The Ruckess Over Executive Compensation

Wow what a week and a fortnight !

The Chief Executive of Aviva, Mr Andrew Moss is forced to quit when angry shareholders vote against any hike in his salary because their returns have been measly. Similarly shareholders at Barclays, Citibank and UBS voted against the rich increases given to the CEOs of these companies in spite of the fact that the share prices of these stocks where steadily going South.

The only sane and sole voice of reason comes from, of all persons, a non HR, a non Compensation & Benefits professional, the newly elected President of France, Francois Hollande who has suggested that he is going to cap the salaries of chiefs of State Owned Companies in France to 20 times of the lowest paid employee in the same company.

Hallelujah !!!

This was one of the key ratios of the HR professional community in the mid seventies, eighties and nineties. Why and how did we ever forget this key ratio ? In our flights of fancy to keep up with the Joneses and be in the exalted company at the "Strategy Table" and be "Valuable Business Partners" we forgot how to knit !!!! And have poked ourselves on our behinds !

This I guess will be the new "learning" and message for our Compensation & Benefits professionals and HR partners as they go around with their new mantras of Talent Management. However one aspect comes to a sharp focus...we should not forget the basic foundations of our functions. They are ( and were ) sound and time cannot replace them with new measures and tools.

Back to the Balanced Scorecards, dears.

Oh HR !!

I am currently the Executive Coach for a senior Executive of a large MNC. This morning I had gone in to meet him up for one of our sessions.

He said, "Ram, Sir, before we proceed with our session today, I want to consult on a HR practice that is prevalent in our Organization". I said, "Sure. So what is on your mind ?"

We have a Performance Appraisal System in our Organization. HR has come up with a "Rule" ( they call it a "Policy" ) that all the people should be rated and that their rating should follow the Bell Curve.

I thought, "Huh, Oh...the dreaded Bell Curve strikes again".

Strange as it may seem, every time I have met with a group of people ( not necessarily from the same company ) , but distinguished people who have retired from Corporate lives after over 20 - 30 - 40 years of Corporate life, they has only one thing to talk about....the dreaded Bell Curve on which the HR Department forced everybody to be rated.

Why is the Bell curve dreaded ? Is it such a deadly tool after all ?

On introspection I find that as a HR profession we have been guilty of forcing this tool down the Organization without proper education and awareness. The advantages of using this tool over its disadvantages, the circumstances under which it can be used, the circumstances under which it makes no sense to use it have not been communicated.

In the current Organization where I am the Coach whether the size of the department is a measly 7 people or whether it is a sizable 100, the Bell Curve had to be applied.

I am wondering whether HR people take the trouble of educating themselves on these tools and when and how to use them. For example, have they read the books,

1. "The Black Swan" by Nassim Taleb where the author eloquently argues about the pros and cons of using the Bell Curve and
2. "Forced Ranking : Making Performance Appraisal Work" by Dick Grote where a more scholarly and well researched book describes the process of executing Performance Appraisals without rancor and remorse.

If the answer to the questions above are in the affirmative, then why do they not have a town hall meeting and debate and discuss the uses and abuses of the Bell curve instead of acting like Policemen and thrust it down the Organization ?

It is very easy to lament about how HR is not being treated as a Business Partner ( Thank you, Dave Ulrich for the new title )....but how can they be..... if they easily don the role of Policemen ?

Child is the Father (or Mother) of Man

Yesterday was a long and arduous day, spent at a client's site, assessing people and putting them through the paces of an Assessment Center. When I got home, I did what I usually do - check my calendar on my Android phone to review the appointments I had for the next day. To my utter horror and dismay, I could not find any of the entries in my calendar which uses the pull technology to synch events from my Google Calendar. I jumped and switched on my computer and went into my Google account to see what had happened to my calendar in the computer. Thank God, it was still there.....Phew.

Toy as much as I could, I was unable to get the calendar on the phone to sync up with the one on my computer. I tried a number of things including switching off and switching on my phone, changing the battery of my phone, uninstalling some apps on my phone that were not used for some time etc...but the damn thing would just not show the events on my calendar on my phone.

I was in a fix and hence I turned to the person that I usually turn to when I am in a such a fix...my daughter ( or my son )_...both "Gen Y"ers. True to my silent prayers, within a short period of time she comes to me with a smug smile and says, "what are you gonna give me if I fix it for you ?" My calendar was fixed and it was repopulated with all the events for this month and all future entries..... and I was back in business and breathing easy again!!

I later got to thinking about the difference in our approach to solving the problem. It was clear that while I preferred to "experiment" and fiddle around with the gadget and learn by trial and error, she went straight to the online forum for the phone, read about the experiences of people who had faced the same or similar problem and fixed it in a jiffy.

Gen Y - web savvy, techno-geeks and don't want to waste time by experimenting...quick fixes and learning from others experiences allows them to arrive at solutions faster. I asked her how she fixed it...she said, "well the calendar cache had all sorts of data which had to be cleared first before the calendar events became visible again". It was all Greek and Latin to me and I still cannot fathom why the events did not appear from the phone calendar.

But now I know the fix - thanks to my daughter! I surmised, in my limited understanding of how these things apparently work - like the slowing down of a computer because lots of "Temp" files get generated somehow...once in a while I ought to clean it up.

But wait...what else did I learn ? We can and must learn a lot from our younger generation..

"They tend to be quick to embrace new technology and it doesn't just stop at generations X and Y. It goes younger still. The old quip, "show me a house with a VCR flashing on 12 o'clock and I'll show you a house without a 12-year-old", needs to be updated for DVD & Blu-ray and the age probably needs to drop about five years".......

but you get the point: Younger people adapt really quickly to technology.

Our attitudes to learning should also change. It must be focused, and go straight to the source where we can get exactly the knowledge we seek. But more importantly we must be AWARE where such knowledge resides...we should be able to "google it" or go to some obscure FAQ stuck somewhere in the World Wide Web and most importantly be able to sort out our issues pronto with the least bit of fuss.

An article about what we can learn from other generations caught my eye and I append it for those who want to learn more...about how to learn more !!

http://www.adelaidenow.com.au/ipad/generations-what-can-you-learn-from-others/story-fn6ci2hr-1226036006200

The role of Procurement for Outsourced HR Services

Some time in the middle of 2008 while working for a US MNC in India I was requested by another HR colleague who was the Business Unit HR Leader to source a Coach for the Head of his Business Unit - an American. He mentioned that he had a quote from a known coach in Bangalore who was also currently an advisor to the Board of a large Indian infrastructure group. He had been given a quote which "seemed" to be high and he wanted to see whether there were other coaches in the country who could fill the need for him at a lesser cost.

The effort to reach out to me- I was at that time the Head of HR -was laudable since his intention was to get the best value for the company without sacrificing the quality of the coach.

I reached out to a venerable gentleman who is ( currently also ) a coach and asked him whether he would be willing to to take up the assignment. The gentleman agreed. The total quote was about 50% of the first person's quotation. And the second person's credentials are impeccable.

It was at this juncture I discovered that I had to now hand over the contact details to the Procurement function of the organization who were then empowered to "negotiate", enter into a contract with the "Vendor" ( to use their standard terminology ) and finally appoint him as a coach on a "Contract".

I wonder what the Procurement can do to value add to the whole issue ? I can understand that they would lay down a process, I can understand that they would be able to audit the process and see that the best deal was negotiated for the Company, they could do the checks whether we had over paid or under paid the Coach. But

-- Can they evaluate the technical competency of the coach ?

-- Can they explain what the organization and the particular coachee needed ?

-- Can they even intelligently state what different methodologies of coaching exist ?

-- Can they articulate what the development needs of the Business Unit Head were ?

-- Can they even guess that since coaching is a multi-disciplinary subject, it could be

potentially approached by a coach in ways that could not be of any use of help to the

coachee unless correctly articulated ?

So then why have Procurement "select" and appoint a Coach ?

I believe that this is the mindless application of making a process a paramount importance. It also stems from the belief that human decision making skills are inferior to the results of implementing a process. And finally a belief there is no need for qualitative intellectual inputs in

a procurement of HR Services especially in areas that are very specialist in character.

Sometimes it is amazing as to how big MNCs make such humongous stupid decisions.

The Extended Enterprise and the HR professionals

Having recently retired from a large U.S. MNC, I decided to set up my own consulting firm and have now started to experience the interaction with HR practitioners in organizations from the other side of the table. And I am saddened by what I have so far experienced, in some cases from senior most HR "Professionals" in some of these organizations.

Lest I may be mistaken and misunderstood to have branded all HR prople with the same brush, I want to hasten to add that these instances are not many, but it is important that I highlight them as they involve senior HR professionals from the Organised sector. Two examples :

I was summoned by a HR person from a software organization in Bangalore to help them set up a Competency Framework, Career Progression and ladders for their Engineering staff and to review their Salary Structures. As the Head of HR told me the objective was to ensure (as his CEO had mentioned to him ) "whether every person in the organization will know what the future has in store for him, whether he will know how to progress there and and what he needs to do to achieve success in the future". As agreed with the Head of HR, I sent him a proposal of the work as outlined in our discussion. After two or three calls to follow up as to what he thought of my proposal it became evident that he had not budgetted enough for the work to be done. After further discussions the original proposal was revised on the commercials and then resubmitted. I have not heard anything from them since. Absolute silence. Three days later when I called up the Head of HR to ask what happened to the resubmitted proposal, he promised to revert to me by noon that day. I don't know which time zone he exists in but it appears that his noon is yet to arrive!

On another occasion, I was asked to design and deliver a Development Center for another company in Bangalore in the education testing industry. It was done after understanding their requirements and also within their budget limits, as was mentioned by their email to me. I later learnt that they had given the contract to some other firm since they were cost effective than my proposal. Nothing wrong with that. I would have done the same thing and I laud them for thinking in the best interest of what is most cost effective for the company. However two things were out of sync - (1) they did not even call me for a second round of discussions to see whether I could revise my cost estimates down and (2) no feedback that they had awarded it to somebody else.

I am wondering whether this is the behavior expected from professional HR people? Is this how they behave with potential external vendors? If so, how can they be expected to behave differently with their employees? What prevents them from picking up their telephones or asking their juniors ( if they are too busy ) to communicate with their vendors that their proposal has not been successful. Even if they do not give any reason for the rejection, it would be a "human" gesture.

No wonder HR gets written about in blogs as a function that is void of human emotions. The latest article on "Putting Human back into HR" is relevant in this regard.

And for those who want to read a tongue-in-cheek account about his (mis)adventures with "inHuman Resources" here is another link...

Corporate Governance in India - the Holy and the Unholy

I was one of the eight members of the Corporate Board of a family conglomerate in India as a professional director. Three of the eight were members of the family, two were professional directors, one for HR and one for finance and the remainder were independent directors.

The Corporate Board acts as the Superintending Board for all the Independent Companies (some listed and many unlisted) and one of its main responsibilities was to constantly evaluate the younger generation for readiness to take up positions of higher responsibility within the Group.

At one point of time, the Board was asked to evaluate the readiness of a younger member of the Family to be inducted on to the Corporate Board. The process was very formal and the decision making people were members of the Appointment Commitee of the Corporate Board....all three Independent Directors and the HR Director. The younger member had to go through interviews with the Independent Directors, a panel interview to boot and then came the final decision - no, he was not yet ready because:

(1) He had yet to show the passion for the job,

(2) He had yet to prove himself in the smaller business that he was handling, and

(3) He seemed to have other interests in life that were more important to him at that point in time which were not 100% business related.

The result was we decided not to induct him on the Board and conveyed our decision to the Chairman. This was accepted. True democracy at work and more importantly a very clean, neat and transparent Corporate Governance process at work.

In the year 2010, I was approached by another Family run business which, strangely enough, had a similar request. They wanted the Chairman's son to be inducted on the Board. Since this was a publicly traded company, due process had to be followed and the approval of an Independent consultant was sought. However the EVP - HR called me and said, "Ram, we do not want the son to face any interview panel. After all its his father's company....he built it and grew it. So we want you to just sign off on the dotted line AS IF you have been one of the independent people (a senior HR Professional) who have interviewed him and found him fit for the job."

Two episodes of the same nature. Two business houses. Both Family run. BUT two totally different approaches to Corporate Governance. It is not that there are no qualified and good intentioned people in the second company...but I ask, "Can they call themselves true "Professionals" ?

Corporate India is full of Family run businesses....few of them I can vouch for and say with certainty that they run on the model of the first example I have given in this article. Many, many of them unfortunately run on the second model.

Even if we have a hundred laws in the country, they will all be made a complete mockery of if we have Corporates of the second type. What is needed is a self regulating Board of Independent Directors who can balance the demands of the family on the one hand and the demands of the shareholder on the other hand.

A self regulating Board of Independent Directors seems to be an oxymoron in a land which has recently been hit regularly by major scams. While organizations like the IOD (Institute of Directors, UK, and India) have for long pleaded for a Board having Independent Directors paid out of a budget or a pool of money maintained by the Companies Law Board (CLB) so that they can be truly independent to state their views forcefully at Board Meetings, this has not happened because of the reluctance to tackle the bull by its horns by the CLB.

It is true that company Boards in India have not evolved as much as their wester counterparts and may be the time has come when we should seriously look into the feasibility of the CLB growing "teeth and fangs" to regulate what happens in the hundreds of different Company Boards in the Country.

"Ye are the salt of the earth: but if the salt have lost his savour, wherewith shall it be salted"

So says the Bible calling upon all men ( and of course women) to be true to their calling.

The year 2010 will go down in Indian history as the most shameful year with scam after scam breaking out in the open and almost every politician being "smoked out" of the muck and morass that he had burrowed himself ( or herself ) into. The media hounded them out and the authorities are today having their hands full making sure that the guilty do not go unpunished.

Amidst all this din and noise is the controversy that people from the judiciary have also got themselves embroiled in the various scams. The CVC at the Central Government level and one of the ex CJIs too have become involved in scams that have affected the confidence of the public.

As for the image and reputation of the country as seen by foreign eyes - who cares ? Who cares if we are at the bottom of the pile in the ranking of Transparency International ? Next year if there is a let up ( no, not eradication totally as we can never achieve this ) of these scams by a small measure and India moves up even by one rank up on this ranking, we can all rejoice as a nation and state proudly India is shining !!!

There is a joke about corruption in India and it goes like this :

Once an American died and went to Heaven. He asked God, "God, I am ashamed of all the corruption that exists in the US. If you were to eradicate it, pray tell me how long will it take ?" God replied, "Well at the rate at which it is prevalent, I reckon about one year". Similarly a Russian died and went up to heaven and asked God the same question as he was ashamed and wanted to eradicate corruption in Russia. God replied, "Going by the rate and record of corruption in Russia, I reckon it will take about three years". and finally, one of the Indians died and goes to heaven. He also wants to be up there with the US and Russia and so he also asks God the same question......

Suddenly he notices tears coming out of God's eyes....he asks in great alarm, "Oh Almighty, pray what is the matter ? Why are there tears in your eyes ?" To which God answers, "The answer to your question.....I don't see it happening in MY LIFETIME" !!

No progress can be ever made by the country despite the fact that we may beat our chests and say we will average 8.5% to 9% GDP growth etc etc etc as long as there are people around who are efficiently and effectively siphoning off the wealth that is being generated for their own benefit.

We have had the two institutions so far in exposing these scams - the first institution, the media, relentlessly pursuing those involved in various scams and the second, the judiciary bringing the accused before them for trail. We must ensure that these two institutions are manned by men

( and women ) of impeccable qualities and values that would make them seem to be "holier than the Pope" in all their acts, deeds and actions.

We have a long way to go to instill and continually monitor the governance mechanisms that we should have in place to prevent such scams from taking place in the country in the future. We need to have the political will, the judicial objectiveness and the tenacity and doggedness of the media to eradicate them. Having forums and speaking at the various functions hosted by them will not be enough.....we have to demonstrate that we mean business when we are ruthless with those who are guilty of creating, aiding, abetting and perpetuating scams in the country.

Question is : Do we have all these qualities ? In my next blog I will touch upon the corporate sector and what it can do to play a part in cleansing the system.....by keeping its own nose clean.