Compensation Wormhole

Time Travel. In the movies, it usually requires some door into a wormhole or some type of hyper-drive. In the business world, it’s one of the easiest things to do. No special skills or tools are required. Leaping ahead 4 or 5 years is as simple as changing the destination in your GPS.

We have been living in an age of 3% annual increases for several years.  Sometimes it’s a bit more; sometimes it’s a bit less. On average, it’s not too inspiring. We do our best to give a bit more to our best performers, but those in the middle must fend for themselves. It’s not hard for them to find a time machine.

Let’s look at it from the perspective of an employee who is doing a good, but not outstanding job.

Let’s say you’re making $100,000 in base pay. You don’t know it, but you are on the low end of your pay range. This is mainly because of the pay from your start date combined with budgetary restrictions.  It’s likely that this number is also the basis for much of the rest of your total rewards. Perhaps your STI target is 30% of base. Maybe your LTI target is 40%. Even your 401K contribution is based on your overall pay. Next year all of these things will climb by 3% (if you’re lucky). Over the next three years, the increase will be about 10%.

While doing your work one arbitrary Thursday, you receive a call from the future. “Hi, this is Florence, I’m calling from five years in the future. I was wondering if you’d like to visit me here and learn what the future may provide for you.” Intrigued, you want to learn more.

Florence tells you that she can provide a way for you to sit and do essentially the same job, for a raise of $15,000 a year. This amount will also impact your future bonuses and other pay. In fact, if you act now Florence says she will offer an additional $10,000 just to make the jump.

The future sounds lucrative and is only one mile away. You walk into your manager’s office and tell her, “tomorrow I am headed to the future, and my commute will be 4 minutes shorter.” You take the leap, get the pay and continue as good, but not outstanding, employee.

Let’s return to our day job.

Of course, there is no quick and easy solution to this. You can’t restrict people from time traveling, but you may be able to stop the desire to do so proactively.

Most of us can do more to level-set the pay of longer-term employees to that of their peers. These adjustments are often small but may be enough to limit the leap into the future that other companies may offer.

Many of us can do a better job communicating the benefits of culture and incentive pay programs. This type of communication is relatively inexpensive, but the stickiness may make the future less real or appealing.

Nearly all of us can do a better job at talking to people and learning what they value. Emphasizing the things that people like about your total rewards, can make them question the magical future promised by the Florence(s) of this world.

Showing the growing value of long-term incentives can put Velcro into the seat of your employees’ pants. Even the most impressive vision provided by a stranger can have a tough time competing with the future vision already communicated by a friend.

In the end, it’s all about being proactive and communicative. No one wants to reprogram their GPS or learn a new place to get great tacos at lunch. Even the most impressive future can’t compete with being happy with where you are now.

How have you effectively combatted time-travel at your company?

Dan Walter, CECP, CEP is the President and CEO of Performensation. He is passionately committed to aligning pay with company strategy and culture and considered a leading expert on equity compensation issues. Dan has written several industry resources including a recent Performance-Based Equity Compensation issue brief. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”“Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @Performensation.

This post originally appeared on Compensation Cafe
Author: Dan Walter-Performensation