Fistful of Talent

Square Peg, Round Hole - Can The Traditional Organization Afford to Focus on Strengths?

Is performance management upside down in Corporate America?  Here are a couple of quick observations:

1.  Jobs are structured for the company, not the employee.  I'm not saying that's wrong, just outlining the facts.

2.  90% of the time we spend talking about performance is about how to manage negative variance.

3.  We don't spend a lot of the time evaluating how we can continue to maximize a person's strengths.  We'll tell them they are doing great, give them an "exceeds", then move on to how they can improve their "areas of opportunity". 

4.  The combination of those competencies, that create "jobs", are pretty inflexible in corporate America.

With that in mind, it should come as no shock that while we love to read books like "Now Discover Your Strengths" and nod accordingly when discussing, we pretty much go back to the coal mine and expect people to fit in the traditional spaces we've defined.

Scott McArthur talked awhile back about the power of positive, strength-based psychology in the workplace.  From the sweet rundown at McArthur's Rant:

"Positive psychology suggests that by focusing on people’s strengths rather than on their development needs we can transform wellness at work and as a consequence improve organizational performance.

The notion behind the work that is being done under the banner of Positive Psychology is to enhance our experiences of love, work and play and by doing so encourage wellbeing. This is in contrast to the traditional ways of thinking in both psychology and business where the focus is on finding what isn't working and trying to fix it.

Techniques such as Appreciative Enquiry and Strength finders (Gallup) as well as writers such as Csikszentmihalyi in Flow: The Psychology of Optimal Experience have been extolling the value of adopting this approach for some time. In Gallup’s case they have produced some strong statistical evidence that it works.."

Scott acknowledges in his post that while focusing on employee strengths is a powerful tool, it's problematic for the traditional organization to figure out how to do it.

Here's my take.  The power of focusing on strengths in corporate America is probably best used in a combination of performance management and engagement.  The smart managers know that they can't adjust a role to fit the employee's strengths with a 100% match.  But with the right amount of praise, coaching and organizational flexibility, they can create an environment where the employee understands that the more efficient they are in their formal job, the more they can chase what they really love to do, and maybe even innovate and create stuff on the way.

And that would be a pretty cool thing... 

We Need a Way To Measure "People." FAST!

Quick: what's the most important determinant of a company's success?

Did you say Culture? Leadership? People? Something like that?

If so, good for you. You're onto something.

Now, here's your challenge: since people do what gets inspected (not expected), and what gets inspected is what gets measured, you're going to have to fight a torrent of pressure pushing you to solve financial problems with financial solutions... not because people think financial solutions work, necessarily, but because those are the ones that we can measure.

Never mind that they got us into our current financial crisis. The power to focus on what gets measured is simply that strong: here are homepages from BusinessWeek, The Wall Street Journal, and Fortune. All of them, on May 10, contained stories entirely focused on financial metrics. We're still very much an economy driven by dollars and finances.

(Kudos to Fortune for having a "management" tab... even though the stories on that page were a bit... light.)

Just because we cannot measure the value of human behavior—and let me be clear, by "measure," I do not mean with a Myers-Briggs test—does not mean that human behavior does not have a critical impact on our financial well-being. Denying the impact of leadership, culture, people, etc. due to lack of measureability would be like denying the health benefits of blueberries due to the inability to measure the impact of antioxidants. Logically, that makes no sense!

Even if you don't deny the benefit of blueberries and their antioxidants, you still have a problem when putting together nutrition information boxes: if you can't measure the value of antioxidants, you can't put that information in the nutrition info box, and if you can't put it into the box, then others can't use the info to make a decision.

It's a tough spot.

Unless you have the creativity to spot causal relationships and the courage to stand by your convictions, you may find yourself trapped once more by the same-old-same-old quarterly earnings pressures.

When you do, just remember that when I asked you what the most important determinant of your company's success was, you answered people.

Stay focused on what's most important, and you'll be fine.

Editor's Note: Editor's Note: Jason Seiden is a career consultant for professionals and managers (http://jasonseiden.com/). He wrote the best dang career book ever (just ask him), called How to Self-Destruct: Making the Least of What's Left of Your Career, and is a master facilitator of the cranial extraction method of on-the-job performance improvement.  And yes, even though we value the intrinsic worth of his writing, we pay him per post.  That makes us part of the problem..

Taking the Easy Way Out - Cutting Hours to Reduce Costs Is Not the Answer...

Ok, I admit it... I read the April 2009 edition of HR Magazine - well at least one article, and a look in the back to see what companies still use their HR Jobs section (which can't be a good use of recruitment dollars). The article that caught my attention was Cutting Hours Without Raising Hackles by Senior HR Mag Writer, Rita Zeidner.  I'm always concerned when HR folks start talking about cutting expenses by cutting hours, primarily because it demonstrates very short term thinking without really understanding the cultural ramifications.  Zeidner shows in her article that some of the benefits of cutting hours vs. layoffs are: smaller unemployment tax hit, spreads the pain amongst all staff, cuts your risk of discriminating against protected classes, could head off certain charges from the EEOC, etc.

I'm still trying to figure how cutting hours reduces costs and helps the bottom-line.  

I do see one positive, in that keeping your talent employed would have huge advantages when your business turns around.  But in the words of Ricky Bobby "that's it, Chip"!   To be an HR Pro who is also a Business Partner, we must recognize the bigger picture for our operations partners.  So, let's look at what we miss when we make the decision to cut hours vs. layoffs:

1. For salaried workers, cutting hours now gives them an hourly working mentality. Think about it - you tell them you're going to cut 10% of their hours and 10% of their wages, and they instantly will know that is a half day a week.  They then begin counting hours - where prior they probably worked more then 40 hours and never gave it a thought - You can now plan on no extra discretionary effort.

2. "Spreading the Pain" - I love that quote, basically because I'm a high performer and guess what I'm going to do while you spread pain. That's right - I will be working for your competition to kick your butt.  Within HR, you need to have courage not to spread pain - but to reduce your staff by letting go of your lowest performers.  Your high performers will respect you for it (and probably give more discretionary effort) and your middle performers will make sure they don't become low performers.

3. In terms of reducing risk, it is our job to help our organizations mitigate risk to the appropriate level - any time you leave someone on because you are attempting to reduce risk - you're making a poor business decision - especially if that person is not performing to standards.

4. Lastly, as savvy HR Pros, we need to build the ROI Value equation for our organizations and our workforce.  Yes, we get some wage expense savings by cutting hours - but is it equal to the value output that person provided to the organization? If it is, you need to question why that person was on to begin with - for the most part every person in the organization should have a bottom-line impact that is greater than their salary and benefits (do you know what yours is as an HR Pro? - You should).

It is time to Raise some Hackles and as HR Pros demonstrate how to add value back to your organizations, and it is not by showing them you can manage and cut expenses better than every other department.

Feeling Tense? Hate the New Guy? It Might be Making YOU Better at Your Job!

In the latest from the "research from people who do annoying studies to prove bloggers wrong" series, a study from researcher Katie Liljenquist suggests that "the new guy" (or gal) can actually make us better at our job.

Lijenquist's findings show that "socially distinct outsiders" actually make for a more effective team than a team with perceived "cohesiveness". Or in simple terms, we don't have to like each other, in fact, it's probably better if we don't all get along, as it makes us better at our jobs.

It makes sense. I recently had a friend over for dinner and I asked how his job was going. He stated it was going well but mentioned that a new boss was making everyone fight for their jobs. He seemed irritated himself but said his coworkers were certainly performing better. While not a comfortable situation for him or his coworkers, reports from his store proved that numbers were soaring.

What does this mean? Let's look at it from a couple of different angles:

--Recruiting Professionals: Well for one, culture fit may be a little less important to overall effectiveness than we originally thought. What initially seems like a perfect fit, may end up being the "weakest link" in terms of the best person for the job.

--Managers: Choosing a team to work on a crucial project? It's NOT the same as choosing sides in kickball. Just because people like each other doesn't mean they are the best choice to work together on a project. The folks that "stand out" create tension and force other members of the team to analyze information more accurately.

--HR Pros: Don't ignore diversity efforts. Diversity means bringing different people to the table, creating the tension that Liljenquist says can create better performance. Recognize that by hiring like-minded employees you may not be seeing to the company's long-term best interest.

--Employees: Recognize that in this economy, there are going to be a lot of new faces, whether you're changing jobs, being reorganized, taking on extra duties or hiring a new team member. Understand that being comfortable is not the same as being successful. Embrace it! Be okay with getting "bumped".

P.S. Please get down on your knees and thank me for being the ONLY person who blogged about this without mentioning Dwight Shrute. Oh...dang it.

Performance Precognition - The Talent Management Minority Report

In the 2002 movie Minority Report, a trio of "precogs" predicted crimes before they occurred and the "pre-perpetrator" was arrested and convicted based on the premonitions from the "precogs."  Wouldn't it be nice if we could do the same with talent in our organizations?  Not the arrest and conviction part but the predict future performance part?

Unfortunately, we don't have a way to predict performance.  We do the opposite of what "precogs" do.  We manage talent by watching, measuring and documenting past behaviors and performance and then devise interventions to "fix" any problems we uncover.  No problems - no intervention.  But this process has a major flaw. When you focus on the lower performing personnel (and let's face it - we all do) the top performers notice.  When top performers see you spend all your time with the non-performers, the message is - "if I want time with management - I better screw something up."  Management attention is a form of reward.  Unconsciously, you are rewarding poor performance.

What to do?

Bring in The PreCogs

There is a site called The Situationist that is associated with Harvard Law School.  Their mission is... "provide a forum for scholars, students, lawyers, policymakers, and interested citizens to examine, discuss, and debate the effect of situational forces – that is, non-salient factors around and within us – on law, policy, politics, policy theory, and our social, political, and economic institutions."

Quite the mouthful.  The bottom line is they study how we behave in different situations. 

Recently, they highlighted a study that was designed to reduce the achievement gap in schools.  They showed a significant improvement in student performance when one group of students took part in a series of 15-minute writing assignments.  The assignments asked the students to choose from a list of values and write about the value most important to them.

The results were pretty impressive:

• The exercise reduced the achievement gap between black and white students by 40 percent over one term

• The benefits for low-achieving black students continued for the entire two years — students who completed the self-affirmation exercise raised their GPA by four-tenths of a point compared to the control group. They were also less likely to need remedial work or to repeat a grade — 5 percent as compared to 18 percent of the control group

They concluded that when people are reminded of negative stereotypes, the stress of worrying about confirming those stereotypes can negatively affect their performance. The self-affirmation exercise reminded students about what is really important to them and may have helped reduce that stress and therefore, helped increase overall performance.

Why This Matters in Business

Here's where I think this can have an impact.  Typically, new hires feel a bit disconnected and a bit overwhelmed with the new position.  They have the impression they are "behind the curve."  But what if when new talent is brought on board at your company you had them write an essay about how what they do best will improve, enhance,and drive success for themselves and your business.  This will "pre-affirm" their contribution and set the stage for greater performance - if the research holds.

This also ties into a principle of influence called "commitment and consistency."  This principle states that we want to remain consistent with past actions, and when we publicly put something out there, we are committing to it - and that has a huge impact on our desire to achieve those goals.

Worst case - you have a document that shows how well new talent understands the mission of the company and their role in it.  Best case - you have improved performance in the future.  Not a bad way to start the day, eh?

Editor's Note - Paul Hebert is the brain behind Incentive Intelligence and a recognized authority on incentives and performance motivation...He's having pizza for dinner and watching baseball tonight - I pre-cogged that.

On New Leaders Who Drop the F-Bomb and Say The Product Sucks...

You gotta like the CEO as change agent when you see it.  Consider the example being set by new Yahoo CEO Carol Bartz:

"Bartz provided a more characteristically salty description of the changes she thinks are needed in product development, which will now be headed by Chief Technology Officer Ari Balogh. "We had a lot of people running around telling engineers what to do but nobody was ******* doing anything," she said on the conference call.

Bartz also offered few details on Yahoo's strategy for restoring growth besides asserting that the company would benefit from a turn in the economy by virtue of its size and presence online, and that it would focus on "creating kick-ass products."

Bartz, 60, took over as CEO in January. She said at an investor conference last month that apart from “core” products such as the home page, news and e-mail, “everything is up for examination” at Yahoo. She described Yahoo’s home page as old- fashioned and said she prefers Google Inc.’s maps site to Yahoo’s.  Bartz also said said last month that she created a “wall of shame” for products she isn’t happy with.

But for every wind of bluster for the CEO of a publicly traded company, there's an analyst community ready to measure results.  So, the Sam Zell approach probably works for awhile, but the rock star CEO ultimately gets measured by a different scoreboard:

"I came away with no impression for what the company's going to do," says Jeffrey Lindsay of Sanford Bernstein & Co. "We couldn't see the strategy of how they're going to grow the business again."

While the first-quarter performance may have bought Bartz more time to work her magic, it's unclear how much more time she has to get Yahoo stabilized. "Her honeymoon days are numbered," said another analyst.

Yikes - this one, like Sam Zell, might be interesting to watch. 

Performance Scoreboards - How Ricky Got Fired...

The Issue - Performance Motivation by Using Public Scoreboards

Regional Director- "The environment is a little stale lately.  We need to invoke some competition."

Ricky, the Underling Location Manager with limited experience - "Let's post the monthly results.  That'll make them compete."

Director - "Good idea, make it so..." (while reading blackberry)

Results - Scenario #1 - Sales Team

Ricky posts scoreboard for sales team first.  Intensely competitive sales types jockey for position.  Performers give 100.5% to gain position on scoreboard.  Non-performers quietly fade away and resign two months later, heads lowered in shame because they couldn't "get it done".

Ricky gets pat on the head from Director.  Feels good...

Results - Scenario #2 - Accounting Team

Emboldened by success with Sales Team, Ricky develops productivity scoreboard for Accounting team.  Ricky sends out an email.  Ricky posts results.  Nothing happens for Ricky.  Accounting team's lack of sensitivity to Ricky's motivational techniques is driving Ricky crazy.  Ricky acts erratically.  Accounting team doesn't notice Ricky.

Ricky complains to Director.  Director tells him he needs to be more intense about his expectations of underlings.

Results - Scenario #3 - Call Center Team

Ricky figures the Accounting team just doesn't get it.  Ricky moves to next department.  Ricky posts scoreboard of call center stats on call center floor, ranking call center reps.  Top 10% of call center reps jockey for position. Middle 70% ignore the scoreboard.  Bottom 20% of call center reps jockey for best protection against getting fired.  Half of those pick EEOC charge with questionable merits.  Other half pick reaching out to local union rep for thoughts on organizing call center.

EEOC charges and internal organizing campaign reach corporate in the following 3 months.  Subsequent focus groups reveal call center believes Ricky wants to fire them, accounting feels Ricky doesn't understand what they do, and the Sales force is motivated by compensation and doesn't know who Ricky is.

Ricky leaves company.

Moral of Story

1. Perception is reality. 
2. PR is a component of managing.
3. One size doesn't fit all.
4. Measurement is not a replacement for coaching/dialog.
5. Don't be Ricky.

Editor's Note: By day, Kris Dunn is the VP of People at DAXKO, a cool software firm dedicated to providing solutions to the best membership-driven organizations in America. At night, he morphs into a blogger at The HR Capitalist and the Founder and Executive Editor of Fistful of Talent. That makes him a career VP of HR, a blogger, a dad and a hoops junkie, the order of which changes based on his mood. Tweet him @kris_dunn...

The Issue - Performance Motivation by Using Public Scoreboards

Regional Director- "The environment is a little stale lately.  We need to invoke some competition."

Ricky, the Underling Location Manager with limited experience - "Let's post the monthly results.  That'll make them compete."

Director - "Good idea, make it so..." (while reading blackberry)

Results - Scenario #1 - Sales Team

Ricky posts scoreboard for sales team first.  Intensely competitive sales types jockey for position.  Performers give 100.5% to gain position on scoreboard.  Non-performers quietly fade away and resign two months later, heads lowered in shame because they couldn't "get it done".

Ricky gets pat on the head from Director.  Feels good...

Results - Scenario #2 - Accounting Team

Emboldened by success with Sales Team, Ricky develops productivity scoreboard for Accounting team.  Ricky sends out an email.  Ricky posts results.  Nothing happens for Ricky.  Accounting team's lack of sensitivity to Ricky's motivational techniques is driving Ricky crazy.  Ricky acts erratically.  Accounting team doesn't notice Ricky.

Ricky complains to Director.  Director tells him he needs to be more intense about his expectations of underlings.

Results - Scenario #3 - Call Center Team

Ricky figures the Accounting team just doesn't get it.  Ricky moves to next department.  Ricky posts scoreboard of call center stats on call center floor, ranking call center reps.  Top 10% of call center reps jockey for position. Middle 70% ignore the scoreboard.  Bottom 20% of call center reps jockey for best protection against getting fired.  Half of those pick EEOC charge with questionable merits.  Other half pick reaching out to local union rep for thoughts on organizing call center.

EEOC charges and internal organizing campaign reach corporate in the following 3 months.  Subsequent focus groups reveal call center believes Ricky wants to fire them, accounting feels Ricky doesn't understand what they do, and the Sales force is motivated by compensation and doesn't know who Ricky is.

Ricky leaves company.

Moral of Story

1. Perception is reality. 
2. PR is a component of managing.
3. One size doesn't fit all.
4. Measurement is not a replacement for coaching/dialog.
5. Don't be Ricky.

Mushrooms, Grapes & Michael Scott - The Good, Bad & Ugly of Goal Management

It's no secret that I love analogies.  Most of us have heard the one about employees being like mushrooms, I'm sure. "Keep 'em in the dark and feed them bull...umm...fertilizer." This comparison got me thinking about conventional talent management practices that all too often reinforce this notion that the employee is disconnected from the company - kept in the dark.

"People-centric goal alignment" is one of those practices.  You'd think that goal alignment in and of itself would foster teamwork, not disconnectedness.  You might be thinking, if they have goal management "how can they have employees that are in the dark?"  Well, that's easy.  Organizations employing people-centric goal alignment are using a model where employees' goals are tied to their managers' goals.  Often, beyond that point, employees have no clue how their work impacts the organization. And what's worse, they may have their goals connected to a manager like The Office's Michael Scott, as opposed to those of Dunder Mifflin, the company.  Something tells me Michael's goals might not exactly do much to inspire performance.

People-centric goal management is riddled with issues aside from employees not having a holistic view of the organization's goals beyond their manager.  Goals in this model are a complicated web, so while it's easy to set goals on the front end, it's pretty difficult month over month, year over year to track them. When there's little visibility into goals beyond that of Michael Scott manager, there's probably no understanding of why or how work impacts the bottom line. And let's face it, if Michael is your manager, he or she is likely to be fired at some point.  So what happens then to your goals when the person they are connected to leaves?  It can get messy.  This is definitely not the most strategic or straightforward way to drive employee performance.

In keeping with the mushroom analogy above, the "organization-centric" approach to goal management is more like cultivating grapes.  All of the employees are on the vine, connected and contributing to produce an overall, common goal - like great wine.  This model of goal management has employee goals tied directly to overall departmental and organizational goals.  This creates a clear understanding of how they connect to the "vine" and how, as a team, they work together to create something great.  So, if Michael Scott is walked out the door at a company where individual goals are tied to organizational goals, it isn't a huge problem, and personal goals aren't impacted.  Everyone can see the whole vine, and it's easier to ensure all employees are pulling in the same direction.  Each employee is accountable, and on the whole, there are more opportunities for them to flourish.

Personally, I've always been much more partial to grapes, so it's easy to extend that preference to goal management styles.  I'd rather be a grape basking in the sun than a cold mushroom in the dark any day.  And I think smart organizations would rather have happy grapes than miserable mushrooms, because at the end of the day, grapes are going to produce a stronger business result.  When results matter more than ever, organizations with grapes are going to be winners.

Editor's Note - Don't Feed the Vendors is a new series at FOT.  The goal of the DFTV series?  We get hammered by third parties who want to write at FOT, so we give them a challenge.  Write something cool and significant we can learn from/talk about in the FOT style, and you can roll with the FOT crew.  Try to sell our readership your product and/or provide a whitepaper, and we'll openly mock your company in public for not understanding the DNA of our readership.  Many inquire, few follow through once they learn they can't post a workup of their latest "research".  For those that make the cut, we'll offer up associate FOT membership as part of the Don't Feed the Vendors stable.

Sean Conrad of Halogen Software is one of the ones that made the cut.  Show him some love in the comments for being up to the challenge and not writing something that should be read on PBS. 

Goals vs. Commitments, Again... Because Jessica is Committed to Making Us Discuss This Further.

I had this back and forth conversation last week with Laurie Ruettimann over at Punk Rock HR on this notion of goals versus commitments. Let's rewind and revisit the chat:

• Microsoft has employees establish commitments rather than setting goals.
• Me? I like the positioning of it - commitments seem to tie back to an employee's values and therefore, it feels deeper. More meaningful. Goals are transactional. They're set, then accomplished, then you get another one.
• Laurie? She feels that work is a transaction, and commitment is something she's made to her husband and the cats she has adopted. Employees aren't paid to commit, and companies don't make commitments to you as an employee, Laurie feels.

It's an interesting discussion. And Kris Dunn jumped in the conversation too last week. First, I get that it's hard to make the argument for commitments over goals as an HR pro, especially when you think about having to lay someone off, for example. You take an employee who is committed, deeply committed. Then you have to make financial decisions for your organization and let some staff go. Particularly for individuals who have demonstrated commitment to your organization - it's heartbreaking, right? And if you've done R.I.F.'s, you know what that's like. ("I've given so much to the company." "How can you be doing this to me?" And to think I had to answer those questions in my first HR job - at age 20! What were they thinking? That's another post for another day.)

But on the flip side, I also know what it's like to not be committed. Me. Yes. Let's not be naive about this - I've had bad days, and bad runs. And you won't get the best out of me when my mentality is that I'm just showing up and doing what I need to do to earn a paycheck. I promise you I'm ineffective when I'm not committed and distracted (including with wandering eyes). You can't have an organization full of noncommittal Jessica's - trust me. There's no moving forward. There's no progress. So let's talk about commitment a bit further...

I'm not normally an academic human resources wonky type - but this article landed in my lap right after Laurie and I took our different positions on goals versus commitments. And, I was interested in reading the piece just based on this one line: studies have shown a positive correlation between employee commitment and job performance. And then it got better as I read on. The study breaks down five different forms of commitment at work:

• work ethic endorsement
• career commitment
• affective organizational commitment
• continuance organizational commitment
• job involvement

The journal piece went on to discuss commitment as one of the key factors for organizational survival and growth, and a key factor to become a learning organization. And I buy it. 100%. Think about it - without commitment - how does an organization innovate? How does it pull itself from the trenches? Organizations are made up of people - and when one has a tough day or tough week at work - isn't it going to take a commitment to bring them back the next day to try it again? Breaking down AIG, and Wells Fargo, and untangling Freddie Mac and Bear Stearns, and salvaging GM and Chrysler... none of that is going to happen overnight, nor easily. It's going to take some serious commitment - to your given craft, to a product or industry, or simply out of a desire to be part of an effective organization - and really, to bettering America. (Sorry to pull that card!)

Commitment, we need. When you make a commitment, it's closer to your core. And when I'm recruiting people, I want someone who is committed in any of those five ways, to the values of my organization, and not someone who is just there for a transaction - create a widget, then earn a paycheck. Goals are transactional. Commitments are lasting. Commit not to an organization - fine. Commit to their ideals, mission and values. Commit to being a certain kind of person. Just commit - because now is definitely the time for commitment.

Editor's Note- Jessica Lee is an Employment Manager for APCO Worldwide, a global PR firm in D.C. Like most upscale HR pros, she spends half of her time on recruiting, the other half on ER, Training and OD.  When she's not hammering a candidate to determine Motivational Fit, she's thinking about the future of HR, and wondering how she can avoid using the job boards to fill the next spot in her organization...

Capping CEO Pay - What It Means for All of Us...

The cause célèbre today is CEO pay and by extension, overall pay transparency, performance-based pay and letting a government entity manage what used to be a free-market concern.  While on the surface, it seems to be a good idea - less hidden pay, less excess, more connection to performance, more oversight - I can see why it makes sense to some.

But from my point of view these are well-intentioned ideas that will just cause more problems in the future - and require increased legislation that will cause more problems that will lead to more legislation, well, you get the idea.

One of the key elements of any incentive and reward activity is to look for unintended consequences.  In other words, what will increased transparency, capping CEO pay and a greater connection to performance mean in the real world?  How will these ideas manifest themselves if (and when?) they go into effect.

Well, we have some history to look to for guidance and I'll take a stab at some of the possible outcomes I can foresee.

1.  Capping CEO pay

This isn't a new concept.  In 1993, then President Bill Clinton signed a law restricting the tax deductibility of executive pay to $1,000,000 effectively giving those in that stratospheric pay range a huge incentive to find other means of compensation.  Enter the creative mind of the financial world.  People were given more perks that got around the cap - giving them bonuses in stock when they hit certain goals.  This is where stock options really hit their stride - and, thanks to the bull stock market of the 1990s, made everybody far wealthier than they would have been using the old pay structure.  So, the last time the government got involved in CEO pay, we got fabulously wealthy CEOs, and now we don't like it.  See what I mean about unintended consequences?

2.  Tying pay to performance

See #1 - we tried that and we didn't like the outcome.  The problem is that there will be few people who will agree on what performance metric to use.  As an example, If we use share price (which should benefit the shareholder) we get shorter-term management and a company that may do well for a while in a given market environment - but will tank when the world changes (can anyone say financial industry crisis?.).  Should we compare performance against historical company performance (absolute) or against the market and the industry (relative) performance?  Either is a good measure, but what is best?  Using stock prices as a proxy for performance doesn't work.  Too many people, internally and externally have an impact on the stock price.  Warren Buffet is fond of saying he doesn't buy stocks, he buys companies.  He does that because a stock is a representative of a company- but an imperfect one.  What would the best metric be?

3.  Increase pay transparency

Talk about unintended consequences.  One of the reasons cited for the huge salaries and pay packages available to top executives is in fact greater transparency caused by the disclosure requirements in Sarbanes-Oxely.  Congress enacted the Sarbanes-Oxley Act of 2002 in response to a spate of highly publicized business failures and corporate improprieties.  The issue they said was a lack of oversight and transparency.  I don't want another Enron and can see why more transparency was needed but, some of the requirements of SOX may be what is driving CEO pay issues.  Specifically, once I can see what others get paid - that's what I want.  The highest salary now becomes the minimum salary and I want more than the minimum.  While this may not be a big issue for rank and file workers - CEOs are a unique breed and their egos probably won't allow them to be number 3 on any list. 

4.  Government involvement in market-driven issues

There are few places the government does a better job than the private sector.  With all its faults and with all the news you hear... the free market is still a pretty good place to test effectiveness and efficiency of an idea, process, or product.  I get that we need some one to make sure we don't let the market control and manage everything - but by and large the market does pretty well.

I just don't like the government getting their nose in the tent.  It won't be long before we see the definition of "exceptional assistance" go from taking bailout money to having greater than 80% of your business come from government contracts (I can see the argument on CSPAN happening) - 'cause if 80% of your business is coming from the government - isn't that exceptional assistance?  While I'm not too high on our lawmakers IQ when it comes to the market - I do know their olfactory senses work wonderfully well when the scent of money is in the air.

So what should you in the HR world worry about?

How 'bout this stuff...

• Once the CEO has a cap - expect others with larger than "average" salaries to be targeted.  Sales, VPs, etc. 
• The government will control your compensation plans - everyone will be on the same playing field and true talent will go "free-agent" because you can't meet their requirements within a corporate environment.  Why not be a contractor and get twice as much money?
• If you deal with government contracts, expect to see more and more oversight into your total pay practices - not just those that deal with the specific contracts.
• Pay transparency will start to trickle down - and everyone will see what everyone makes - and will have input into how much a job is worth - regardless of reality - the crowd will rule - and salaries will start to cluster around an average - an average that is not representative of the job or the market - but of what most employees think it is worth.

I, for one, am not looking forward to this stuff...