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13 Ways to Build a Culture of Giving Thanks

The season for giving thanks and expressing gratitude – to our vendors, customers, and most importantly our employees – has commenced. There are many ways that employers can cultivate a culture of gratitude and giving thanks in the workplace not only around Thanksgiving, but throughout the year.

Showing Gratitude at the Holidays

The holidays are an ideal time to show gratitude to your employees and provide a number of opportunities for us to express our appreciation. Here are some ideas for showing gratitude around the holidays:

1. Create hand-written holiday cards of appreciation to employees, ideally from supervisors or leaders in the organization.
2. Personally call or visit each employee between now and the end of the year to thank and acknowledge them for their specific and unique contributions this year.
3. Some organizations provide holiday gifts to their employees. For example, some NorthCoast 99 winners provide employees with a turkey for Thanksgiving. Others give employees personalized gifts.
4. Use time off as a way to say “thanks.” Use this season as an opportunity to allow employees to attend a child’s school event, leave work early to take care of some holiday errands, or provide an extra day off to celebrate the holidays. Be understanding with weather circumstances that will affect your employees.
5. Have a luncheon, gathering, or holiday party with your employees.
6. One of the best ways to show your gratitude is by giving back. Donate to those in need or coordinate a community service activity for employees. For other ideas on community efforts, download our recent survey results.

Building a Culture of Gratitude

Does your organization have a culture of gratitude? Each day there are countless opportunities to show gratitude to others in the workplace. Supervisors, leaders, and coworkers can all help build a culture of gratitude by acknowledging the contributions of those around them in specific and genuine ways. Here are some ways to foster gratitude in the workplace:

1. Formal recognition programs are a common way employers build a culture of gratitude in the workplace. Formal annual, quarterly, monthly, or even weekly awards can help build a culture of recognizing the behaviors and results your organization seeks.
2. Having a method of peer recognition is important in developing appreciation among coworkers. Create a program or initiative that encourages peers to recognize and thank one another for their help.
3. On-the-spot rewards and recognition allow employees to be recognized at any time by supervisors, management, or even peers through some small reward, such as a gift card, ticket to local event, or other valued recognition. Spontaneous rewards and recognition can be welcome surprises for employees.
4. While your organization may have recognition programs in place, if your supervisors and managers are not using them, they likely won’t be effective in helping to drive a culture of gratitude. Many organizations train their management staff on the importance of recognizing employees and how to use the tools and programs provided by the organization.
5. Making celebrations a part of your organization’s activities is another way to build a culture of gratitude – as well as fun and enjoyment. Coordinate a few celebrations throughout the year to show appreciation to your whole staff. Some organizations even go so far as to celebrate personal events like birthdays, weddings, and births.
6. Although it sounds simple, many workplaces forget to say thank you – especially to their most valuable assets: top performers. Saying thank you via email, phone call, voice-message, card, e-card, or in-person, or taking an employee out for coffee or lunch to say “thanks” can be very meaningful.
7. When developing a culture of gratitude, remember that formal programs are only part of the equation. It’s equally as important to create new habits, expectations, and norms throughout the organization to develop a culture of gratitude – and this typically starts at the top. Encourage leaders and managers to lead the way in thanking an employee each time they do something exceptional or of assistance to them, and to post or communicate successes publicly – through newsletters, interoffice mail or email, on bulletin boards, and at department or staff meetings.

A culture of gratitude can change your workplace into a positive, uplifting, and collaborative environment – eliciting more enthusiasm, engagement, and positive relationships. Use the weeks ahead to plan a strategy to make your workplace one in which giving thanks happens year-round.

Additional Resources

• Benchmark your organization’s paid holidays and holiday practices by participating in ERC’s surveys: 2011 ERC Paid Holiday Survey and ERC Holiday Practices Survey.
• For a guide to creating effective reward and recognition programs, download our 2010 NorthCoast 99 Winners Report.
• For assistance in creating a rewards and recognition program, please contact consulting@ercnet.org.

3 Workplace Guidelines for the Upcoming Election

Here are three critical points employers need to know regarding legal voting rights and political activities in the workplace in terms of the upcoming election.

1. Voting. In Ohio, employers cannot fire or threaten to fire an employee for taking a reasonable amount of time to vote. Employers also cannot induce or compel an employee to vote or refrain from voting.

2. Union Activity. According to NLRB guidelines, a strictly political activity not tied to any labor or employment related concerns may be prohibited by lawful employment policies. If the political activity is tied to labor or employment related concerns and not restricted by lawful employment policies, employees may be protected.

3. Policies. Employers should create policies regarding political issues and elections such as appropriate behavior and use of the company building, email, public areas, dress code, political paraphernalia, and political discussions, and apply these policies consistently throughout the organization. If these policies have already been created, it’s important to communicate and remind employees of them.

For additional questions regarding issues involving dealing with politics in the workplace, ERC members are encouraged to contact hrhelp@ercnet.org.

10 Ways to Prevent Office Politics

Election time is well underway and office politics may be brewing in your organization. Different views, beliefs, and stances on issues pervade our workplaces – not only in regards to political issues, but also on organizational and workplace issues that affect our business. Whether the issue is conflict over differences in political views or everyday politics of favoritism/unfairness, conflict, gossip, or lack of teamwork, dealing with office politics extends well beyond the elections for HR. Here are 10 ways to effectively deal with office politics.

1. Help employees understand each other. Like most workplaces, yours is probably full of different opinions, backgrounds, personalities, cultures, religions, values, passions, and political views. These differences can be a minefield for potential conflicts and politics. The key is to communicate and train employees on the value of these differences in the workplace and help employees better understand their own idiosyncrasies and how these impact others and the unique strengths, skills, and values of their coworkers. There are many assessments, activities, and retreats to help facilitate this.
2. Encourage respect. A healthy and functional work environment is characterized by respect among coworkers. Set the tone for professionalism in the workplace by creating expectations of respect, cooperation, and professionalism. One common way organizations encourage this and hold employees accountable for respectful behavior is by evaluating these competencies or behaviors during the performance review process. In addition, policies should be created and most importantly – enforced – to deal with employees that are not being respectful of others. These include policies related to employee conduct, harassment, discrimination, violence, and politics in the workplace. Disrespect should not be tolerated in your organization.
3. Provide training. ERC finds that in many organizations there is an absence of skills in managing and resolving conflict, building effective teams, and communicating with one another. In many organizations, individuals continue to struggle to get along, collaborate with one another, work as a team, and communicate well, which further deepens office politics. Soft-skills training and skills coaching can be effective interventions to help address these issues.
4. Address conflict. How many conflicts go unresolved in your workplace? If the answer is too many, it’s time to better manage and resolve conflicts. Unresolved conflicts result in lower productivity, higher costs, and decreased morale and engagement. HR can be a tremendous resource in helping to mediate and resolve ongoing tensions between coworkers, and employees and supervisors.
5. Break up the cliques. While workplace friendships, tight knit groups of coworkers, and strong relationships are inevitable in the workplace (and positive in many respects), clique-forming can be detrimental to workplace productivity. Cliques can potentially create unhealthy alliances that cause dissention, put up barriers, hurt work relationships, and create divisions – all of which undermine the business’s productivity and success. Be aware of clique-forming in the organization, the individuals promoting the formation of cliques, any negative issues that are stemming from their presence, and the causes of anxiety or negativity that are prevalent in these groups.
6. Discourage gossip. Gossip is another workplace behavior in organizations that creates an uncomfortable work environment. While there is no easy way to prevent it, there are ways to change your culture to one which encourages more direct confrontation of problems. HR can also take the lead in determining the sources of gossip, attempting to stop gossip in its tracks, reminding employees of the consequences of gossip in their career, and coaching them on different and more effective conflict management and problem solving strategies.
7. Create fair policies. One common issue we see in many organizations is the creation of unequal policies, perhaps for different types of employees (i.e. office staff vs. production staff; exempt vs. non-exempt). These discrepancies in policies frequently create more political issues within the office by creating an “us” versus “them” culture and typically lead to feelings and complaints of favoritism and unfairness. ERC frequently recommends that organizations challenge the rationale behind having these inconsistent policies and reduce or eliminate the discrepancies if business needs allow. They often do more harm than good.
8. Institute clear policies, criteria, and processes for decisions. We’ve all witnessed the common complaint of favoritism or unfairness about a promotional decision, distribution of recognition, or perhaps even the amount of a pay raise or bonus. Decisions regarding highly valued rewards such as promotions, development opportunities, recognition and rewards, pay, and incentives, should be based on very clear and fair policies, criteria, and processes – and line supervisors and managers should be held accountable for using this information to guide their decisions.  Strive to clearly communicate how decisions are made and minimize subjective factors. Employees are often skeptical of subjectivity, and where decisions are vague and left to interpretation, employees may perceive that a supervisor or leader is “playing favorites.”
9. Provide an avenue for open, honest, and anonymous feedback. Another frequent problem we observe in organizations is the failure to offer an avenue for employees to provide open, honest, and anonymous feedback. When these avenues are not provided, employees often resort to either silence about problems or gossip and other counterproductive feedback methods to express feelings, frustrations, and complaints. Surveys, suggestion boxes, and focus groups or interviews facilitated by an outside or neutral individual or firm can all be effective methods of feedback collection. These modes provide employees with a safe and constructive way to share their concerns, and the organization with useful feedback for solving workplace problems.
10. Walk the talk. Finally, these same rules apply to HR and leaders. Most importantly, it’s crucial that we model the behaviors we expect in our workplace. Be aware of how you are behaving in the workplace and how your employees perceive it.

Additional Resources:

• For training or skills coaching in topics such as conflict management and resolution, team building, problem solving, respecting/valuing others, supervisory skills, and more, please contact ckutsko@ercnet.org.
• For assistance with individual development assessments and/or coaching, please contact coaching@ercnet.org.
• For assistance in gathering employee feedback using surveys, focus groups, or interviews, please contact consulting@ercnet.org.
• For help with employee relations issues discussed in this article and HR policy development, please contact hrhelp@ercnet.org.

4 Legal and Employee Issues to Consider for Holiday Functions

The upcoming Halloween holiday (and other emerging holidays) brings to light a few critical legal and employee concerns that every HR professional needs to be aware of for their organizations. What may appear to be innocent office decorations, attire, conversations, celebrations/events, and more, can create legal and employee relations issues in the workplace. Here are some key issues to be aware of surrounding upcoming workplace holidays and events your organization is considering.

Harassment

Harassment is a major concern that surfaces in the workplace around Halloween and other holidays when social gatherings occur. HR needs to make employees aware of what types of costumes, decorations, props, and other items are not appropriate to bring into the workplace. In addition, around Halloween, interoffice jokes and pranks can become more common. Be sure to communicate what behaviors or conversations are not appropriate for the workplace and institute basic rules surrounding decorations, costumes, and other activities to make sure that employees’ ideas don’t get out of hand and lead to harassment or be viewed as indicative of a hostile work environment.

It’s also important to note that cyber-harassment has recently become a major issue for employers who allow employees to use electronic work equipment such as email, cell phones, laptops, and others at work.  Inappropriate emails, texts, calls, or use of other electronic devices can be cause for concern, especially around Halloween and other holidays when inappropriate emails may circulate with greater frequency. If your organization does not have a policy regarding harassment and the use of electronic devices (i.e. computers, email, cell phones, etc.), be sure to create one and communicate it to your employees.

Workplace violence

Halloween is a unique holiday, and as a result may lend itself to concerns pertaining to workplace violence. Workplace violence, however, may also be a more pressing concern at other holiday social gatherings, depending on the nature of the event and if the organization allows for alcohol consumption. As with harassment, be sure to have a policy in place and communicate it to employees and also establish rules regarding appropriate and inappropriate behaviors, costumes, props, and decorations.

Religious accommodations

Many workplaces have small holiday festivities or celebrations, or some departments may choose to coordinate their own internal activity. Some employees, however, may consider Halloween (or another day) a religious holiday or be opposed to the workplace having such a celebration due to their religious preferences. HR should be highly sensitive to these religious preferences and should not mandate attendance at or participation in such a festivity or celebration. If an employee considers Halloween or another holiday as a religious observance, it’s recommended that organizations accommodate this with time off or an alternative paid holiday.

Employee objections

In the workplace, there will undoubtedly be some employees that object to certain office decorations or activities, leading to some employee relations issues. These objections shouldn’t suggest that organizations must ban all of these types of activities in their workplace. HR should be mindful, however, of conduct that makes any employee uncomfortable in their workspace and put into place a fair complaint resolution process to resolve these sorts of issues. Diversity training may also be a viable intervention to help employees recognize the diverse backgrounds and perspectives of their coworkers and become more mindful of their behaviors and how they affect other individuals in the workplace.

If Halloween parties/festivities, costumes, decorations, contests, trick-or-treating, and other activities may be on your organization’s agenda for the next week, keep in mind these potential workplace concerns. Communicate any rules or guidelines surrounding Halloween and other holiday activities very clearly in advance, make sure supervisors are aware and enforcing these rules, have appropriate workplace policies in place for harassment and workplace violence, be sensitive to your workforce’s diversity, be prepared to use discipline on the spot, and consider alternative approaches to celebrate and come together as an organization – such as non-Halloween related fall festivities (SHRM, 2009). Common events other local employers coordinate are fall festivals, clam bakes, hay rides, and potlucks.  These can reduce the likelihood that your organization encounters potential legal or employee issues.

Holiday and social functions are a necessary part of the workplace, allowing for enjoyment and socializing.  They are effective methods of recognizing and engaging employees and building important coworker relationships.  As a result, your workplace can and should continue to hold these functions. Just be mindful of the potential legal and employee issues that could impact your organization, and put into place policies to protect your organization.

Source:
SHRM (2009). Allowing Halloween Costumes at Work Can Be Tricky

Additional Resources:

• HR Help Desk (Members Only) – For additional information and guidance related to holiday practices, contact hrhelp@ercnet.org.
• Surveys – Benchmark your holiday practices among other local employers. Participate in ERC’s 2011 Paid Holiday Survey and Holiday Practices Survey. Results of these surveys will be published in November.
• Host Your Event at ERC! – ERC is a great setting to host your holiday party or event. Contact Jasmin Denholm at ERC (jdenholm@ercnet.org or 440/947-1274) for more information on our event services.
• Training – For training on workplace topics such as harassment, discrimination, workplace violence, and other legal and employee relations in the workplace, please contact ckutsko@ercnet.org.

4 Critical Points to Communicate about Health Benefits

Open-enrollment period is upon many organizations, and with the complexities of health care reform, increasing costs, and employees relying on employers to educate them on how these matters impact them, having a well-developed communication strategy for your open-enrollment period can help your organization better address the most pertinent employee concerns and questions.

We’ve summarized four critical points your organization should include in its communications to employees during its next open-enrollment period.

Changes to health benefits
According to Hewitt, health care costs are anticipated to rise nearly 8.8% in 2011, with employees expected to contribute 22.5% (on average) to the health care premium, up from 2010 (Hewitt, 2010). In response to the increasing costs of health care benefits, it’s expected that employers may continue to adjust the designs of their health plans through cost shifting, increasing premiums or deductibles, and changing plan designs.

When making these changes it’s important to be mindful of how they will be perceived by your staff. For instance, employees typically have negative view of cost-shifting, but a positive view of having more personal control over their health care decisions (SHRM, 2010). As a result, tailoring communications with language that conveys more personal responsibility, may be beneficial. In addition, explaining the “why” behind any added costs you are placing on employees helps to clarify inaccurate assumptions.  This includes explaining how added costs may be necessary for organizational sustainability.

What choices employees need to make
Present employees with information on what is changing with regard to their health benefits and/or benefits package, what the costs will be, and the options or choices they will need to make (i.e. changing plans, adding or removing spouse/dependents, etc.). Encourage employees to evaluate their individual needs, make use of available cost-savings opportunities (such as wellness incentives, use of FSAs or HSAs, etc.), and get involved in the organization’s wellness initiatives to become healthier individuals.

How health care reform will impact employees’ benefits
The enrollment period is an ideal time to communicate how health care reform will impact employees’ benefits. Even if your organization has been communicating these changes as they emerge, the enrollment period is another good time to readdress how employees are and will be impacted by the reform. Be sure to clearly explain the changes, in as simplified a way as possible, so employees have an understanding of how health care reform has impacted their plan – whom the company plan now covers (including children up to age 26), elimination of annual or lifetime limits, changes to reimbursements through flexible spending accountings/health savings accounts/health reimbursement accounts, new requirements for preventative benefits, and an increase in HSA tax on non-qualified medical expenses.

How employees can receive the most value from their benefits
Communicate or show employees the value of their benefits (perhaps in a dollar amount). Benefits or total compensation statements can be an effective means of showing employees the dollar amount value of the package provided by the organization. In addition, provide updates or reviews on services available through the company benefits program (i.e. preventive or wellness programs) and education on how to be good health care consumer and help control their cost of medical care. Offering resources such as access to benefits experts (one-on-one meetings, presentations, small-group focus groups, etc.), hotlines, online resources, and other print educational materials on benefits, can also be helpful in communicating the value of company benefits.

Benefits can be confusing to employees, and in our experience, effective communication of benefits-related information plays a critical role in achieving benefits satisfaction from employees, and is nearly as important as the benefits themselves.

Additional Resources

Local Benefits Practices
To see how your health benefits compare to other similarly sized organizations in Northeast Ohio and other organizations across the United States, as well as other benefits including dental, vision, retirement, disability, and many more, participate in the ERC Policies & Benefits Survey, open until October 15th. If you need your loginID and password, contact surveys@ercet.org.

HR Help Desk (Members Only)
For additional information or assistance with the complexities of open-enrollment and administering benefits, or for questions related to health care reform, please contact hrhelp@ercnet.org.

ERC Health
ERC Health is a healthier idea in health insurance. By making the right business decision, organizations in ERC Health have saved over $34.5 million over the past four years alone. Learn more about its benefits.

Answers to 5 Common Questions about 2010-2011 Compensation

Your boss approaches you and asks what you are planning for in terms of salary administration in 2011. You’re responsible for maintaining competitive pay rates, rewarding your best people, but also meeting your organization’s budget limits and managing your employees’ expectations. You’ll need to determine how you will approach base pay, pay increases/adjustments, and pay for performance or variable pay, and still maintain a competitive benefits package and pay for other employee programs like training and development in the upcoming year.

Here are answers to five common questions employers just like you are asking about compensation for the rest of 2010 and into 2011.

1. Should we be reviewing base pay?

According to a recent study conducted by Mercer, nearly 40% of employers have reviewed their base pay programs this year, indicating that organizations are looking at base pay more closely than perhaps they have the past few years. ERC typically recommends reviewing base pay programs at least bi-annually, but monitoring trends annually. As retention of top talent becomes a more pressing concern, reviewing base pay will be critical, if your organization does not want to fall behind in terms of competitive salaries and wages. In addition, if your organization has done any of the following – freeze pay, cut pay, not provide salary increases, or hire for new positions, or senses pay dissatisfaction among your staff, reviewing your base pay practices should be a priority.

2. Are employers providing pay increases?

According to a recent ERC survey, more employers (78%) are planning increases for 2011 – a sign that raises are once again becoming a standard practice. As a result, it’s recommended that salary increases be included in your 2011 compensation budget. Keep in mind that across-the-board and cost of living adjustments, however, are becoming less commonly offered by employers and instead, being replaced by increases tied to performance.

3. What is the status of pay for performance or variable pay?

Pay for performance and incentive options remain a crucial part of many employers’ compensation practices, and we have seen little change in the types of incentives being offered by local employers. Nearly 80% of employers continue to offer these options to employees, according to our most recent Pay Adjustment & Incentive Practices Survey. In fact, some employers have replaced annual pay increase programs with variable pay due to fluctuations in business performance impacting compensation budgets.

What may have changed with regard to pay for performance and variable pay are the performance measures and targets, in light of new business objectives and strategies, amount of payouts (larger or smaller depending on the financial state of the organization), and eligibility for payouts. Thus, employers should review these programs to make sure that they are producing the results intended and measuring performance accurately and effectively.

4. How should the costs of benefits and other employee programs factor into our compensation decisions?

There’s no question employers are stretched these days with increased benefits costs and also the need to manage talent by offering various employee programs and developmental opportunities – all of which have tremendous costs. Some employers are being faced with decisions to heighten pay, but decrease benefits or vice versa depending on their financial situation. Therefore, we strongly recommend that organizations consider employees’ total compensation when making decisions about pay.  As with compensation, this involves continuing to benchmark the practices of other employers with regard to benefits, training, and more using data such as these ERC surveys.

5. What data should I use for my 2011 salary administration?

There are many sources of reputable and accurate data on base pay for positions, average pay increases (actual and projected), and pay for performance/variable pay trends. These sources include published salary surveys such as ERC compensation surveys as well as those conducted by ERI, Mercer, WorldatWork, Watson Wyatt, BLR, and other industry-specific resources. Not only are these sources credible, but they are highly regarded by many employers when conducting compensation administration. They provide competitive data, provided by actual employers to help you make good compensation decisions.

Here are some general guidelines on using data provided in these surveys:

• Use data relevant to your organization (similar size, industry, location, etc.).
• Use multiple sources of data. A good rule of thumb is 3 sources. While compensation data can be expensive, an ERC Membership (for example) provides you with access to numerous reputable sources of compensation information that makes the process far more cost-effective than purchasing survey data on your own.
• Observe trends in compensation data (notably base pay) over multiple years, as compensation survey data tends to be highly influenced by the organizations that have participated in the survey, which may differ somewhat from year to year. Make market adjustments based on those trends. Compensation data, similar to other market information, is susceptible to sample variability.
• Market price jobs based on your compensation philosophy. For instance, it you aim to pay all your jobs “at market,” then the median rate would be the metric you would want to use when pricing your organization’s jobs. Whereas, if you aim to pay some of your jobs “above market,” using a higher percentile (75th, 90th, maximum, etc.) for these jobs will be most beneficial.

It’s expected that 2011 will bring about even more issues and new trends impacting compensation administration.  Make sure you are prepared with the data you need to make the best and most competitive decisions.

Not an ERC member? Visit www.ercnet.org/survey to find out how ERC can support your survey data needs in 2011 and as you budget this fall.

Boost Business Results by Creating a Great Workplace

There’s no question that HR impacts the bottom line, largely through the practices it employs to effectively engage its staff and build a great place to work. In recent years, numerous studies have suggested that building great places to work can and does lead to organizational success, meaning that great places to work frequently outperform other organizations.  Simply providing unique perks, benefits, and a fun workplace, however, generally isn’t what creates a great place to work (although these certainly may be part of the package!). Research shows that great workplaces that best engage employees are those that see the most successful results. This emphasis on meaningful workplace practices surrounding employee engagement is what truly characterizes great workplaces nowadays. Consider the following:

• Hewitt Associates (2010) found that when organizations had at least 65% of engaged employees, its total shareholder returns were nearly 20% higher than average total shareholder returns.
• The McGill Institute for Health and Social Policy (2010) found that organizations that invested in their employees via supporting their health, providing training and advancement opportunities, offering incentives, engaging employees, and taking steps to ensure that their companies and the community profited, increased their profitability.
• Towers Perrin (2007) found that organizations with the highest percentage of engaged workers saw a 19% increase in operating income and 28% increase in earnings per share. Organizations with the lowest percentage of engaged workers, however, experienced a 33% decline in operating income and 11% decline in earnings per share.
• The Great Place to Work Institute (2010) reports that great workplaces (specifically Fortune’s 100 Best Companies to Work for in America) experience lower turnover, reductions in health care costs, higher levels of customer satisfaction, higher productivity and profitability, and greater innovation and risk taking.
• The Department of Labor found a link between progressive workplace practices and bottom line results, determining that there is a positive relationships between training, motivating, and empowering employees and improving productivity, employee satisfaction, and financial performance. In addition, the impact of progressive workplace practices tends to be more significant in the long term (Great Place to Work Institute, 2010).

While this is simply a snapshot of the many studies indicating a correlation or relationship between great places to work and business success, it’s obvious that great workplaces which focus specifically on engaging employees find themselves experiencing more business success than those that do not. In fact, recently Inc. 5000 released a list of the top companies in the Cleveland area which are growing at a rapid rate – several of which are past or present NorthCoast 99 winners. This is yet another testament to the strong relationship between great workplaces and organizational success, especially in our own region.

So what practices generate the most impact on engagement and create a great place to work? As discussed in our complimentary 2010 NorthCoast 99 Winners Report, the answer is very multifaceted – spanning engaging new-hires through recruiting and on-boarding, implementing effective compensation and rewards practices, developing and advancing employees, encouraging feedback and open communication, and promoting strong relationships with coworkers, supervisors, and leaders. In addition, there are many different ways of engaging employees and creating a great place to work and each organization approaches this in similar, but distinct and unique ways that are consistent with their culture.

If your HR department is looking for ways to boost business results, it’s important to make employee engagement and creating a great workplace part of the equation.

Additional Resources:

• NorthCoast 99: For more information on the NorthCoast 99 program, including a list of our 2010 winners and other reports and information, please visit www.northcoast99.com.
• HR Help Desk (Members Only): For additional information and guidance related to creating a great workplace, please contact hrhelp@ercnet.org.
• HR Consulting: For assistance with a variety of talent management projects or employee engagement surveys, please contact consulting@ercnet.org.
• Professional Development: To learn about methods of measuring HR and using a variety of HR metrics, join us for the following workshop: Measuring HR: Metrics for Successful Outcomes. Click here for more information or to register.

A 4 Step Guide to 2011 Salary Budgeting

It’s time for 2011 salary budgeting and surveys say that increases are being planned by many organizations for the upcoming year. So how much should you plan to provide? Should you pay top performers more than the average increase? How do you sell your budget plan to finance? We’ve compiled a short 4-step guide for creating a salary budget for 2011 and to address these common questions from our members.

1. Plan to provide increases of at least 2.7%

Survey results suggest that your organization should consider providing increases of at least 2.7% next year, as the majority of reports are showing average projected adjustments between 2.7% and 3.0%.

According to surveys conducted by Mercer, Towers Watson, WorldatWork, Hay Group, and ERC, employers are projecting higher pay increases for 2011 compared to those increases provided in 2009 and 2010. We’d recommend using any of these credible sources as benchmark information help you devise your salary budgeting.

Source	Projected Increase
ERC	2.8%
Mercer	2.9%
WorldatWork	2.9%
Hay Group	3.0%
Towers Watson	2.7%

Pay adjustments can and do vary depending on industry, size, region, and other variables including whether your organization plans to provide formal range adjustments or individual increases.  It’s important to look at all of these variables when setting your plans.

2. Differentiate increases based on performance

Many organizations differentiate increases based on level of performance (i.e. top performers, average performers, and bottom performers) versus providing a flat average increase to employees.

We typically see organizations differentiating increases by at least 1-2% for each performance level. Using 2.7% as a benchmark average rate, it may be common for top performers to earn increases close to or over 4%.

Mercer and Towers Perrin’s surveys indicate that employers plan to provide average pay increases of 4.3% to top performers, 2.6% to average performers, and less than 1% to bottom performers (Mercer & Towers Watson). WorldatWork’s survey showed slightly lower projections for performance levels with 3.7% for top performers, 2.4% for average performers, and less than 1% for bottom performers.

The merit matrix is a common way in which organizations set guidelines for merit pay adjustments or increases, particularly when they wish to differentiate increases based on performance to reward their top performers, with many organizations setting average increases for average performers.

3. Sell your budget plan to finance

Selling your budget plan to finance or accounting will be crucial, especially during a time when cutting expenses (versus adding them) is the preferred strategy. Payroll expenses make up a large percentage of the operating budget of your organization. When selling budget plans to finance, it’s important to speak their language which means presenting plenty of data and evidence to back up your plans.

• Make sure that accurate, valid, and detailed data is compiled and used in your budgeting plan.  Salary budgeting surveys are helpful tools. Just be sure there is enough data to justify or support the budget you propose. Employee feedback can also be used as data to justify your budget. For example, if pay satisfaction is low or exit interview data suggests that individuals are leaving due to pay concerns, this data could support your plan.
• Make sure that you’ve estimated increases accurately and that the added expenses are justified. Work to understand your finance or accounting department’s dilemma in continuing to look out for the organization’s profitability.
• Aligning your budget plan with organizational goals or objectives also typically resonates with finance.  It’s likely that pay for performance plans or increases tied to the achievement of objectives will help reinforce these goals and objectives.
• Compensation philosophies or policies can also be helpful in supporting your pay plans. For example, if your organization has a philosophy to pay at market, adjustments will likely need to be made based on this year’s data. Similarly, if your organization has a philosophy to pay above market, adjustments above the average will likely need to be made.

4. Continue to stay alert to market changes

Keep abreast of changes in the market during 2011. Even though organizations plan to provide a certain percentage increase, the market sometimes leads them to adjust this projection in the first or second quarter of the year. Plan to confirm your budgets at least once next year to make sure the market is showing what was projected.

Additional Resources:

• Surveys – To benchmark projected wage and salary adjustments for 2011, please click here to download the 2010-2011 ERC’s Wage & Salary Adjustment Survey. Or, to benchmark market trends in pay for specific positions, consider using ERC’s various compensation surveys. Not a member of ERC? Visit www.ercnet.org/survey to learn more about accessing our 2010 compensation surveys for no cost.
• HR Help Desk – For questions or guidance related to salary budgeting or to obtain additional data to support your organization’s budgeting plans, please contact hrhelp@ercnet.org.
• Compensation or Performance Management Project Assistance – For project assistance related to compensation or performance management, please contact consulting@ercnet.org.

Sources:

• Mercer (2010). U.S. Compensation Planning Survey
• WorldatWork (2010). Annual Salary Budget Survey
• Towers Watson (2010). Global Talent Management and Rewards Survey
• Hay Group (2010).
• ERC (2010). 2010-2011 ERC Wage & Salary Adjustment Survey

3 Questions to Ask Your Top Performers

What would your top performers say about your workplace? What would they say about its strengths, its weaknesses, what makes them stay, and what makes them think about leaving? How would they describe the ways in which your organization has handled the challenges of the past year?  Perhaps the greatest test of our workplaces and organizations is the perceptions of our top people. So consider asking your top performers three important questions:

• How did we respond (or how are we responding)?
• What will make you stay?
• What would cause you to leave?

This past year, ERC did just that. We asked top performers in Northeast Ohio what they perceived to be the main reasons that they continue to stay at their organizations, the aspects of their organizations that cause them to consider leaving, and their perceptions of how their organizations handled the economic challenges of the past year. The results yielded some important insights into what local top performers at NorthCoast 99 winning organizations have to say about their workplaces.

How did we respond?

Top performers at this year’s NorthCoast 99 winning organizations overwhelmingly felt that their organizations were proactive in addressing challenges of the past year, implemented creative cost reduction, constantly communicated with them about the state of the organizations, cut unnecessary expenditures to preserve jobs, maintained customer/client focus, continued to innovate and focus on growth, and focused on teamwork and collaboration. In addition, they felt that their organizations made difficult decisions with great sensitivity to employees, did all they could do to preserve and protect employees and their jobs, had strong and supportive leadership, remained positive about the future of their organizations, and continued to give their staff the resources they needed. All in all, top performers at winning organizations were impressed and comforted by their organization’s approach during challenging times.

What makes you stay?

In addition, top performers cited numerous reasons why they stay at their respective organizations with many of these reasons fall into a few buckets: the job itself, the people, and the workplace. In terms of the job itself, top performers report staying at their organizations mainly because they enjoy the work they do, are passionate about their jobs, are challenged, and constantly learning new things. Top performers also report staying at their organizations because of the people – their coworkers, managers, and leaders. They have strong, supportive, and understanding relationships with their coworkers and managers and feel that leaders have the best interest of their employees in mind as they make decisions impacting the organization and lead the organization successfully. Finally, top performers stay at their organizations because of the workplace and its many rewards including, but not limited to, work/life and flexibility, developmental and advancement opportunities, pay and benefits, and rewards.

What would cause you to leave?

While many top performers at winners cited no aspects of the organization which cause them to consider leaving, even our NorthCoast 99 winners constantly have the task of improving upon the aspects of their workplaces to better retain top talent.  Based on the data we collected, among the greatest opportunities for our winners and other organizations are providing top performers greater ability to deal with stress and workload issues, continuing to expand development and advancement opportunities, maintaining compensation competitiveness, and helping top performers deal with other unique demands or concerns relating to their job or the organization (autonomy, communication, job stability etc.). By far, however, the most common theme among top performers is stress and workload concerns, suggesting that many top people in our region feel overstretched.

Would your top performers respond similarly to those at our winning organizations? If you’re not sure, ask these questions, get the answers, and mobilize the rest of your efforts for the remainder of the year around the feedback of your top people. 

Congratulations to our 2010 NorthCoast 99 winners who have “passed the test” in the eyes of their top people.