4 Ways to Communicate Compensation That Drive Strategic Outcomes

bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes 4 ways to communicate compensation that drive strategic outcomes.
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Rusty Lindquist V P S T R A T E G I C H R I N S I G H T S B A M B O O H R Mykkah Herner D I R E C T O R O F I S X S E R V I C E S P A Y S C A L E
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Value Perception Crisis It’s time to blow up HR and build something new Rethinking HR Why we love to hate HR What will it take to fix HR It’s time to split HR HR faces a crisis of credibility in the boardroom HR is our “favorite corporate punching bag”
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Evolution of HR Business Value H L Strategic Micro Small Mid Large Operational HR viewed as a cost center Transactional HR High-Impact HR HR as a strategic investment
Basic Operations Strategic Operations HR HIERARCHY OF NEEDS (Culture, Performance, Engagement, Satisfaction, Employment Brand, Advising Talent Management, Succession Planning, Learning & Development…) General Operations Business Value (Operational Efficiency: HRIS, Records, Talent Acquisition, Compliance Tracking, Etc.) (Payroll, Benefits, Time & Attendance, etc.)
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Payroll is, by far, a company’s biggest expense; the cost of getting it wrong is tremendous.
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes 1 Creating Pay Transparency in the Workplace 1
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Defining Transparency
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Transparency Spectrum
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Pay Transparency gets everyone in the same boat, paddling in the same direction.
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Why Would Anybody be More Transparent about Pay? Pay Transparency Trust Better Business Outcomes! Engagement
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Employees who perceive a ‘fair and transparent pay practice’have lower intent to leave and higher satisfaction PERCENT OF RESPONSES LOW AVERAGE HIGH 50% 31% 19% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 1 2 3 4&5 % Responses with Intent to Leave % Responses with High Satsifaction
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes www.payscale.com Communication Roles Executives Communicate program to organization at a high level Managers Communicate compensation details to employees Employees Bring questions to manager or HR HR Prepare communication, consult and inform Executives, train Managers
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes How Compensation Discussions Impact Your Organization Culture Performance Engagement Retention
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Performance Loyalty Satisfaction Engagement Retention CULTURE Greater Business Output CULTURE
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes CULTURE Impact? CULTURE
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Everything you do becomes part of that story… The story of what you value
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Compensation: The story of how much you are valued
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Compensation: The Keystone of Culture
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Making the Compensation Conversation a Culture Builder Don’t be offended Be open Take it seriously Be objective Be proactive Be Positive
Communicating with Executives 2
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes www.payscale.com • Understand the executive audience • Align compensation with business objectives • Incorporate leading edge practices • Keep executives up to date Exec communication tips
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes What do your Executives Care About?
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Benefits of Comp Plans 25
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Prepare Talking Points • Compensation philosophy and purpose • Compensation plan changes at the highest level • Market study and results • Next steps—talk with managers
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Report High Level Info • Get them familiar with a dashboard (Compa Ratio, Market Ratio, etc.) • Report these on a regular basis
Communicating with Managers 3
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Compensation is about an exchange of value, not money.
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Value Exchange Experience in industry Experience in market vertical Experience in adjacent markets Experience in field of discipline Experience in adjacent disciplines Experience with competitors Product knowledge Competitor knowledge Time and experience in company Education Discipline training and certification Supply and demand Employer Value DriversEmployee Value Drivers Base pay Performance Pay Paid time off Benefits Travel Culture and environment Work flexibility Work/Life balance Meaningful work Who you work with Challenging work Opportunity to impact Job security Shared purpose / mission Career advancement opportunities Autonomy Senior leadership
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes of company leaders do not feel confident in their managers’ ability to effectively communicate with employees about salary issues. 2014 PayScale CBPR 73%
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Agents of the Organization
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Equip Managers • Set expectations • Educate them • Give them the big picture • Give them tools
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Identify Creative Solutions Consider Workplace “Currency”  Know what motivates your employees  Additional/Alternative Perks  FTE preference  Staggered increase or offer  PTO  Work assignments  Development opportunities 34
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes The Compensation Review Meeting 1. Prepare for the meeting 2. Deliver feedback and listen 3. Follow up
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Provide Talking Points • Compensation Philosophy • Market Study / results • Structure Overview • Position in range • Adjustment • Rationale • Open the door
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Prepare Manager Toolkits • Compensation Plan Talking Points • Compensation Plan Information • Details for each employee they supervise • Tips for each type of conversation they may have o Pay is low or perceived to be low o Pay is high o No increase due to performance o “I found this on the internet”
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Report Relevant Info Give them tools for success: • Flight Risk report & the inverse report • Disparate Pay report Give them insight into what employees care about • Am I making enough money to cover my basic needs (entry level) • Am I being paid fairly (professional level) • Am I being paid enough to deal with managing people (Mgrs/Dirs) Give them talking points for comp conversations with employees
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Communication Tips • Know your audience • Watch the jargon • Don’t present issues without a way forward • Prepare, prepare, prepare • Be direct and also empathetic • Communicate early and often
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Align With Strategy
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Focus on Outcomes
Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform? What key activities do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? What type of relationship does each of our Customer Segments expect us to establish /maintain with them? Which ones have we established? How are they integrated with the rest of our business model? For whom are we creating value? Who are our most important customers? Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated, and which ones work best, or are most cost- efficient? How are we integrating them with customer routines? What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? (How would they prefer to pay?) How do we report on this “revenue” to the rest of the organization?
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Follow BambooHR and PayScale on social media: bamboohr.com/blog | payscale.com/compensation-today Thank you!
bamboohr.com payscale.com 4 Ways to Communicate Compensation to Drive Strategic Outcomes Questions? BambooHR Receive a free job posting on our ATS and full HRIS for one week. We will contact everyone within the next few days to set this up. Download our free eBook: Communicating Compensation: Your guide to tackling tough conversations about pay PayScale

Editor's Notes

BambooHR (welcome)
BambooHR (intros)
BHR – (no slide changes necessary)

Context on the need to elevate HR

Context on the need to elevate HR

What it means to elevate HR, introduce strategic operations
BHR – (no slide changes necessary, but if you can think of a better way to illustrate this, that’d be great… we use this slide a lot).

Talk about HR’s strategic outcomes
BambooHR

We elevate HR by aligning our operational activities to strategic outcomes. Comp is one of the main parts of HR, and getting it wrong can be costly. But getting it right can be huge too… let’s talk 4 key communication opportunities you can use to drive strategy.
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Introduce pay transparency as the first way to drive strategic outcomes
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what exactly is it
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SPEAKER NOTES: Transparency is a means to an end –

We do transparency to build trust
- building trust increases both engagement and through that productivity/performance
- performance drives business results and outcomes
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Managers are both agents of the organization and advocates for employees
We want your managers acting with confidence – hence, training.

The “Go ask HR” response:
Don’t want to undermine your own authority
If you say, I don’t know, go talk to HR – then when are they going to talk to you?

HR won’t let me:
HR is there to support, not hinder you
EE confidence that the organization knows what its doing

Executives’ Role
Approve program.
Communicate program to org at a high level.
Perform manager/supervisor role.
HR’s Role
Get program ready.
Ongoing communication to Execs.
Train managers.
Managers’ & Supervisors’ Role
Understand the program.
Communicate with employees.
Get support from HR.
Employees’ Role
Agree to the program.
Communicate with manager/supervisor.
BambooHR

Compensation can have a profound impact on your organization. Employees, after all, are your biggest expense, and more importantly, the key to your organizations success. And compensation affects every employee.

So let’s take a look at three critical ways compensation impacts your organization.
BambooHR

One of the primary ways compensation impacts your organization is through culture.

We know how important culture is. Culture is the heartbeat of our companies. It fosters loyalty and satisfaction, it powers performance and engagement, and results in retention. All of these lead to reduced operating costs, and increased productivity, which themselves result in greater business output.
BambooHR

So Culture, as abstract as it may be, is a powerful strategic lever within our organizations. But sometimes our abstract view of culture means we fail to recognize how our actions actually impact it.
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So for a moment lets think of culture as a story. Think of it as the shared narrative we create together about where we work. It’s a story we tell our employees, and it’s the story employees tell each other about where they work.

Thinking about culture as a story, can help influence the way you manage it, and invest in it. Because everything you do becomes part of that story.

Sometimes you’re adding words and scripts, and sometimes you’re adding whole chapters. Sometimes what you add creates cohesion, strengthening or reinforcing that story, and sometimes what you add creates confusion, detracting from that story.

Compensation, along with discussions and attitudes around it become a strong part of that story.
BambooHR

Because compensation is quite literally, the story we tell our employees about how we perceive their value.
BambooHR

And because few things impact a person more than their perception of their own value, and their perception of how we value them, compensation can be considered the keystone of culture.

Because all the stories we create about what we value as a company become subservient to the story we tell each employee about how we value them.
BambooHR

So how do we make compensation a culture builder. Let’s start with how to have constructive conversations about compensation. Because they don't have to be awkward, and they don’t have to be negative (and yes, that’s true even when you don’t have budget for monetary adjustments).

Here are some specific things you can do to help set the stage for productive compensation discussions, and guide them to fruitful conclusions when they happen.

Be open - Listen, your company’s attitude about compensation discussions are clear to the employees. It radiates with deafening clarity.

And if employees know that they can come in, and are welcome to have open conversations about compensation, then it makes a huge difference. You’re telling them that you value them, and you care about them feeling valued. But if they know that you’re not open, if they know that you hate compensation discussions, if they’re taboo, or really uncomfortable, then they won’t happen, and people will just leave. Often we find people would rather leave, and find a new job, then approach an uncomfortable compensation discussion with their company.

Take it seriously - Sometimes simply the act of being very sincere, of having a serious discussion can make the difference between them feeling valued or not. Remember, compensation is the communication of how much we value that employee. If they feel undercompensated, they’re feeling undervalued. This is deeply emotional. If you take it seriously, your story to them is that you’re serious about their value.

Don’t be offended - Compensation is inherently highly emotional, and if you have an obvious, adverse reaction to the conversation, you can unintentionally entrench the employee in their emotion by your reaction. HR and managers in a company need to know that they can happen at any time. They need to be prepared for it. And they need to not be offended when it happens. We’ll talk more about this a little later.

Be Positive - When you get asked, if you don’t make it a positive experience, you could be telling the story that you don’t care, or hate talking about it, and that can stifle future conversations and create a culture where it’s easier to just leave, then ask for a raise. Make it a positive experience. Even if you think the employee will end up just leaving, or isn’t worth trying to save, because remember, how you treat that conversation will be a story that gets shared, and will become part of a cultural narrative that you have to operate within.

Be objective - Diving in and deconstructing the misalignment by focusing on actual value, and the employees value drivers can help strip the emotion away from the conversation, and focus it on a more constructive end. Your objectivity and openness about the conversation can tell a strong internal story that the company cares about it’s employees, and is fair in talking about comp. In just a few minutes we’ll unwrap this part a lot more.

Be proactive - Don’t wait for compensation to be brought up. Having designated periods (such as an annual review) can help an employee feel like you care about being competitive with comp, and making sure the employee is fairly comped for their value. It can also cause employees feeling out of alignment to be at ease, knowing their comp review time is coming. Simply having it scheduled can help them feel more objective about the discussion.
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Communicating with executives involves
Understanding the executive audience: Put yourself in the shoes of your executives.
Making sure compensation is aligned with business objectives: Present yourself as someone who understands the business.
Incorporating leading edge practices: Your execs need you to keep them abreast of the best of the “best practices.”
Keeping executives up to date with quick “snapshots:” Keep the details to a minimum, please.

Understand the Executive AudienceYour executives got to where they are by learning how to get what theywant, so before approaching them you better get your ducks in a row if youhope to get want YOU want. Understand that executives:• Don’t want to be told what to do: Does anyone?• Can be distrustful of change: Change? Yeck! More hoops, more work,and more $$$.• Are used to making decisions: Do your homework to provide severaloptions, then ask for input. It’ll make your execs feel special!• Know they know stuff Avoid coming of as a “know it all” yourself.Ask the Right QuestionsThe RIGHT compensation policy starts with asking your executives theRIGHT questions. (We’ve provided a few right questions to get you started.Aren’t we the best?)Question: Why do you want to have a good comp program?Answer: To pay people RIGHT.Question: Why do you want to pay people right?Answer: To attract and retain top talent.Question: Why do you want top talent?Answer: To accomplish our business objectives.

• Regularly REPORT OUT how the plan is performing. Your information should be high level (avoidtoo many details) and relevant. Hint: PayScale makes this easy with multiple dashboards.• Give them TOOLS FOR SUCCESS (e.g., reports with relevant information).• Give them INSIGHT into what employees care about.• Give them TALKING POINTS for conversation with employees.
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Alignment
Validates compensation strategy and aligns to business goals

Fairness
Clarifies the market and internal value for each job, and provides a way to manage employee pay effectively
Ensures pay equity (legally defensible)
Provides room to reward your employees based on performance, experience, etc.

Communication
Provides a tool to talk with employees about development

Confidence
Quantifies compensation costs & enables budget decisions
Determines pay for non-benchmark jobs
Gives HR, managers, and employees confidence that pay decisions are fact-based
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Along with other dashboards & “health of the organization” information, they should have the pulse of comp – org/wide – high level. 20K feet. Etc.
BAMBOO
BambooHR

It’s very helpful to step back into a more objective, analytical view of compensation, because when it comes to comp, we often suffer from functional fixedness. Functional fixedness is a cognitive bias that limits a person to thinking about something in only one, traditional way.

So let’s look more broadly at compensation. Compensation is simply an exchange of value. It’s value the employee gives to the organization, and value the organization gives back. Some of that value exchange is about money, but not all of it.

And understanding the value drivers on both sides of the equation, can help you gain mental flexibility leading to more productive negotiations, and more satisfied employees.

It also serves to strip much of the emotion away, by objectifying the discussion. Remember that as long as the emotional brain (the limbic brain) is engaged, which it is at the beginning of most discussions about comp, the rational brain (prefrontal cortex) is disengaged. So easing their emotions, making them feel safe, validating them, and focusing them on an objective analysis of value exchange is critical to hosting constructive compensation discussions.
BambooHR

Let’s now look at the value drivers for the organization. Clearly understanding each of these, and being able to adequately articulate them, gives you substantial influence in compensation discussions.

Review…..

This is where we have to escape from the functional fixedness of money as the only motivator for employment.

HR needs to be able to excite and engage a candidate around the mission, the higher cause. People love to belong to something larger than themselves. And if you’ve hired right, you’ve carefully selected people who naturally resonate with your mission, and who inherently want to stay with your company, even if it means tolerating less pay, because there’s other ways their work provides meaning and fulfillment to them.

HR needs to be proficient at not only the extrinsic motivators, but leveraging intrinsic motivators as well.

Small start ups can often hire people at below market rates, because they offer unique things that the employee values, like belonging to a higher cause, being part of a disruptive market force, or being part of building something new.

These motivators are value, and the greater your ability to articulate that value, the more you will be able to draw on them as levers in a compensation discussion.

The biggest dilemma, is just stepping out of the traditional view that compensation is only about pay. It's not about pay, it's about value exchange.

Remember that most of the time when people are looking for a job, it's not because of the compensation, but rather because they're not getting along with her boss. But as soon as they start looking elsewhere, the lead priority is pay. That tells you that people value relationships at work, more than pay. So don’t hesitate to communicate the value of the work experience and how the people in your organization make that worth staying around for.

Obviously, we shouldn’t avoid bringing people up to their fair market value, and paying people what they’re worth. So we need to use these tools carefully. But the reality is that sometimes you don’t have the budget, and you need to get creative.
Being honest and open with the employee, and helping focus them on some of the intangible, but very real benefits of their job can help buy you time to bring them up to par with the rest of the market.
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It isn’t about spending more
It is about spending smarter
We want to take the budget and make it work for your business
In order to make your comp plan “work” for you, we need to make sure it touches everyone in your workforce rather than sitting in an excel sheet
With Insight expert we make it
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Managers are there to help you solve the puzzle…
- also, eyes and ears of the org -- first alert system to something may be awry.

- take ownership for decisions
- speak with Ees with confidence of knowing comp decisions are sound, etc…
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Equip your managers to have productive talks with employees about compensation by:
Setting expectations. Ask more and expect more from your managers.
Teaching negotiation & listening skills
Big pic – why and how does it fit in to org objectives
Tools:
Helping to prepare them for the compensation review meeting (including talking points).
Presenting compensation basics.
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Here is a quick overview of what your managers need to know – we will dig more deeply in to different ways the conversation might go in the next webinar.

First, to prepare them for the meeting, you’re going to need to provide them with a packet of information for the meeting:
Documents you might want to include:
Compensation history for each EE as well as for the team as a whole
An increase spreadsheet
Talking point FAQs. This might include information about the company’s comp plan for example.

And, some talking points. They’ll likely want to cover things like
Review prior evaluations, goals, the EE’s JD
Review org/team goals
Consider org/cross-team projects

Make sure that they are versed on any Employee specific info:
Know the employee’s pay, grade, and range.
Know when they received their last increase and the amount of the increase.
Be ready to discuss the following:
Where the employee falls within their range and why
What the employee needs to do to move up in their range
What the employee needs to do to move to the next level / range (if applicable)
And, If there is a potential issue (for example, the employee’s pay is above range), consider the reason behind that. Is there a way forward? – we’ll talk more about these kinds of different scenarios next time.

2. Deliver the feedback (Ask, Here’s the behavior, here’s the impact, here’s what you need to do differently in the future)
Listen first
Offer feedback and your own ideas
Feedback sandwich – start with something good, give them an area to improve upon, and then follow up with something else positive.
Be specific, honest, and professional; there shouldn’t be any surprises!
And, Provide a way forward

3. Follow up

Ensure meeting outcomes are documented
Revise forms, complete signature page, go through the transactional items need to be “done”
It’s a good idea to encourage your managers to track performance on an ongoing basis - Providing regular feedback makes a big difference in how these conversations go.
Check in regularly about goals
Set up mid-year check-in meeting
Encourage & support employee
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Digging a little big deeper into the talking points, what should managers cover in this meeting:

Market study/results – make sure the manager is knowledgeable around this – their knowledge doesn’t have to be extensive. It can be as simple as a one-liner about why the company did the study and what the overall result was.

Comp Philosophy – yours managers need to know what your comp phil is before they can champion it. As you are giving them the packets in preparation for their meetings, be sure you are reviewing this with them so they can be proficient.

Structure overview – not just what a structure is, but why it benefit them and why it is a good thing.

Adjustment – know the EE’s appropriate adjustment, if any. Know both $ and % (or whichever is more meaningful in your organization).

Rationale – the why or why not. This is where the real listening comes into play. And, this is the part that everyone is afraid of. This is a good time to remember the conflict management techniques and the different roles we discussed during the last webinar. Remember – address conflict early and often!

And, Open the door – no matter where someone is, there is always a way they can do more and earn more – through a promotion or a bigger/any merit increase next time. Here is what we are looking for. Here is how to attain it.
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Be prepared…

The employee is often going to want:

More money
Promotion
To be paid like their peers
To understand why others are paid more than they are
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Talking points: heard someone refer the way that managers feel about the comp convo with EE to how parents feel about having the birds & bees conversation with their kids. It gets real, and it’s really uncomfortable.
BambooHR
BambooHR
Bamboo
Keep your eye on the prize: Don’t do it just to say you have a reward & recognition program because you think you should. Think about what you’re really going to do and how it’s truly going to help your people and your company. Are you bought in?

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