Total Rewards Statements and Delivering Bad News

I have long been a believer in the value of Total Rewards Statements.  But what kind of message are we delivering when we provide Total Rewards Statements to our employees that show a decline in the value of their total package over time?  It depends on if/how we address that issue.  Some companies are planning to cancel Total Rewards Statements this year, but I think there is a better solution.  If a communication vacuum exists, employees usually fill it with the worst possible scenario.  This is exactly what most of them will do if they’re used to seeing a Total Rewards Statement and all of sudden don’t receive one.

A different approach is to communicate to employees that their Total Rewards package is tied to company performance.  Only people who have their head buried in the sand aren’t aware of the fact that the economy tanked.  And although Bernanke believes the recession is over, that hasn’t stopped the unemployment rate from continuing to rise.  Most of your employees realize that everyone is experiencing difficult times, and that this can mean an impact to their Total Rewards package. 

We’ve been presented with a rare opportunity to really show how pay-for-performance works on an organizational level.  We can communicate with our employees about how our company is navigating the downturn.  It may help them to understand why their pay package is lower if they see the cuts we’ve made in other areas too.  We could also use the opportunity to explain any areas where we haven’t made cuts.  If a certain division is crucial to ongoing growth and success, we can talk about why we continued to spend money there and how it will benefit the company and the employees in the future.
 
One thing to keep in mind though, if you’re going to send the message to your employees that their remuneration is effected by company performance, you will have to be prepared to increase their package if the company’s performance improves.  This doesn’t mean you have to share 100% of every dollar in improved profits, but it does mean the merit budget, incentive program payouts, etc. will have to improve over where they were during the heart of the recession.

Communicating decreased pay/benefits packages is never easy, but it can show your employees both that you are still investing in them (even if it’s at a decreased level), and that we all benefit from improved company performance so we should all work to make our companies better.

Darcy Dees works as the Compensation Manager for Rock Bottom Restaurants, Inc., headquartered in Louisville, CO.  She has been working in Compensation for over 5 years now and recently attained her Certified Compensation Professional (CCP) designation.  She spends what little free time she has hiking and reading.

Comments

[Ann Bares]

Darcy,

An outstanding post ... and point, and you make it very thoroughly and convincingly. Great work!

[Jill]

Great article Darcy. At Dollar-Compensation-Statements.com, we have conversations all the time with clients who are considering skipping a year of statements. Total reward statements can be tailored to deliver whatever message employers need to send about company performance, compensation and benefits, yet most employers go with a very generic message. Research shows that employees prefer direct and honest communication from their employers and dliminating statements just gives employees the impression that their employer is trying to pull one over on them.

[Paul Weatherhead]

Thanks for the great post Darcy!

Perhaps in this era of downsizing labor costs, it's the BEST time to communicate total comp costs.

Here's a link to our annual benefits statement that does a pretty good job of showing how much the employee and employer are paying for pay and benefits: http://www.worldatwork.org/waw/adimLink?id=33640

Since the savings plan is shown quarterly from a different source, the savings plan total account values aren't in this particular communication. But the value of employee and employer contributions is shown.

[Darcy Dees]

Paul - Showing that the company is still investing in it's workforce is very important. Thanks for commenting!

[David Janus]

Even in difficult times, most employers have a story to tell when it comes to total rewards. The total rewards message, and explaining the value of each employee's complete compensation package, is still relevant.

Your point about a "communication vacuum" is also important. Cutting back on communications when conditions grow more challenging is not necessarily the best approach.

[working girl]

Great point that once corporate performance improves the largesse should also be shasred with people who tightened their belts during the lean times.