Editor's Note: In today's Classic, Margaret O'Hanlon reminds us that when we don't communicate clearly and truthfully with employees about the how and why of their pay, they will make up their own version of the story. And it may not be pretty. So listen up!
When it comes to compensation, everything you do sends a message. Whether you distribute total compensation highlights brochures or limit pay communications to the annual review, every paycheck sends messages to employees that they hear loud and clear.
Employees are expert translators. And when leadership is not straightforward, they feel they are expert at reading the writing on the wall. They will not hesitate to make guesses - because it is better than feeling like something is happening to them that they don’t understand. And, when the information hasn’t been provided on the up and up, their guesses are likely to be negative and sap morale.
That’s why I advocate candid, direct communications with employees on base pay, covering how the salary structure was built, how pay ranges work and where management has discretion (and why). If leadership isn’t straight with employees about these topics, employees’ translations will be off, and you’ll be stuck with complaints like, “I’ve worked here long enough to be paid as much as he is.”
A recent Management Tip from the Harvard Business Press tells us “Don’t Assume They Won’t Understand.” It is addressing business strategy, but the same warning applies to compensation. So often, companies limit pay communications to current salary and annual increase percentage because they assume employees won’t understand the balancing act that is involved in designing compensation practices.
In my experience, most employees are ready to learn more about the company’s pay practices and are more than willing to support them . . . when they have a chance to talk them over with people who understand how things work and who will give them straight answers.
Employees are itching to know why things like midpoints work the way they do. Frankly, companies should be itching to have employees who can link their job performance with their pay and feel recognized for their work. Respect goes hand in hand with productivity, especially in these business conditions.
How much information is enough? Almost as important, how much is too much? Do pay communications imply that we have to have an open book?
Much depends on the relationship between your managers and Human Resources. Emails and brochures have their place in pay communications, but managers are your primary communication channel. How do they feel about the difficult issues related to compensation?
Assess their readiness as well as their skill level to determine how effective they can be as total compensation communicators. If you can’t rely on them today, that will tell you where you have to start. Get going on improving their leadership and communication skills, so you can build from there. (I’ll cover detailed suggestions for next steps in future posts.)
In a recent Cafe post, “Do the Right Thing, Be Fair,” we were reminded that “cost saving measures” like watering down separation pay can influence a company’s reputation – separated employees will talk.
Active employees have even more to say. Trust them to get it right.
Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.