In a Webinar last week for Compensation Connection, I gave out a “survival kit” for communicating this year’s merit budget. We finished the Webinar the way you normally do. The participants sent in questions about the tough situations they are facing. But Webinars aren’t exactly the best place to solve complex problems.
So I thought I would take another shot at two of their tough questions -- today and in my next column. Who knows how many of you may be facing the same sort of challenges?
Here’s one of the question that I got at the Webinar. “My company is a small, successful subsidiary of a large, struggling company. We were given the same 2.5% merit budget as the company is using. How can this make sense to my employees?”
Where to start? There are lots of emotions involved here and we’ll get them in a minute, but business issues are always the best place to start.
Like any mystery, follow the money.
What is your relationship to your parent company? Do employees understand why it is best for your business strategy to be a subsidiary of this company? Unless you are doing a very different business than your parent company, your organization could have been folded in to the larger one, after all.
Odds are that a shared merit budget is meant to send the message that, “We are all in this together.” What does this mean in the context of your business strategy? Why does it make sense to merge the financials in this way? Your employees need to know, in detail. And, of course, one of the details is to acknowledge how your subsidiary company’s successes contribute to the parent company's annual results.
Tricky business, but a great employee communication opportunity for building business insight. Have the CEO of the parent or your own CEO -- or both -- take on the role of educator. They will need to do this in person, face to face, because from the sounds of things employees don’t believe you really are in this together. In fact, they may resent the idea. To make a meeting of the minds possible, employee opinions and emotions need to be acknowledged in a candid and open way. Include information on your role (as subsidiary) in the goals that are projected for 2010, so it becomes clear how much your employees’ work will matter.
Will employees buy it?
The business context will help employees understand the reality of the situation. At the same time, it’s unrealistic to think that this information will immediately change your employees from skeptics to believers. You’ll have to face that their emotions run deep, and it may take months of listening and talking if employees are to get over feeling resentful.
In other words, you need a formal communications strategy, not a once and done compensation announcement. How much more insight do employees need if they are to understand and accept their role as part of the subsidiary? What kind of recognition will they value? From whom do they need to get the recognition so that they feel that their questions have been answered candidly and that some of their disappointment has been resolved? The answers to these questions will help you determine the steps in your communications strategy.
Want to not only survive but grow during these tough times? Your communications strategy has to acknowledge employees’ feelings, even if they are dark, and give employees a way to work through them.
Yeah, well, I’m not getting an increase.
Given the situation you find yourself in, subsidiary, think carefully about how to use your merit budget. It may only be 2.5%, but there are still a variety of messages that you can send with it.
If you follow the conventional approach of reserving the money for the highest performers, will you overlook some employees who have directly influenced your results? Why cut them out if you could give everyone 2%, for instance, and take the remainder for small but telling additions to high performer’s increases? Imagine how much more positive the messages will be, even though you will miss the chance of really singling out your stars this time.
Or if you have a strongly team-based culture, would it make sense to give a cross-the-board increase this year? If you consider this option, be clear with employees that you are not setting a precedent. Announce that this is a one-time action and explain why you are making an exception this year.
Finally, keep checking that management’s actions match their words. Over the coming months, do they continue to act and talk with employees in a way that demonstrates they genuinely believe, “We are all in this together?” Management will have to model this belief in their actions and decisions if they are going to make real inroads into the natural employee skepticism that will occur this year.
Coming up . . .
My next column will cover another tough question raised on the Webinar, "If we’re only giving increases to employees with the highest performance ratings, aren’t we cutting everyone else’s salary?" It's a challenge many of you will get from employees.
And if you have any other questions you'd like us to take on, why not send them along?
This is a very well thought out post that reminds us that a little bit may go a long way if used wisely. And where did you get that picture of me?? But on the flip side, there has been studies showing that a tiny difference in increases between top and average performers can also have the opposite effect when it comes to pay for performance, i.e., top performers don't feel appropriately recognized if they only get a fraction of a percent more than the 'masses'. Personally, I think you're right that it mostly comes down to effective communication rather than the actual money.
Posted by: working girl | 10/07/2009 at 03:12 AM