Kathi Enderes - HR Tech 2024 - Breaking Free From Outdated Pay Practices
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Welcome to the HR Data Labs podcast, your direct source for the latest trends from experts inside and outside the world of human resources.

Listen as we explore the impact that compensation strategy, data, and people analytics can have on your organization. This podcast is sponsored by Salary.com, your source for data, technology, and consulting for compensation and beyond. Now, here are your hosts, David Teretsky and Dwight Brown.

Hello and welcome to the HR Data Labs podcast. I'm your host, David Teretsky, and we are recording live from the HR Technology Conference here in Las Vegas, Nevada at the Mandalay Bay Exposition Center. I have the pleasure or the honor to be speaking to Kathy Andaris. How are you, Kathy? I'm great, David. Thanks for having me. Isn't this an amazing couple of days we've been here? Oh my God. So much energy, so many vendors. It's been a great day.

I'm exhausted. Well, and what's fascinating about this year is it's just so much bigger. There's so many more products to look at. It's so big. Yeah, it's so big. And of course, everybody is talking about AI and mentioning AI. And it's very different than last year, where it was just a little blimp. And now it's everywhere. The only booth that I've seen that doesn't have AI in it or on it is over there, the Omaha Steaks booth.

But next year, I think they're going to have an AI cow. They have the virtual steak. Yes, exactly. The virtual steak that you can eat and then change it to a different one, maybe get a different cut, have it cooked a different way. But no, it's really kind of fascinating. Everybody around here is all AI, AI, AI. It's all AI. It's all everywhere. Yes. Isn't that crazy? It is crazy. It just took everything by storm. Absolutely. Absolutely. But yet, when I'm talking with some of the...

the buyers, some of the companies, most of them are not ready yet. Most of them are... You see the tech vendors go exponentially with all the features and all the functionalities. And meanwhile...

Their companies are still stuck, right? They're like, well, my IT department is blocking everything, right? We can't use generated API at all in the company. Well, actually, I've been talking to a lot of people about that being the smart move for now until you create the right risk strategy, the right...

walled garden strategy so that our trade seekers aren't walking out the door, our data's not walking out the door. And even the small innocuous questions we might be asking at ChatGPT4.0 or Gemini or the other, Copilot, those questions have your IP address attached to them. They have your company name probably attached to them. You probably used your email address to sign up from your company. And so you're asking things to these people

to these bots and it knows what you're asking and now has ingested that. Yeah, no, absolutely. And I mean, the whole thing about the own data being clean and good and can you rely on it? Can you trust it? I mean, these are all important questions for sure. And before I get into this, because this is exactly what I want to talk to you about and we're going to talk to other things. What's one fun thing that no one knows about Kathy that we can give an update on?

Well, one fun thing, and I'm going to embarrass myself a little bit, and I'm just going to say it because it just happened. Okay. A couple of weeks ago, I was here actually in Vegas, too, for the Oracle Cloud World Conference. Right, sure. And I was walking with my heels to a very nice restaurant over one of these bridges in Vegas, right, over one of these bridges, and I was in a little bit of a hurry, and there was one of these grates on the floor, and my heel, my stiletto heel got stuck. Oh, my God. And I splattered all on the floor.

floor and this grate fell away and everybody was looking, all these tourists that were taking pictures, they looked at me and I was on the floor with my shoe and the grate on the other side. Very embarrassing. Oh no, are you okay? I

Fine, but I was, of course, it was so embarrassing. And I told that story to one of our business contacts. And afterwards, from that same company, I met some other people the next day. And they all asked me, you're the lady with the shoe. And I'm like, yes, I'm the lady with the shoe. I'm so sorry, Kathy. So nobody should know this, but some people already know about me. Oh, my gosh.

Not very flattering. There are no pictures, so... There's no pictures. I hope none of the tourists took a picture of me on the floor. But nothing happened, so I was happy about that. Well, we're going to use some artificial intelligence and create a picture. No, I'm kidding. I'm kidding. We're not going to do that. And the shoe didn't even get hurt. Somebody asked me when I told the story. The most important question is, how is the shoe? How's the shoe?

It wouldn't be my first. I would say, how are you? Oh, well, and you did. You said, are you okay? Yeah, no. The shoe is good, too. Okay, well, I'm glad both of you have survived that. We did. It's very embarrassing, and I'm glad you're both okay. Oh, my goodness. ♪♪♪

Now let's transition to some of the really cool questions that we get to talk about. Because one of the reasons why I love podcasting with you especially is I learn so much. So no, I'm serious. So let's get to the first one. The first one is really about the evolution of compensation and what you've seen from a process and a technology perspective. In what you've been thinking about or what you've been researching or talking to clients, where has compensation been? Where do you think it's going? Well, where it's been...

It's been in the 1980s. Yes. It's been stuck in the 1980s for the most part. In most companies, they're using spreadsheets. They're not thinking about transparency, communication. They're not thinking about how can we open it up? How can we tailor it for employees? How can we personalize it?

It's behind the curtains. It's behind closed doors, not tech-enabled. Meanwhile, I mean, look around here. All these AI companies here, hardly any of them are compensation-related, right? They're all talent acquisition. They're all employee experience, learning, whatever it is. Well, except for salary.com. Well, except for salary.com, and that's where we are. But, I mean, you're one of the outliers. If you look at all the other ones, obviously, it's not really there yet. It's true. It has been stuck in.

In the 80s, as we said, stuck in very top-down, not very transparent, not very employee-centered at all. Right. Meanwhile, of course, it's the most important thing that you can do for the employee experience. Because I guarantee you, all the other things won't matter so much if people don't feel they're paid well. Absolutely. It frustrates them. It disengages them. Absolutely. It may not confuse them necessarily, but it will certainly distract them. It totally distracts them. And it's...

It's, yeah, it's especially now with inflation and everything and employees. I mean, I just read a story, a study where I think every other American is living paycheck to paycheck. And even people with six figure earnings live paycheck to paycheck. So it's, it's, it's, it's, it's a really big deal. And if they're not living paycheck to paycheck, they're one mistake or one illness or one,

accident or something away from it and or lose their job. That's right. And so we are in an economy that is unforgiving. We're in a time where people are getting laid off left and right. Yes. And the knowledge worker is really kind of, well, it's not unique anymore. And it's what the economy we've been living in.

There are a lot of other ways of getting that data or getting those skills. Yeah, no, it's so true. Yeah, so compensation really key to the employee experience more so than anything else. And very insular right now. So we feel that it has to open up insularly.

into other disciplines, into other areas of HR and the business, quite frankly, to not just be about compensation because compensation is really not just about the money side. It's about other things, right? It's about, yes, of course, it's about the money side. It's about pay for performance. It's about pay equity, of course, very important. It's about, but also,

Can I build a career here? Yes. Can I have my essay here in this company? Does it feel like a culture where I want to work? Right. Does it feel like I have flexibility to do my job how I want to do it? Right. Do I have the tools and the resources? We showed our compensation framework once to a group of total rewards leaders. Some of them said to me,

I don't do careers, so don't have this on there. But an employee doesn't care who does it, right? For them, it's all part of the package. Yeah, not my job is not a good answer for an employee. Exactly, because an employee doesn't understand this, and nor should they, right? They don't understand what compensation and benefits and payroll. They don't know any of this. Those are all walls that we've artificially put up between the HR groups because each of those HR groups...

needed to have functional alignment, but functional focus. That's right. Exactly. But now we see with the pay transparency laws, like in Colorado, where they've said, listen, I don't care compensation if it's your problem or if it's your job. You need to publish career frameworks and you need to have accurate job descriptions and you need to provide that to employees. Well,

That means that now they have to dust off those skills or get new skills to be able to create or hire consultants, by the way, to be able to develop those things. Because saying it's not my job isn't going to help you with the state of Colorado. Yeah. Or you work across the company, right? Work with the learning and development team to develop career frameworks. Work with town acquisition to get the right job descriptions and with the business, of course. That's right. Work across the company, not just...

in your silos. And I think those silos have to come down. We see that recruiting is evolving and with the pay transparency again, we see that recruiting and competition have to really spend much more time together and have to become best friends because

they're going to need to rely on each other to be able to post these ranges and be able to make sure that those are accurate and also that they're relevant. Relevant, exactly. And not too broad, right? I mean, we've all seen these ranges that are like 80,000 to 800,000. Well, I mean, what's that? Does that mean, oh, not posted at all? I still see those that are not posted. Well, and one of the things that I'm talking to companies about, and I've had a lot of conversations with clients about this is,

Well, what should our strategy be across the country and are actually globally now with EU's pay transparency regulations? You know, where do I go to take or do I go each individual municipality or each individual state and do each one separately? Yeah.

No. Choose the one that's the most rigorous and do that across your entire company. Embrace it. Choose the highest bar, not the lowest bar. Right. Because in the end of the day, it's going to help you as a company anyway, because it's going to help you have more pay equity, more pay, like fairer pay, basically. And we know from all of our studies, that's actually one of the most important factors that's driving business outcomes.

And CEO wants it, by the way. CEOs absolutely want pay equity, but yet most organizations can't do it. But that flies in the face of a lot of what I've seen with leaders in the past and what I've seen with survey results in the past, which say, yeah, but we don't want to share everything and we don't want to be too open. And pay transparency shouldn't be everything. That's not pay transparency. That's being cagey or that's being evasive. Right.

Well, and I think you need to go beyond the light of the law and actually look at if you're just posting on job descriptions because the law requires it to do. What about employees? Why couldn't employees see it? Exactly. That's where companies are going. I mean, we've talked with SAP, for example, not the software provider, but the company. Yeah.

They share for all of their over 100,000 employees worldwide in SAP and the SAP system, you can see salary ranges basically for everybody. Not the individual salary, of course, what everybody makes, but salary ranges for all levels, not just for your job functions, but any for job functions and executives too. So they see all of these salary ranges.

And it's right there rather than saying, oh, I need to look outside and maybe there's a job posting there and then I have to scrape it and cobble it together. They said, no, why wouldn't we show it to our employees? Why would we be more transparent to job seekers than internal people? Well, and some of the laws that are coming out in the U.S. say, and in fact, this is part of the Massachusetts law, is that you need to be able to provide people not only with...

candidates with the salary range, but also anybody who wants to post internally. They have to be shown the salary ranges as well. That's right. And so that's what these companies are doing. Other companies are doing this too. And it needs to be easy to do. It needs to be easy to see. And why wouldn't you share it? Do you have something to hide? I mean, that's... Oh, yeah. Like what you hear so far? Make sure you never miss a show by clicking subscribe. This podcast is made possible by Salary.com. Now back to the show.

So do you think that there needs to be a little bit of a, what do I call it, a reboot on all of the documentation and all the training with this? Because we use a lot of terminology in compensation, HR, I mean, comp ratio, range penetration. They're not statisticians. They don't understand what's the median of the market. They don't care. They don't understand this. Nor should they. How do we translate that? How do we simplify it? How do we make these things more accessible, more...

Practical, simpler, I guess. Communication is so key. Communication of both your strategy, your compensation philosophy, how we pay, and then also how you portray these salary ranges, for example, our compensation models or any of those kind of things. Right.

um is really key and i think you hit it right on the head it's so important to simplify it and not use hr speech because i guarantee you nobody's going to know what this means and nobody's going to want to learn this right and it also means we have to go back to the drawing board on a lot of the compensation plans we've created because if you've read a bonus plan lately you know there are some people who i i when i was at morgan stanley i used to have to talk

to the heads of investment banking and say, here's what an employee stock option is. It's not a tradable option. It's not what you're doing. This is something that you're granted. It's got a vesting schedule. You know, this is why we do it, blah, blah, blah. There's forfeiture. There's other things. And, you know, because this is so emotional because this is now part of their comp. They've never had it before. They used to get cash and now they're getting restricted stock and options and things.

And you really have to go back to simple stuff, even if you think this person is one of the most brilliant people in the world. Absolutely. Absolutely. And I think that in general, in all areas of HR, it's critically important. If we speak our own language, business won't understand it and you're not going to gain any credibility. If you speak about things that the business doesn't care about or doesn't understand, if you talk about...

Honestly, employee experience is another one. It's such a buzzword, right? And does the business leader really care about employee experience? No, they care about productivity. They care about performance. They care about retention. And does my customer actually get that service that they need? And that's all part of employee experience. But if you talk at the HR speech, you won't...

Get really get to the business results you need to get to. And really, you mentioned it before. These things need to be business processes, not HR processes. Needs to be business. And getting the leadership, getting the CEO, getting the people who run the company to be 100% behind this means we have to get out of our lane. We have to start speaking their language. We have to stop being afraid.

When the CEO calls, we need to embrace when the CEO calls and say, hey, I can't believe you called. It's so wonderful. Hey, I've got these things to talk to you about. I know. What do you need? I'd go a step further. I would say, can we bring these to the CEO to tell them you should really you need to care about this. If they don't care about it today, I need to show you why you need to care about pay equity, for example, because it's critically important for your business. Do we need if we're going to do that? Do we need to make decisions?

Do we need to make a business case for these things? Or do we just say, listen, this is the law. This is what we have to do. Or, you know, you see what I'm saying? Yeah, yeah. No, I totally see it. I think there's a...

I mean, saying it's the law is, of course, the easy way out, right? You can say, oh, well, we can't break the law, so here's the compliance reason. I think that always runs the risk that you only do what the law requires, which is usually not what you need to be doing, because really, pay transparency is only a step in the right direction to pay equity. And that's what you really want to have, right? Just because you post your salary ranges, you could still hire all the men of the higher end and all the women of the lower end.

And for example, you still have pay inequities. So you still need to focus on what do you really want to solve for? Why is it a business imperative for my business? Make that case to the CEO, to the leadership team, because they need to be on board. Because if you want to make it right, it's going to require investment.

Do you see boards of, well, especially boards of public companies, do you see them getting involved more often in compensation matters? Or is it really where leadership and HR and internal HR leaders are dealing with these issues on their own?

I think the boards are getting more and more involved in that because of the regular requirements and the landscape and all of that. And so they hear about that. And by their nature, they always have to govern risk, right? So they need to...

fend off risks. And so I think that helps us in HR when we then want to go a step further than what the law requires. So if that case is coming from the boards, then you can say, okay, yes, we need to do this absolutely, but we also need to do all these other things to make sure that the pay is not just transparent, but it's also equitable and fair and consistently transparent.

embedded in all the processes that we have. And you mentioned it too, embedding and recruiting, of course, making sure that also all the recruiting processes are unbiased, that you mitigate bias there. But then also you think about promotions, you think about performance management, you think about career opportunities, you think about learning opportunities, succession planning, on and on and on. All of these need to be

Even location decisions in a way, right? You can think through all of the business decisions and think about them from an equity lens. And everything that you just mentioned needs to be documented in ways that people can reach out, find them, and be able to understand them because they're making their own personal decisions too. So whether it's decisions about their career, where they're living, how they're going to drive their careers, right?

Do you see any move to having these things being posted on intranets or is it a manager gets it, manager communicates? Are we using managers of Fulcrum here or are we doing something different? Is there a different technology that we should be using?

Well, managers are right now, for those companies that are doing it somewhat well, they are educating managers and making sure that managers can actually communicate that in an easy to communicate way. And that they first understand it themselves and they understand their own behavior and their own impact and their own decisions on that. And so training managers and upskilling managers on that is critically important.

in an easy to understand way. So Schneider Electric, for example, in their quest for pay equity, they have like really revamped all of their manager training to include that, not separate training, right? Not saying, oh, now you're going to go to this pay equity training because everybody's like, oh, now I've got to do the pay equity training. They roll their eyes and go, oh no, another HR training. Exactly. It's like, okay, great. I'm going to

I'm going to go there, I'm going to sit through it, and then I'm going to forget all about it. But they put it into all of their existing management development programs where it fits, right? So they're revising that. And I think that's the way to go on the manager enablement. I think absolutely, like making sure that you communicate it directly to employees as well, that they have access to the information. AI can really help with that, by the way, because you can...

communicate with them in a personalized way, right? Personalization of communication, all of that through internet or through other media, whatever the best medium for the employee is.

I think that's really where the next step should go to. And then if they have questions, of course, as the manager talks with them, the manager has to be right there. If it's an HR communication, it's guaranteed to fail, right? Because if HR just says, oh, here's a big pay transparency thing now, please pay attention to that. Managers are going to fail.

It's not going to work. They roll their eyes and they say, again, another HR thing. It's another thing that they're trying to get me to do. Instead, if it becomes, if it comes from leadership and it gets built into their training, then it's their way of being able to communicate to the employee and be able to connect to the employee. That's right. And it drives deeper relationships. Oh, absolutely. I mean, there's, uh,

I've talked with companies that said, we don't want to communicate to people that they have a pay equity increase because... And I said, why didn't want to... Because then they think they were not paid fairly before. But that's a really...

short-sighted way because employers really will value it and they will say, oh my God, the company is actually looking out for me. I never complained and yet still they're doing this. That's trust. I mean, you're not trusting that the employee is going to be mature about this and you're basically saying knee-jerk reaction. I'm going to give them an increase, but I'm not going to tell them why. Okay. Well, that's not the good reason to do it. What's the ROI of that increase then? Exactly. Yeah. Yeah.

Hey, are you listening to this and thinking to yourself, man, I wish I could talk to David about this? Well, you're in luck. We have a special offer for listeners of the HR Data Labs podcast, a free half hour call with me about any of the topics we cover on the podcast or whatever is on your mind. Go to salary.com forward slash HRDL consulting to schedule your free 30 minute call today.

I want to shift gears for a second. I want to ask you a question about pay for performance, if you don't mind. Yeah, let's talk about that. Gosh, we need another full podcast on this one, David. You're going to like this one, though, because I've been talking to companies about retiring merit programs and instead using a cost of living adjustment or a flat adjustment for pay increases for merit, for salary increase.

But then using an incentive program, it doesn't have to be, you know, 30, 40, 50% of base. But using a targeted incentive program that then replaces merit and it becomes the mechanism for dealing with performance issues.

So you do the performance evaluation and instead of saying, oh, with the two or 3% you're getting is now 1% or zero, which I don't know how that helps anything. Instead, take the 10, the five, 10% you're going to give them in terms of an incentive or that you should be, or you could, and make that variable based on not only company performance to drive the thought process of as a team, but also the

Or as an individual performance, how did you do? You get more or you get less based on your performance? Yeah, that's exactly actually what we have seen most successful because when you use the base salary for pay for performance, you're introducing automatically pay inequities, right? Somebody has a great year because it's especially on the upside, right? Somebody has a great year, you give them a significantly higher increase on the

on the base side. Well, next year, what about all these other people? Then they are further ahead. And sometimes they get, if they're a high performer consistently, they get further and further ahead. Is that really, like, it's going to, like, basically reduce your pay equity potential. So when, and also I think on the other side, when you think about what you can actually do with an incentive pay, with a one-time pay, basically,

You can go much higher because you're not increasing your cost line, right? You do it once. Exactly. Oh, I love that. So what you're saying is, is that I can pay for the great performance within a year and that stays within that year. Exactly. But next year, we're all reset. We start again because who knows? Because just because you had a great year one year, right? It doesn't mean you should indefinitely get more and more competent.

And from a company perspective, of course, you carry that load, right? That's right. Carry it forward versus when you pay it once. Exactly. You pay it once and that way you can make it bigger because guarantee, I mean, I see this so many times. Employees don't like it either. They talk with each other, right? And somebody got a 5% increase. Somebody get a 5.2% increase and they're like, wow.

Why did they get more than me? And usually it's a few hundred dollars, right? So it's not even big money, but it gets so hung up on the actual increase percentage. Why not make it dependent on market, right? Market condition, cost of living, whatever. Make it dependent on the market, how the market has moved for those jobs. So make it a market increase, not a merit increase. And the merit is the bonus. It's the incentive. But pay for performance. We're so aligned on this.

Totally the same way. But I love your thought process around how I can pay those jobs now more similarly because we're not introducing another difference in pay. The pay can stay similar, can stay the same, actually. Exactly. In terms of the proportion of pay to each person in that job, because now I'm not introducing yet another factor into it.

Merit's taken out of that completely. Exactly. Exactly. And I think it simplifies the process too and could allow organizations to actually maybe do more frequent pay increases or bonus because business doesn't happen annually, right? But business app

happens really on a quarterly basis, but yet pay only happens on an annual basis. That's kind of also not working how the business works. We also have distinctions in like administrative or non-exempt or support or manufacturing jobs where we say these are going to be on step rates and these other ones are going to be, you know, once a year, but they're not getting merit. They're just getting cost of living. Now, if you're doing it across all of your levels, across all the different types of jobs in a similar way,

Now there's no artificial distinction. That's right. Exactly. There's really no difference between a professional and a non-example when it comes to a merit increase. Yeah. Why would you? Why would you do it differently? It's just, you know, going back to your point before about we live in the 80s. Exactly. It's like we've always done it like this. When you ask companies, why do you do it like this? Well, this is how

compensation process. That's how we've always done it. But employees have moved on, right? Employee expectations have moved on. Technology has moved on. Businesses are changing rapidly, but yet this is still static and kind of, yeah. It's disappointing. I mean, I've been doing compensation for 35 years. We still hold on to some of the old precepts because...

This is what's worked. And this is what's always, I mean, it hasn't always worked, but this is what we know. This is what we know. That's it. Exactly. This is what we know. I mean, other than salary.com, because there's a lot of innovation there, but because that's my boss. But other than that, there's very little innovation that's been happening. I'm sure you've seen this, but I get RFPs now that are looking for job evaluation, point factor job evaluation. Yeah.

I did point factor job evaluation when I graduated from college in 1989. And we used to do replication. We used to do regression analysis to figure out job points, you know, the know-how skills and abilities and working conditions. Yeah. Kathy, that's still happening. It's still happening. I mean, if you look at all the like grading systems and job bands and all that, it's still the same that we've done for the last decade.

40, 50 years. But when you think what was in place in 1989, we didn't have smartphones, we didn't have phones, cell phones even. We didn't have the internet, we didn't have AI, we didn't like all of this. The world was completely different. It was. I mean, we barely had...

computers on every desk. Oh, barely. Desktops, right? No, well, there weren't any. Not even desktops, yeah. I went to interview for one auto manufacturing company and they said, well, here's the HR computer. It's in the middle of the floor. If you need it, you can borrow it for that time. I said, I've been using computers at college now for four years. And before that, on my own, why can't I have one on my desk? Well, that's kind of selfish. Everybody shares this one.

It was too expensive, right? That's why you couldn't have it. It was. Because you couldn't afford it. But they also didn't have that ROI as to what could people do. Why would you need one? Right, exactly. Why would you need one? You're an HR person, right? Why do you need one? They hadn't gotten to that level. So that's what I'm saying is that, to your point...

The innovation cycles that we're in right now, the technologies here, I mean, we're at the HR tech, it's starting to happen. It's starting to happen. And we're starting to drive there. Because when you think about what could be possible with AI, I mean, you could personalize completely the pay, benefits, all of that. Not just the statement, but let people, for example, tailor

This year, I want to have more, maybe more bonus at stake because this year, maybe I don't have a big mortgage or whatever. And next year, I want to have a much more, like less at stake thing. Like all of those kind of things you could let people tailor. Well, okay. But then the problem with that is then there's that constructive receipt.

And so now we have to deal with the election. That has to be an election in the year prior. Remember the whole thing about qualified plans are, you can do deferrals of your base salary into bonus or bonus into your 401k or whatever, but you can't do it in the year it happens. It has to be the year before. Well, and then it doesn't really make sense because it's not flexible enough. But that's the government not keeping up with technology. Yeah, I mean, that's...

Of course, that's always the case. I know we talked about how tech companies are ahead of organizations and the government is even slower to adopt. So, yeah, I mean, that's a whole different story. We can actually have another podcast on that completely. On that too. And on pay-per-performance, we can talk about another few hours too because lots of opportunities. I mean, performance management is such a big topic.

Oh, my God. Continues to be a big topic all the time. All the time. All the time. It's like it's never going away. Nobody gets it right anytime.

And actually, what I'm going to do is I want to ask you back and we're going to do one specifically on performance management. Oh, let's do that. I can't wait. I can't wait because I have so many things to say about that. Awesome. Thank you, Kathy. I appreciate your time. You're awesome. Thank you, David. It's so great to talk with you anytime. I know we could talk for another few hours on comp and tech and all of that. Exactly. It was great. Thanks. Thank you. Take care. Have a great way. Well, get home safely. Thank you. Take care.

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