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.

What should you expect from your C&B colleague?

It’s nice to see that nobody’s knocking on others’ doors in the festive season; so many people are having very relaxed time at the end of the year.
In Middle East, the general practice is that short-term incentive payout and the salary reviews are generally done in the first quarter of the year, so it applies for the C&B professionals here as well.
Well, this might be the silence before storm (Yes, it is!) but it’s the subject of another post.

We mentioned knocking on doors… The dark, unholy and rusted doors of the narrow cave called C&B Department?
Hey! Chill… Just joking… We’re not Orcs…
Image courtesy by Iron Mitten

However, I understand. Since many years, C&B has been the black box of the organization and the C&B professionals are seen as the bad guys of the town. Employees were very nervous to talk to them or ask questions… They were afraid to get a call from them which might mean that their time in the organization is over…

But it’s not the case in reality and I blame us for this.  We created this dark environment by being secretive, discussing the matters behind closed doors and doesn’t come up with answers when even the most simplest questions like “how are the salaries reviewed?” are asked.

Flickr_IntroverLeadersCommunicationMED-kenfagerdotcom4886342418_db75a10808Since last decade we are investing on the importance of the strategic communication in Total Rewards and try to be more transparent, educative and approachable. We are saying that three main objectives of Total Rewards approach are to attract, motivate and retain the employees and we are working on that.
We are spending our efforts more and more on how to communicate rather than how to calculate.
This has been accomplished in some regions and it’s still in process in others.

That makes me feel we’re in the good way when I see the happy sparks in the eyes of the employees I train on Total Rewards.

Do the C&B professionals to be that much approachable and transparent? What do you need to expect from them?

I think that there’s a limit. Yes, we should be more open and social  but we cannot give up from the main characteristics our job requires:

  • Confidentiality

A C&B professional is not allowed talk too much. At least about the details of his/her job. As a person having the maximum access to the most sensitive data of the organization, he/she cannot spread even a single part of that data. Luckily, many C&B professionals follow this invisible oath.

What do you need to do:
You shouldn’t ask too many questions regarding other people or any plans and projects about organization.

  • Working under pressure

We work under pressure.
Yes, everybody does but we do  a bit more. We work with Human; we work with Government; we work with Blue-collar and also Executives; we work with past, present and future money transactions which goes directly to YOUR pocket rather than the bank reserves which has a direct impact on people’s lives. We work with transactions as well as strategic plans.

What do you need to do:
Do not blame us for issues and problems directly and have a co-working approach. We work in the same organizations and we support you; so should you. Please do not think that C&B is just printing some pay slips and transferring money via online banking.
We can prove easily that we conduct analytical practices that many engineers never do in their daily routine. (No offense; I gave this example because I was an engineer before and never done such exhaustive analysis before)

  • Influencing

We are your consultants. If your C&B Specialist is a very well-educated and experiences in his/her area, she can be very influencing on you and your decisions.
Personally, I helped many employees when they got another offer from another company and we cannot retain them anymore (after the real break-up you can stay friends, no?), when they had issues with tax authorities or even when they were confused about the host package for their expatriation. So, again, we’re here to help.

What do you need to do:
Consider us your therapists in your Rewards. We’re there to help but also be fair and consistent. We can give you insight about the information that you can only have by word of mouth (which is almost always untrue) or won’t have access at all. Think about it like you have a legal issue and you go directly to the Corporate Legal Counsel.
Same thing here… Just don’t misuse this service and don’t take our recommendations as we try to damage your career – if we say so, it’s real.

I assume that if your C&B professionals and employees work together taking above points into consideration, the organization’s journey in Strategic HR Communication will have a big leap sooner than you think.

Infographic: Inflation Rates of the Last Decade

One of the most important economic factors that Compensation & Benefits professionals usually take into consideration is the inflation rate in their country and/or region.

Since some time, I have gathered quite a significant amount of data from various survey providers and economic research reports and summarized the outcome in a simple yet effective infographic.

The results are interesting and more analysis can be done with the data but I tried to give a nice sneak preview with that.

This infographic shows you some key data regarding the worldwide inflation rates between 2003 and 2013.



P.S.: Please click here if you cannot see the embedded version.

Should the C&B professionals be certified?


I’m really delighted to see my score on my last required exam to be certified as CCP (Certified Compensation Professional) by the renowned and reputable organization WorldatWork.  This is my second certification – the previous one was GRP (Global Remuneration Professional) – and I admit that it really took a lot of time and hard work to get them.

When I was talking with my colleagues and friends about my study the whole year, I’ve been asked many times if it’s worth it or if I really require them.

First of all, I just want to highlight the famous quote of Allan Bloom:

 Education is the movement from darkness to light.

That is I really care about and believe in. What I see in today’s world that it’s not the financial system nor the army or technological advancements, but the education system. If you really want a population regardless the scale, be it a nation, a group or just a team, develop and transform itself to adapt rapid changes of mankind, you need to have a robust education system. Afterwards, it has to be enhanced with the mindset of the people: Continuous, lifetime learning.

Back to the question of the requirement, I’ll be very political…
I do not have a clear answer, so: Yes and No.

Yes, because:

  • I’m 100% sure that you’ll have a basic foundation about the methodology and generally accepted updated practices.
  • They give you a good point of view for the new era of HR: Being strategic business partner specialized in Total Rewards.
  • It’s an accepted and respected certification, which will shine in your CV.

And No, because:

  • Like all other certifications, nobody forces you to get one for a job. Many experts, gurus, VPs etc. don’t have such certifications. It won’t hurt your career advancement if you don’t get it.
  • There’s a cost, eventually. That might be a burden for many people.
  • It takes a lot of time and work (even if you’re a seasoned expert in Rewards area). I’m one of the fastest certified people especially in Middle East while working and it took almost one year for me to get both certifications.

So, I’m not going to do any advertisement for the certifications, especially after I also started having a volunteer participation in WorldatWork, but when I look at each of those 3 top reasons for both answers; I would choose the part “yes” and go for them.

I did and I’m going to do so… “because education matters.”


The main bridge between HR and Finance is C&B

All organizations in modern business world are trying to bring Human Resources and Finance closer as a main result of cost efficiency or profit maximization. As HR costs rise day by day and the war for talent is pushing really hard on organizations to reduce such costs; both departments’ professional are forced to work together to control the costs.

Yes, we always mention the word costs because (unfortunately) HR is one of pillars in an organization that doesn’t create any revenue although carries an enormous capital. As a fiscal point of view, being a good HR professional requires with a competency of controlling costs.

Image courtesy of sheelamohan /
Image courtesy of sheelamohan /

Well, when we talk about money, especially within Human Resources area, all fingers point to one department of course: Compensation&Benefits.

As we always say; A good C&B practice is simple and cost-effective. Therefore a good C&B professional needs to have the competency I mentioned above. Combined with communication skills, C&B professionals should bridge Finance and HR departments and ensure that both talk the same language and align seamlessly.

Following tips might help you to be successful if you are experiencing hard time with this issue:

  • Go to Gemba

If you never heard this jargon, the  Japanese term “gemba” means “the real place” or “where the action happens or value created”. So, in production areas if you have an issue in your production line according to Kaizen or Continuous Improvement methodologies you should go to “gemba”. You should go to the place where the problem rose and check what happens. In our case, basically you should directly go to Finance department and talk to respective stakeholders to align with them. Don’t forget; communication matters!

  • Streamline processes

From my previous experiences, it’s always good to brainstorm/sit down couple of days and sort all processes between two departments and create process maps. Document it, train it and always check it. You’ll see that if two people start talking the same language actually they don’t stop!

  • Standardize tools

This comes along with the former point. By streamlining processes you should really start creating robust, standardized reports that have to be useful and meaningful for both parties. According to Aristotle, there are three modes of persuasion: ethos, pathos, logos whereas logos meaning logical appeal (by facts, figures) is the most persuasive out of this three.
Long story short; standardized tools and reports persuade better.

  • Be able to look from multiple points of view and listen

I think this is the hardest but most important factor. Usually, both sides have a very different angles to look into the issues. That’s why you always have to look at both sides listen to rationales of both and try to solve all issues closest to the optimum “win-win” situation.

I assume that if you can make all above worked out, your organization (and eventually yourself) will benefit from it.