In a word, NO.  In two words, "H*** NO". 

Of course, you know that.  But, even if you and the rest of the world understand the risk, most of us are still plodding along with a merit system that doesn't protect stars.  Each year, we see the details regarding merit pay from World at Work, via their annual salary budget survey.  The 35th version of this annual survey (which includes over 2,700 participating organizations) was recently released, showing the following:

-The 2008 actual average increase in salary budgets was 3.9%, and the survey projects a 3.9% increase again in 2009.  Good news in a bad economy. 

-For the third consecutive year, participating organizations are reporting that, on average, 91% of employees can expect to receive an increase in their base pay this year.

-High performers can expect raises of over 5% while below average performers can expect 2% or less.

Good news on the salary budget growth front, and that most companies are still doing merit increases in a down economy.

As for the average increase for high performers, 5-6% is nice, but it won't protect your best talent.  Remember that the best time for employees to get a double digit increase is when they accept an offer to leave your company, and many recruiters actively do the math to figure out what type of offer it will take to steal your star.

So, when I read this, I'm thinking not about the masses.  I'm thinking about the stars, and looking in the sofa for spare change to make them feel different.

It's almost August, and that means we're heading down the stretch of the baseball season.  It's also hot, which tends to bring out the worst in tempers (or the best, depending on how you look at it) in the national pastime.   

Imagine a workplace where a manager can have a classic meltdown, complete with throwing things, screaming about 100 obscenities and generally losing all control.

Hopefully that's not your workplace.  But there's one like at a ballpark near you.  And when this manager does it, he's an embarrassment for his corporate office, but probably raises the future profitability for the division he resides in.

The manager?  Take your pick.  The most recent one? The Minor League manager Kash Beauchamp (Wichita Wignuts, independent minor league franchise).  Oh yeah - forgot to tell you - his tantrums are caught on tape:

That's classic "I forgot my meds" stuff.  Can you imagine these guys applying for a position at SuccessFactors, where they have a "no a%&*&**s" rule? (Warning - vulgarity follows the link)  The lead recruiter googles their name, and up pops the video and.....  Well, let's just say that each one of them gets the automated "thanks but no thanks" response to his resume....

We've flogged the topic of pay transparency and employee sources for pay data enough lately - both here and over at Fistful of Talent, with good friend of the Capitalist Ann Bares pitching in as well.

Still, there's room for one more post, right?  Penelope Trunk had a post up recently advocating that the pay data for every employee in your company should be public knowledge in your firm.  PT gets paid to mix it up, so that wasn't a surprise.  In addition, her point regarding the need for managers to have the skill to defend the differences in pay is valid.  What she doesn't tell you is this:

1.  There's a basic privacy issue involved.  Lots of employees don't want others to know what they make.  That's a pretty big trust issue related to managing a workforce.  In fact, I can't think of a bigger problem with opening up pay data.

2.  Your current slate of managers isn't capable of defending the differences in pay between positions or within the same position.  If Penelope had a company with 40 managers, most of them wouldn't be ready for this either, regardless of experience.  It's not their fault.  The free market is a dynamic thing, and they didn't start the fire - and most aren't capable of diffusing an irate employee on this topic.

In the comments of PT's post, there's a question regarding the fact that if governmental salaries are public information (and they are in most cases), do governmental agencies face problems as a result?

"I also know that you can easily get most state and federal employees' salaries via FOIA. I wonder if that screws up government offices (more)?"

I think Lance at Your HR Guy posed that question, and it's a good one.  My experience with this is that governmental agencies usually operated a pretty strict scale regarding how they bring people in and value experience within the salary range.  While that causes less drama, it also costs them valuable talent that can command more $$$ in the free market away from the government.

Lance also notes a free market reason why he has reservations on the practice - the fact that it would make it easier for competitors to poach your talent.  Same reason why you have to pause before you publish entire company org charts openly to all employees in the company - who needs to make it easier for others to steal your top talent ? 

It's easy and fun to call for total salary transparency.  It makes you look progressive.  I tasted the Kool-Aid.  It needs more sugar, so I'm not drinking....  Most who have managed employee relations with a company/unit of significant size will be like me.  Attractive idea, but there are many, many unsolvable issues that will prevent you from squeezing the trigger.

There's always been a school of thought that playing sports as you grow up has value.  Regardless of your skill level, the thinking goes that, via sports, you learn valuable lessons about persistence, competition and how to be a good teammate.  JLee wrote about it over at Fistful of Talent earlier this week.  I agree with those thoughts, but would stop short of saying that sports are the only way to learn those lessons.

Apparently, being active in sports may also be valuable when you're all grown up.  From the Wall Street Journal (hat tip to Capitalist reader Christopher):

"Playing sports at least once a month may have as big an impact on your long-run earnings as an additional year of schooling.

That’s the conclusion of a study published by the Centre for Economic Policy Research that explores the relationship between leisure sports and labor market outcomes. Its author, Michael Lechner of the University of St. Gallen in Switzerland, takes a rigorous look at how the decision to play sports influences one’s wages years down the road.

Using survey data that followed the lives of thousands of Germans from 1984 to 2006, the German Socio-Economic Panel study, Mr. Lechner found that sports-playing adults saw a boost in income of about 1,200 euros per year over 16 years when compared to their less active peers. That translates into a 5-10% rate of return on sports activities, roughly equal to the benefit of an extra year’s worth of education.

It turns out, according to Mr. Lechner’s calculations, that only about one-fifth of that increase comes as a result of better health. Some of that unexplained component could be chalked up to social networking benefits. In fact, the sports-playing men in Mr. Lechner’s study reported a significantly higher level of “social functioning” than did the less active men. The fact that the German survey followed people over time allowed Mr. Lechner to compare people with the same amount of sports activity in their past. So former high school athletes were only compared with others with a similar amount of experience."

Click through for the comments on the original article regarding testing bias, confounding variables, blah, blah, blah.  Interesting to see some science behind this, and more interesting to note it's about participation in sports as an adult, not the lessons learned as a child.  They even control, in the study, to compare adults who had similar activity levels as a child.  So they're comparing the child sports prodigies with each other.   

Me?  I'm still hooping like Jim Carey in Cable Guy.  Making friends and influencing others just like him.  We usually play prison rules over at the Y - you should stop by next week.  Here's some video of what to expect...

You can check out (and many have), but you can never leave....

From a site called the "HR Files", which brings you a tasty quiz on what they consider to be HR.  Among the nuggets stretching your Talent management muscles and jones for action:

"If a company requires an applicant to have a physical examination in order to be considered for employment, the employer must pay the costs of the exam. T F

It is legal to prohibit supervisors or managers and subordinates from dating each other if the relationship could potentially damage the company's reputation. T F

If a pregnant employee can not perform her job due to lack of skills rather than the pregnancy, the company can terminate her. T F"

I know, I know, I'm a snob.  First person to take the entire quiz and send me their score in the comments wins a used copy of the Ft. Harding State personnel manual.  It's a keeper and choc full of employment and payroll law stuff.

Will my answer suffice?  "Um, hey do you mind if I keep recruiting or working on an issue that seems to be a little strategic and then we can do that research when presented with the issue, rather than thinking we need to close the knowledge loop in that area now?"

Please?  Thanks for the legal and payroll primer though....

Last week we profiled an interesting article over at the Wall Street Journal outlining the cafeteria style compensation plan of Skyline Construction, which allows eligible employees to pick their own salaries, within a specified range.  The catch: Choosing a lower salary means a shot at a larger bonus.

It's like Vegas without the free drinks.  And a whole lot more accountability.

We had some good dialog in the comments and were fortunate enough to have the CEO of Skyline, David Hayes, check in with clarification on some points the article didn't have a chance to make, as well as more detail in his philosophy on rolling it out.  Here are his notes (with his permission) for the readers of the HR Capitalist:

"Hello Everyone,

As CEO of Skyline, I’d like to comment on all of the above (see comments and original post).

First, let me say that no comp plan is the perfect solution. I worked at a Fortune 500 firm for 12 years and had some horrible experiences related to compensation, which ultimately made me leave. At that particular firm, base salary ranges were the same for each job category and all bonus was discretionary. Even after producing more profit and sales than any of my coworkers in the same job category, I was rewarded with a bonus slightly above others and less then some senior people who had more tenure. I got the "oh junior, your day will come, relax." Talk about a buzz kill!

When I became CEO of Skyline, I knew I could not satisfy all of the people all of the time. Instead, I needed to make a cultural commitment that I believed in passionately. Being an interior construction firm in San Francisco is not unique. There's little barrier to entry and lots of competition. The quest became, "how do I develop a unique culture to create a superior client experience and have highly motivated people pushing that commitment"?

I decided on the following structure:

• Equity stake in the company performance for everyone (we’re an ESOP)

• Incentive based compensation that was measurable and tied into profit, client satisfaction and other key performance indicators

• Open book management to teach each employee what it really costs to run a business

• Have the people who do the work, develop the strategic plan based on the ultimate mission and goals

Implement, watch, learn, adjust and implement again. After 40 months, we’re in the “implement again” stage.

On the compensation plan: many of your points are right on the mark. Candidly, the peer pressure to comply with the group is there, is on purpose, and is working. With so many competitors in our marketplace, employees who don’t like it have many excellent firms to go work for who will pay them the same salary. However, the statement about higher salary selection employees being coasters or weak, is unfair. Those choices are usually made by employees who just purchased a new home, started a family, have a spouse that is not working, had some personal health challenges that impacted their time at work, etc. We have had employees who made the high salary choice who did "coast" and guess what? The peer pressure to perform was brutal and they left for a competitor. It has happened twice in the last 3 years. That's okay by us. We are who we are and not for everyone.

Finally, as a former college athlete who played on a team, this is anything but "anti team". In fact, it is pro team. A team consists of individuals committed to the same goal, using their individual talents to contribute to the team’s success. Great teams are not always the best players but the players who bring out the best in each person, thus making the power of many better then the power of each individual.

I hope this helps, and I really appreciate all the intelligent discussion around this topic!"

David - thanks for checking in.  Good to hear more depth about your program, and while we can all extrapolate how it would work in our environments, you're living it and to be commended for taking chances with how you motivate and compensate! 

Hope you have a chance to check in often and join the discussion!

The price tag bandied about regarding Google Daycare - 57K for 2 kids under Google's new bundling plan - sent a shockwave out across parents in the working world.  Relax everyone, it's got more to do with the cost of stuff in the valley than it does with any Google desire to stick it to working parents.

For some perspective, let's rely on economic data supplied by yours truly and trusted subscribers to the Capitalist:

-First, there's me.  I live in Birmingham, Alabama, a metro area with a population of a little over one million.  The southeast/sunbelt is known as a pretty affordable area to live, and the magic city was recently rated as the 3rd most affordable housing market in America.   I had two kids in high end, education-first day care for four years, and the biggest annual bill I ever had was around 16k.  That's 8K per kid, and that came down a bit as the youngest one got out of infant care, etc.  (total annual cost per kid - 8K).

-Then, there's my friend Evil HR Lady, who hit us in the comments to the original post.  I don't know where she lives, but my guess is it's a metro area bigger than Bham that's not on the west coast.  She gave us the weekly cost of $300 for one kid, which is $1,200 per month or $14,400 annualized (assumes 2 weeks out for a trip to the EHRL beach house) (total annual cost per kid - 14.5K).

-Next, friend of the Capitalist, Meg, gave us the baseline cost of daycare in the Silicon Valley area, providing a figure of $10/hour or 20K annually for solid daycare.  Ouch.  (total annual cost per kid - 20K)

So, those are the market figures, and it's important to note that those prices represent, parents paying 100% of the cost.

And, that's where the math gets freaky when comparing the market to Google's subsidized daycare. 

Let's start with what's easy.  Daycare at Google, for those fortunate enough to get the benefit (supply/capacity issue) use to be able to get 2 kids in daycare for 33K a year, or 16.5K per kid.  That made it twice as expensive as Birmingham, but comparable to where Evil HR Lady lives and cheaper than what folks could buy on their own in the Valley.  With the price increases, that figure goes up to 57K, or 28.5K per kid.  That makes it twice as expensive as EHRL, and significantly more costly than what Meg reported as a baseline.

But, that's not the full story, since Google was subsidizing and continues to subsidize the cost of their daycare.  According to the NYT article, Google was subsidizing the cost-per-child, before the change, to the tune of 37K per child, meaning the total loaded cost was 53.5K per child (wow).  The article suggests that Google was making changes to the childcare operation that included raising the child per caretaker ratio.  That would naturally drop the total cost.

Assuming Google made changes to the childcare operation that resulted in them providing a subsidy per child similar to Cisco and Oracle (12K per child), the total cost of the Google daycare solution would be 40K per child (28.5 per kid plus 12K - I rounded down).

And that's roughly 5 times the Birmingham price, 3 times the EvilHRLadyville price, and 2 times the normal Silicon Valley price. 

Which means if I ever work for Google, I would be... how do we say it....

...a Telecommuter, from Birmingham.

WOW.      

Looking for a feel good human interest story this week?

Consider the case of Josh Hamilton of baseball's Texas Rangers, a former first-round draft choice who burned through millions after succumbing to nasty drug and alcohol habits, only to get clean after three years and re-emerge in the Major Leagues last season.  Call him the comeback kid. 

Hamilton went from skid row to being named to the American League's All-Star team this season for his work with the Rangers.  As a part of the festivities of the 2008 All-Star game, Hamilton participated in the Home Run Derby, and hit a record 28 Home Runs in the first round of the derby before falling in the finals to Justin Morneau.

Still not feel good enough for you?  When you participate in the Home Run Derby, you get to pick who pitches to you.  Hamilton picked his youth coach to pitch to him at Yankee Stadium:

"Years ago, Josh Hamilton made a promise to Clay Council. They never shook hands or signed a contract. It was just the word of one baseball player to another.  Hamilton, an Athens Drive student at the time, told Council, an American Legion volunteer coach who tossed batting practice, that if he ever reached Major League Baseball's Home Run Derby he would take him along to pitch.

Three weeks ago, Council's phone rang in his Cary home. On the other end was Hamilton, the former Athens Drive High School phenom and now major league All-Star for the Texas Rangers.  "That's the first guy I thought about," Hamilton said on Thursday after batting practice before a game against the Los Angeles Angels at Rangers Ballpark.

Hamilton added, "He's done so much for so many kids and probably hasn't got a lot of thank yous for it. This is a big thank you." Hamilton, voted this season to his first Major League Baseball All-Star Game, called Council to remind him of the promises they made to each other years ago.

"Are you as good as your word?" Hamilton asked.  "Yeah, man," Council answered.

And so 71-year-old Clay Council will travel from the Triangle to New York on Sunday to toss pitches to the Raleigh-born Hamilton during Monday night's Major League Baseball Home Run Derby at Yankee Stadium."

If you aren't familiar with the comeback trail of Hamilton, read up on the fall from grace that occurred due to drug addiction.  As a part of the story, you'll read that a little faith and a lot of behavior modification has gone into Hamilton remaining drug-free.  He never has more than $10 in his pocket, fearing carrying cash will test his will power to stay clean.

Here's the Talent angle to the story.  If you've been in an HR generalist role for a significant time period, you've dealt with employees who have struggled with drug abuse.  You're also painfully aware that few make it back from serious addiction, with relapse frequently occurring.

I thought about that at the start of the Home Run derby.  28 home runs later, I'm suddenly more open to wondering if someone with a history of addiction can turn it around, do the 180 and stay in the workplace permanently after returning from rehab, etc. 

Great job, Josh.  On the recovery, not the home runs.  Here's hoping you never look back.   

Like many of you, I've been to Costco.  Like all of you, I've been to Wal-Mart.  On the employee PR front, it's not hard to find articles that say Wal-Mart is terrible at taking care of their employees.  If you pay attention, you'll also see information that heaps a good amount of praise on Costco for their treatment of employees.

So what's the difference, and does it result in better service to you?   Let's examine pay, benefits and retention at Wal-Mart and Costco, then think about whether the customer sees the difference.  From Slate:

"It's not hard to make a case that Costco pays employees more. The most relevant comparison is between Costco and Sam's Club, Wal-Mart's membership warehouse, since both business models rely on membership fees for a large percentage of revenues. A Sam's Club employee starts at $10 and makes $12.50 after four and a half years. A new Costco employee, at $11 an hour, doesn't start out much better, but after four and a half years she makes $19.50 an hour. In addition to this, she receives something called an "extra check"—a bonus of more than $2,000 every six months. A cashier at Costco, after five years, makes about $40,000 a year. Health benefits are among the best in the industry, with workers paying only about 12 percent of their premiums out-of-pocket while Wal-Mart workers pay more than 40 percent.

Another theoretical benefit is that Costco employees, being better paid, are less likely to leave the company. Again, some data back that up: Greenhouse points to Costco's low turnover rate, which is 20 percent and, among employees who stay at least a year, 6 percent. Wal-Mart's is about 50 percent (no separate data for Sam's Club). But is this a business advantage for Costco? While some point to the costs of training and hiring new employees, a widely leaked 2005 memo from Wal-Mart offers a different perspective. In it, Wal-Mart's senior vice president of benefits argued that the company's turnover rate was too low. After all, she explains, long-term employees are more expensive and not necessarily any more productive. Such reasoning—though sinister—may actually help explain why Wal-Mart's profit margins are twice as high as Costco's (3.36 percent compared with 1.75 percent).

Costco's revenues per employee are about five times as high as Wal-Mart's. (No separate financials are available for Sam's Club.) Then again, it's also the case that Costco sells more expensive stuff—high-end French wine, triple-cream brie, and Cartier watches, all of which presumably have high margins—along with the cheap toilet tissue."

So, what conclusions do you draw from that, both as a HR/management pro, and a customer?  I'll take the HR side first and say the obvious - Costco looks like they care about retention, both with the aggressive pay plan and the benefits.  That's a good thing. 

The difference in pay (assuming good performance) is startling, and while it's difficult to know the details around their benefits, enough bad stuff is out regarding Wal-Mart and benefit eligibility/employer contributions that it's easy to call it vastly superior.

Here's where it starts to get tricky from a business perspective.  Costco has revenues per employee five times as high as Wal-Marts, but Wal-Mart's margins are twice as high as Costco.  Here's why Costco's revenue per employee is higher - they have a dramatically different staffing model, and don't need nearly as many employees.  When's the last time you saw a Costco employee before you hit the checkout line?  Never - and the "try this snack people" at every isle don't count, they're contractors. 

As a result, I can't say the customer service I get from Costco employees is significantly better than Wal-Mart's, because there isn't really any service.  They roll it in on palettes, I throw it in a big cart, then go to a checkout line modified to handle the big cart, usually without a "how are you today?" from the checkout person.  All the manpower is focused on checkout/security, and the overall staffing per store is as lean as possible, and much leaner than a typical Wal-Mart.

As a result, Costco has the ability to treat their employees well.  Wal-Mart could do some of the same, but will never catch up.  It's economics, they need too many people per store because they don't roll it in and display it on palettes. 

So, I'm glad Costco treats their employees that well, and I think it's obvious that the business model allows them to staff lean and treat the employees they do have well.  That's cool.

I just wish I could feel the retention as a customer, because I can't...

Update - found the following staffing analysis for staffing levels at Sam's Club vs. CostCo at staffing.org.   Still looking for normal WalMart metrics.  "In 2004, a well publicized study of Wal-Mart's Sam's Club and rival Costco compared the HR policies of the two companies. The particular significance of this study lay in the fiercely competitive low-end market they both serve, where strict cost-control, a Wal-Mart specialty, was thought to be essential to success. The comparison showed that despite much more generous salary and benefit packages, Sam's Club's cost of labor and overhead as a percent of sales was 17%, almost double Costco's 9%. Added to that, Costco's sales were much higher on a per-store basis as it generated nearly as much total revenue with one-third fewer employees. Consequently, profit per employee at Costco was $13,467 compared to only $11,039 at Sam's Club." 

Let's say you're an early bloomer - a responsible Gen Y guy who had kids early, and because of the nature of your workplace, you're around a bunch of peers who don't have the same responsibilities you do.  They're not married and don't have kids.  Like the Fresh Prince's parents, they just don't understand.

If you're Corey Hart (not the "sunglasses at night" guy, but thanks for asking), that's you.  You hang out with a bunch of Gen Y males to whom beer is made readily available, in the workplace, at the end of the "shift".

Sounds like a blue collar job, but it's not.  Take a look at this funny (to some it might be scary) video.  Hart's a professional baseball player with the Milwaukee Brewers, who just got named to the All Star Game.  Because he's a stand-up professional, he's meeting with the press to talk about it.  Because he's a dad, he brought up his young daughter to sit on his lap while he talked to the media. 

Take a look at the video and I'll see you below after the clip.

That's right, the Gen Y crew busted through the door, happy for Hart, and showered him with beer (that's why they call them the BREWERS and they play at MILLER field).  Just one problem, this one little thing... They started the freight train of interruption and beer bath with the little girl on his lap.  Didn't the ladies used to wash their hair with beer back in the day?  I guess this little girl is getting an early start.  Here's my fictional memo that would have gone out the next day...
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TO: All Players
FROM: Management
DATE: July 11, 2008
RE:  Your Powers of Observation and Appropriateness

Team - great idea to celebrate Corey's first All-Star game in front of the media last night.  Always good to show unity and all that.  There's just this one little thing - do you think you HEATHENS could have noticed the 2-year old LITTLE GIRL on his lap before you busted down the door screaming, charged his seat and doused him with a 24-pack of Old Milwaukee?

C'mon guys, what's next?  Demolition Derby with one of the spare wheelchairs against the folks who use the handicap access on the main concourse?  THINK, then act.  Flight to New York today is featuring "Fried Green Tomatoes" to help you get in touch with your sensitive side.  PS - Corey tried to save some bucks and took the consumer based plan in 2008, so if the girl needed treatment or therapy as a result, I suggest you spot up and take care of it for Corey.

THINK, then act.

Skipper
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