Take the Drama Out of Compensation — Strategies for Honest Communication with Employees About Pay

Negotiation strategies indicate that when both sides work together to share information, both parties come out better. When you hide information or believe the other party is hiding something, both sides come out with worse deals than if they had been honest. Yet, it’s in our nature to think we’re leaving something on the table.

Then again, just bothering to ask for a raise can get you nowhere (or a knee in the groin). “The Secret Life of an HR Lady”  shows just how painful that compensation conversation can be.

Compensation drama makes things more tumultuous in a company culture because people think they’re missing out. Or that decisions aren’t being made fairly. A lot of worry and gossip stems from people trying to fill in the blanks themselves. There will always be people who make compensation discussions dramatic, but you can reduce anxiety by being upfront.
Here’s how to communicate honestly with employees about pay:
·      Be upfront when there isn’t money.Employees get more frustrated when you hide the reality of your business than if you had let them know things were tight. It’s tough to hear that the business is going well but that people will have a fourth year of no raises. It’s a mixed message. Is the extra money going to pay off debt? To invest in a different rewards system? Employees can be on your side if you’re not hiding information.
·      Measure performance so you have data to support compensation decisions. If your company is truly implementing pay-for-performance, you are no longer distributing rewards evenly (aka the peanut butter approach). When someone doesn’t get a bonus or raise, you’ll have the information to support the decision. You’ll also need a plan for developmental steps so that performance can be improved. And if you want to reward a top performer, you’ll have the documented justification to request the spend.
·      Deliver on your promises.When you have contracts or agreements that call for bonuses, commissions or raises, you’re obligated to deliver. You can add language around performance deliverables or goals, but if you renege on the agreement, employees will find out. They’ll wonder what else you’ll renege on. There might be good reasons for having to back out, but be prepared to have a conversation about why you can’t deliver and about a plan to revisit the obligations in the future.
Employees will gossip; that’s why they call it water-cooler talk. You can still control messages but also share information. Your behavior influences how employees perceive your honesty. Don’t let compensation drama impact your company’s productivity and culture. Strive for transparency, document your decisions, and deliver on your promises.