We love data. In fact, compensation professionals seek out data like artists desire southern exposure in New York or kids crave waterslides in the summer. Data is our friend. It helps guide us and it provides credibility for our decisions. But, we must always beware of prepackaged data. This type of data is our “frenemy”. It gives us hope or makes us feel confident, then pokes us in the eye. Take for instance the recent announcement that 43% of employees would take a pay cut in return for a better company 401(k) match. The subheadings for these articles cited a report published by Fidelity. Fidelity is a well-respected source of 401(k) data. What could be wrong?
Well, the report was based on more than 1,000 employees who were still working and were actively contributing to their retirement savings. While this does qualify as “more than 1,000 employees” it’s not representative of 1,000 employees at any one company I have ever heard of. That’s like saying, “We took a survey of 1,000 people and 100% agreed that ice cream was one of the best things ever on a hot day.” While not telling people that you took the survey at the exit door of an ice cream store on a hot, humid August day.
The reports on 401(k) (here, here and here) went on to discuss that the average company match was about $3,540. Average of what companies? Average of which employees’ contributions? The reports do not specify. Most also mention this amount is $1,000 more than 10 years ago without mentioning of “why”. Could it be that people are paid more than a decade ago? Maybe the companies in the survey offer better 401(k)s now, but have cut short-term incentives, long-term incentives or other benefits. We simply cannot tell from the information provided. Only after reading multiple articles do we learn that Fidelity reports that the average employer contribution is currently 4.3% per year vs. 4.0% in 2006. So, no big change there.
But, it’s not just those of us working in compensation that gets caught in this trap. Sometimes it's the people we pay. A friend who was laid off a couple of months ago has had a difficult time finding work in her chosen field. She sent me a note the other day with a link to an article on AOL that “supported” the incredible lack of full time jobs. Those of you who jumped ahead and opened the article will see that it discusses the fact that only 1.3 billion adults worldwide have full time jobs. Specifically, one in four adults globally had full-time employment last year.
My friend was focused on the fact that 75% of people did not have a full-time job. And, she was part of the growing 75%. No real thought went into how many people in the world are too old or too young to work. What about the demographics of the other continents? And, then there are the rural poverty-stricken parts of India or China that assuredly play into this global statistic. She gave no consideration into how many of those people lived in places where full time jobs have nothing to do with a “chosen field”. No thought went into that fact that she lives in New York City a place with less than 8% (not 75%) unemployment.
Now you might say that my friend is not the smartest cookie, but would you also say the same about compensation professionals who believed the reports on 401(k) match? Or perhaps, in a world and workplace swimming with data, statistics and ready-made sound bites, do we all get caught in the trap of easy-to-access information? Just remember: If you see percentages, ratios or hard numbers in an article, beware. You might be seeing a journalistic or marketing artist’s surreal masterpiece rather than the facts.
Dan Walter is the President and CEO of Performensation and is committed to aligning pay with corporate strategy and culture. Download the “Equity Compensation Design and Use Matrix.” Dan has co-authored several books including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, “GEOnomics 2011” and “Equity Alternatives.” Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.