller markets.
  • Expansion – a regional approach allows for gradual expansion into new markets, permitting “testing of the waters” before entering a market.
  • Local knowledge and expertise – staff in a regional center are usually familiar with more than one of the markets in the region, so can often help bridge market, language and cultural differences.

Regional offices sound like a great model for many companies. But how does a regional role impact compensation? This is a subject of considerable debate amongst compensation professionals.

Here’s my take:

Regional roles should be benchmarked against the market where they are physically located. So, a regional role based in Kenya, focused on East Africa, should be compared to the Kenyan market. Now, I know some of you would suggest I’ve got this wrong — you think a blended approach using data from multiple countries would be better. Why?

A blended approach could result in a lower number since lower-paying, less developed markets come into the mix. In the East Africa example, would you include Ethiopia? Rwanda? Tanzania? Uganda? Burundi? In Central America, would you look at data from all six countries for a position in El Salvador?

I believe a better approach is to use local market data for the regional office location. It’s usually the largest and most sophisticated market and typically has a more robust (but not necessarily the highest-paid) labor market. But how do you match regional jobs with local country roles? What if there are insufficient regional positions in your survey for a good measure of the market?

The simple solution is a regional “premium” which usually takes the form of an increased grade level. For example, in Kenya, if a country-based Brand Manager is an internal grade 8, a regional Brand Manager might be slotted as a grade 9. This reflects a premium for the regional role to compensate for added complexity, multiple market coverage, more customers, etc. You may debate if this is enough — that really depends on your business and how the jobs are actually structured.

This is a better approach because you end up using solid benchmarks to build your country market profile, and then overlay the regional jobs using mostly internal criteria. This makes sense because each organization structures their regional roles a bit differently, and none are really solid survey benchmarks.

Another point-of-view argues that a regional position competes for talent across many countries, so all of the countries are appropriate to consider in deciding on compensation levels. But, each country market is separate, impacted by multiple factors besides availability of talent. Consider standard of living, exchange rates, tax and social insurance differences and benefits, to name a few. It’s impossible to reconcile these factors into a truly blended regional pay rate, unless you are willing to just take the highest country as the starting point. Even if you could create a blend using multiple country data, there is a high likelihood that for more senior level professional roles, the sort that are usually regional, there won’t be clear benchmarks from every country of the region used in your blend.

One more issue to think about is how to treat foreign nationals in a regional office. Most regional offices will recruit nationals from neighboring countries. Are these incumbents expats, even if there is no possible role for them in their home country? Many will have previously migrated to the regional office headquarters and are then hired; will you provide any special benefits? How should expenses such as schooling be treated, especially if languages are different (for example, a Uruguayan in Brazil, or a French national in Germany)?

My view is “it depends.”

It depends on each unique situation, and sometimes it will be necessary to provide something extra. Generally, though, I would discourage treatment of locally-hired foreigners as expats, and even for those recruited from the region, a modified local-plus approach makes more sense for the company.

By now, you are probably thinking that this stuff is getting really complex. You’re right – this is a complicated subject. What is your experience managing pay for regional roles? What pitfalls have you encountered? What are your “better” ways?

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

WHY JOBS, NOT OBJECTIVES, MATTER WHEN MEASURING PERFORMANCE

Written by Bianca Valencia on . Posted in Resources.

There is a lot being written about these days about the ineffectiveness of performance management.  Some writers suggest that we just give up, throw in the towel and get rid of performance appraisals entirely.  Others claim to have a better way.  Many focus on the fact that performance discussions and feedback are actually more useful and more critical than the appraisal itself.

Of course, we also all know that even though appraisals can be difficult or tedious, they are necessary.  All people need to know how they are doing, and they need to know this in a qualitative manner measured against well-understood, objective standards.  Staff usually put great effort into their work.  They need to know how their employer values this effort.  To paraphrase New York’s famous ex-mayor, the late Ed Koch, they need to know “how they’re doing.”

The reason performance management is such a mess is because we are assessing the wrong things!  We have made it into a pseudo-science, artificially dense and hopelessly complex.

In classic performance management, the employee develops a set of objectives, often aligned with corporate initiatives that are set at the top of the organization and cascaded down to all levels.  Through these cascading objectives, employees focus on the critical activities which management believes will deliver the business results desired during that year. This approach fails to recognize that work is dynamic.  Objectives change, become superseded, and new priorities emerge.  Using cascading objectives for work planning has value, but as part of performance management it is highly flawed.

So how can the employee get a fair and useful evaluation?  In many organizations, there will be some negotiation to remove unmet objectives and to substitute with tasks that actually got done.  Companies spend inordinate amounts of time “calibrating” ratings in an attempt to promote some uniformity which in the end further undermines transparency and management accountability.

So what is the alternative?

Assess Performance Based on the Job

We think performance can be effectively measured by considering the job instead of the cascading objectives.  Think about it.  The context of the job defines expectations.  These expectations remain constant through various operational challenges and changing priorities.  You always expect your finance officer to ensure integrity in managing financial transactions.  You always expect your brand manager to be seeking opportunities to promote your products and bring you market insights.  These expectations have been designed into the job role.  In each and every interaction, staff are judged against three simple measures:

  • Does this individual know what they are talking about?
  • Is this person listening to me and understanding my needs?
  • Can I count on this person to deliver to my expectations?

From the lowest position in the company through senior management, each and every day we are individually judged against these three basic parameters, which are informed by the job roles we encumber.

Here is a simple example:

Remember the last time you ate at a restaurant?  There was a server who took your order, brought your food and looked after you from the moment you were seated until you finished your meal.  You have no idea what objectives were agreed upon between the server and his or her manager.  But I bet you have a very good idea of the server’s performance for your meal!

For example:

  • Were you greeting politely when seated?
  • Were the daily specials explained and were all of your questions about the menu choices answered efficiently and effectively?
  • Was you meal well-prepared and delivered promptly?

You get the idea. You can easily answer the above questions about your server at a restaurant.  And if the answers were all yes, I think you’d agree that the server’s performance was excellent (be sure to leave a nice tip!).

We’ve assessed performance in this example based on our expectations of the job – the things good servers in restaurants are expected to do .  Objectives are not needed because we know how to assess performance based on our expectations of performance for the job.

Performance can be measured against three factors – Purpose, Engagement and Delivery.

Think about our restaurant server again.  The purpose of the job is to take your order, serve your food and maintain a high level of satisfaction through excellent customer service.  For engagement, the server must communicate effectively with each customer, as well as the kitchen, busboys, and other restaurant staff, to ensure that everything goes well for your meal.  Delivery is probably the easiest to understand – was the order delivered on a timely basis, accurately and in a way that makes the dining experience a pleasure for the customer?

The Birches Group Solution

At Birches Group, we’ve built our Community™ suite of applications around the three core factors of job evaluation – Purpose, Engagement and Delivery – mentioned above.  Our Community™ Performance Management (PM) module uses the underlying job levels to create a consistent, graduated scale on which to rate performance based on the expectations of the job, rather than the completion of specific objectives.  It’s a 360° approach which includes self-evaluation, manager assessment and feedback from peers and customers (internal and/or external to the organization).

The best part about Community™ PM is its simplicity.  It is easy to use and takes just a few minutes to complete a review, but provides both employees and managers with robust feedback suitable for a meaningful performance discussion.

Let’s not give up so fast on performance appraisals.  Instead, let’s try managing them differently.

We have — and it works!  Contact us to learn more.

Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.

BASICS OF WORK WHITE PAPER

Written by Bianca Valencia on . Posted in Featured, Resources.

Organizational design and job evaluation can be simple things to understand. By not focusing on the simple, clear and purposeful aspects of work, many HR “gurus” have made this simple starting point more complex than it needs to be. The result is staff and managers who are unclear about their purpose and role, which results in ineffective organizations. To clear things up, we need to go back to the basics.

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THE COMMUNITY PLATFORM

Written by Bianca Valencia on . Posted in Featured, Resources.

Birches Group Community™ is an integrated talent management solution that’s simple to use and brings clarity around the value of work. We fuse job design and evaluation, compensation management, skills development, performance management and consulting to bring order to your business.

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LETS TALK ABOUT WORK – INTEGRATING HR

Written by Bianca Valencia on . Posted in Resources.

Human resource management is more alchemy than science.  The mysterious ways HR tries to blend policies and approaches to create an effective workforce usually has the same disappointing outcomes as Medieval conjurers had with trying to turn lead into gold.  We at Birches Group think constantly about this challenge and why HR struggles to become more of an organized discipline.

The analogy of alchemy to the state of HR is particularly apt.  Alchemy as a foundation of science existed across the planet and held sway for centuries.  Only with the introduction of intellectual rigor and modern methods of scientific inquiry that relegated alchemy to its final resting place with astrology and magic.  A large reason for the fall of alchemy:  the rejection of ancient wisdom.

Many approaches to modern HR management similarly rest on broadly accepted notions that when examined with greater rigor simply do not hold up.   Equally HR often just cannot see the self-evident, fundamental contradictions that are starkly present before our very eyes.  A critical confusion reigns in HR’s (mis)understanding of jobs where it muddles the purpose of work (i.e. the focus of the job) with features of incumbency (i.e. the person in the job).

To bring rigor to HR it is necessary to bring clarity to the distinction between jobs and people.  This may seem obvious but it is all too rarely found in most HR programs. 

In Birches Group, our point of departure is that with clarity on job design all subsequent HR functions — from compensation setting through recognition and reward — can be well aligned and integrated.  Without clarity on jobs all that follows is out of focus and usually stymied in effectiveness.

There are many approaches to job design and evaluation.  Most of the classic approaches fail on two basic points: 

  • the evaluation criteria include elements related to the person and not the job; and
  • the methodologies are dense making them inaccessible to non-HR managers, and therefore are not compelling or convincing to the rest of the organization. 

However, the biggest weakness in conventional job design and evaluation is found in the information which is gathered about jobs themselves.

The job description in most organizations is a rather loathsome document.  Managers hate writing them, often cutting and pasting rough fitting passages from other job descriptions.  The result are descriptions of extreme inconsistency and questionable value either to support good job evaluation or as a founding document in support of other HR functions.

And it is of little wonder how this situation arises.  HR gives managers little to no guidance about how to describe work.  Little more than a blank piece of paper with possibly some identified boxes is provided. No briefing about the distinguishing features which define different job levels and how teams are formed are provided to managers. 

Birches Group has pursued a different approach.  Firstly, we have lifted the veil on job evaluation.  No more pseudo-science of point-factor evaluation; No multiplicative factors which overlap and blend person-based characteristics with job elements.  Simple and accessible is our mantra.  All that is needed is all that we give.  We use just three factors to illuminate distinctions in work, and organize work into four clear and complementary clusters of job levels.  The components of team are readily available for managers to understand how teams are formed.

And as for job descriptions?  Yes, we have developed a simple methodology which uses just six functional statements, no more or less, linking job design to the underlying factors which distinguishes its level.  Using this approach, managers are free to craft jobs with clarity which are compelling for staff and consistent for the organization. 

Getting job design right is just the first step in making HR a rigorous discipline.  What makes our methodology radical is we have not stopped here.  The principles and tools which support job design and evaluation in Birches Group have been refined and adapted to form the foundation for all following HR functions.  Rather than the disjointed disconnect that generally prevails in HR between structural policies (those governing jobs and pay) from people management policies (those which guide recruitment, development, and reward), our approach is seamlessly connected.  We start with jobs and really, where else would you start?  Jobs are at the foundation of every organization.  It is the conversion of mission into action.  That is why it needs to be done right.  The simplicity of our approach, our methodology, positions HR to partner with the business function by demonstrating a true role in building an effective workforce.  Only HR can undertake this role, it’s about time we start.

Gary is the founding and managing Partner of Birches Group.  He has worked in the areas of organization design and compensation management for over forty years.  Following a career with the United Nations, Gary has led the Birches Group consulting practice working with many leading international organizations in over 100 countries.  Gary has pioneered a new simpler way to integrate job design with skills and performance through Birches Group’s Community™ platform.  He is recognized as a global expert on job theory and design delivering workshops and lectures around the world

IT STARTS WITH JOBS

Written by Bianca Valencia on . Posted in Resources.

The Birches Group solution for job evaluation is Community™ Jobs.  In a prior article, we explained a bit more about our integrated approach to HR management through the Community™ platform.  In this article, we will delve more deeply into how organizations establish their internal structure, and how to measure it.

Community™ Jobs is intuitive.  It segments the workforce into groupings of jobs that are clearly distinguishable from one another in a progressive manner, zeroing in on the placement of jobs step by step.

The How and The Why

The first step is to determine into which of two categories a job falls:

The How and The Why

This division of an organization can be traced back to the military.  The Roman Army was the first large organization where roles were arrayed according to rank: the enlisted (“How” jobs) and officers (“Why” jobs). These military structures have been adapted by private and government institutions over time, and while they certainly have evolved a lot since Roman times, the fundamentals are still the same.

The two categories are complementary:

  • Why jobs focus on managing and leading the organization, and the origination and delivery of policies, products, and programs.
  • How jobs focus on executing processes and transactions, including quality control, under predetermined guidelines.

Let’s take a closer look.

The Community of Work – The Four Job Clusters

Within the categories of How and Why, we have identified two clusters of related jobs within each group, as shown in the diagram below:

Job levels found within each of the job clusters defined above possess similar characteristics based on their purpose and contribution toward the organization’s mission.

Fourteen Job Levels

Once jobs have been classified into their appropriate clusters, using the three job evaluation factors of Community™ – Purpose, Engagement, and Delivery – it becomes possible to finally evaluate jobs, level by level, into Birches Group’s fourteen Community™ job levels.

Beginning with physical or manual roles at BG-1 under the General cluster, all the way to organizational leadership at BG-14 in the Leadership cluster, the fourteen Community™ job levels can easily be adapted and used to determine equivalent worth amongst jobs in any organization.  The table below shows the values for each factor by level.

When an organization’s jobs have been aligned to the fourteen Community™ job levels, a foundation is established to easily ensure internal equity, measure market competitiveness on pay, assess skill level among staff and manage performance evaluation, using the integrated Community system™.

To learn more about Community™ and how it can support your organization, contact us.

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.