D&I in Rewards

Nowadays, HR world’s priorities are filled with Diversity and Inclusion initiatives and priorities.

I’m not surprised by this as we have seen how the world is shaken recently on this matter. My aim in this post is to share my thoughts about D&I initiative and how they can be linked to Rewards practices.

What’s D&I anyways?

Global Diversity Practice, a global consultancy firm specializing on such practices, defines it as follows:

Diversity is any dimension that can be used to differentiate groups and people from one another. In a nutshell, it’s about empowering people by respecting and appreciating what makes them different, in terms of age, gender, ethnicity, religion, disability, sexual orientation, education, and national origin.

Inclusion is an organizational effort and practices in which different groups or individuals having different backgrounds are culturally and socially accepted and welcomed, and equally treated. These differences could be self-evident, such as national origin, age, race and ethnicity, religion/belief, gender, marital status and socioeconomic status or they could be more inherent, such as educational background, training, sector experience, organizational tenure, even personality, such as introverts and extroverts.

Simply put, it’s a dimension which can explain the differences of your workforce by several groupings and respecting those differences.

How does it relate to Rewards?

In the recent years, we started seeing an accelerated effort from a lot of states to point these and how they relate to the social welfare of their population. Obviously, it’s directly correlated to the workforce and the workforce’s living.

For any member of the society, who is also a part of an organization and earns a certain level of compensation and is entitled to some benefits, it automatically impacts their involvement in the broader society.

A perfect example for such exercise is gender pay gap.

A lot of countries are concentrating on passing legislation that checks the pay equity between gender, ethnic group or race. It’s generally a reflection of the social issues that the respective country faces and tries to either increase awareness or even penalize based on the results.

Past reflections

I wrote about different pay scales for different nationalities and how this practice was interestingly common in the Middle East long time ago.

I believe this is diminished significantly over the years but it was a great example how far we came along and how much further we need to go.

You can even see the French legislation and see that one of the major indications is about getting a salary increase after returning from maternity leave. This is deliberately added to the legislation as the pay discrimination against French working moms is systemically common and creates a pay gap that is becoming harder to close as year passes by.

What can we do?

These were few examples in our field that shows how pay equity is created, and unfortunately, pretty easily.

My quick step-by-step recommendation on effective pay equity and fairness work are as follows:

1. Conduct regular checks

Obviously, everything starts by analyzing and identifying the gaps. If you don’t ask question, you will never get an answer. Therefore, asking the right questions, looking at all the different data cuts is vital.

2. Find the root cause

Once you identified the gaps, dig deep and understand the root cause. Sometimes, it’s pretty easy to tell that a pay gap is because of a wrong offer that’s extended or it’s just an outlier. Bear in mind that a compensation "life cycle" is technically a timeline and the reason could lie at any point of that timeline. Reflecting back is pretty helpful in this case.

3. Train your workforce / Create awareness

Create awareness and educate your workforce on importance of pay parity and fairness. Start from the population that has a decision-making authority in Rewards processes, but scale it to the whole workforce. Cascading this responsibility with creating awareness will help you down the line.

4. Keep the consistency on practices

Be consistent. I think this is already a crucial aspect of being a Rewards person but exceptions create outliers; outliers create inequity.

Please let me know if you’d like to see more hands-on examples on how to look into these processes or if you are looking for more details on these aspects.

Most powerful yet unsung Excel functions for Compensation professionals

I thought about writing a more technical post but didn’t know where to start from.
It could be a nice series of post starting from scratch, however after some googling, I thought it might be more beneficial to write about the unknown and/or unrecognized magic words that saves your time in front of the screen covered with cells.

As I advance in my career in Rewards area, I started to use macros more and more. This could be a good subject for another post but there are some formulas or that saved my life.

I will list some of these Excel functions and give you examples how and when to use it. You will not find the generic VLOOKUP() and similar essential formulas in the following list. Here we go:

INDEX() and MATCH() combination

Slowly leave your VLOOKUP() down and kick it to me. Nobody needs to get hurt!

Yes, this is it. The combination of INDEX and MATCH is one of the most powerful formula combination to save your life while trying to extract data from a data table with multiple input variables.

Let’s say we have a table like the one below and we would like to get the “Benefit” amount of the employee with the ID of “EMP3”:

MS Excel INDEX/MATCH combination

The formula would look like this:

=INDEX(C4:E13,MATCH(“EMP3”,B4:B13,0),MATCH(“Benefit”,C3:E3,0))

As you can see, the index formula is the main formula where you need to identify as a first variable the area where the values are stored. You should not choose the left and top column in this area hence they are identifier row and column which will help us in the second and third variable.

INDEX() function works this way: I will give you the row number and column number and the cell at the intersection of those is the value I want.

MATCH() function a little bit different: Give me the exact place of this value in a range/series.

So with the MATCH() functions we identify the row and column numbers that INDEX() want. We want the row number of EMP3 in unique ID’s and the type of the pay “Benefit”.

IFERROR()

Life cannot be without errors. More important thing is how you handle the errors. This formula can give you a better control in your data management if used properly.

Let’s say, you want to pay 5,000 USD even there’s an error in the calculation (in this example addition of three cells) of a cell.  Normally, the formula would look like this:

=A1+F45+K7

What if K7’s value is not a number? The Excel would give you an error for sure. To avoid seeing “#….!”, you can use IFERROR() and tell that even if there’s an error my sum would be 5,000:

=IFERROR(A1+F45+K7,5000)

Pretty simple, huh?

AND() and OR()

The basic logical operators are here. If you want to check two conditions that they are TRUE at the same time (AND) or at least one of them (OR) you can use these:

=AND(“Arif” = “Arif”, “Excel” = “Excel”)

will always give you a boolean result of TRUE like

=OR(“Cat” = “Dog”, (3-2) = 1)

does.

Now, before going forward I would like to warn you about the following two functions. Although they are saving lives in some instances, they are called as “volatile functions”.
A Volatile Function is one that causes recalculation of the formula in the cell where it resides every time Excel recalculates. This occurs regardless of whether the precedent data and formulas on which the formula depends have changed, or whether the formula also contains non-volatile functions. That’s why you have to be really careful and mostly avoid using this.

OFFSET()

We will use the same table above. As per that data table, we will analyze the below formula and see how OFFSET() function works:

=SUM(OFFSET(C4,4,1,3,2))

Translation is: We will start from C4, go 4 cells down, then 1 cell right and starting from that cell we take all 6 values in a 3×2 table and add them all… Makes sense, right?

The table is this part:

3x2table

So, the result would be in this case 37,594 in case you want to try.

INDIRECT()

I use this mostly in consolidation of various files with pre-set names that can be linked to an identified variable.
For example, you have one template for each country in your region and you want to get a value from its first sheet, cell A1:

indirect

It might be confusing, but the above figure is pretty self-explanatory. Please note that, you will see a #REF! error, if the target Excel file is not open.

I will continue to explain other functions in the Part II of this post and hope that this will help you come up with a better Compensation analyses!

People Analytics and Human Resources

Nowadays, the fanciest topic in Human Resources field is People Analytics. The word “People” comes from the area of Human Resources and the word “Analytics” from Statistics, specifically Predictive Analysis.

The evolution of decision-making in HR is now on the verge of shifting from reactive to a proactive position. The main reason behind it would be the changing dynamics in the working environment and the good, old “talent war”. The traditional HR decision-making process excluded the data analysis until the last decade. It was fascinating; Human Resources was also becoming a true co-pilot where the decisions were backed with fancy graphs and some numbers. But what was the source of data? Past.

We are now in an era where we start trying to become well-recognized fortunetellers. The success lies within the capability of reading the future based on historical and current events while assessing and implementing current factors that could affect the situation.

So, the summer days of “Analytical HR” is over. It’s becoming obsolete. HR needs to be geekier, more technology-driven, more complex than ever.

We need more “people engineers”, statistician or mathematicians in HR department rather than some social guys/ladies that are competent in arranging events or shoot out some fancy corporate announcements  to become more successful. No puns intended!

I just wanted to remind you that the world’s changing.
So should the beloved department of Human Resources.

P.S.: I will go into detail in another post what would it mean especially in our area, Total Rewards.

Working under Stress?

It’s been so long since the latest blog post but I’m sure you can excuse me if you ever have an idea of the “Rewards peak season”. It’s going off, so expect more activity here!

Back to what title says – if you think you’re under pressure at work, please think again after watching the video below. Just saying…

Is this the end of Merit Pay increase?

It’s been awhile that I couldn’t spend time on my blog, but after reading this month’s WorldatWork Journal, I wanted to share some thoughts regarding the merit pay.
I feel that it’s a good timing to question merit increases hence it’s the time for pay reviews here in Dubai.
As per the article authored by Scott, Somersan, Repsold in this month’s issue, I quote a paragraph:

Low merit pay increases in recent years have made it difficult to differentiate the rewards of high performers from those with only average performance. Furthermore, getting managers to differentiate performance across their employees is difficult. One strategy for improving merit pay that has been discussed in recent years is to separate pay adjustments based on labor cost increases from increases for good or exceptional performance. The former would be based on the cost increases in the labor market not on employee performance. Thus, merit increases that were previously rolled into base pay would be given as bonuses, which does not increase base pay and long-term fixed payroll costs.

I would like to concentrate on the last sentence. I’ve experienced very high and also very low levels of inflation in some countries. As the authors also implied, it was easier to link the merit increases to inflation and cost of living and labor in recent years. However, especially in emerging and developed countries, trying to differentiate employees with merit pay linked to inflation started to be an issue because of low increase rates.

An example:

A very aggressive merit matrix set with regard to (of course) corporate costs and budgets would have maximum differentiation of 300% -tell ya, it’s a VERY aggressive one- between a top performer and low performer.
Multiplying this with a very low merit increase like 2%: Max. differentiation is only 6%?

Here it is. A basic example showing that merit pay is not enough anymore to be a differentiating factor for the high performance because I don’t think it’s rational to tell a high performer that he/she is differentiated from a low performer by only 6% of the annual salary. It sounds funny, I know.

In the new world’s economic outlook we need to revise our reward schemes and be more flexible and creative. We have the tools and practices – just need to use them accordingly and smart.

Last but not least, I think it’s a good idea to rely less on merit increase and try to differentiate employees with a short-term incentive where we also need to leverage on our performance management systems and processes.

Let me know what you think about this topic by writing a comment to this post.