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 ?