"Say on Pay" for Employee Compensation?

Today the Wall Street Journal website included an article called "When One Pay Raise a Year Isn't Enough." The topic is intriguing and the graphics were great. The thing is, the article addressed a 2013 survey by Aon. Not so cutting edge for a publication that brings us "breaking news and current headlines."

So why did they publish it? Aon reportedly indicated than only 5% of the 1,147 companies who they surveyed follow the practice of giving increases more than once a year. And by this time, the data is more than a year old.

It looks to me like one more example of the growing media trend to give employee compensation a public forum. As I've observed in my last couple of blogs, I think a trend is taking shape. The media would like to give employee pay the same attention it gives executive compensation, keeping it in the public eye and delving deeper and deeper into our practices.They have a hunch that our practices need to be given a public discussion. We may not appreciate the scrutiny we will face.

Whether you think they are right or wrong, some of our colleagues are reading the tea leaves. I have recently been invited to speak about pay transparency to a group of cutting edge companies. Why now? Odds are, they've been reading the media speak and, hopefully, talking with their managers and employees. The truth is, the longer we have teeny weeny merit budgets, the weaker the case for pay for performance and the harder it is to feel rewarded by competitive pay. And WorldatWork recently told us that 2015 is going to be more of the same, with current planning for 3.1% total salary budget increase in the U.S.

In my mind, part of the interest in pay transparency is actually, "How do we explain what's happening in our pay program."  Better yet, "How do we make a case for our practices, and give people a business context?"

Executives and managers are having an ever harder time answering employees' direct questions. And websites are building better and better public pay databases. Even without the media pressure, we would be in for some real communication challenges. Throw in the media, and you've got a bigger issue on your hands.

Of course, the optimistic approach is always the best, and this is looking like a good, much needed shift. After all, here's another business case for investing in compensation communications, so get ready to make the case and include the funds in your next budget. Everything we do in compensation is communications. I'm thinking it's time to take that advice seriously, or find yourself dealing with what someone outside your company thinks you should say.

Margaret O'Hanlon, CCP is founder and Principal of re:Think Consulting. She'll join Ann Bares and Dan Walter of the Compensation Cafe to speak the unspoken -- Everything You Do (in Compensation) Is Communication --  in an ebook to be released before the end of July! Margaret brings deep expertise in compensation, career development and communications to the dialog at the Café. Before  founding re:Think Consulting, she was a Principal with Towers Watson. Margaret earned her M.S. and Ed.S. in Instructional Technology at  Indiana University, Bloomington. Creative writing is one of her outside  passions, along with Masters Swimming.

Comments

[Dan Walter]

Margaret,

I may be cynic at times, but I think some of what might be driving this media coverage is the media itself. The average journalist is paid somewhere between $37K and $49K (what a wild range, based only on who is reporting the data).

As long as journalists are paid poorly and the bosses of their companies are paid well, this will be a common topic. So I guess what I am saying is that this will be a topic for a long time!

http://www.payscale.com/research/US/Job=Journalist/Salary

[Margaret O'Hanlon]

Oh, absolutely. They have a personal stake in it, too. And, from observation, most reporters start from a context that is more union oriented than public company oriented, so it also makes philosophical sense to them that employee pay is becoming a hot topic.

[Jacque Vilet]

I shudder every time the media gets involved in any topic. They will take the most egregious issue at Company A and blow it up so that it makes people believe that it a common example of why pay is so secretive. They sensationalize everything. And the biggest problem I see is that we in Compensation don't really know how to answer questions.

[Trevor Norcross]

Hi Margaret,
This is the problems when journalists write stories about topics they don’t really understand. Having more frequent merit processes does not address the budget issue. At least with the CFOs I work with if I suggested semi-annual merit increases they would want to set the budget or rules to mitigate the compounding effect. This article also does not address this issue or what percentage of employees get an increase during each event. If they have quarterly reviews but only 20-30% of employees are impacted during any cycle the impact may be mitigated.

Superficial reporting can create a bigger misperception of reality.

I have one question with her last example where Epsilon lowered starting salaries so that they could then make it look like their pay was quickly escalating. With this artificial manipulation were they able to hire the best recruits or did they join other companies that were going to pay them appropriately from the start?

Companies need to tread lightly when thinking about “pay transparency” and make sure they are well informed before following a trend.

[E. James (Jim) Brennan]

Journalists are paid to write exciting stories and will create issues when needed. You can count on them to dig for "shocking" content which will be invented (via the usual hysterical subjunctive "may" and "might" clauses) if not discovered.

Pay gets a lot more attention in tough times, as discussed earlier (http://www.compensationcafe.com/2011/09/compensation-becomes-critical-when-budgets-are-tight.html). Get ready for the inevitable oversimplifications and frequently unjustified attacks on us poor minions!

[John A. Bushfield]

Executives shudder at the notion of pay transparency because most were brought up in an era where an employees pay was a secret, not to be shared by anybody. Many companies adopted policy sections which outlined draconian consequences if one employee was caught telling another how much they were paid. And, even if they were to accept the concept, getting there was so fraught with risks and the culture change that would need to occur so complicated, it was rejected because the effort to make it happen trumped any perceived benefit that might be realized.

The fact that employee pay is getting increased media attention is, I believe, directly related to the general condemnation of executive pay practices. The gap between worker income and executive income is increasing, and with minimum wage issues becoming a political football, the subject is just too juicy for media to ignore.

Is pay transparency becoming a trend? I don't think so. Some organizations may have dipped their little pinky in the water, but no company of any consequence is getting wet, as far as I know. Right now its a high visibility issue du jour, but the menu is bound to change in the not too distant future, and this too shall pass.

I've been advocating for pay transparency for quite a while, on this blog as well as others. I believe it's inevitable, not because its a smart business move (it is) or will have a positive impact on organizational cultures (it will), but because the new generation of employees will demand it, and the future organizational model's won't function well without it. Many employers will get dragged kicking and screaming into pay transparency, convinced that the proverbial sky will fall. When it doesn't (it won't), and companies realize the competitive advantage they gain by adopting it, there will be a mad scramble to implement transparent pay practices, the result of which benefits all.

[Margaret O'Hanlon]

Thanks, John. Couldn't have said it better myself!