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The Hay Group Guide to Executive Compensation.

The Hay Group is a venerable and much-respected consultant firm, advising business clients coast-to-coast on compensation systems and practices. It earned its reputation in the industrial sector with the design of job evaluation instruments that enable companies to rank order occupations for purposes of determining equitable pay. And for some time now, Hay consultants have extended their approaches and theories to service and not-for-profit entities. They also advise on benefits and other indirect compensation as well as scrutinize specialty compensation plans, such as those for executives and physicians.

Because of the firm's reputation for solid expertise, one approaches this book with respectful anticipation. Authored by Hay's top consultants, it is subtitled "How to Meet the Complicated and Sensitive Challenges of Rewarding Key Executives in the Health Care Field." One expects prescriptions for plan design, wise and legal ways to wend one's way through tricky IRS mazes, approaches to incentive plans, or other contemporary tactics for creating rewards in a highly competitive environment. What one gets, unfortunately, is both way too much and way too little. Depending on one's needs, and with selective reading, however, one may find some useful information here.

What is "too much" is the vast detail covering the waterfront of compensation planning and programs; virtually every option and definition is given some attention. As a comprehensive textbook for job analysts and students of compensation, this is a useful resource. For the busy CEO, chairman of the board, or other top executive, it is cumbersome and requires preseverance to wade through the verbiage to get to the "how to's" the book's title promises.

The book is too general and platitudinous to serve as a blueprint for specific plan development. For example, when setting performance measures for an incentive pay program, the reader is advised, "Every attempt should be made to make these measures quantifiable and unambiguous and to place them under the control of the plan participants. At the same time, the measures must be consistent with the financial, market, service, and values objectives of the organization." Huh? Perhaps the words are wise, but one has not the foggiest notion of where and how to begin setting performance measures.

Moreover, while the book is directed toward health care executive compensation, and the examples in case studies and graphs are all from health care, the content is generally applicable across industries and touches rather superficially on the issues that distinguish the health care employers from other.

For example, the chapter on "Compensation of Physicians" primarily confirms the idiosyncratic nature of doctors' pay programs and acknowledges that "exceptions" to defined pay systems are common. Unrealistically, the author urges that "these exceptional management decisions should not set precedents for further administrative capriciousness in the compensation plan." The author also states that, since "internal equity is often as much perceptual as it is statistical," an organization should not disclose information about individuals' pay: "Many organizations have erred on the side of openness by disclosing too much information about individuals' income levels. Although the intention may be noble, overdisclosure usually results in dissatisfaction for all parties." While no one would dispute the responsibility of administration not to disclose individual salaries, it is unrealistic to believe that doctors will not talk among themselves. Rather than urging secrecy as the best means for creating perceptions of fairness, assuring that income disctinctions are defensible would seem wiser advice.

Further, some of the practical, but hard-to-deal-with issues related to physicians' pay are not acknowledged. For example, the author encourages an organization to link incentive systems to activities that serve the organizational mission, being careful not to violate inurement regulations. Good advice, yet nowhere is the issue of quality of care probed as part of this discussion. What about the doctors who order the most tests? Are they punished or rewarded? In an HMO, ordering many tests costs the plan a fortune; in a fee-for-service setting, it makes the practice a fortune. Where does quality come into play relative to the motivating incentive? The fact that increased revenues and quality of care are both objectives of an organization makes this a tough subject, not to be glossed over.

So where does one find assistance and guidance in this book?

The last chapter, "The Hay Perspective Human Resource and Compensation Issues in the Health Care Field," written by James B. Williams and Robert C. Ochsner, is excellent. In no-nonsense fashion, it delineates the issues facing the industry and poses the concrete questions an organization must ask itself in designing compensation plans to address those issues. For instance, it identifies a dozen or so firm steps for installing a gainsharing program. Future compensation trends are also suggested.

The chapter on "The Employment Contract" by Bernard E. Schaeffer and its supporting appendices also offer solid strategies. The advantages and disadvantages of contracts are spelled out; specific provisions of contracts are crisply identified.

Robert M. James' chapter on benefits and perquisites is thorough in citing the impact of current regulations on benefits and offers a precise and helpful example of a "typical benefits package." It provides a good starting point for an organization to think about its benefit plans and how they are administered. However, it is so detailed about all kinds of benefits--including those for hourly workers--that the book's theme, executive compensation, is a bit buried.

As a reference book, The Hay Group Guide to Executive Compensation would have value for students learning about the components of compensation as part of a human resources curriculum. It also would be useful to compensation and benefits specialists and administrators of pay systems. They would know how to skim the book for what they need.

For physicians in a group practice, however, scratching their heads about designing a fair creative pay program to attract new doctors while keeping old ones happy, or for a board of trustees of a big hospital trying to determine whether administration is proposing sound pay programs, this book is too much and too little. Might as well pick up the phone and invite a Hay consultant in to talk to you. For the price of the book, you could get just the right amount of advice.--Laura Avakian, Vice President, Human Resources, Beth Israel Hospital, Boston, Mass.
COPYRIGHT 1991 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Avakian, Laura
Publication:Physician Executive
Article Type:Book Review
Date:Sep 1, 1991
Words:1038
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