At a recent business meeting of local HR professionals the topic was compensation. And the recommended approach for business leaders was: “put your mouth where your money is.” What a great idea!
Our speaker from The Hay Group has been involved with organizational surveys to evaluate what employees find makes a compensation program effective. One of the top characteristics involved with successful compensation programs, our speaker noted, is communication about compensation. My first thought was, “Naw, it’s just about the money and whether it’s fairly distributed.” On second thought, I realized that he was right. It does also matter to most of us what our employer communicates about our compensation. And this is especially true in difficult economic periods, when raises are both scarce and essential because both employers and employees are struggling financially. Here are some (fictional, but still apt) examples:
- Raise percentage — When my employer tells me that I’m receiving a 3% raise this year and I know that the increased cost of living in my geographic area is more than 4%, I’m pretty disappointed and discouraged. But if my employer also tells me that the average raise in the company this year is 2% and I’m receiving 3% because of my outstanding and ongoing leadership on a particular project, then suddenly that 3% feels alot more affirming and exciting. I still have to deal with the overall dollars and what this means for my wallet when I buy a loaf of bread or a gallon of gas. But at least I’m better able to put my manager’s decision in perspective.
- Overall profitability — As an employee, I may also have a better perspective on my compensation if my manager explains to me how my “package” fits within the overall profitability of the company. For example, let’s say that my supervisor tells me that my raise for next year will be 2%. That sounds pretty meager, especially in the face of inflation. My supervisor explains that our profits have been pretty stagnant because it’s just been such a tough year economically. In fact, so stagnant that the management has been planning to limit raises to no more than 1%. But then, while they’re planning and budgeting, they have realized that my team has worked hard to reduce expenses by reorganizing our advertising, which has saved the company money. As a result, the supervisor is pleased to tell me that all the members of my team, including me, will receive the 2% raise in thanks for our cost-saving efforts. Again, I still have to deal with the actual dollar amount from paycheck to paycheck. But this communication has helped me to recognize the economic struggles of the company and to know that our managers do appreciate the initiatives I take. This helps to motivate me to continue with those cost-saving efforts.
- Employee investment — My boss tells me that he would like to give me a 4% raise for next year, but costs are just skyrocketing and he can only afford to make it 3%. You can guess how that feels! Costs are skyrocketing for me, too: the cost of electricity/gas to cool and heat my home is up by 10%; the cost of gasoline to drive to work is up 15%; the cost of groceries to feed my family is also increasing dramatically. So I’m not feeling particularly generous about that 3% raise! But then my boss tells me that the cost of our company’s health insurance plan is increasing by 10% this year. He tells me in exact dollar amounts what the company pays for my individual coverage alone. And then he tells me that the company will cover this increase in order to keep my portion of the premium price at a reasonable amount. This gives me a much fuller picture of how this company is investing in me, not just what they’re paying me.
Some employers are realizing on their own that they need to better communicate the bigger pictures of their compensation plans: the average pay raise percentage; the pay raise in relation to profitability; the overall investment in the individual employee; and so forth. Good for them! And many of these same employers are using these compensation conversations to help set measurable goals for next year’s individual and company success.
But not every employer has made steps toward that business practice transparency. Maybe some of them need a little nudge! If you’re disappointed or frustrated about your compensation package, why not ask for your supervisor or manager to interpret some of that bigger picture for you!
