Compensation Design

RCMP Turnover Rates

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Could it be the reward strategy?

TORONTO - NOVEMBER 18: RCMP members attend the 108th Santa Claus Parade in Toronto on November 18, 2012.
Canadapanda/Shutterstock

The compensation reward strategy is the foundation of any organization’s success. Getting it right is not a guarantee of success but getting it wrong can send shock waves through the organization. Currently, the Royal Canadian Mounted Police (RCMP) are dealing with very high turnover and this may be happening for many reasons, as outlined below:

  • Uncompetitive pay
  • Poor working conditions
  • Outdated equipment
  • Hostile working environment
  • Big bonuses for RCMP Brass

Click here to read an article about the RCMP quiet protests.

Click here to read and article about the RCMP culture of bullying.

Click here to read an article about RCMP bonus pay issues.

All organizations have to be strategic in their total compensation reward plan. Do they match the market, lead the market or lag the market? It is a question all organizations must answer. If the organization is lagging the market in wages there must be some other factors, such a great working conditions, to attract and retain employees.

It seems that the RCMP are not very successful in their overall reward strategy. Mounties at the rank of first-class will earn on average $20,000 less than a constable in Calgary or Vancouver, and according to CBC news, Mounties have been purchasing their own equipment.

Click here to read more about problems in the RCMP.

These issues are combined with a poor working environment and a perceived unfairness of compensation to senior staff. For instance, when the rank and file see bonuses paid out to RCMP Senior Leaders, like the ones below

  • $295,514 divided up among six deputy commissioners,
  • $596,669 for 28 assistant commissioners and
  • $838,137 for 56 chief superintendents.

While the front line Mounties have not received a raise since January 2014. Things are going to become unsettled.

All organization must be vigilant on understanding the impact the compensation reward strategy has on all aspects of organizational success. It looks like the RCMP must review theirs.

Discussion Question

  1. You are a senior HR Analyst for an HR consulting firm, and your company has just been asked to provide a reward strategy to the RCMP. What recommendations would you make? Where would you recommend the RCMP begin to ensure their turnover rate does not increase?

To Disclose or Not Disclose?

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What is the big workplace secret?

Employee compensation economy. Man working on laptop sitting next to young woman under money rain. Pay difference concept.
pathdoc /Shutterstock

We have it in the public sector: it is called the sunshine list, but should we have complete salary disclosure in the private sector as well?

In an interview with David Burkus, an Associate Professor of Management at Oral Roberts University, Sarah Green Carmichael from Harvard Business Review brings the topic of salary transparency right to the forefront.

Click here to read the complete article.

David Burkus is the writer of a book called, Under New Management: How Leading Organizations Are Upending Business as Usual. His research says that complete pay transparency makes for a better workplace for both employees and employers. His thesis is that when we keep salaries secret people feel they are underpaid and this breeds disengagement.

Click here to watch David Burkus speak on this issue.

Salary disclosure is a topic that many employees and employers are not comfortable talking about. But does it happen anyway in the workplace? Everyone has some idea of what their coworker makes, but no one has complete information, so assumptions are made and we know how often assumptions are wrong or inaccurate. Having access to accurate information helps: it can possibly create a more trusting and collaborate working environment. If so, perhaps more employers should consider removing the veil of salary secrecy, as David Burkus suggest.

Discussion Questions

  1. With a partner, have a debate and discuss the benefits and negatives of salary transparency in the workplace. Please research your arguments and plan on using your arguments to defend your position.

Compensation? Do Tell!

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What do employees want to know about compensation?

Close-up Of Businessman Hands Giving Cheque To Other Person In Office
Andrey_Popov/Shutterstock

What makes compensation effective? Employers, do you really want to know? The secret is that employees just want to know. They don’t necessary want to know everyone’s wages but they do want to know how the compensation system works in their organization.

Most organizations are afraid to talk about compensation. It is almost like politics and religion, which are not usually talked about in public. However, like any topic that is not discussed in the workplace, misinformation breeds like a wildfire. Misinformation leads to assumptions and workplace assumptions are usually incorrect, which can lead to organizational frustration.

A study by Peter LeBlanc shows that effectively communicating your compensation system will benefit your organization.

Click here to read about the study.

According to the study, the best way to communicate your compensation systems is to, “Keep it personal, interactive and it is best presented one on one from the employees direct manager.” Furthermore, the study also found that “…at all income levels…the more knowledge our study participants have about their pay system, the more likely they are to be satisfied with their pay and engaged at work.”

The shroud of secrecy over workplace compensation needs to be lifted, and open one-to-one communication encouraged so an employee’s supervisor can pave the way.

Discussion Questions

  1. If information about compensation is best presented to the employee by their manager, what role can HR play in supporting the communication roll out strategy?
  2. Develop an outline of a training program for managers to discuss compensation with their employees.

Pay for Production

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Are you paying for hours, or for productivity? The difference could be huge.

Woman balancing life and work
nmphoto/Shutterstock

All organizations need to develop an effective compensation strategy that is aligned with their business strategy; that is HR and Business 101.

Many compensation consultants discuss the concepts of base pay, performance pay and indirect pay, and most of those concepts are built on the foundation of an annual salary or hourly wage. Our society has been ingrained into the concept that a full-time employee works eight hours a day and 40 hours a week for approximately 2000 hours a year. It just can’t be any other way, most HR professionals would say.

  • What if our society’s concept of the paid hour of work for eight hours a day is a flawed concept?
  • Is eight hours the most productive number of hours per day to work?
  • Are there any alternatives?

Well, some researchers and some businesses are exploring alternatives to the eight-hour day and seeing very productive results. Tower Paddle Board, a manufacturer of stand up paddle boards (SUP), moved to a five-hour work day and a five-percent profit sharing model.

  • What was the result?
  • Was it higher costs?
  • Was there lower productivity and greater customer complaints?

I bet you can guess the answer to those questions was a big and bold: NO!

The opposite was true: workers’ wages went from $20.00 per hour to $38.40 per hour for 25 hours a week, and annual revenues were up 40 percent. Also, they have been named one of America’s fasting growing companies.

Click here to read about Tower Paddle Boards.

Discussion Questions

  1. Read the article about Tower Paddle Boards. Review the five steps Tower Paddle Boards used to implement a 25-hour work week. Pick a company and see if you could use those five steps to make a 25-hour work week work for that organization.
  2. Conduct some research online to learn about how other countries and companies schedule their work week. Come up with your own ideas for alternatives to the 40-hour work week.

Good news. Good choices.

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People in a Meeting and Single Word Rewards
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For many students, the study of compensation planning takes place mainly within a theoretical framework. There are limited opportunities to explore real consequences of designing and deploying pay systems.

How do performance pay choices work in ‘real-life’ situations? Fortunately, the team of employees led by the owner of Homestead Organics is able to provide us with a step-by-step example of the application of theory to reality.

Homestead Organics, located in eastern Ontario, started as a family based business dedicated to growing and developing sustainable agricultural products.

Click here to access Homestead Organics website.

As this particular company developed and expanded in size, so too did its profitability. Homestead Organics decided recently to share its good fortune with its employees by introducing an Employee Share Ownership Program (ESOP).

Click here to read the article on Homestead Organics’ ESOP implementation.

Both the article and the information from the website reinforce the importance of a high-involvement managerial strategy in the application of successful pay for performance systems. Further, the article provides us with an overview of the key elements that need to be in place from the beginning of the design process through to the delivery of returns to employees who have chosen to participate in this plan.

From theory to reality, this is indeed a good news story worth ‘sharing’!

Discussion Questions:

  1. What are the positive effects for employees as share-owners of Homestead Organics?
  2. How does the concept of share-owner differ from stock-holder in this case?
  3. What types of employee behaviours will this share-owner agreement reinforce in order to ensure continued success?
  4. How do you think the values of Homestead Organics influenced the decision to provide a share-ownership program for its employees?