Sunday, 18 March 2012

The fair play in fair pay

I wish the media pushed half as hard to get people to donate eyes for the visually impaired, as they do to get eyeballs for the sake of circulation and viewership.

A television channel claimed to have lured viewers to their election coverage of ‘real stories of political intrigue’ and away from the ‘boring numbers, graphs, trends and analyses’ presented by rival channels. In a bid to boost sales, an advertisement for the channel boasted, "why go to sleep when you’ve just woken up ?", in a clear dig at other channels that were less sensationalist and more educating. There seems to be a free-for-all to ‘dumb-down’ the consumer. Consumers have a free choice and can choose what they want, you might say. I agree. But I think that since consumers have a free choice they should also consider choosing what they need. Appropriate communication and true information would certainly help.

Consider this. A few days back, a headline in several publications screamed that Cognizant had paid its employees a whopping 200% as annual bonus. In many instances, the related articles did not adequately clarify that it was upto 200% of the target bonus paid to the best performers at some or more career levels. That, if an employee was to receive, say, 25% of fixed pay as bonus, the actual payout to that employee was doubled. You might think that common sense would lead the readers to the right picture anyway. I thought so too. Till I read numerous reader comments posted on social media sites like, “awesome man, my company sucks since it has given me only 15%”, and, “it’s a lie, no one can give 200% bonus”. Huh ? Were these people seriously mistaking that Cognizant had paid its employees 200% of fixed pay as bonus ? If this is how many people, who belong to the elite 7% of our population employed in the organised sector, received this news report, what about the scores of others outside of this group ?

It’s not that I don’t respect what Cognizant did. They’ve a history of doing good with employee compensation and promotions, and I’ve always respected that. What I have respected even more is what lies behind that act. That’s what, I feel, the people at Cognizant as well as the people elsewhere need to know. The company’s SG&A (sales, general and administrative) expenses as a percentage of their revenues, has consistently declined over the last five years. And that their revenue per employee has consistently increased over the same period. Which means, that the company’s employees and leaders have been consistently doing many things right. Which also means that the company has consistently had the capacity to pay.

It would be in their interest, for the employees of Cognizant to know, that their future compensation and benefits are dependent on a maintenance or increase of that capacity. And that, they would have to play their part in it. Or else the sweet run might soon end. There's another thing. Companies that have phenomenal growth have to recruit in very large numbers. Which means that they are at risk of their own employees grieving about ‘lots of people from outside’ coming in with better pays and bigger jobs. That’s also probably why high-growth companies stretch a bit more and show willingness to provide higher than the required raises and higher than the necessary promotions. It might be worth considering that faster than optimal progress might also take at least some employees to their stagnation points faster.

For the employees of other companies it is necessary to admit, that to get the kind of rewards that Cognizant provides, their own companies must also have comparable or better capacities. And comparable or better growth. That only employee desires can’t be benchmarked. So should the organisations’ capacities and willingness to pay.

Which brings me to make a suggestion.

Why not include these factors (of capacity and willingness) to adjust the results of compensation benchmarking exercises and make them more real ? Let’s say, that the usual study throws up that company A has an average salary of Rs. 80, your company has Rs. 100, and company B has Rs. 120. If company B has better capacity (revenue per employee, overheads as % of revenue, or any other relevant metric) and better willingness (growth, or any other relevant metric), than your company does, then the relative advantages of company B need to be adjusted downward to allow for real comparison. Similarly, if company A is worse off than your own in capacity and willingness, then your relative advantages need downward adjustment.

In the above example, what that means is that the salary gap between company A and your company needs to be reduced. And so does the salary gap between your company and company B. The adjusted scenario could, say, look like this - company A at Rs. 95 (in place of 80), your company at Rs. 100, and company B at Rs. 110 (in place of 120). Or whatever else, it does not matter, so long as the basis of adjustments are logical and reasonable. Since it would be realistic and fair. To employers and employees. After all, if company B, with higher average salary than your company, had worse than your capacity and willingness, then its relative disadvantage would need adjustment and its adjusted average salary could be Rs. 140 instead of Rs. 120 for a real comparison with your Rs. 100.
Surprisingly, I am getting a better feeling about this than I earlier thought I would. Perhaps, such an adjustment might just reduce the gap between what the employees want as pay versus what they need. Perhaps, such an adjustment might just reduce the gap between what companies want to give as pay versus what they need to.

Perhaps then, our work-lives wouldn't be as headlines driven.