Category Archives: Compensation

Money Talks

Communicating About Compensation

You’ve just completed a compensation review, made pension plan changes, or are about to award annual bonuses. Now you need to communicate the information to affected employees or the whole organization. This can be a stressful moment.

Communicating about compensation can be a vexing experience for both employers and employees. Employees don’t always trust that they are getting the straight scoop when it comes to how their pay stacks up against other employees, both in your organization and in the marketplace. And often they seem un-interested in the total value of their benefit and compensation programs. They simply want to be paid well.

On the employer side, managers often lack skill and/or credibility when explaining rewards to their direct reports. Complicating matters, confidentiality can become an issue when leadership struggles with identifying a comfortable level of transparency.

So, how can you effectively discuss pay with employees? 

Try Your Hand at Mindreading

There is a cognitive disconnect when it comes to pay. HR thinks about market comparators and midpoints, but employees think about their gross and net pay.

All successful employee communications are built from the perspective of the employee rather than the employer. When you put yourself in the shoes of your audience, you can address what’s on their minds and initiate a connection. Communicating effectively has more to do with building a relationship than it has to do with words and pictures. A message must resonate with your employees.

Instead of starting with the method or format of a communication, think first about your audience—what’s on their minds? Then determine the best way to deliver that message.

Over half of companies surveyed by WorldatWork in 2016 believe their employees do not understand the company’s compensation philosophy. A sound communication strategy starts with education on the basics such as philosophy and an overview of how programs are administered. Sharing knowledge about what guides these decisions helps lay the groundwork for establishing trust.

Empower

Whatever is driving your financial communication dictates the content of your message (e.g., special market pay adjustments, a pension plan freeze, a global compensation review, annual bonus awards, change in FSLA status, etc.). Regardless of the content, consider if and how your employees are empowered by the information you are sharing. Relate the message to all areas where the employee has some amount of control.

For example, a younger crowd may feel that a five-year vesting period is a long time away and retirement is a lifetime away. Focus on the near future first, and then distant goals. When communicating about performance and pay adjustments, direct employees to resources that explain things they can do to increase their pay. Also, empower the audience by creating space for questions and feedback. Don’t fear a negative response when it can be turned into an opportunity to increase understanding.

Nearly eight in 10 employees (77%) are engaged when workers strongly agree there is open communication, opportunities to provide input, a clear connection between current changes and the company’s future, and management support for changes that affect their workgroup.

Gallup Business Journal, “Managing in Tough Financial Times: Does Engagement Help?”Chris Groscurth and Stephen Shields (2016)

Open the Door

While it’s important that pay policies and benefit programs are documented and accessible, the communication can’t stop there. Two-way, face-to-face communication is crucial when it comes to financial matters.

Gallup’s 2016 study, The State of the American Manager, Analytics and Advice for Leaders, finds a strong correlation between employee engagement and regular meetings with managers. In fact, employees whose managers hold regular meetings with them are almost three times more likely to be engaged than employees whose managers don’t. Regular communication removes ambiguity and addresses concerns before they become problems.

Complete the Story

With most communication, the audience first tunes into the story and then decides whether or not the information is credible. Conversely, if information is watered-down by being vague or omitting too many details, credibility is shot.

But there must be balance—it’s easy to overwhelm when discussing pension plans, 401(k)s, and salary structures. The key is figuring out the appropriate hierarchy of the information and then organizing it in a way that creates a coherent and relatable message. A large amount of data can be comprehended if it is well organized.

If you leave out too many details your audience will look for alternative information sources. Coworkers, friends in the industry, and websites sit ready, willing, and able to provide your employees often inaccurate or ill-informed information. This information often comes with personal perspectives on fair salaries and other financial matters. You want to be a trusted source for information regarding your employees’ pay.

For example, if base salary levels or this year’s merit pool are below historical levels or competitor rates, explain why. Maybe your company rewards more through bonus than base. Or, training and development opportunities are far better than your competitor. Sometimes it has just been a bad year and budgets are tight. If employees perceive they are sacrificing pay, they’ll need a good reason why. Whatever the reason, don’t gloss over it—just say it.

Temper the Emotion

Financial messaging is wrought with emotion.

The strategy behind your company’s approach to pay is objectively based on market position, growth plans, the current talent market, and the last quarter’s returns. Yet, when you talk about compensation, the conversation can become very personal to the employee. Impersonal market forces can feel like an indictment of a person’s worth and value.

With any financial communication, it’s important that you demonstrate the company’s commitment—even passion—around the program and its impact on employees. However, be careful to detach this emotion from the facts. Don’t communicate “bad news” in a way that is self-congratulatory.

Constantly educate your workforce about the science behind pay and the work that went into creating a pay program or financial benefit. Remember that the program itself is not the company. It is just one component of the company’s business strategy. At the end of the day, your employees should be able to explain why they receive the pay or financial benefits they have and feel good about them.

Avoid the Fluff

Don’t waste your audience’s time—and risk losing their attention or trust—by filling your communication with rote content. Your audience will quickly tune out if it’s just more of the same thing they’ve already heard too often. While repetition has its place, too much can lead to boredom.

Include only what’s important and what will hit home with your employees. Find a good editor who understands the content. Creating succinct, effective material takes longer than creating lengthy pieces that often go unread. Make sure to allow enough time to create the right message.

Consider the ROI

There is no shortage of data linking solid communication practices to increased employee engagement, retention, productivity, and financial performance. Even in a downturn—especially in a downturn—spending a small fraction of your salary or benefit expense to communicate the value of compensation to employees can help you realize substantial return on your talent investment.

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