How to prepare managers to talk about pay

Press Release from Davis & Company

Communicating compensation to employees can feel

Of all the topics organizations need to talk about, you’d think they’d be most effective about communicating compensation. After all, although you hope that employees love their jobs, they work to earn money — to pay their mortgage, put gas in the car and buy their children shoes. So employees care deeply about how they’re paid.

But here comes the tricky part. Compensation is, appropriately, a delicate subject. For many good reasons, Person A may be paid differently than Person B, even though they’re doing the same job. So although you can broadly communicate your philosophy and framework for how you pay people, what you pay employees needs to occur in a private conversation (preferably between the employee and his/her manager).

Because of the need for confidentiality, companies often under-communicate about compensation. The result is that employees experience compensation as a “black box,” a device whose workings are not understood or accessible to its user.

The black box becomes like a frustrating magic trick. Information (like performance management ratings) goes into the box, but then a secret process occurs, and what comes out — a salary increase or bonus amount — seems mysterious. This can cause employees to become confused, frustrated or even de-motivated.

How can you demystify pay so that employees understand their compensation and feel good about it? Start by making internal communication as simple and clear as possible, using plain language, visuals and examples to bring this complicated topic to life.

Next, use a powerful strategy that best-in-class companies deploy to ensure that employees really “get” compensation: Provide managers with the knowledge and tools they need to talk to their team members about pay. After all, the best way for an employee to receive critical information about his/her pay — such as salary increases and bonus amounts — is in a one-on-one conversation with his/her manager.

That’s why, especially when compensation is complex, or when the system is changing, it’s essential that you set managers up for success. Here are three ways to do so:

1. Make sure managers understand how compensation works.

Don’t assume that managers get it — even if they’ve been in the organization for a while. The best practice is to give managers convenient opportunities to learn about compensation. Choose the method that best fits your situation and meets managers’ needs:

  • Create online learning modules that explain key aspects of compensation. These should be brief — 10 to 15 minutes — and allow managers to go through the module at their own pace.
  • Invite managers to a virtual learning session. If possible, limit this meeting to 30 minutes, and present for no more than half the time, allowing the rest of the time to answer managers’ questions.
  • Hold an in-person workshop when making big changes to compensation — especially when these changes affect employees’ pay. When the topic is complicated and/or the change is significant, provide managers with a more intense experience so they are well prepared.

2. Develop an online hub where managers can find information when they need it.

As much as you’d like managers to plan their compensation discussions well in advance, the reality is that managers often wait until the last minute to prepare to talk to their team members. So by providing managers with an intranet site, they can find the information they need on a just-in-time basis. Include useful tools (see #3), plus an online forum where managers can connect with a compensation expert or other managers to ask questions and get advice.

3. Create tools that fit the way managers actually communicate.

Don’t expect managers to make a formal presentation to team members about compensation. But do provide managers with tools that fit their communication style:

  • PowerPoint slides (but just a few). Managers won’t give a detailed presentation, but they will use a short (5–8 slides) PPT to share highlights at staff meetings and during one-on-one discussions
  • Frequently Asked Questions help managers feel prepared when team members approach them with questions. To create the best FAQs, include tough questions and candid answers and avoid corporate speak.
  • A one-pager. What essential information do managers need to know about the compensation program? Distill that information into a brief one-pager managers can print out and refer to as needed.

By giving managers what they need to talk about pay with their team members, you’ll ensure that those conversations are informative and productive.

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