Helping Managers Talk about Pay

Only 1 in 10 managers conducts pay-related conversations effectively. Here's what you can do about it

By The Staff of the Corporate Executive Board

The top priority for two-thirds of compensation executives in 2010 is ensuring that managers accurately and consistently communicate about pay, according to a November 2009 survey by the Compensation Roundtable, a program of The Corporate Executive Board. This priority comes as no surprise: companies want managers to explain pay more effectively because managers can best personalize pay for their employees, explaining why they are being paid a certain amount and what they can do to earn more. In fact, a pay-related communication from a manager has three times the impact on engagement, performance, and retention as that same communication coming from a central function such as HR.

Unfortunately, only roughly 10% of managers conduct these conversations effectively. Through ongoing conversations and industry analysis the Compensation Roundtable has identified the following three best-practices to help managers conduct better conversations related to compensation:

• Understand the Value of Your Role in Pay Communication.

A full 90% of managers surveyed report they don't see the importance of engaging in compensation activities like communicating pay. This is not to say that managers don't believe pay is important. Rather, on average, managers perceive pay-related activities to be the role of HR or the compensation function. However, managers should know that clear and transparent communication about pay will increase the productivity of their direct reports.

• Take Accountability For Effectively Communicating Pay.

In most organizations, employers expect managers to deliver pay communications, and to do so well. Managers must feel responsible for having pay conversations with their direct reports and communicating the necessary messages. Managers that feel accountable for these communications are more likely to be effective at them.

• Obtain the Skills and Confidence to Talk to Employees About Pay.

More than two-thirds of managers don't feel they are equipped to talk about pay. Managers can benefit from guidance and training to communicate the reasons behind pay decisions and respond to the tough questions employees may ask about their pay. Skills can be learned through "active learning" training where managers practice tackling real-life situations in a relatively safe environment.

Effective manager communication on pay is particularly important this year. Compensation Roundtable data show that many employees will receive lower pay increases than they have historically, while employee expectations about their pay are rising rapidly as economic news improves. The difference in expectations between employees and their employers over pay could negatively affect employee motivation, but managers can help mitigate this problem.

The Compensation Roundtable has found that an effective manager pay communication strategy includes building the business case to managers for pay communications, training managers to deliver pay messages effectively, and measuring the impact of these communications.

Provided by Corporate Executive Board —What the Best Companies Do™

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