Archives for April 2015

Is Your Compensation Strategy Actually Strategic?

Is your compensation strategy actually strategic?Employee compensation typically consumes 40 to 70 percent of operating costs for Canadian employers. For most firms, compensation is their single largest operating expenditure. Last year, according to Statistics Canada1, employers in Canada spent nearly a trillion dollars on wages, salaries, and benefits – imagine a stack of $100 bills more than 1,100 kilometers high! Are they getting their money’s worth? Is this money well-spent?

In many cases it is not. Some organizations are spending too much. But others are spending too little. While the amount being spent is important, it is not the key issue. The real question is “what is the organization receiving for its investment in wages, salaries, and benefits?” Is your compensation system contributing to the achievement of organizational objectives in the fullest possible way? Does the firm have in place the compensation system that adds the greatest possible value to the firm, after its costs are taken into account?

A compensation system is one of the most powerful tools available to an employer for shaping employee behaviour and influencing company performance, yet many organizations waste this potential, viewing compensation as simply a cost to be minimized. Even worse, some firms not only waste this potential, but their compensation systems actually serve to promote unproductive or even counterproductive behaviour. Problems of low employee motivation, poor job performance, high turnover, irresponsible behaviour, and even employee dishonesty often have their roots in the compensation system. Problems as varied as organizational rigidity, inability to adapt to change, lack of innovation, conflict between organizational units, and poor customer service may also stem, at least in part, from the reward system.

What complicates matters further is that, without any obvious warning signs, a compensation system that has worked well in the past can become a serious liability when circumstances change. Failure to adapt reward systems to changing circumstances can cause business strategies to falter, organizational structures to collapse, new technologies to malfunction, and entire companies to founder. Ironically, because the reward system often affects behaviour in very subtle ways, many firms never identify their reward system as a major contributor to these problems.

So, how can an organization avoid all this grief, and be sure that their compensation system is an asset, and not a liability? Although it is not a simple matter, asking yourself these questions can help to put you on track.

  1. Is our current compensation system strategic? A compensation system is strategic if it promotes the kind of employee behaviour our organization needs to meet its overall mission, and it does so in the most efficient possible way. This does not necessarily mean it is the compensation system that costs the least, but the compensation system that makes the greatest contribution to organizational objectives, after considering all its costs. The key is not so much the amount of compensation, but the structure through which compensation is provided—the mix of base pay, performance pay, and indirect pay—and the specific means through which each component is provided. How do we know whether we have this right?
  2. We need to ask ourselves, for the majority of our employees, what types of employee behaviour do we really need from them? We can think in terms of three main categories of employee behaviour—task behaviour, membership behaviour, and citizenship behaviour. Do we need employees to perform complicated tasks to a high level of proficiency, utilizing initiative and creativity, or do we need them simply to do what they are told in a reliable and consistent manner? Do we have a highly-skilled and hard-to-replace workforce for which we want a high feeling of membership—and therefore low turnover—or is it really not that big a problem for us to replace employees who quit? Do we need our employees to think of themselves as citizens of the organization as a whole, looking for ways to go above and beyond the call of duty, or is it enough for our employees to simply do their jobs competently and efficiently?It is important to be honest with ourselves about which types of employee behaviour our organization actually needs; developing a compensation system that produces all three types of behaviour is a complex and costly endeavour, which will incur a higher ongoing bill for total compensation and administration. It is tempting to say “of course, we need all three” even when our organization simply doesn’t, and investing what it will take to achieve unnecessary employee behaviours will be a very poor investment.
  3. In the light of the employee behaviours we need, which human resources strategy will produce the necessary employee behaviours? In general, we can think of two main HR strategies that are more or less polar opposites—high involvement and classical. A high-involvement HR strategy is the best choice to produce all three types of employee behaviour, while a classical HR strategy is a more traditional top-down, hierarchical approach that will be the most efficient choice when these behaviours are not strongly needed. In general, a classical HR strategy will be effective in business environments that are relatively stable, with relatively straightforward assembly-based or transaction-based technologies, with cost-oriented business strategies, and that require low to moderately-skilled workers. A high-involvement HR strategy is generally necessary in rapidly-changing business environments, with complex technologies or services, with business strategies based on innovation and/or differentiating products or services from those of competitors, and that employ highly-skilled workers.
  4. Next, we need to make sure our compensation strategy dovetails with our choice of HR strategy. If a classical HR strategy fits us the best, a fairly conventional compensation system using base pay geared to time worked or output produced, with some individual performance pay in circumstances where it fits, and an adequate package of benefits will suffice. However, a high-involvement HR strategy will require a complicated mix of intrinsic and extrinsic rewards (where a “reward” is defined as anything offered by an employer that satisfies an employee need). Jobs will need to be designed as to allow for intrinsic motivation, by incorporating skill variety, employee autonomy, employee teams, and the like. Decisions will need to be decentralized, giving employees extensive opportunities to participate in decision making. Supporting this will require a compensation system that provides for common goals, through such practices as team-based pay, gain sharing, profit sharing, and employee stock plans. Where feasible, base pay will be geared to the capabilities of employees (i.e. skill-based pay), rather than the specific tasks they perform, and the benefits package should emphasize elements that are of particular value in supporting a high-involvement strategy, such as support for learning and development. A flexible benefits plan that allows employees choice about the particular benefits that are of most value to them would fit the high involvement concept.
  5. A final question is how can we be sure that our reward and compensation system is actually producing the employee behaviours we need? At this stage, we need to make sure that we are collecting information that helps us assess the extent to which the desired employee behaviours are taking place, whether key compensation objectives are being achieved, and, of course, whether the cost of our compensation system is commensurate with the results it is producing. Ongoing assessment and adjustment of the reward and compensation system is essential to ensure that it continues to support our human resources and business strategies in the most effective and efficient ways.

About the Author

Richard J. LongRichard J. Long is Professor of Human Resources and Hanlon Fellow in International Business at the Edwards School of Business at the University of Saskatchewan. This article is based on his recently-published book, Strategic Compensation in Canada, published in Toronto in 2014 by Nelson Education.




Long, R.J. (2014). Strategic compensation in Canada (5th ed.). Toronto, ON: Nelson Education.

Statistics Canada. (2015) Table  281-0049 –  Survey of Employment, Payrolls and Hours (SEPH), employment, average hourly and weekly earnings (including overtime), and average weekly hours for the industrial aggregate excluding unclassified businesses, seasonally adjusted, monthly,  CANSIM (database). Retrieved April 8, 2015, from



1 Statistics Canada. (2015) Table  281-0049 –  Survey of Employment, Payrolls and Hours (SEPH), employment, average hourly and weekly earnings (including overtime), and average weekly hours for the industrial aggregate excluding unclassified businesses, seasonally adjusted, monthly,  CANSIM (database). Retrieved April 8, 2015, from

The Tough Work of Managing Change

The Tough Work of Managing ChangeThe literature on change management contains a lot of advice about formulating a change idea and planning it at a high level but much less on how to implement the idea once it has been created. For example, although strategy implementation is viewed as an integral part of the strategic management process, little has been written or researched on it. Likewise, in the public sector there is a great deal of advice on how to formulate public policy, and many academic courses teach this. But try to find a course or a book on getting that policy implemented successfully, and you will find very little. Why should this be so? I believe that implementing a change is a lot tougher than planning it because you actually have to deal with people instead of just things and concepts. Concepts do not resist or argue back. But this is not accepted wisdom. Senior leaders often believe that a great change idea should be easy to implement, that anyone can do it. So it is less glamorous and attracts fewer accolades.

Top management often backs the implementation effort in words but not in actions. When that happens, implementation problems occur that have not been anticipated or expected. For example, in one study the following implementation problems occurred in over half of the firms studied during their implementation effort.

>> This paper is one chapter from Dr. Carol A. Beatty’s e-book, The Easy, Hard & Tough Work of Managing Change. The complete e-book is now available on our website at no charge: Download

Old World vs. New World: Where Does Your Organization Live?

Get ahead of the shift with the 2015 Queen's IRC Workplace in Motion SummitDo you encourage collaboration between departments?
Are you ready for a changing demographic in your workforce?
Do you know how technology will change your organization in the future?

The world of work is shifting. Centralized systems and hierarchies are giving way to more fluid environments.  With innovation, not efficiency, as the aim, success comes from harnessing and connecting talent and knowledge through technology.

Sound possible? Or maybe it sounds totally foreign to the way you and your colleagues currently operate.

What’s the old world? It’s traditional roles divided into units with a clear hierarchy and a bricks and mortar location. It’s seniority-based, with clear delineations around who owns what work and how it is done. This is the organization born of the 19th century horse and buggy era, when labour meant muscle and competitive advantage came from streamlining routine operations for maximum efficiency. Labour was a cost to be minimized, not an asset to be linked and leveraged.

What’s the new world? The new world turns the traditional organization on its head, and re-establishes value based on knowledge, talent and innovation. The new world measures success by the ability to learn and innovate, and leverages talent by bringing together teams with diverse abilities and sub-specialties to create and mobilize knowledge.

The principles from the old world are so deeply rooted in our organizations that we often do not see them – and yet, they are the genesis for many dysfunctional corporate practices. Executives are still focused on short-term goals at the expense of longer term prosperity, unit goals and rewards are shaped independently, engagement is limited, and communication channels go up the stovepipe, not out and across the network.

Perhaps you or your organization don’t think it’s possible to make the shift from the old to the new.  We’re going to show you why it’s not just possible, but critical to your survival. Our ambitious aim at the Queen’s IRC 2015 Workplace in Motion Summit is to introduce you to pioneering organizations that are re-imagining the workplace and creating value for a whole ecosystem of customers, suppliers, partners and communities. We’ll explore how key trends in technology, global competition, generational flux and the knowledge economy are shaping the new world of work. Together we’ll discover what you and your organization need to do now to prepare for a successful future.

The world is changing – and we can either get ahead of the shift, or get left behind. Let’s begin the conversation together and discover what’s next.

The Who of Change

The Who of ChangeTwo groups are crucial to any change project: planners and implementers. The planners, typically more senior than the implementers, must answer some important questions before they hand over the initiative for implementation. When these questions are not dealt with adequately, the initiative can get off to a shaky start.

In this paper, I will give you those key questions and also advice for overcoming what I call the “iron curtain between planning and implementation.” Implementers have the more difficult task of the two groups. Until implementation begins, the change initiative is only an idea. The transition structure for implementation should definitely include a skilled change champion, but a steering committee, an executive sponsor and implementation teams are also associated with a successful change project. The tasks of implementation are numerous—communicating, scheduling, assigning responsibilities, thinking about details, dealing with resistance, assessing progress and so forth—and so getting the right people with the right skills focusing on the tasks of implementation is very important. Some of this work is easy, some hard and some tough.

This paper will highlight the tough work that you should not avoid. Plus, the skills and task lists will help you manage your transition structure wisely.

>> This paper is one chapter from Dr. Carol A. Beatty’s e-book, The Easy, Hard & Tough Work of Managing Change. The complete e-book is now available on our website at no charge: Download

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