ORC Sightlines
August 2008
In this issue:
- U.K. Companies Ignore Government Warnings on Pay Increases
- Senior HR Officers Consider Roadmap for Diversity
- Study Illuminates Senior Leadership Impact on Diversity
U.K. Companies Ignore Government Warnings on Pay Increases
At the July meeting of the Global Reward Meeting Group (GRMG) held in London, attendees were particularly keen on discussing and sharing their pay increase plans for the U.K. in 2008 and beyond. Given the current economic uncertainty, this topic is not only high on the agenda of all compensation professionals, but employees are also showing greater interest than before in how their own pay may progress over the coming 18 months.
As the cost of living in the U.K. continues to grow at a significant pace, employees will be looking for pay increases to be at least in line with inflation. However, the Government is wary of the potential for inflation-driven pay increases to spiral out of control as happened in the early 1990s. Alistair Darling, Chancellor of the Exchequer, is calling for any pay increases to be kept in line with the Government’s inflation target of 2 percent. In an attempt to demonstrate pay restraint in the public sector, Government ministers will be foregoing pay increases this year. It will be extremely interesting to see if the private sector, and indeed other parts of the public sector, follow suit.
Given this context, it was somewhat surprising to hear that attendees at the GRMG are budgeting for increases in 2008 of from 3 percent to 4 percent. While in direct contradiction of warnings from the Government, these plans are in line with other recent data showing average pay increases anywhere between 3.2 percent and 3.9 percent for 2008. Before everyone gets too excited, however, it should be recognized that these figures, although higher than the Government’s target, still equate to an effective pay cut for employees when compared to the predicted inflation level, which is expected to break 4 percent shortly. Many economists predict a further 1 percent increase in inflation over the coming months, which in all likelihood will prevent a cut in interest rates and lead to continued Government pressure for more moderate pay increases in 2009.
ORC’s Global Reward Meeting Group, based in London, is a network of reward and compensation managers in multinational organizations with headquarters or regional offices in Europe. Contact Paul Coleman at +44 (0)20 7591 5600 to learn more.
Senior HR Officers Consider Roadmap for Diversity
At its core, diversity management is a change management initiative. Any organization that wants to derive the full benefit of having a diverse workforce must somehow “bake” diversity into the way it goes about its business on a day-to-day basis. Members of the Senior HR Officers’ Network and Human Resources Solutions Network talked with ORC Vice President Patrice Hall at their meetings last month about the best way to embed diversity and inclusion into organizational systems and achieve deep, sustainable change.
Ms. Hall described ORC’s “Roadmap for Change,” a strategic model that lays out the critical elements of any successful diversity initiative:
- Goals that clearly articulate how diversity will contribute to the organization’s growth
- Active partnerships among internal and external stakeholder groups (business leaders, middle management, employees at large, HR business partners and specialists, Board of Directors, community groups, etc.)
- An action plan that specifies how diversity will be woven into all the organization’s key systems and processes (e.g., workforce planning, engagement, performance management, business planning, corporate social responsibility, etc.) and the communications plan and accountability structures that will drive implementation
- The competencies that diversity champions need to develop within themselves and/or their teams
Many organizations with sophisticated diversity and inclusion programs have found their journey stalled or detoured because they missed one of these key elements. The ORC model includes a simple diagnostic tool to help pinpoint which of the steps might need more attention. Network members used this tool as the basis for some lively sharing of experiences and comparison of results.
For more information on ORC’s Global Diversity Roadmap and equality, diversity and inclusion consulting services, contact Patrice Hall,+ 1-212-852-0358, Deirdre Golden, +44 (0)20 7591 5600, or Mary Martinéz, +1-212-852-0414.
The Senior HR Officers’ Network is a confidential forum for chief HR officers in Fortune 500 corporations. The Human Resources Solutions Network brings together HR heads for business units and divisions of major corporations. For more information, please contact Susan Carter, +1-708-358-1361.
Study Illuminates Senior Leadership Impact on Diversity
Earlier this month ORC Worldwide’s Global Equality, Diversity, and Inclusion practice released results of a study funded by Industrial Relations Counselors, Inc. (IRC), a nonprofit foundation, on how senior leadership commitment affects attempts by employers to achieve and manage a diverse, inclusive workforce.
Thirty-two North American and European companies responded to an online survey that asked about the behavior of CEOs and senior leaders in the organization and about programs and processes associated with diversity management. In addition, companies were asked to provide information that could be used to measure the success of their diversity and inclusion efforts including:
- Representation in key talent pools of women, racial/ethnic minorities, and nationals of countries other than the headquarters country (W/M/NHQs)
- Turnover and promotion rates for women and racial/ethnic minorities
- Employee perceptions of the company’s diversity position
- Satisfaction/engagement of diverse employees
- Amount of purchasing budget spent with diverse suppliers
- Increase in sales from diverse market segments
The study found that companies with the most successful records on these measures tend to share certain characteristics:
- The CEO is held responsible by the non-executive Board of Directors (the Board) for the company’s diversity initiative and his/her compensation is linked to diversity performance.
- The Board itself is ethnically and nationally diverse.
- The Board reviews the diversity of high potential pools and succession slates.
- The CEO talks frequently to his/her direct reports (the Executive Committee) about diversity, demands regular reports from them on the progress of diversity initiatives, and holds them accountable for both their personal behavior and for meeting objectives such as developing and mentoring diverse people.
- Managers are trained to recognize and avoid “microinequities”.
The data supports the common assumption that commitment from the top is critical to diversity success, but the study also suggests that senior leadership support is not, in and of itself, sufficient to produce the best outcomes. The highest performing companies have institutionalized diversity and inclusion. They have enshrined their commitment in value statements that explicitly refer to diversity or respect for differences, and they have integrated diversity and inclusion protections in key organizational processes such as training, succession planning, and identification of high potentials.
The full report is available on the Industrial Relations Counselors Web site.