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:
- Base salary for a fully competent person delivering on the expectations
- Performance pay i.e. at risk, variable pay linked to contribution above normal expectations
- 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 any position. This statement combined with the gender equality distraction, highlights the lack of any evidence of modern procedures for the remuneration of human assets whether it be Lisa Wilkinson or anyone else. In modern organisational and HR asset management the remuneration package elements for the position, often referred to as the “contributing elements”, are known before any person is considered for the position. The performance pay element is the variable component driven from the Channel 9 corporate performance (hope they have a corporate performance framework). If Lisa thought she could perform at a level that contributes above normal expectations producing additional Channel 9 performance outcomes for her to “share” $1.5 mil to $2.5 mil of it, then I have no problem with that (and she is willing to take the risk). I do have a problem when the demands are not linked to any performance achievements be it for Lisa or anyone else. Productivity and contribution has to start at the top and packages that are fixed or partially fixed regardless of performance destroy the concept of accountability and pay for contribution.
Media advertising is big business, with live-to-air Television holding its own as compared to say print which is competing directly with the electronic media. The Daily Telegraph article “Lisa Wilkinson goes commando as Today takes a $200m gamble” by Jonathon Moran & Annette Sharp, 19th Oct expose some great points. “The morning TV market is worth up to $200 million and that revenue is used to justify the hefty salaries paid to hosts such as Wilkinson and her former offsider Karl Stefanovic”. “A 30-second ad on Today is believed to cost about $8000.” The article quote Steve Allen, from marketing consultancy Fusion Strategy who says: “The total television advertising revenue for the past year sat about $2.2 billion.” And “The war between Sunrise, Today, Studio 10, The Morning Show and Today Extra has become more fiercely fought than ever before thanks to the massive cash at stake in the timeslot.” Using these figures and assuming the Today Show has 30% of this market i.e. $60 million and there is a 35% GP margin, then GP would be $21 mill. There seems to be room for some progressive performance challenges where an incumbent can demonstrate that they can perform above and beyond “normal” expectations. I’m surmising this achievement would need to be well in excess of the $1.5 to $2 million additional contribution (but dollars are just one measure).
How much is this Channel 9 incident a “Gender Pay” issue?
October 18, 2017 NSW Premier Gladys Berejiklian said “Wilkinson had sent a strong message. That would be akin to me getting a pay cut because my predecessors weren’t female, so I completely appreciate her position if that’s the reason and I congratulate her for taking that stance,” she said. Despite the media argy-bargy, politicians say Wilkinson’s shock move has struck a blow against gender pay gaps.. Opposition leader Bill Shorten said on Tuesday …“Good on you for following your principles. There are millions of Australian women who would have taken a small measure of comfort from your actions.”
While this has raised the very real issue of gender equality, especially relating to pay, we believe the real issue in this case is poor organisational and human asset management principles, procedures and philosophy. This may be the lack of definition of effective corporate expectations or at least the lack of communication of these so they can be incorporated into the key and other staff remuneration.
There have been a number of very public pay bomb shells recently including Ex-TAFE SA boss, Wesfarmers new CEO, Rob Scott with his reduced $2.5 million in fixed pay, plus up to $7.5 million for meeting certain targets and now Lisa Wilkinson who has walked away from Channel 9 over package issues, just to mention a few. These have all been around the demands and desires of the individuals rather than how the position contributes to the core business and strategies of the organisation and then finding a person with the competence and attributes to deliver. Provided the base salary addresses the competence and business “base” expectations then the performance pay is related directly to the outcome of achievements above and beyond expectations i.e. performance reward above and beyond the corporate normal expectations (probably the “budget” figures). Over the years we have seen the concept of performance reward increase but not necessarily the alignment of the payments to the contribution to the organisation. Unless this strategic alignment is incorporated into the remuneration procedures then the contribution will not be measured properly and performance pay will revert back to a subjective “bonus” which does not necessarily help the organisation and probably not the individual themselves in the long run.
In an interview with the Wall Street Journal (6th October ‘17) The Reserve Bank of Australia board member Ian Harper said “The thing that is causing an issue for us [the RBA board] is slow growth in wages, which is feeding into slow growth in household income.” … “If you start to lose that momentum, that might be the basis of some sort of policy action.” It is a shame that the RBA does not take this opportunity to promote improved productivity and the opportunity for performance reward. Yes, base salaries are likely to move very slowly over the next few years but this is an ideal opportunity to push greater productivity and greater reward for achievement above and beyond. This additional “consumption” money would then be directly linked to productivity.
Modern approaches to human capital management focus on developing the right strategically driven structures, now and into the future, and designing the most efficient contributing elements (positions). These quantifiable position descriptions are complete with outcomes, performance measures and competence which provides the precise size and value of the position. This process must be completed before any consideration is given to appointing a person to the position. The HCM systems that provide size and value for the position also value the applicants or incumbents fit against the designated position and report on any capability/competence gaps. These systems should remove most, if not all, bias as they are quantifiable. These systems provide current value and gap as well as an assessment of the potential to develop into the future position – growth based succession planning. While these quantifiable approaches may not completely remove the “unconscious bias” they will go a long way towards it.
An article “Unconscious bias is keeping women out of senior roles — can we get around it?” originally posted in The Conversation March 8, 2017 by Melissa Wheeler and Victor Sojo, from University of Melbourne, provides suggested ways of addressing the unconscious bias; “Gender targets, de-identifying CVs and structured interviews are but a few of the strategies that can help eliminate such bias in recruiting employees.” Gender targets can be applied simply by saying “after going through a normal selection process, if the preferred candidate is not a [targeted group] then consider the second and possible third most preferred candidate provided a) the initial gap and development is not too great and, b) they have the potential to develop, then offer it to the No 2 or No. 3 if they are in the target grouping”. The development plan for any gaps needs to be part of the letter of offer and the base salary offered aligned to the competency possessed, regardless of the gender or minority group. The October 2017 HRM magazine article More Than Meets the Eye by Amanda Woodard reports on Stan Grant’s presentation where he says “For inclusion and diversity to work, it requires leaders to take action. Someone has to intervene. No one achieves success by just being talented.” This article addresses the processes for equality at the “potential employee – organisational interface” but has not addressed the macro issue of inclusion and diversity that Stan refers to. However, I believe that given the opportunity, success is how one applies the competence they have as well as the potential and willingness to develop. A major issue we see is poor or undefined “contributing elements” and sticking with traditional and often out-dated “job descriptions”. My experience with organisations such as the First People Disability Forum and the NDIS, indicate that the scope for re-defining traditional “jobs” into outcome based position descriptions that suit the needs and competence required on the ground will lead to more people achieving success, especially in the more remote areas.
The tools and approaches to human capital management are not new, the Australia Productivity Commission (APC) Review of Executive and Board Remuneration hearings in 2009/2010 addressed the issues of quantifying salary driven by the position design and how much it contributes to the organisation. OK, Lisa was employed prior to this but I am sure there has been reviews and renewals in her 10 years with Channel 9.
When organisations go to so much trouble to purchase physical assets like tools and equipment or vehicles and machinery why are our procedures for the most important asset “our people” handled so poorly and often at the expense of the well-being of the organisation? With a sound rolling Strategic Plan in place we should know what capabilities we need and the value of the contribution of those elements in the current and future structures i.e. base contribution as well as an understanding of the potential to perform at and above the norm. This is in place before we consider assessing any applicant or incumbent.
I think we all know that wages are likely to remain flat for some time and certainly the Reserve Bank of Australia board member Ian Harper recognises this as reported in the Wall Street Journal interview on 6th Oct 2017. While we want consumption to continue to grow now is an opportunity to put more focus on productivity and performance reward i.e. reward for contribution above and beyond normal expectations. The need for greater productivity is well recognised by business and certainly in 2010 the Australia Productivity Commission report on remuneration (after the GFC) emphasised the need for productivity and reward alignment. However, despite the procedures and tools being available these “organisational and human resource” debacles continue to occur. We believe these productivity issues are wider spread in Australia than most people realise. A part of this lack of productivity alignment is fuelled by the “government outsourcing”. So, when will we learn from the past and address the future productivity positioning of Australian?
Maxumise Consulting Pty Ltd
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