Garry Straker - Will These Surprising HR Trends From 2023 Continue Into 2024

[00:00:02] Here's an experiment for you. Take passionate experts in human resource technology. Invite cross-industry experts from inside and outside HR. Mix in what's happening in people analytics today. Give them the technology to connect, hit record, pour their discussions into a beaker.

[00:00:21] Mix thoroughly and voila! You get the HR Data Labs podcast where we explore the impact of and analytics to your business. We may get passionate, and even irreverent, that count on each episode challenging and enhancing your understanding of the way people data can be

[00:00:39] used to solve real-world problems. Now here's your host, David Turetsky. Welcome everyone to a very special HR Data Labs podcast sponsored by salary.com. Hi my name is David Turetsky. I'm the CHRO and VP of Consulting here at salary.com, and I have with me my very good

[00:00:59] friend and special guest, Garry Straker, who is one of our consulting partners here at salary.com. Garry, how are you? David, I am terrific. So nice to be with you here again today. I always love

[00:01:09] connecting with you. Well, we usually have a really great time with you on the podcast, and I think today is going to be no exception. Garry, why don't you give us a little bit

[00:01:16] about your background and how you got into this point? Yeah, so I've been a total rewards professional for almost 25 years, and during that time I've had an opportunity to work with many different clients in different parts of the US and some internationally,

[00:01:29] in many different industry segments, in many different pay markets. So I've really sort of enjoyed that 25-year run and I will tell you the last few years, as you know, David, has really, it's been a lot more sort of interesting and fascinating in some ways

[00:01:44] challenging than maybe the many years prior to that. But it's a fun time to be doing what we do. It is fun and we're going to be talking a little bit about some of that fun that we've seen

[00:01:53] over the last year and then what we're going to expect. But Garry, before we get there, what's one fun thing that no one knows about you? Yeah, I knew you were going to ask that, David,

[00:02:03] and that's always a challenging one. But you know, I've sort of an interesting sort of career which started out in the theater, believe it or not. And back in the day, I spent many

[00:02:15] years, as you and I both did, living and working in London. And during that time, I had an opportunity to work for the Royal Shakespeare Company. Not many people know that and it was a time that I sort

[00:02:25] of thoroughly enjoyed and lots of fond memories. I wish I would have seen one of the productions that you were part of. Maybe you did actually. I know our time in London overlapped a little

[00:02:39] bit. Who knows? Yeah, that was really cool. Yeah. Well, one of the fun things that we get to do on the H.R.D. D.L.A.B.s podcast is talk to brilliant people like you. And today is no exception

[00:02:48] because today we're going to be talking about the things that surprised us about 2023, the things that we expect to happen in 2024, and maybe even what might happen in 25. So let's start. Let's talk about what trends did we think were going to be bigger in 2023

[00:03:14] and kind of what surprised you about 2023 in the world of compensation? Sure. Yeah, I mean, one of the things we saw in 2023 is just more legislative activity, particularly around worker protections. And certainly, I think World of Work coined the

[00:03:29] phrase that 2023 was the year of pay transparency. And of course, we saw lots of new legislation being introduced at the state level, introducing new pay transparency laws. Some states went a little bit further than others. And I thought that trend was going to continue and we would

[00:03:47] see other states actually pass bills. We know that a lot of bills have been introduced, but not as many states passed them as I thought we were going to see. Well, I think one of the ones that really affects me is Massachusetts. That was kind of held up,

[00:04:00] isn't it? It is, but it looks promising. I think all indications are that Massachusetts, you know, depending on the time will probably be the next day to introduce new pay transparency legislation. Everyone expects to see that happen in Massachusetts. And to be honest with

[00:04:12] you, David, I'm surprised Massachusetts didn't do it sooner. Yeah, well, me too. Well, and even Colorado, Colorado went a little bit beyond where they had actually originally started, didn't they? Yeah, I mean, they introduced some amendments to their original

[00:04:26] legislation. One of them that caught my eye was this sort of career progression disclosures, right? Requiring employers to actually provide some visibility and transparency into promotional opportunities and even requiring them to provide information to current employees about new hires that came on board. And,

[00:04:47] you know, Illinois introduced some legislation didn't quite go as far, but it did have that sort of language in it. And interestingly enough, there was a new directive in the European Union, which will impact all member states, all 28 member states. Again, very much focused on

[00:05:02] pay transparency, but also introducing that element of career progression disclosure. So keeping my eye on that one day, but I think we're going to see more, you know, perhaps more legislation around it and certainly more focus on that area from employers.

[00:05:18] Now, you and I both know because we love doing this kind of work that looking at career frameworks and looking at job architectures is actually a really great thing to do anyways. And from a disclosure perspective, it's something that should be part of hygiene about keeping people up

[00:05:33] to speed between their employee and manager as to where can I go and how can I grow? So that's not really a bad thing for employers, is it? No, I certainly agree, David. And unfortunately,

[00:05:45] you know, it's a shame that we have to have legislation introduced around some of these things that we're talking about, which you would have thought just would have been best practice, right? Just sort of the, you know, the normal way of sort of doing business,

[00:05:57] particularly in the area of HR and compensation. But, you know, sometimes organizations are slow to move. Let's talk a little bit about some of the other areas of legislation that kind of shocked us or that may actually be a big shock to organizations like the potential change to

[00:06:13] FLSA to the minimum rate on exemption. It's going to go up by what 30 grand? Yeah, significant jump. If in fact it does go through the federal at the federal level, you know, there are proposed rules that do increase that threshold significantly. You know,

[00:06:28] I think there's a lot of pushback on that from certain stakeholders, but we may see that as early as the end of Q1, at least some commentators are reporting. So it'd be interesting to see

[00:06:40] that and how that sort of, you know, changes things from, you know, in terms of jobs that are considered exempt or non-exempt. You know, it does make me think that it may create some salary compression. You know, maybe some organizations will decide just to go ahead and

[00:06:55] pay that overtime, right? Make those jobs eligible for overtime rather than, you know, create other issues within maybe their job hierarchy or the compensation structure. So certainly keeping our eye on that this year. Well, it'll certainly be an expense or it'll

[00:07:10] be a difference in how they track people, how they track their hours as well as, you know, what's their total compensation and how do they pay it? So yeah, it's a lot to look at.

[00:07:21] Yeah. And as we know, David, that FLSA exempt status, right, can be a status thing for many, you know, junior level employees who aspire, right, to further career growth and prospects. And so, you know, taking, if you had to take away the exempt status, but for some employees,

[00:07:38] I think that that would be a hard pill for them to swallow. Absolutely. Let's transition a little bit to labor unions because we actually saw some gains. We actually saw some losses. What shocked you about 2023 with labor union?

[00:07:51] Yeah, I mean, labor had a moment, didn't they? I mean, we saw some, certainly a lot of media attention and high profile labor settlement, big salary increases for a lot of labor unions. Of course, we've seen labor organizing efforts in Starbucks and Amazon. Some have been successful,

[00:08:07] some have been held up, some unsuccessful. But it certainly, you know, it didn't escape me that unions were, you know, had a high profile year in which, you know, they generated a lot of

[00:08:19] interest. And there was an article recently that I saw on NPR about the labor union membership did actually increase last year for the first time in many, many years. I think private sector labor employees in labor unions is down to about 10% of course in the 50s, right?

[00:08:35] It was probably closer to 40%. But it does seem to be that, you know, unions and the work that they've done in terms of labor protections and salary increases, you know, caught a lot of

[00:08:47] people's attention last year. It'd be interesting to see how it pans out and what we expect to be a sort of, you know, a labor market that is continues to evolve and maybe slowing down a little bit.

[00:08:57] Well, I mean, we think about inflationary growth that we've gone through over the last couple years and now it's died down a little bit. But that hasn't actually impacted wage growth, has it? I mean, because if we look at labor unions, as you said,

[00:09:08] collective bargaining was really beneficial to those employees who were actually able to potentially get the benefit of that collective bargaining. Do you see that that may have had an impact as well? Yeah, I think it certainly did. And certainly expectations that employees had,

[00:09:23] you know, have been higher than probably some have ever had in their entire careers. I mean, David, you and I have been doing this a long time. The kinds of increases that we saw in 2022 and 23 surpassed anything we saw in the previous 20 years. That's right.

[00:09:36] In terms of average wage increases. And you know, there are signs that it is cooling. Of course, inflation had a lot to do with it. Inflation has kind of come down as a result

[00:09:45] of monetary policy. So, you know, we certainly did see some pumping of the breaks amongst our clients and certainly heard about that. And I think this year, you know, maybe things will settle back down to the norm, sort of, you know, the types of wage growth

[00:10:00] that we historically have seen during the course of our careers. Like what you hear so far? Make sure you never miss a show by clicking subscribe. This podcast is made possible by salary.com. Now, back to the show.

[00:10:16] So let's actually do that. Let's transition. Let's talk about 2024. So if you think about 2024 and where you see things going, what do you think of as the major trends that

[00:10:28] are going to impact us this year? You know, so one of the things that we have to talk about is AI, right? And the impact of AI. Of course, that's making media headlines and, you know, a lot of

[00:10:38] investment in that area and a lot of organizations try to understand how AI can increase productivity and efficiency in the organization. And in some cases, maybe eliminate jobs. You know, I don't profess to be an expert in AI. And like everybody else, I'm sort of sitting on the

[00:10:54] edge of my seat waiting to see how it all transpires. But certainly in the HR work, the work that we do, if you think of some of the tasks, right? Some of the administrative responsibilities that we have in HR, you know, things like generating job descriptions,

[00:11:10] for instance, right? Always high on the to-do list but often gets pushed down further down the list as a result of other priorities. And of course, you know, job descriptions are really a building block or foundation on which to build, you know, a compensation program that

[00:11:25] has integrity, right? That is credible. And it's compliant. That's right. And supports, you know, consistent administration of compensation. All those things that we know are important. But, you know, interesting to be interesting to see how AI does change the

[00:11:40] work that we actually do in HR. Well, I'll be honest with you, I've heard a lot of people saying AI is going to take away a lot of jobs. And I got to be, I see this parallel to when we

[00:11:51] started to talk about computers coming into the world of the organization, right? It's going to take away this job. It's going to take away that job. And for many tasks, yes, there are certain

[00:12:01] jobs that did go away. But to me, AI is just another tool in that toolbox that we use. So for your example of creating a job description, is compensation going to go away? No, they

[00:12:13] may actually be able to use AI to develop a good job description. Of course, they're going to have to check it. And then they're going to be able to use that as a tool in our toolbox, especially in

[00:12:22] the next few to me months slash years, to be able to then hone how they change what they do from being extremely tactical, to be much more of a consultative maybe strategic leader.

[00:12:36] And so to me, AI does impact, but especially short term. I don't think the robots are taking off or I think that's maybe for next decade or so. But yeah, I think you make a good point, David.

[00:12:51] I mean, a lot of the work that HR has the task of fulfilling is, it can be sort of repetitive. Some of it is mundane. It's often viewed as administrative or compliance driven.

[00:13:05] And to the extent that AI can help sort of take away some of that and take that out the desks of HR professionals so that they can begin to think more strategic, more long term rather

[00:13:16] than putting out fires every day. I think that's a good thing. And we'll see. Because that's actually not just a 20 to 24 impact. That's beyond that as well. Let's talk a little bit about managing labor markets and especially internal labor markets for 2024.

[00:13:33] Yeah, and this is going to be an interesting year in terms of the overall labor market dynamics. It's evolving literally as we speak. I mean, there was just a couple of articles in the

[00:13:43] Wall Street Journal last week that talked about how difficult it is for people to move jobs already this year compared to what it was last year. Of course, we heard about the great resignation, right? And people were, it was like musical chairs and people were moving

[00:13:55] to get bigger salary increases and they did successfully. That has changed in a few short months. And now there's a lot of jobs because we're finding it hard even though they may have interest in changing their job, they're finding it difficult to find the openings.

[00:14:07] We know that job openings in terms of what's being posted have been reduced dramatically. So the labor market is going to look very different I think in 2024. And I think it's going to be important for employers to better manage their internal labor markets, right?

[00:14:23] You certainly want to keep your rock stars. You want to keep the good employees engaged, most importantly. You want to keep them within your organization rather than have them go and look elsewhere because there's a good chance that the ones who will be moving will be the

[00:14:39] rock stars, right? Because they'll be the ones who will be most attractive to other prospective employers. So you've got to find a way to keep them engaged. You've got to continue to develop employees, give them some visibility into career

[00:14:51] progression opportunities and growth. Continue to upskill them as best you can. And so we were talking a little bit before about career frameworks, being able to be utilized to be able to show people where they can go, where they can grow and how they get there.

[00:15:06] I think one of the things you're talking about in this career progression is being able to show the best people where they can go to flourish. To me it's also about being able to show the people who need some development,

[00:15:16] maybe the people who aren't performing as well, maybe to look at what they do and see if there's a better fit for the skills that they have so that they can perform better

[00:15:25] and they can see a different path forward. Yeah, I agree, David. Let's face it, there are some circumstances where an employee may not be succeeding in a particular role. Perhaps through no fault of their own. Maybe it's just the role has changed, maybe it's

[00:15:43] lack of skills in a certain area. And I think it's incumbent upon employers to sort of recognize that and make sure people are in the right seats, right? And you can play to their strengths,

[00:15:53] but also allow them that growth and development opportunity. And I think that that's what's going to keep people engaged. And it's really ultimately all the work that we do has has to lead to

[00:16:03] higher levels of employee engagement and motivation. And if we're not doing that, we would be failed. One of the ways in which I know some organizations are dealing with this is by looking and doing assessments on people and seeing where the gaps may exist in skills.

[00:16:20] Can you talk a little bit about the development of skills as being that kind of tool that can be used to kind of judge not only where am I now and where can I go? And how do I close those gaps?

[00:16:31] Yeah, and I think we're doing a lot of work in that area in terms of helping define competencies and skills that may be specific to a certain role or a certain career path.

[00:16:41] And we're seeing a lot of interest in our clients in that area. They're trying to sort of build out a job architecture that defines the skills and the competencies that are needed in order to succeed in certain roles, and also make employees aware of what they need,

[00:16:58] what they need to do to be able to be successful in those roles. And just creating that little bit more visibility. And I think it really comes into heading of more appropriately managing expectations of your workforce so that employees hopefully don't feel as though that they're stuck,

[00:17:14] that they've hit a glass ceiling, that there may be other places in the organization where they can add value. But if I'm interpreting what you're saying correctly then then we need to be more transparent about not just the career framework but also the descriptions,

[00:17:27] the possibilities, the skills that are required and being able to arm managers and employees with information that maybe they've never really had before or they may never had access to all these things at one time. Yeah, we have to eliminate the mystery,

[00:17:43] right? That sort of black box mentality where things happen but nobody really understands why they happened or what is the rationale, what is the logical reason for things occurring or people moving from one place to another within an organization. But yeah, absolutely,

[00:17:59] we need to provide visibility. Of course, we're doing that in the area of paid transparency, you know, partly being our hand is being forced there as it was in the legislation. But I think

[00:18:07] we need to do that more in terms of that career progression, right? That job architecture and doing a better job at documenting and communicating differences between roles. That's not really been HR's core suit is giving this information, giving this data out to people.

[00:18:22] So how does HR kind of do that in a way that they actually probably need to upskill in order to be able to solve for being able to train other people on that, right?

[00:18:32] Yeah. And when you kind of think about trying to build out a job architecture, especially in an environment where maybe you have historically relied upon market pricing and let's face it, we've talked about this many times, David, there was a time when you and I started this work,

[00:18:45] we used to spend a lot of time on job evaluation. There used to be methodologies and processes for defining roles within an organization. But we've moved away from that as a result of the prevalence availability of market data. Market pricing has been our

[00:19:01] predominant method for most organizations of building out those job hierarchies. And so I'm not saying we need to go back to the future, but we need to do it in a more efficient and modern way, right? Which reflects the modern work environment and sort of the skill sets

[00:19:17] and expectations of the modern workforce. Well, if I remember correctly, the thing that we're kind of pointing to is something like the hay system, which there might be people who are having flashbacks to the 80s and 90s when I use that terminology. But hay's going strong. And it's

[00:19:33] a framework for being able to do job evaluation that has very strict criteria about knowledge, skills and abilities and the ability to measure those things and be able to attribute points to them. And then actually to also be able to attribute market pricing to those points. So

[00:19:51] it was actually like a good closed end system, but it had, if I may use the term dogma, it had a dogma to it that you had to go through this process. You had to do it the way that it was

[00:20:00] prescribed or there became holes in the process. Yeah. And unfortunately, the integrity of those programs was compromised because people started to gain the systems, right? They began to understand that certain words or certain attributes may result in more points. And so

[00:20:17] the integrity of those systems, I think became undermined and people began to second guess them. And then all of a sudden they were not serving the purpose that they were designed to serve.

[00:20:29] But I think we do need to find a way of doing that work. And again, providing clarity, again, coming back to the hay system and point factor systems, there was a lot of mystery around that,

[00:20:39] a lot of confusion around it. There was a binder that sat under drawer and it was nobody got to see it except HR. And so we need to move away from that and provide, again, the visibility and transparency needed to appropriately manage, I think, employee expectations.

[00:20:55] And by the way, we're not just picking on hay. I mean, but I think you can apply that at same exact terminology or thought process you just described to pretty much every job evaluation methodology that was very static. Yeah. And organizations have to find the right solution

[00:21:09] that works for them, right? Given the complexity of their organization and the kind of roles that they have. And I don't know that there's a one size fits all. I don't think there is a one size fits

[00:21:17] all. And so every organization is built differently, designed differently, they have different culture and values and how they define roles in their organization. So they have to find something that works for them. The importance is it has to be administered consistently, right?

[00:21:32] And you need to have appropriate documentation, transparency and consistency. And if you don't have those things, you're going to be in for a rough ride. Oh my gosh, yes. Because you're going to get people saying, Hey, wait a minute, what about that job?

[00:21:45] Or what about that person over there? They're this and it's a mess. Yeah. Yeah. So Gary, let's talk a little bit about some words that were used a lot in 2023. We haven't heard about the much in 2024 yet quiet quitting. What's going on with quitting?

[00:22:00] And is it louder now or? Yeah. I mean, it's not in Relay to the point I made earlier about the difficulty, the number of job openings that have been posted is diminished. So employees are

[00:22:11] having a more difficult time to move out of their current role in fact they're dissatisfied. And so I think that that's going to continue into 2024 and it comes back to making sure that people

[00:22:23] are engaged and motivated. So we need to have the systems and processes in place to make sure that if people are underperforming for whatever reason, maybe they become disenchanted or

[00:22:34] maybe they no longer feel as though that their job is a good fit for them. We need to have the systems and processes in place to be able to identify that and address it quickly. Because

[00:22:43] there's nothing worse than having a demoralized employee or working amongst a team of highly motivated employees who's not being treated any different, who's not sort of being called out for that. And I think what it comes to performance management systems, everyone has

[00:22:57] challenges in that area. But I think one of the most important things that performance management systems need to do is appropriately address underperformers. We can always talk about dealing with high performers, but if you're not dealing with underperformers effectively,

[00:23:11] again you're I think creating a negative impact in the overall environment and potentially others in the workforce. And again it may not be, I think we made this point before, it's probably not their problem necessarily, it may not be their problem. They may not have

[00:23:25] the skills necessary to do what's needed or there's an environmental issue and career progression or career frameworks might actually help them by putting them in a better situation where they could be a star. That's right. Being able to support the employee who might be struggling,

[00:23:40] who might have opportunities and then find those opportunities inside might be a benefit to everybody. Yeah I agree David and I hope I'm not being naive but I think everyone has the ability to be successful in some role. Now sometimes it may take a little bit of time

[00:23:56] to find the right role, but I believe in people and people want to be energized and motivated and engaged. They want to feel as though they're doing meaningful work and sometimes they might not be sitting in the right seat and so it's our job as HR professionals again

[00:24:11] coming back to managing your internal labor market. Let's find the right fit within our organization and see if we can improve upon that. Yeah we saw something in them when we hired them right? Yeah. We brought them into the organization for a reason. Yeah. Is there really

[00:24:24] a reason to get rid of them or could we try and reskill them or find them a better fit? So I agree. Yeah and by the way you're not being naive. I think I feel the same exact way as you where

[00:24:33] I have hope that we might be able to find a role for somebody who might be struggling. Yeah. So by the way I just wanted to mention that if you have any questions just feel free to use

[00:24:42] the Q&A and we'll try and address them along the way but in the meantime let's go to question three because this is a cool one. Hey are you listening to this and thinking to yourself

[00:24:54] man I wish I could talk to David about this. Well you're in luck. We have a special offer for listeners of the HR Data Labs podcast, a free half hour call with me about any of the

[00:25:04] topics we cover on the podcast or whatever is on your mind. Go to salary.com forward slash hrdl consulting to schedule your free 30 minute call today. So if anybody remembers the tonight's show

[00:25:19] with Johnny Carson he used to put on a hat and he used to pretend he was Karnak and Karnak was a seer and he had these hermetically sealed envelopes of suggestions that he wrote down at some point

[00:25:32] in the past and it's talking about what's going to happen in the future. So if you put on your Karnak hat Gary, where do you see things happening beyond 24 into 25?

[00:25:44] Yeah so well of course this is then a big year in terms of the election and so it's going to be painful to sit through the next 10 months or so until we get through the election. Come on everybody

[00:25:55] loves political ads. Come on Gary. So we're going to have to get through that and sort of what comes out on the other side of that may change things in terms of some of the things we've already been talking about and certainly if you look at the Democratic

[00:26:13] party they're all about pro-labor and encouraging further labor growth and development. I'm not quite sure a change in administration is going to feel the same way about that so that may change just in terms of some of the legislation that we've seen floating

[00:26:27] around as it relates to worker protections. But the economy is probably still going to chug along and do what it does right? And so the labor market we've already seen signs of it

[00:26:41] cooling. I think we're probably going to see a cooling in 2024 once we get into 2025 maybe we'll get over the hump and maybe there will be more opportunities in the economy, more job openings

[00:26:56] and maybe a little bit more movement coming back to what we've seen. Probably not so much as we've seen in the last couple of years but maybe increased from its current state. So it's always difficult

[00:27:07] to look out that far ahead. I still think and maintain that organizations are going to have to do better at managing their internal labor markets regardless of what happens externally. And I think putting more emphasis on making sure our employees are engaged and motivated

[00:27:25] and successful in their roles is something that's not going to go away. I think one of the other things that we typically see in the kind of election year that we're in is we see things stabilize from a price perspective so we shouldn't expect, well who knows,

[00:27:42] but we shouldn't expect gas prices to go through the roof and then have a ripple effect on the economy like it did a couple of years ago. We're actually just starting to see,

[00:27:50] I just built up my tank a couple of days ago and we almost saw $2, high $2 gas. Well, you haven't seen that in years. So one of the bits of good news is that kind of

[00:27:59] stabilizes prices so that might mean, which I think is your point, inflation stabilizes for that period then we're not dealing with that wage pressure that we had the last couple of years.

[00:28:11] Yeah, it would surprise me if we see going into 2025 and beyond any kinds of wage growth that we experience in 2022 and 23, things I think probably will revert to the main. For years, if organizations were typically budgeting around 3%, there were some years when

[00:28:32] maybe it was less than 3% but you can go back many years and see that 3% was more or less the number. I would expect things to once we get out of 2024, it's going to be a little bit

[00:28:44] of a bumpy year. I think there is some uncertainty for a whole host of reasons but hopefully looking beyond that, things will settle down and we'll see things sort of revert to the norm in terms of the labor market and what we see in terms of wage growth.

[00:28:56] And just so everybody knows when we're talking about 2025 and beyond potentially getting back to the threes, the extraordinary length that we had to go through to convince people that salary increases or salary budgets at least were going to be higher than 3%.

[00:29:13] That kind of was taken out of our hands because inflationary pressures were up in the 8 high-eights even beyond and people were saying, why aren't they more? Well, for those of you don't know wage pressures are more about cost of labor than they are about cost of living.

[00:29:30] And so when you start to see inflation rise only to the extent at which that affects the cost of labor, do you get those increases and those very large increases in your merit budgets? So I guess, Gary, I'm just interpreting. I'd love your interpretation but getting back to

[00:29:47] the norm as you say, getting back to 3 is probably because that's where we've seen the cost of labor for many, many years, right? That's right. It's going to be a function of the labor market and certainly the cost of labor isn't disconnected from the cost of living.

[00:30:00] Of course. But obviously we've seen moderation to cost of living and cost of labor will follow suit. And I don't necessarily think it's such a bad thing, right? I mean, I think employees still have an opportunity to see growth potential in their

[00:30:16] income. Hopefully they see growth potential in terms of their career development if we're doing our work successfully. And I think it's just going to be a little bit easier to sort of manage compensation and sort of HR generally. I mean, we've, you know, we had to take

[00:30:32] sort of a leap of faith in 2022 and 23 into a certain extent. We were shooting from the hip at times, right? Because we just didn't know. But hopefully things will kind of settle down

[00:30:43] and we can kind of move into a more consistent pattern of how we have historically administered compensation. And we definitely saw when the surveys came out and companies were telling us what their salary budgets were looking like in the 2023-2024 timeframes,

[00:31:02] we saw a market move from the beginning of 2023 to the middle and end of 2023 in terms of how companies were actually going to push their budgets higher. And so, and somebody asked a question

[00:31:13] about, you know, going into the kind of the definition of cost of labor and how is it relative to merit increase budgets? Think about it this way, if you're having a hard time hiring and you're losing people and you're seeing that increasing rates are happening around you,

[00:31:31] whether it's for just starting rates, whether it's for experienced hires or whatnot, you then have to start thinking about how do you increase pay in order to be able to sustain where you are in terms of your labor, your current book of labor. But then also when

[00:31:45] you start hiring too. And so companies work, HR and finance work together to figure out what's the right level for not just their merit budgets but for your salary structures and how does

[00:31:56] that change how we recruit? Has that changed how we reward? Gary, how do you react to that question as well? Yeah, I mean, I think industry sector could also play a role in that. Of course,

[00:32:07] where we're seeing the wage growth and more job postings nowadays is in hospitality, leisure, healthcare for instance. There are other sectors, yeah, not so much. We are seeing significant layoffs. Obviously, the tech sector comes to mind. So I think you've got

[00:32:23] to continue to monitor the situation and look at your recruitment and retention goals and needs and adjust accordingly. But it may be that certain industry sectors are going to have to do

[00:32:36] more than others. So certainly not going to be even across the board is what I would expect. Right, absolutely. Gary, let's talk a little bit about some of the other areas in 2025,

[00:32:46] putting your hat back on. I'll use the words while I use the initials AI. How do we see that artificial intelligence moving beyond 2020, beyond 2024? Yeah. Listen, if I had a crystal ball and I could look into the future, I wouldn't be here. I'd be doing something else.

[00:33:06] You would have bought Amazon from the beginning. There you go. There you go. Yeah, listen, it's going to be a part of our lives, right? And I think that there's a place for it certainly in the work that we do in HR and potentially compensation.

[00:33:21] And like everybody else, I'm not exactly sure how all that's going to transpire. But I think we have to be prepared to embrace it. I have to tell you when chat GPT first came out, I was a little

[00:33:31] skeptical. Right? And so I went online and did probably like what a lot of other people did and sort of plugged in a couple of questions here and there to see what the response is. But

[00:33:41] those early experiments with chat GPT probably did. I wasn't overwhelmed by them, right? But it's going to continue to improve and get better. And I think how we leverage AI in the workplace

[00:33:54] remains to be seen, but I think we need to keep our minds and eyes open, right? We need to be prepared for trying to look for opportunities when we can hopefully improve productivity and

[00:34:05] efficiency and use it in the best possible way. So there's a reason why there's a job called a prompt engineer, which is a brand new job. And that prompt engineer is getting paid a lot

[00:34:15] of money. And it's because AI needs us to learn how to deal with it, because we have to get trained on how to be able to ask the right questions. So as we start building into what we do,

[00:34:28] not only will the technology be better, but will be better. It's kind of like asking that that a name that on the Apple iPhone and the name on Amazon, because if I say it,

[00:34:39] she'll answer and asking it a question that you know, it can't answer like what time of day it is or what's the weather. But when you start to try and ask much more complex compound questions, it struggles because we don't know what the capabilities are necessarily, because we're

[00:34:54] still in that mindset of ask it something simple. And it's the same thing with the current generative AI unless you're trained like those prompt engineers to be able to really focus

[00:35:06] on what the business problem is and solve it in that right way. We're not going to be there yet. And that's why that's a business problem right now. And it's going to become a consumer

[00:35:16] problem at some point, but not yet. So I'm with you. But I think one of the areas that we might want to talk about is the potential legislation around AI that might actually take it in a completely

[00:35:27] or at least delay it from actually being more widely used, right? Yeah, I mean, certainly, you know, the abuses that we've already seen and have been hearing about it, you know, that they need to be curtailed in some way. And so

[00:35:39] I think our politicians are sort of wrestling with how best to do that, how can we achieve it without inhibiting the potential opportunities for leveraging this technology. And I don't really know what direction that is going to go in. But there are certainly lots of different

[00:35:56] ways in which AI is open to abuse. And I think we have to get our arms around that. And certainly, there's a lot of people, a lot of people, a lot smarter than myself,

[00:36:06] who are trying to figure out how best to do that. And I think they're struggling with it, they're wrestling with it because partly they don't really understand and maybe the technology is just you know, we haven't really got our arms around the full capabilities and, you know,

[00:36:20] and maybe some of the downside of this technology and how it can be disruptive to individuals, right? And people and their lives. I mean, you don't have to be talking about movies where AI is the center of the movie

[00:36:33] and it's become evil. We actually just saw within, I think it was the New Hampshire primary where there were deep fake not only videos but deep fake robocalls that were made in a very nasty way. And it's all pointed at AI as artificial intelligence do well, you know,

[00:36:50] programmers have been doing this for a long time, audio engineers have been doing this for a long time. It's just much easier now. Yeah. And so I'm hoping that, you know, I'm seeing it as an opportunity, right? And I'm trying to sort of stay positive and look for

[00:37:05] you know, the I think the potential for how it can enhance, you know, my certainly my work life, maybe my personal life too, but that remains to be seen. But I'm hopeful. But you can ask Netflix what movie you should watch and that AI is pretty benign,

[00:37:21] unless it suggests a horror movie and you can't sleep. Yeah, that's not my genre. So. Yeah, not mine either. Yeah. So we actually did have a question that somebody asked, do you have a recommendation on the average

[00:37:32] percentile companies hiring should be paying in an effort to be competitive and acquire top talent in today's market? Wow, that's a good one. Yeah, it is a good one. And let me take a stab at this and you certainly chime in.

[00:37:46] But, you know, we know that most organizations are focusing on the median of the market as a market reference target. And most are trying to align their compensation philosophy and policies around paying to the median of the market. But of course,

[00:37:59] you know, there's always exceptions to the rule. And, you know, we already talked about some of the industries where the market continues to be in tight and there are shortages. And so, you know, I think there are times when you might have to rethink down a little bit.

[00:38:13] But, you know, and I think, you know, one of the big issues that we're seeing just in terms of how we pay new hires is just this, again, more pay transparency. And you also have to consider how you're paying new hires relative to your existing employers. And so,

[00:38:28] Internal equity. That's right. And so you can't deviate so much from, you know, what you're paying your current employees without potentially creating concerns or issues from a pay equity perspective or just, you know, an internal equity issue. So we have to look at this, I think, pretty

[00:38:44] broadly and comprehensively to make sure that we're not creating problems in other areas of the organization just to be able to sort of recruit and be prepared to be flexible. I'll say that I love your answer. Let me ask the answer a little bit differently.

[00:39:00] And let me say that different industries certainly pay differently and will target differently. And so if you're looking at survey data that's specifically of your industry, one of the things you have to ask, especially for your finance department is,

[00:39:13] are we laggards? Are we leaders? Where do we fit in this world? Right. Where does our performance lie? And does that meet what we should be doing as far as a compensation philosophy? Because if you're laggards and you could tell your shareholders,

[00:39:28] we're going to be leaders in pay, they're going to ask you, whoa, whoa, whoa, wait, what? So you definitely have to have that risk reward methodology. I like having maybe our total direct compensation be 75%ile. But maybe it's because your base pay is the 25th

[00:39:47] and you're making it up with short and long-term incentives that incentivize growth and performance. Absolutely. Sustainability is important, right? And we have to understand the implications in terms of sustainability. And so there may be other ways in which we have to sort of

[00:40:03] strengthen our value proposition through, maybe there's other parts of the compensation mix, whether or not it's benefits or PTO or more work from home flexibility, whatever it is. Sometimes money isn't always the answer, but sometimes it can be challenging. And so I think

[00:40:19] you've got to be able to step back and look at it holistically. I agree. Well, Gary, I don't see any more questions. Is there anything you want to kind of round out from what shocked you?

[00:40:28] What did you think might have happened last year, this year in the future? What are things that you surprised you that didn't happen? I guess one of the things that I often am surprised about, and this is certainly true when I talk to

[00:40:42] clients across businesses, is this whole performance and merit-based pay discussion or conversations. And particularly when you get into a very tight labor market and you're trying to sort of manage budgets. And we know that once you build a large increase into base

[00:41:02] salary, you're stuck with it. You've inherited that for the lifetime of that employee. So I was a little bit surprised that we didn't see more focus on incentive-based pay linked to performance.

[00:41:14] Because I think if you're struggling to sort of keep pace with what we saw, high base salary increases but provided some upside potential, hopefully a leveraged upside potential based on performance, then maybe you've closed that gap a little bit without committing yourself

[00:41:32] to those increases in future years. So a little bit surprised about that. I always think that's a challenge for organizations to get that right. But maybe we'll see more in the future. I agree with you on that. We actually just got some more questions in, Gary.

[00:41:46] So let's try and hit them before we close. So one person said, how do you back down from incentivizing from COVID without losing employees? And I think you kind of touched on it a little bit about building things into base versus keeping

[00:42:00] things separate so it doesn't become part of your fixed pay, right? Yeah. I think so. I'm not quite sure. I fully understood the question as it relates to COVID. Well, remember there were certain things that were provided to people. There were

[00:42:13] certain pay elements and certain... I don't know if it was an incentive or not. Maybe the person can clarify it. But to me, there were certain things that were given as part of... Oh, yeah. Okay. Got it. Yeah.

[00:42:24] Now takeaways are going to be tough to take them away from people. Yeah. We certainly did go probably a little bit further in trying to keep our employees happy. And so we might have done that through either spot bonuses or work at home flexibility or whatever

[00:42:40] else we did to sort of keep employees engaged and motivated. And yeah. So backing back down from that and beginning to take things away, always hard to do. Very difficult to sort

[00:42:49] of give something to an employee. But I think it really kind of boils down to your role compensation philosophy and being clear and articulating what your philosophy is, appropriately managing expectations and managing the narrative, right? So don't let employees or anyone else for that

[00:43:11] matter begin to create misperceptions about pay and what your intention is or what you're actually doing. You've got to be able to control that narrative and be clear about it, about what your intent, what your expectations and perhaps even what your aspirations may be

[00:43:25] because you may not be able to do everything that you'd like to do. But hopefully there's maybe a roadmap for being able to make improvements further down the road.

[00:43:34] I agree. And let me just put a finer point on it. Be clear about what a pay element is for. If you're giving an award, the cover for child care from COVID or whatever it was,

[00:43:47] be clear it's for that timeframe because if it's not clear and now you're going to take something away, how do you explain that? So I like where Gary is going though. I think we're good on that.

[00:43:58] Let's talk about the next one. This is actually really cool. We haven't touched on this and this is a neat one. Do you have any thoughts on companies returning from defined benefit versus 401k? Yeah. No world of pension. Remember that, those days.

[00:44:13] I still have a pension from one of my employees. Yeah. Yeah. Of course, unfunded pension liability was a real drag on a lot of organizations and so organizations moved away from that and moved to a defined contribution model.

[00:44:28] We are starting to see some organizations who are reintroducing defined benefit plans. I heard a little bit of noise about that. I don't think it's broadly used in the marketplace yet, but I think a lot of it comes down to providing security and demonstrating a commitment to your

[00:44:47] employees. I think every organization has to be able to do that. Of course, a lot may depend on in terms of your workforce. Is it a transitionary workforce? Is there a lot of turnover? How much responsibility do you want to take for someone who,

[00:45:02] well, if your average tenure is only let's say three or four years and people are moving on, does that make sense? Again, I understand the question. I certainly understand from an employee

[00:45:12] perspective how that might be attractive. But I think you've got to do a lot of work to determine whether or not that is feasible and something that really helps your business in

[00:45:23] the long run. Yeah. Let me also add demographics matter. I don't know if every age group will value a defined benefit plan the same way they would of 401k because the 401k usually has much

[00:45:35] more control by the individual. I think I'm right in saying that, Gary. You can direct your funds. You are the owners of those funds once they become vested. Whereas with a pension, it's just sitting behind a wall and you think it's going to be there. You're hoping it's

[00:45:54] going to be there when you're ready for it. It better be contractually. We have some more questions. I'm not sure we're going to be able to get to all of them. So what I suggest we do because I think we're running out of time, right, Megan?

[00:46:06] We are about three minutes over. All right. So let's try and take a couple more questions, Gary. We're going to have to keep them short. Okay. Given that more employees are able to be full-time teleworkers, what are you seeing

[00:46:15] in how companies are handling geographic differential is a great one. Yeah. Right. Is there a typical percent the companies are targeting between geographic tiers and number of geographic tiers? Yeah. And so we're certainly seeing amongst our clients

[00:46:28] more interest in introducing geographic cost of labor differentials. Coming back to what David said earlier about the pandemic, we just wanted to keep our workforce employed. Right? And so we did whatever we needed to do. But I think we're starting to see hybrid models

[00:46:42] nowadays. People are sort of stepping back from some of the things that were done as a result of the pandemic and we are starting to see more interested in leveraging geographic cost of labor differences. Those organizations that are doing it, and I think two-thirds of

[00:46:56] organizations either have or are planning to do it based on some of the studies I've seen from World at Work. But those organizations that are doing it are sort of creating pay market tiers. So again, if you have a distributed workforce across 50 states, you can easily

[00:47:11] sort of group a number of tiers, right, to reflect the cost of labor in those various pay markets. The key is, you know, don't make it administratively over burdens. Right. Keep it simple. And again, you have to figure out what works best for your business in terms

[00:47:25] of recruitment and retention, but no, a lot of employers are doing it. And when I've done it, I've tried to stay as little as possible. I've done four tiers and made those very wide swaths of percent up, percent down, so that it is, you know,

[00:47:39] to your point, I'd love your point, it is not an administrative burden. We can't cover up on all of these questions. So my suggestion is, if you guys go to salary.com

[00:47:48] and go to the consulting page, you can actually schedule a time with Gary or myself. And we give away free half hours to solve some of your problems or to talk about how we might be able

[00:47:59] to help you. So I would go to salary.com to our consulting page. And if you want more answers, then we can give you today. Please go there. Gary, thank you very much. You're

[00:48:17] always a pleasure to have on. David, thank you so much. Always enjoy spending time with you and enjoy being part of your podcast. Thanks for having me. Thank you for joining in. And thank

[00:48:25] you all for stinking around and listening. And for those of you who want to replay of this, we'll have it on the HR Data Labs podcast, which is also on the salary.com website shortly.

[00:48:34] Thank you so much. Take care and stay safe. That was the HR Data Labs podcast. If you liked the episode, please subscribe. And if you know anyone that might like to

[00:48:44] hear it, please send it their way. Thank you for joining us this week and stay tuned for our next episode. Stay safe.