Is the grass greener on the other side of the fence?

Amar catches you ,the manager, in the corridor and wants to have an urgent chat. Immediately, your mind goes off on a wild goose-chase, wondering what the issue is and the short walk to the nearest team room seems a long way off. After the initial exchange of pleasantaries, Amar says he is not happy with the pay and that his friend in a different company is earning a LOT more than him. Hmmm,for Amar the grass is greener on the other side of the fence. Doesn't this situation sound common-place? May be you feel the same, but wearing a manager's cap in the current situation you do not have the luxury to share similar feelings. If you are a seasoned manager, you would have been in many such situations with the Amars, Akbars and Anthonys of the world. So how did you, as a manager, deal with such a situation?


The next set of crucial conversations you have with Amar, will determine whether you succeed in retaining him or not. It will also determine if he is still motivated enough, to continue working for his current employer. The worst thing to do, in this situation, is to go on the defensive and throw a bunch of numbers that you got from your HR to prove that what Amar is saying is not true. As far as Amar is concerned he has the real data and ,according to him, a good reference for comparison as well.

The recommended practise is to advise Amar to look at the compensation in total and not just the pay. You suggest that he look at the benefits, ESOPs, work culture etc., While this is the correct approach, some managers / organisation may go over-board to quantify the benefits and make the Total Compensation look very attractive.If Amar does not care about benefits then trying to convince him to look at the estimated benefits does not cut any ice. All he may care about is only the number credited to his bank account at the end of every month. I doubt anyone would dare to use ESOP as a retention tool when the market is bearish. Even when the market is bullish, one of the common mistakes done by the organisation is to quantify the money one can make on ESOP by looking at historic data.In reality, many uncertain factors like the company's performance, the timing of the ESOP exercise etc., determine the actual value of the stock one has. So do not try convincing Amar with the estimated returns of the ESOPs. If you are genuine and stick to facts, that potential gains are possible , but not quantify them, then you would atleast earn Amar's trust. Explain the total compensation philosophy and let Amar use his judgement to associate value to these extra benefits.



Sometimes the manager may make the mistake of suggesting that, the quality of work ,done at his current employer, is far superior to others and that Amar could miss the great learning opportunities if he moved to a different company. In my opinion it is not ethical to use good work as a retention tool.

Any company's biggest assets are its people(HR is being renamed as HA), so it has vested interests to take care of its employees. If this is true, then why would a manager in any company face issues like the one that Amar has brought on to the table? If you dig deeper you would notice a fundamental dichotomy - For Amar even one reference datum is sufficient, to feel that the grass on his side of the fence is not green enough. However a company cannot make policy decisions affecting people across the board based on one or few data points. If Amar is a top performer then the company can make exceptions by giving him either a reasonable hike or a retention bonus. But the compensation decisions that impact everyone is based on current market data. The companies base their compensation decision by comparing themselves with their competitors of reasonable size.



There is greater fairness in the compensation strategy when similar companies of similar size are compared. If a company has many different business units(BU), it may not be practical to compare each of its business unit with a different company doing similar work, especially if the business unit size is small. Given this, it may so happen that, some of the business units compensation need not be equitable to its direct competitor. Unless the business unit size becomes so large that it warrants its own compensation to be compared with the competitor, or if there is a significant attrition in the BU, the company need not take any action. These are the discrepancies one has to live with.

Few questions that can help tell if your company is competitive in its compensation policy are: How many competitor companies does it choose for comparison?. Where does it want to position itself vis-a-vis the market - at par or above par? To what degree does it want to compare itself with other companies ? Does it compare its employees at different responsibility levels with equivalent responsbility levels at other companies? Does it drive the compensation decisions based on the number of people and the responsibilities they have? How often does it participate in such surveys? Does it keep updating the competitor lists?

If your company does all, or many of these, then you can be sure that your company has a competitive compensation policy. However, remember that, percentage hikes, actual salaries, benefits that the company decides is an average number for each responsibility level. It cannot match the compensation for each individual vis-a-vis its competitor. In this sense the compensation data that the company deals with is statistical in nature.

But this still does not solve Amar's problem. If the company is fair in its compensation policy then the different business units or the groups within the company would get compensation budgets that track the market data. Amar's compensation would be based on Amar's performance ranking and the degree of performance differentiation that is done between the top performer and the bottom performer in his group. His relative performance, compared to others in his group ,determines his compensation. It is not done on his assessment of how valuable he is with respect to his friend in another company. There in lies the discrepancy. It is not humanly possible to make a 100% objective comparison of one individual's performance with another. Subjectivity, let alone nepotism, in the form of bias, perceptions, expectations play a role in the assessment which cannot be avoided. Even if it is possible to objectively compare Amar with his friend in a different group in the same company, his friend may still get a higher hike if his group has more poor performers than Amar's group. So it is a lost cause to compare one's compensation with another person.

So what can a manager do to address Amar's concern ? If Amar was an average performer, the manager could reinforce the compensation philosophy about how the company strives to be competitive in its employees compensation, how fair the rating/ranking process is. He should be courageous, honest and talk with facts. He can give a bonus/hike if it does not affect the equilibrium of the group. However, for the long term, he should challenge Amar to further improve his performance. He should also be prepared for potential attrition.

What can Amar do? He needs to understand that comparing his compensation with another person will always be a futile exercise. If he is convinced that the company is fair and competitive in its compensation practises, then he needs to work on improving his performance to get higher compensation. Before taking any decision he needs to compare the companies on parameters that matter to him - Pay, the benefits that matter to him, career growth opportunities, learning opportunites, typical hikes, long term stability of the company etc.,.

The grass that looks greener on the other side of the fence today may change color tomorrow, so before you jump over the fence make sure you think long term.



Happy Reading
-Ram