Monday, August 22, 2011

Pay Communication: The Less You Know...

Most blue chips run employee surveys on an annual or biannual basis. Those are very effective and, if managed properly, can really help the company redress the major motivation issues and avert a low morale disaster. Yet, I don't need a crystal ball or any of those fancy questionnaires to predict the three things that on a company-wide level will always score lowest:
low salaries, lack of training and insufficient communication.
Why is human nature organized in such a way that we start complaining the moment we come across something that's not up to our liking even without looking into the root of the matter? Complaining for the sake of complaining can be a ruse to get some grease if you are a wheel but surely there must be boundaries. It does not matter how you slice and dice the employee engagement survey results (seniority, gender, organizational unit, etc.), the rankings for salary satisfaction are always among the lowest. Yet, the staff normally have limited understanding of the entire mix of the remuneration practices, and here is the proof.
A few years ago, World at Work conducted a Rewards Communication and Pay Secrecy research in order to find out to which extent is compensation information is being communicated within the companies and how effective it is. The results were not encouraging: compensation professionals believe that employee understanding of organizational reward strategies and philosophy is limited. Depending on the focus of the communication,
  • 42 percent to 70 percent of respondents reported that only a “few” or “some” of their employees (40 percent or less) understood basic information related to their reward strategies and philosophy.
  • Specifically, 70 percent reported that “few” to “some” employees (40 percent or less) understood how the mix of base pay, variable pay and benefits was established.
  • Only 13 percent of respondents indicated that “most” to “all” employees (60 percent or more) did understand the reward mix.
So here we are, trapped in the conversation of "don't see, don't hear, don't tell". Each party blames the other and everyone is unhappy. 50% of companies do not disclose the pay scales to their employees, the other 50% provide full clarity. Neither approach provides the desired results. Some companies have a separate budget for pay communications, others do not. Nobody reports on their efficiency, and in any case the ROI on such intangible things are difficult to measure.
What should we do? To me, it looks like we can agree on a few fundamentals and stick to them:
  • Communicate is better than not communicate.
  • Different employee groups need different amounts of information.
  • Employees' dissatisfaction about their pay may not come from the amount of pay per se: look deeper.
  • Regular "temperature checks" are a must
  • Do not leave communications to amateurs: more harm can be done than good.
As a parting sentiment, I would like to add that senior involvement and back-up is critical. Making sure that your leaders fully understand the pay philosophy, support it and are able to explain it to the rest of the company and externally is a cornerstone of successful implementation of your Retain & Reward strategy.

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