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Will salaries and wages be the biggest influence on the next federal elections?

Maxumise/HRmonise – Australian Salary Curves 2018 – 2019

By Max Underhill from Maxumise Consulting Pty Ltd – August 2018

Well Scott Morrison tried hard to talk up salaries and wages while he was treasurer, with little success, so what will he try now he is PM.  These predictions were the most difficult we have every experienced despite a mid-term review earlier in 2018.

While the politicians and Reserve Bank of Australia (RBA) talking up the need for increased base salaries and wages, generally the 2017-18 salaries did not grow at the “budget forecast” rates.  The exceptions were the top-end positions in sectors where remuneration is in, or above the top quartile.  Contrasting with this the lower quartile total salary curves remained static or in cases drifted backwards, an unusual phenomenon in normal times.  Clearly these are not normal times and we feel there are still more surprises to come for salary predictors.

Maxumise/HRmonise develops the position size and value based on its contribution to the organisation i.e. ideal position design.  The HRmonise system can also assess the capacity of the incumbent to ensure equity is maintained and bias is removed.  Maxumise has been advocating for a greater focus on performance pay and a clear distinction between the base (contribution) value and other components of the package, especially performance reward.  This was part of the outcome of the Australia Productivity Commission Review of Executive and Board Remuneration – submission and hearing 2009/2010.  APC Commissioner stated that; “Maxumise put science into human resources management” referring to remuneration practices and methodology.

The 2017 budget was based on the Official Wage Price Index to increase from 1.9% to 3.75% in 4 years.  The Maxumise/HRmonise curves for 2017/18 predicted some significant increases for the [...]

Q&A the Gender Pay Debate – less emotion & more science needed

I am amazed how Q&A can canvas a range of snap-shot views on issues and leave these views, some of which are ill-informed and extreme, hanging.  On 26th Feb 2018, one of these was the gender pay equality.

In October 2017 the Channel 9 – Lisa Wilkinson case raised the important issues of gender equality and pay equality, however, the real issue of “human capital management” procedures, processes and audits was largely been overlooked.  With the quantitative methodology and systems available today this situation should never occur and the way it has unfolded is a true debacle – a complete failure, especially because of bad planning and organization.  It was not unexpected that this high profile “flash in the pan”, gone from sight within a month and what has changed?

The issues of gender pay is not new – 65 years ago we had the International Labor Organisation (ILO) Equal Remuneration Convention, No. 100, that was adopted on 29 June 1951 by the General Conference of the International Labour Organisation at its thirty-fourth session.  Last year, 2017, “ILO, UN Women and OECD, the Equal Pay International Coalition (EPIC).  By 2030, achieve full and productive employment and decent work for all women and men, including young people and persons with disabilities and equal pay for work of equal value.” (Launched of EPIC in Asia Pacific was Feb 2018).  What happened to Convention No 100 and the many other papers and resolutions.  It would be interesting to see how many of these organisations have a fair pay system, we suspect at least one is still using an incremental pay system – this is not equal pay for equal work.  In 2009/2010 the Australia Productivity Commission (APC) Review of [...]

Who wins the “stuff-up” challenge, Malcolm or Barnaby?

Management by knee jerk reaction? By the end Malcolm and Barnbyof last week we must have got close to a perfect “stuff-up” score for Malcolm and Barnaby; a dead heat I would say.  How can our “peak body” policy makers be making such a mess of basic good management and leadership?  They seem to be stuck in an old-fashioned management style based on activities and tasks rather than a modern outcome approach which identifies and measures the performance by empowering the people to deliver on what we hired or elected them to do.  Rather than looking up to these “statespersons” and taking the lead from them, they have now become the laughing stock of the country.

If business had the same level of internal management distractions and loss of image, the owner/board would quickly step-in and stop the bleeding.  However, well managed businesses would not allow public debate nor apply the knee-jerk, activity-based responses like we saw last Thursday.  They would have the outcomes needed to deliver the organisation’s strategic objectives defined and internal processes would be applied.  From the outside it would appear that the coalition has no such “strategic direction” or framework of indicators as to how they  achieve and manage the success of the delivery of the strategy, collectively or as individual contributors.  Is an elected party or coalition any different to a well-managed business?

Malcolm, we hope you have a team working on your list of instructions for the next set of activities of “unacceptable behaviour” which will might include; drunk and disorderly, gambling, drugs/smoking, driving irresponsible, bullying, unbecoming dress, lying, contradiction and undermining of colleagues, inappropriate communication with the media etc., [...]

Ch 9 – Lisa Wilkinson an Organisational & HR debacle

While the Channel 9 – Lisa Wilkinson case has raised the important issues of gender equality and pay equality, the real issue of “human capital management” procedures and processes has largely been overlooked.  With the methodology and systems available today this situation should never occur and the way it has unfolded is a true debacle – a complete failure, especially because of bad planning and organization.

The NSW Premier Gladys Berejiklian and Opposition leader Bill Shorten have allowed themselves to become caught up in the media frenzy, but blinded by the gender equality aspects they did not address the real issues.  Australia supports the ILO Convention recognising equal pay for equal work, but even so there is a lack of accountability and reward for true contribution.  Despite this support, Governments and many private sector organisations in Australia still utilise incremental pay approaches to base pay.  How can this be equal pay for equal work?  Maxumise has assessed people on the extremes of a “level” and it is not uncommon to find a competence reversal i.e. the most competent contributors being paid the least.

In modern organisational and HR asset management, remuneration is made up of the following three (3) elements:

  1. Base salary for a fully competent person delivering on the expectations
  2. Performance pay i.e. at risk, variable pay linked to contribution above normal expectations
  3. Legal and business based benefits as well as adjustments and “perks”.

In the Lisa Wilkinson debacle, real “business” issues started to emerge when Channel Nine CEO Hugh Marks said: “Today Show is one of the biggest roles there is in Television…”.  Did he mean that it has potential to contribute to revenue, profit, channel 9 image etc.?  “Biggest” is probably not the best term to describe [...]

Goldman Sachs joins HR lions club with a squeak!

Navel Gazing larger Goldman Sachs joins a long chain of icons that are shaking up their performance appraisal process – wow, probably 15 to 20 years late and even then they are just tweaking them around the edges when there are real quantifiable and empowering solutions available.

Where would we be if we managed our other assets like these companies have been managing their people?  Maybe the better question is where would we be now if we had been managing our people assets effectively for the last 20 years?  What if we had included proper position definitions, quantitative measures and empowerment not to mention placing HR assets on the balance sheet?

As the Human Times Monday 30th May 2016 edition (humantimes@humantimes.us.com) reported Goldman Sachs “experimenting with an online system” joins Accenture “more frequent check ins between management and employees”, General Electric (similar to Accenture), Gap, Abode and Microsoft “abolished numerical ratings” with J.P Morgan, Chase & Co and Citi Group making “management changes focussed on retaining junior bankers”.  PwC and Delloite are also changing their performance appraisal system, jumping from one subjective system to another.  These prides of lions are squeaking not roaring.  Just imagine if we managed our finances or stock or physical assets like we do our HR – let’s sit down at the end of the month to casually discuss how we feel about the revenue and profits, what about the cost and how do the stock levels look like to you?

There have been human capital management methodology and tools around for 20 years that define the expectations of positions including measurable outcomes that empower the employees to understand how they are performing and [...]

A Sugar Tax or Social Responsibility on the Balance Sheet

Is there a company out there that doesn’t promote itself as a socially responsible company.  These companies also work hard on increasing their market capitalisation (value), so where does sugar fit in?

 The gap between the book value and market capitalisation is largely unquantified but in reality it is made up of the employee value, often called HR asset value, intellectual capital and the socio-economic contribution.

There are tools to value the HR assets so this is possible, the accountants say they can value the intellectual property (although those innovative inventions are thin on the ground these days) which leaves valuing the socio-economic contribution of the organisation.  This is where the “rubber hits the road” and with some companies the socio-economic value may be neutral or even negative for example tobacco companies, heavy polluters, some alcohol promotions and maybe foods that contain ingredients that the medical profession tells us is “damaging” like excess added sugar etc.  We have been down the path of putting a value on the carbon footprint including pollution, carbon “miles” but did we transfer this to the balance sheet as a socio-economic value?

 I am not an accountant but we are all governed by accounting standards for reporting through standards like GAAP, IASB (IFRSs) and FASB which appear to prevents us from putting these values on the official book value (but they will allow goodwill which can now be impaired to make up for losses elsewhere).  However this should not prevent us from advocating for it, nor does it prevent us putting these values in as a balance sheet notes.  This has been done for [...]

Is Australia’s Economy of Scale Adequate for the Future?

Turnbull team cartoon low

Australia has an increasing imbalance between the economic contribution from its “residents” and the cost of providing social services and government administration.   Are there lessons we can learn from the past and how do we move forward?

In the mid 1990’s Australia lost most of its manufacturing base.  Not only were jobs lost, but the need for highly specialised skills, together with the problem solving expertise to create unique innovative solutions in these industries evaporated.  The car industry limped on under the “Button Car Plan” with government incentives to share components such as body pressings.  Entities like Kellogg, with raw materials on its door step, changed structures and redefined traditional “jobs” to outcome based contributing elements (positions), empowering their employees.  Whilst Kellogg’s workforce nearly halved at the time, some manufacturing was retained and survived a further 20 years.

Government reviews at the time considered what options could be adopted to retain some of the exiting manufacturers as competitive businesses.  The findings in each sector were similar; firstly the need for investment in new technology including robotic processing, and, secondly the production and processing scales for efficiency were many times the Australian domestic demand at that time. 

I remember being at a presentation for new piece of equipment for a communication company.  When a slide showing the optimum output for the smallest model was displayed the CEO thought there was a misprint on the capacity as the minimum recommended output was 10 times what they required and they thought they were big a player.  The equipment supplier then suggested they [...]

Infrastructure and Asset Maintenance is failing us – who is to blame and does HR have a role.

Professionals Australia provided a link (as part of their Better Infrastructure campaign) to a very humorous YouTube clip from the US Last Week Tonight with late night talk show host John Oliver: Infrastructure (HBO) Mar 2 2015.

This topic would be funny if it was not so serious but what has it to do with human resources? The clip raises the question, who is John Oliver really making fun of, is it just those maintenances engineers or is he criticizing the organisation’s broader “good governance”.

The John Oliver clip is brilliant at getting across the message of the importance of infrastructure maintenances from a retention of the value and safety aspects. While it is probably not difficult to find a measure like Return on Assets (RoA) or something like this in most organisations, it is not as easy to find measures on how well we are looking after those assets. In a Human Capital Management approach to organisational management it is critical to have a balance between all the measures. While the John Oliver clip highlights the obvious importance of looking after the infrastructure, it is the practical setting of the level of this maintenance and monitoring that we find is essential, but unfortunately often missing. In organisations Maxumise often find two (2) gaping holes when it comes to asset management. The first hole is the human asset value – why isn’t this included as a real and significant assets in all organisations? Secondly there are rarely any maintenance measures for the assets including infrastructure, plant, equipment and yes the human assets who also need to be maintained.

Professionals Australia describes John Oliver clip as “an informative and humorous insight [...]

Human Resources are True Assets

The value of the HR asset can be calculated and an increasing number of organisations are putting the HR assets onto the balance sheet, although currently only as a balance sheet note, but it is still used and reported on. In the valuation of our company the HR assets explains the gap between book value and market capitalisation, and that gap is made up of human capital and other intellectual capital.

This places the focus on increasing the value of our people and to do this we need to define the structures and positions correctly incorporating a performance management system that empowers the employees; letting them produce the outcomes using initiative and innovation. This will progressively increase the competence and therefore increase productivity i.e. an increase in HR asset value.

To be in a position to allow the organisation to place the HR on the balance sheet (Note) the organisation must have a clear strategic direction/focus, be outcome focussed and the key HR programs must be integrated:

  1. Strategic Planning – current and future capability and performance frameworks;
  2. Structure Management;
  3. Role design (size) and position evaluation – a precise form of the old outdated “job” evaluation e.g. point-factor
  4. Employee Management; management of an incumbent’s performance achieved against the performance set in the role description
  5. Performance Management system;
    • The performance measurement envelope – target, high stretch and danger
    • Performance achievement management – predictive modelling and performance reward calculations
  6. Recruitment and Assessment – acquiring and matching people against role design;
  7. Learning and development based on competency gap
  8. Strategic Reporting including HR asset value as a “balance sheet” note.

Maxumise is a consulting company with over 20 year history of Assisting Organisations Improve their Performance through the better management of resources, particularly human resources.

Maxumise provides a Human Capital Management methodology as well [...]