Posts Tagged “HR”

Ok…really its two different topics, so I’ll take holistic thinking first.

So I do HR consulting, and we are always talking about the big picture…creating a holistic transformation, etc, etc.  Let’s think about holistic.  Its means whole.  You’re thinking about the whole thing.

Why is this is pipe dream?  Two reasons:

  1. Employees, no matter how high up in an organization (other than the CEO/COO) only have a certain purview.  The Executive VP of Compensation….deals with compensation.  If s/he were to think about the effect of compensation, it is just one piece of what keeps an employee at a company and motivated to perform (there is also benefits, manager competence, even the comfort of the chair s/he sits in at work).  In short, the VP of Comp can’t afford to think holistically about “total rewards” or “employment brand”….their purview is too limited.
  2. Some companies now have “total rewards” managers, or some other role, trying to get around this paradox.  Its a good idea, and likely works better than roles with more limited scope.  2 issues here:
    1. Its hard to find someone that knows a fair amount about everything related to Total Rewards or Employment Brand (It was hard enough to know just about Compensation).  Competence at this level will be difficult to come by….by definition.
    2. Here is the main issue, and my main issue with Holistic thinking….even in the best case scenario:  Complexity is hard to sort out.

People are not smart enough to deal with real complexity.  No one is.  The human brain cannot deal with an unlimited number of variables.  If you make a manager’s scope too limited, they are not holistic.  If you make the scope larger, they run into the issue of complexity.  Ok….what’s the real issue?

They call it the Butterfly Effect or perhaps more accurately the Law of Unintended Consequences.  Bottom line, we are unable to predict the outcome of systems that get too complicated.  The weather is an example.  Businesses are another…at least currently.

I think business/management will eventually become more scientific.  The human brain often fails at modeling complex systems (no person can predict the weather), but science can do a little better given time.  Of course, we still can’t very accurately predict the weather…even with science.

Any advice for businesses?  Yeah, I do have some.  Its a vote for the next-best, iterative solution.  The great Holistic strategy is not forthcoming, and if it were… would be too complicated to implement.  Be willing to start something today that you know is a step, and isn’t perfect, and is full of holes.

Companies already do this.  They’re good at it.  Where then do they fail?

Short-sightedness.  They start on a step 1…by the time step 2 is supposed to happen, they’ve had turnover (the original planners are now gone), the business environment has changed….they’ve already come up with another plan.  Plan 1 isn’t anywhere near done, and they’re already on Plan 3.

There is an abundance of strategy in corporate America.  There is not a ton of execution/follow through.  Even I recognize this.  By the time I’m good enough at my current job to have real effect….I’m off to something else.  Sustained effort is gold.


And then there is inflation.  I explained here what the US is doing with its monetary policy (printing money), and how we might bail ourselves out of this mess (other countries will finance our ir-responsibility).  It seems the Chinese know it too.

Another short bit on inflation:  I’ve heard the business press say wage pressure causes inflation (if people get paid more, then prices go up).  That’s shit.  Inflation is primarily caused by a change in the money supply.  The money supply is controlled by the Federal Reserve.  The Fed causes inflation.

What the Fed tries to do is even out the business cycle, to prevent inflation, to prevent boom and bust by slightly rigging the system all the time to ensure even growth and stable prices.  We get back to Complexity though (and weather prediction).  No one can predict economics.  The Fed gets it wrong….and thus causes our business cycles, not prevents them.

I’m not down on the Fed….I’m sure Ben is one of the greatest economists ever to live….but that don’t mean shit.  The greatest weatherman is still just some clown pointing at clouds on a map…..failing against Complexity.

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I read today about Obama chiding Wall Street for their reported $40 billion dollars in bonuses this year (even though they were down over the past few years).  It does offend one’s sensibilities, I certainly agree.

I mean…if risky mortgages are the source of the problem, then don’t bail out the banks, bail out the people…the banks get the money in the end anyway (since the people still have to pay the mortgage) and the people get to keep their homes.

If you bail out the banks…the banks get the money, the people still lose their homes…which then means the banks get the homes………so the banks get the homes AND the money:  And they were the ones responsible for the mess in the first place (to the losers go the spoils)!

Seems like they’re making out like bandits.  We lose our homes AND we pay to bail them out.  But whatever….that’s another conversation (the gist being that it really ISN’T the bad mortgages that are causing banks trouble, otherwise bailing out the people would be a more logical economic and political solution).

What the continuance of Wall Street bonuses really means is that pay for performance is a myth, and that is what it has to do with my job (HR Consulting).  Pay for performance is the idea that each is paid (in some measure) according to what they contribute.  If you do better, you get more.  A bonus (since it is a BONUS and not part of regular pay) would be linked to some performance measure and if you meet that measure then you get the bonus.

This is where it gets a little human on us:  The bonuses are largely paid out anyway (people set goals attainable within the normal flow of work, or managers “adjust” for externalities, etc.)  In effect, bonuses are not pay for performance (otherwise Wall Street wouldn’t get any)….they are really just a part of base pay.  In a good year you may earn 100% of a potential bonus; in a poor year you may still earn 75%.

Merit pay increases work the same way:  The average salary increase is 3.5% or so a year.  The average merit increase for good performers is 5%; top performers 7%.  In other words, there is only a 4% difference in pay increases between those who are just drawing paychecks, and those who are the best of the best (the best of the best do get promoted though).

Anyone who’s ever worked in corporate America knows the top performers are worth 10x or more than the average worker.

Of course there is the issue of measurement (how do you know how much more someone is worth?), and the issue of fairness (would you work next to someone doing your job that is making 10x more than you?), and the holdover from manufacturing/assembly line era of pay where a warm body is a warm body…anyone can pull a lever or start a machine, so everyone should make the same.  And then there is simplicity:  its easier to largely pay people the same.

Anyway, don’t blame Wall Street for their bonuses for the most part….its just part of salary.


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