Great Project to consider: A Compensation Overhaul

In our Jumpstart program this month, I had someone ask me via an email conversation what one project I would tackle if I was still at my previous corporate job. With that as my context (I was VP of Operations at a residential resort community in Hawai‘i) I was able to answer instantly: Compensation structures tied to job classification reinventions.

In my opinion, leaders either are not brave enough to tackle this (primarily because of perceived union objections or labor law obstacles), are too greedy to do so (why pay more when you don’t have to? Shortsighted indeed), or simply are blind to the possibilities.

A good part of the client base in my business still revolves around Hawaii’s hospitality and travel industry, and I find I am increasingly impatient with those who employ low wage earners in service positions, for they are so locked in automatic pilot. These jobs are sadly, tragically out of sync with the cost of living, and things MUST change.

I continually challenge small business owners to assume more responsibility for reinventing the labor equations in their business model, leading the way for the “big guys.” When you are smaller you are more nimble and must be more creative to compete successfully. Money is not the answer. Above all else you have to be braver, and those are the people I love to align myself with — passionate risk takers.

New business development is booming in the islands despite an alarming workforce shortage, a shortage which will get far worse before it improves: For every person newly entering the job market here, 3 or 4 baby boomers depart. What do most employers do about it? Work harder at their recruitment efforts, but not smarter. Not by a long shot.

I believe there ARE better answers, and that we need to rally together to find them. The Lōkahi team approach of our Ho‘ohana this month would definitely be my choice if I was currently leading a larger organization (I am currently a solopreneur, mentoring others in their own entrepreneurial efforts via contracted work for SLC.) The decision making for some of the ideas I propose, must be kākou — inclusive of all those involved, at every level of an organization, if they are to be lōkahi — harmonious and unified in intention and commitment to new experimentation as we seek a better way.

What are my ideas? Most are not that new, I am just not as willing as others to take “No, we can’t possibly do that” as the answer. For instance:

1. Refuse to pay any more overtime, doing whatever it takes to make that refusal reasonable. Overtime is not needed when you are ‘short staffed’ but when you are poorly staffed:

• Overtime is needed used when you have poor performers: They need more time to achieve the work your good performers crank out routinely — How does that make sense that they get paid more, and cost you more? Coach them to better performance, recast or replace them.
• Overtime is needed used when your job classifications are hopelessly outdated: The work has changed, but staffing levels and job expectations don’t reflect that. The actual work being done is happenstance and reactive, not intentional and proactive. Adjust!
  
• There are exceptions, but usually I find that most businesses are in fact over-staffed when you consider the amount of time their people are fully, productively engaged in worthwhile, still relevant work. When they are, they usually should be paid more, but business owners hesitate to revise wage levels accordingly — even when doing so actually saves them the excessive overtime dollars, and is the right thing to do.
• Far too many hourly wage earners depend on overtime to make ends meet. They proliferate poor working habits that will always necessitate overtime approvals by their managers, and their sympathetic managers knowingly allow them to get away with it. Do not cheat, be part of the solution to make things right.
  

2. Totally replace hourly positions with salaried positions. For years business people have tried to do this by cheating the system, for workplace laws on exempt versus non-exempt positions make it very difficult to eliminate hourly positions. However I remain totally convinced this must happen to eliminate overtime, and much more importantly, to eliminate the hourly working mentality which keeps employees focused on work “on the clock” versus passionate work on-purpose.

• The Lōkahi team approach is essential if we are to ever tackle this mind shift successfully, for team representation is needed from all who are stakeholders.
• Again, job classification reinvention must go hand-in-hand with changes in compensation levels so that they are tied into smart business performance, not tradition.
  
• Replace overtime with bonuses paid when people do find they must work excessive hours for good, strategically fulfilling and innovative work which makes perfect sense for the right reasons.
• Capitalize on the ‘salaried mentality’ that those on salary should not need to be supervised: They are intelligent human beings who were placed in the right job, and who have a lot to offer. They can assume responsibility and make their own decisions, and they don’t need managers who are babysitters. This is how we must think of all who work for a living, expecting much more and respecting them more.

3. Annual performance reviews are NOT good vehicles for determining compensation increases, and a first step in compensation level overhauls is to break any connection to the annual appraisal process. The short and sweet of this one is that people are individuals and will all tackle jobs in a unique way: They must earn their keep, and be compensated fairly for their performance. I have yet to see an annual performance review process that achieves this. ‘Fair’ is not the annual budget bell curve with percentage ceilings erroneously justified with appraisal metrics in the name of equality.

What would you add?

I know what I propose are biggies, for we have been tied to traditional work models for a very long time, and change is difficult, even for those who potentially can be the biggest benefactors of taking the leaps of faith innovative ideas can entail. Within the Lōkahi team approach we strongly propose pilot programs, knowing there will likely be unanticipated kinks to work out along the way.

To ever have the opportunity to work on those kinks we have to start someplace, don’t we. The question is if we have the guts to do what it takes.

Postscript: If anyone knows of a similarly comprehensive article which is an update to this one by the Economic Policy Institute (June, 2003), please let me know:
Eliminating the right to overtime pay.

If you have clicked in but are not presently in the MWA Jumpstart Program, you can learn more about the Lōkahi team approach in Chapter 8 of Managing with Aloha.

To read more about a pilot on converting hourly pay to salaried job reinventions, I also highly recommend reading Joy At Work, A Revolutionary Approach to Fun on the Job by Dennis W. Bakke. More here.

A timely look at unemployment here in Hawai‘i appeared in our Honolulu Advertiser just this morning: Fair brims with entry level jobs... “The largest number of recruiters ever — 206 — turned out for the state’s largest job fair of the year as Hawai‘i continues to enjoy the lowest unemployment rate in the nation for 24 straight months.”