Lessons Learned for HR Development From the Compensation Handbook … Book Review
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Berger, L., Berger, D. (2008). The Compensation Handbook. NY: McGraw-Hill.
The Compensation Handbook by Berger and Berger (2008) is a detailed analysis of the strategy that employers can use when considering compensation of all-level of workers. It breaks down the structure of compensation, the types of compensation, systems of compensation, and perceptions of compensation. All of it is based on the simple dynamic that a "winning culture" is absolutely essential on the ground floor of the HR department in order for the company to succeed in adopting the right compensation strategy for its employees (Berger, Berger, 2008, p. 5). This means that a healthy workplace culture is the key component in solidifying, strengthening and maintaining the right orientation between payers and payees, and this is nothing that is not supported by other researchers and academics in the field, who see the value of organizational culture as being the most essential element in organizational success (Beer et al., 1984; Jacqui et al., 2014; Rogers et al., 2015).
The point that Berger and Berger make in this regard is that culture is not something that should "evolve in a happenstance way" or consist of "unconnected and nonstrategic processes that affect how people are hired, promoted, developed and terminated" (p. 6). On the contrary, culture should be the guiding force in each of these activities: it should clearly and definitely connect the different aspects of the workplace environment -- the business professional cluster, the social cluster and the personal cluster. These three clusters lay out the overall quality of the business: the first deals with relations to customers; the second deals with leadership, teamwork, and ethics; the third deals with creativity and risk tolerance. Culture plays an inherent role in every one of these concepts and, thus, if it is neglected in the process of establishing a program of compensation for each of these different levels of participation within the company, the company itself is beginning on the wrong foot. Culture, in other words, should be the number one position and priority of the company: culture before profits is the best to look at -- because it is this perspective that makes profiting from production a reality. Culture is the force that keeps the engine going strong: without it, the engine won't last more than once or twice around the bases. The company will lose. Compensatory strategy will increasingly become problematic and disaffected employees will more than likely become the rule.
The drivers of this culture-based strategy, according to Berger and Berger is to develop a superkeeper pool, which consists of leaders whose task is maintain a culture of excellence at the company; provide enhancement to incumbents and keep strong backups from going too far in critical positions; and provide the right training, rewards, education and development for current/future employees (p. 7). This depiction of drivers is in line with applicable HR discipline as it relates to the strategy of building and maintaining a solid and consistent team based on several distinct operations that work together to give fluidity and support to the overall aim of the organization.
Another concept that the book describes is the "total rewards" structure of compensation, which is a modern development or evolution in the realm of compensation from the more traditional structure of base pay and bonus strategy. The concept of "total rewards" is viewed as a natural evolution that is still as of yet not quite finished in its development. Because of the need for more specialized and qualified tasks and having a smaller recruitment pool, a total rewards compensation package is a natural strategy to use in order to get the most out of employees (Berger, Berger, 2008, p. 22).
This strategy requires a philosophy that unifies and connects the rewards program to the company's core mission and values. It requires definition and identification of the drivers, such as "the competition for talent, corporate/unit/individual performance, the infrastructure to make sound decisions, desired types of behaviors and support for strategic change" (Berger, Berger, 2008, p. 23). A total rewards strategy is therefore simply the compensation-based side of the mission strategy of the corporation: it ties performance to reward, talent, skill and position.
Berger and Berger also tackle concepts such as base salary, variable compensation, executive compensation, and more. At the center of each concept, however, is its integral relationship with the foundations of the organizational culture, the key building-block in all aspects of the company's success and an important fundamental driver in the compensatory strategies used at each level. For example when issuing symbolic awards or earned time off, it is important that these merit-driven compensation tactics be linked to the overall mission of the company, otherwise they will actually have negative ramifications for the organizational morale (Berger, Berger, 2008, p. 177). Questions that must be asked by other workers who see their peers being rewarded are, "What did this person do to deserve this?" "How can I do the same?" "What do I need to do to better my own productivity in this organization?" Rewards breed these types of thought so it is necessary to ensure that the kind of behavior a company wants to see multiplied within its doors is the type of behavior it rewards on a consistent basis. Rewarding employees whose behaviors are questionable or unethical is a great way to make sure the company is doomed to failure in the long run.
Berger and Berger overview the various strategies of rewarding for each aspect of cultural and company development, whether focusing on top performance or moving the middle, the plan for each will differ as the end-goals are unique and should be met with their own unique reward structure. By keeping the reward structure unique, it identifies the unique contribution that each key player makes to the organization and helps to not diminish the part that every member plays. By making every level have the same reward, on the other hand, a sense of lethargy and complacence can set in -- for if there is nothing different or better about being rewarded at a higher level then there is no reason to be work towards that. At the same time, the benefit of being awarded at a lower level has to be enough to drive and motivation the needed behavior so as to be worth it at that level too. Identifying specific needs as well as the ability to utilize nonmonetary awards to drive success is pivotal (Berger, Berger, 2008, p. 183).
My professional assessment of the merit of the ideas presented by the authors of this work is that Berger and Berger have done an extremely thorough job of identifying and relating the various forms compensatory strategies that can be utilized at every level of employment from the bottom all the way up to the Board. The most important aspect of this collection of information is that at each level the compensation strategy should reflect the overall cultural strategy of the organization so that performance and reward is in line with workplace environment's goals regarding ethics, commitment, morale, productivity, achievement, knowledge and success. There is a total correlation of parts and not just empty, routine, or arbitrary compensation packages that otherwise undermine the strategy that the organization is trying to cultivate.
Thus, the work is focused both on a technical aspect of compensatory aims, as in its examination of executive compensation strategies, which, historically, Berger and Berger acknowledge has been assessed according to "salaries, set bonuses, granted equity or other long-term incentives" upon review and offered as "discrete, often unconnected events" (p. 311). But this traditional practice is out of line with the concept put forward in the book, which is that all compensatory strategies at every level should be connected by the same cultural spirit. Part of this is due, as the authors note, to the desire of investors to see compensation linked to performance even at the executive level (p. 311). However, there are also new rules in place by the SEC that demand certain "thought processes" be explained in the compensation practices of that company. Thus, there is a technical and regulatory concept that also has to be considered when providing compensation even at high levels.
How I would apply what I have learned from the author in my organizational situation would be to emphasize the aspect of using the organizational culture to underline the connectivity between performance and compensation. This would mean that as a leader in HR, I would have to develop and promote the proper organizational culture message and set this out for employees at every level so that all workers could be aware of it and on the same page with regards to what is expected of them. These expectations would relate to ethical performance, productivity, morale, diligence, commitment, positivity, communication and all other positive associations that can be made between organizational success and employee participation. The essence of this approach is that it gives workers the ability to see what is required… [END OF PREVIEW]
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