Article originally published in the American City Business Journals on November 21, 2016
Most of us have run into policies at work that don’t seem to make any sense. They impede the ability of the company to implement change and to achieve its goals.
Without the influence or authority to change them, employees are frustrated, wondering why these policies remain in place.
Every company needs policies and procedures to effectively serve its customers or clients, ensure equitable treatment of employees, protect against litigation, and to meet legal and regulatory requirements. Without them, there would be chaos.
What I am referring to are those policies that don’t make sense, but are rarely challenged.
At the first anniversary of my job as a process engineer at PQ Corp., I received a performance review and was told that I was being awarded a salary increase of 5 percent, compared with a marketplace salary structure increase of 4 percent. During our conversation, my boss made the mistake of telling me that the other engineer in our small group would be awarded an increase of 3 percent.
I thought my co-worker was a solid performer and questioned why his salary increase was less than the marketplace increase in the salary structure. My boss said that was the way the system worked — the overall percentage salary increase for our small department could not exceed the increase in the salary structure — 4 percent.
I told him that made no sense. My boss responded, “Well, that’s just the way it is.”
I then told my boss that when I rose to a level within the company where I could influence or change the system, I would. That compensation system didn’t fulfill what I thought should be its intended objective — pay employees commensurate with their performance, and no one ever did anything to fix it.
Years later, I was appointed to the position of president of PQ’s Industrial Chemicals Group. I now had the influence to change the compensation system, which over the years had undergone minor changes, but was still not effective.
I convinced the other two operating group presidents, the new, proactive leader of the human resources department, and PQ’s CEO of the need to change how we compensated our employees.
The new performance and compensation systems that were developed had input from employee focus groups, which created buy-in. The employees liked it because it provided a more rational approach to compensation administration. Employees also had ownership in the system, since a group of them helped develop it.
So, how was the new system different than the previous one?
In the previous system, salary increases were targeted to meet an annual operational budget objective: To ensure that the average salary percent increase for all employees was no more than the marketplace percent increase in the salary structure.
The new system met a longer-term strategic human resource objective: To ensure that on average, employees were paid at the 50th percentile of the salary range for their specific job, based on marketplace data that was updated annually.
Where in the salary range an employee was paid depended on their performance, including how well they worked with others to continuously improve the operation of the company, which was rigorously assessed.
Paying employees on average at the 50th percentile was a strategic policy decision. We could have decided to pay employees on average at the 75th percentile as some companies do, or some other percentile of the salary range.
Some proponents of paying above the 50th percentile argue that to achieve superior performance, the company needs to pay on average at the 65th, 70th or 75th percentile. We preferred using variable pay — the annual bonus and long-term stock option programs to reward employees when the company achieved a performance above its short and long-term goals.
Once launched, the new compensation system remained in place and was successfully used until the company was acquired 15 years later.
CEOs, listen to those employees who challenge policies that don’t make sense to them. Never respond with, “Well, that’s just the way it is.”
These employees are your talented change agents. If frustration leads to them to leave your company, they may go to work for a competitor.
Stan Silverman is the former president and CEO of PQ Corp. He also is founder and CEO of Silverman Leadership and is vice chairman of the board of trustees of Drexel University. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.