With 68% of employees disengaged, you would think the board’s critical eye would be turned on the executive suite.

You would think wrong.

One of the greatest causes of disengagement is the difference in compensation between the CEO/executives and the workers.

That difference is the direct result pay-for-performance, coupled with the board’s ego-driven competitiveness and desire for bragging rights.

Name the most brilliant, talented, past or present CEO you can think of, then remove them from their position.

The company may hiccup, but it won’t go down in flames.

Now remove all the line managers/team leaders OR all the workers in a specific department or with a specific talent and watch the company stagger and fall on its face.

An unintended consequence of pay-for-performance is we treat companies as if they are in the airline business, except the only person who matters is the pilot—not the grounds crew, nor the quality control tinkerers, nor the guys who wrangled the ore and fuel from the ground, forged the parts, tightened the bolts and soldered the frame.

In their rush to acquire the “best” talent, boards are likely to forget that corporations are not independent entities

It’s a group of people all moving in the same direction, united in a shared vision and their efforts to reach a common goal.

To move in the same direction people need to be engaged.

But how engaged would you be when the proceeds of your hard work show up in someone else’s paycheck?

In the 1970s, shareholders took out about 50% of a company’s profits, while the rest was reinvested in the productive capacity of the firm, including R&D to employee training and rewards. Today, the shareholder gets over 90% between dividends and share buybacks. Today, a 60% or greater weight on equity or equivalents is the norm in pay packages.

Dominantly CEO/ senior pay packages.

The funny thing is that rank and file aren’t looking for similar pay.

They are looking for fairness in relative pay.

Image credit: JustyCinMD

Yesterday we considered the error companies make by basing offers on salary history, instead of future performance.

That may be about to end, at least in the outliers of Philadelphia and New York City.

In short, the law prevents employers from asking candidates about their current/previous compensation.

Candidates can volunteer the information, but can’t be asked for it by the company or any recruiting process, including third parties.

Doing so opens them up for lawsuits.

Ignoring implementation and legal hurdles, what does it really mean and why do I see it as such a positive?

Primarily because I don’t believe that either performance history or salary history has a damn thing to do with the value candidates bring to their next job.

Companies need to have a hiring range for each opportunity based on the impact that specific position should have on the company’s success.

The low end is based on average performance, while the high end is the result of an over achiever in the position.

The offer should be the highest number within the range based on the hiring manager’s evaluation of the candidate in light of two strong constants.

1. 98% of star performers become stars as a function of their management and the ecosystem in which they perform.
2. People who join for money will leave for more money.

Merit raises are then given based on that individual’s actual contribution to the company’s success, as opposed to some number from HR.

This puts most of the responsibility on the hiring manager — exactly where it belongs.

Image credit: gardener41

In bygone days the ‘my father can beat up your father’ was a favorite taunt.

These days it’s more often ‘my father earns more than your mother’.

So goes the gender pay gap and has since women entered the workforce.

Much has been written and many hands have been wrung over the disparity of pay between men and women doing the same job.

But the bias isn’t always intentional.

A vast majority of them are fair-minded guys who want women to succeed. They’re absolutely certain that they don’t have a gender problem themselves; it must be some other guys who do. Yet they’re leaders of companies that pay men more than women for the same jobs.

Now an intriguing idea has surfaced playing off the SEC’s new rule forcing companies to publish comparisons of how much chief executive officers take home compared with ordinary employees

The idea is to do the same between males/females within each company.

This would be especially interesting in tech, which admits that diversity may be a great goal, but won’t happen any time soon, even in companies which have made it a priority, such as Apple.

In the event the idea gains any traction you can assume enterprise will fight it as passionately — probably more — as it fought the CEO comparison, which took five years to become reality.

Without the force of law, how likely that the comparison could become a reality?

There are two ways that come to mind.

• The first is to have a company step forward and offer the information voluntarily.
• The second is that an internal whistleblower will publish the information anonymously on social media.

The second is far more likely, especially in the data-driven world in which today’s companies must operate.

Flickr image credit: Mike Licht, NotionsCapital.com