The Booz Theory
There is a theory stuck in this mess offered by the chosen three from Booz & Company. First they ramble on about statistics on industry wages and how employers use MRPs, or market reference points, to determine salary ranges in their area. Hawkes et al say these MRPs usually come from “third-party sources" but I believe the U.S. Bureau of Labor Statistics offers up similar statistics for free. If you want accurate data, I guess according to the Booz men, go to a third party and pay for it right (some expense experts here!).
When the rambling is done, the Booz’s offer up four points in their theory to help retool labor costs. As they say, if “employees fall north of the norm," employers should do one of the following:
Appropriate job categorization and responsibility adjustments – This basically means when Machinist Joe started 25 years ago, his job should have had initial salary levels and ceiling levels where he could advance in pay no further—unless of course Joe wants more responsibility or his job description changed. The only hope here for Joe would be perhaps a merit raise here and there but no salary increase. If Joe doesn’t just jump for joy here and agree with the Booz plan, he could be placed back to a level one machinist and receive a cut in pay. I’m sure Joe would not agree with this idea.
Voluntary separation – Some mega corporations already do this by offering a one-time payout and a benefits package which in the long run will cost the company less in other payroll expenses. I love this from the Booz guys: “It is critical to tell employees that the company is determined to cut costs and smooth out salary discrepancies and that after the severance program’s deadline passes, more aggressive ways to reduce wages will be considered."
Darn tooting it’s critical guys or what it really says is, take the package or the company will have to look at other ways to save money like firing you!
Involuntary separation and performance management – Here the Booz guys don’t want to mentor employees or offer up much of a chance for newbies to improve and learn on the job. Instead, if they aren’t up to par, terminate them. Or, if they continually receive low performance reviews, fire them.
Again, where is the employee engagement here? If I worked for a company where I knew ahead of time that two bad reviews meant I would be cut, I’d always be job hunting and you can bet my resume would be in the company copy machine—all the time.
An average employee not given an appropriate amount of time to be a great employee is often the fault of the company, not the employee. Bad idea, Booz guys.
Wage reduction – At this point, I am pondering what the Booz guys are drinking? Cutting the wages of long-term employees is not a good idea. Sure your company might want to implement a personal improvement program for you but to save money so cash flows by cutting your salary? That’s a double no!
You can read the story from the Booz Guys here but jumping to the comments section is your best bet—it’s the best part of the post!