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How Compensation Discussions Make Or Kill Culture
The document explores how compensation discussions significantly influence organizational culture, employee engagement, and retention. It emphasizes the importance of aligning compensation strategies with business goals and effective communication with executives, managers, and employees to foster a positive work environment. Additionally, it outlines key considerations in compensation planning and the potential consequences of misalignment, such as decreased engagement and increased negativity.
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How Compensation Discussions Make Or Kill Culture
- 1. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture
- 2. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Rusty Lindquist VP Strategic HR Insights BambooHR Mykkah Herner Head of Professional Services PayScale
- 3. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture v How Compensation Discussions Make or Kill Your Culture: Organizational Impact Determining compensation Communicating with executives Communicating with managers Communicating with employees Your seat at the strategic table
- 4. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture v How Compensation Discussions Impact Your Organization Culture Performance Engagement Retention
- 5. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Performance Loyalty Satisfaction Engagement Retention CULTURE Greater Business Output
- 6. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture CULTURE Impact?
- 7. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Everything you do becomes part of that story… The story of what you value
- 8. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Compensation: The story of how much you are valued
- 9. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Compensation: The keystone of culture
- 10. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Making the Compensation Conversation a Culture Builder Don’t be offended Be open Take it seriously Be objective Be proactive Be Positive
- 11. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Using objectives and values to determine compensation v
- 12. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Compensation is about an exchange of value, not money.
- 13. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture 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 Employee Value Drivers
- 14. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture 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
- 15. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture THE COST OF GETTING Payroll is by far your biggest expense; the cost of getting it wrong is tremendous.
- 16. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Align compensation plan with business goals
- 17. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture 1. Drop in engagement. 2. Drop in performance. 3. Distancing. 4. Sudden increase in negativity. Early Indicators of Compensation Misalignment
- 18. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Communicating with executives v
- 19. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Executive Audience • Leaders don’t want to be told what to do • Leaders can be distrustful of change • Leaders are decision-makers • Many leaders have access to information • What matters to your leaders?
- 20. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Execs are also Managers 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 Report Relevant Info
- 21. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Communicating with managers v
- 22. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Agents of the Organization
- 23. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture • Sell the organization and the full package on the table • Sell the benefits of the offer (initial or increase) • Listen to the ask behind the ask • Meet them and then move Negotiation Skills
- 24. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Listening Skills
- 25. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Manager Training Compensation Plan Overview Putting It Into Practice • Compensation 101 • Philosophy & Strategy • Structure • Policies • Linking Performance to Pay • Calculating Increases • Talking with Employees
- 26. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Communicating with employees v
- 27. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Develop a Communication Plan
- 28. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Lead The Conversation Finding out where you stack up vs. peers can dramatically change: • Desire to stay/leave • Overall job satisfaction • Exert more/less effort I was approached by an employee who was very upset that her base pay was being frozen. After going through our philosophy, the employees pay compared to the grade and range she was in the employee left the meeting with a smile on her face, feeling positive about the conversation. Monarch Landing, 300 employees Source: Card, D., et al., (2011); “Inequality at Work: The Effect of Peer Salaries on Job Satisfaction.” “Wow! This is what our employees need to see! They only ever talk about what they see in their paycheck, so this would really drive home our total investment!” Alberta Motor Association - 2,000 employees of employees will compare pay
- 29. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Anticipate Employee Questions & Concerns
- 30. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Employee Pay is Low Consider • Should the employee pay be low? • Is the organization able to adjust employee pay? Talking Points • Start by appreciating accomplishments • Mention market movement of the position if applicable • Explain position in range • Remind of last year’s adjustment amount if appropriate • Discuss what you will or won’t do for increase or bonus depending on skillset, performance, etc. • Open the door
- 31. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Employee Given No Performance-based Increase Consider • What does the employee need to be eligible for the next round of increases? • What potential does the employee have to move up in the organization? Talking Points • Start by appreciating contributions • Remind of performance issues • Explain position in range • Discuss what you will or won’t do for increase or bonus depending on skillset, performance, etc. • Explain what they need to do to be eligible next go round
- 32. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture “I FOUND A SALARY REPORT ON THE INTERNET” • Conflicting information • The “independent study” • Position pricing vs. people pricing • The conversation
- 33. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture v Compensation: Your seat at the strategic table
- 34. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture Follow BambooHR and PayScale on social media: bamboohr.com/blog | payscale.com/compensation-today Thank you!
- 35. bamboohr.com payscale.com How CompensationDiscussions Make or Kill Your Culture 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
- #2 BambooHR (welcome)
- #3 BambooHR (intros)
- #4 BambooHR (ROADMAP) Determining compensation using objectives and values
- #5 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.
- #6 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.
- #7 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.
- #8 BambooHR 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.
- #9 BambooHR Because compensation is quite literally, the story we tell our employees about how we perceive their value.
- #10 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.
- #11 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.
- #12 Payscale
- #13 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.
- #14 BambooHR Let’s take a look at some of the leading drivers of employee value. Understanding these will give you a framework to diagnose perception misalignment during crucial conversations about comp. Review….. All of these, and probably more, impact an employee's value to the organization, and impact an employee’s perception of their own value. Often when an employee comes seeking a compensation adjustment, they feel out of alignment, but may have a hard time identifying or articulating the origin of that misalignment. This is where you can act as a consultant, and using these value drivers, help both them and the organization diagnose alignment issues, identify hidden value, and land in a mutually agreeable appreciation of the employees value. Sometimes you’ll end up helping an employee realize that the discrepancy between their perceived value and compensated value is a perception problem. But sometimes the perception problem is with the organization. This can sometimes be due to role constraints. If the organization isn’t currently capitalizing on some key competencies of the employee, then that employee may feel under compensated, but the organization will feel that the compensation is aligned with the employees contribution of value. At this point, having identified the origin of the misalignment, you can host and facilitate a constructive conversation about how to get the maximum value from the employees potential. Sometimes the organization just won’t ascribe the same amount of value to one of these things as the employee does. But being able to have an honest, open, and analytical discussion about the actual value one of these things has on the organization can turn what feels like a personal affront (“you don’t value me”) into a more logical, objective analysis that doesn’t harm the relationship. Focusing on the employee value drivers, and not a general statements of value can remove a lot of the emotion from the discussion, and help lead to more constructive ends. It helps focus the employee on "actual value”, or “value delivered" to the organization, instead of “perceived value”. Understanding that, can help guide both the employee and the manager. It could be the employee wants to start asking for more responsibility, or new assignments, causing them to stretch, and deliver more value to the organization, so they can demonstrate “value delivered” to justify the compensation adjustment they are seeking. But that is an entirely different conversation than “you’re not paying me enough”. But you have to deconstruct that statement into the value drivers to get there.
- #15 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.
- #16 PayScale
- #17 PayScale Why alignment matters Comp plans vary from org to org I’ve created dozens of comp plans – like snowflakes, no two have been alike. Depends on: Size, Industry, Style/Culture of Organization (flat? Hierarchical?) Business Goals Comp plan should support business goals Alignment shows you’re in tune with org needs Win Execs over by showing that you know what matters to them and that you want to help the org succeed by putting $ where it’ll create the most impact and alignment with what they’re trying to accomplish You’ll need to know: What’s on the business agenda? ((FOR EXAMPLE…)) Growth – multiple schedules, multiple levels of positions Doing more with less – finely controlled ranges, ROI of base pay
- #18 BambooHR Learning to recognize when employees begin to feel out of alignment with compensation can help you be proactive, and can go a long way towards building a positive culture, hosting crucial conversations, and keeping employees engaged. Drop in engagement - Employees feeling out of alignment will often disengage with their work. They won’t volunteer for new projects, take on new tasks, or put as much into the tasks they have as they usually do. Drops in performance - Employees feeling underpaid will suddenly start producing less. Sometimes this stems from employees feeling like they’re “owed” something, and should therefore contribute less. Sometimes it’s simply that they’re disengaging, and that drop in passion is leading to less work produced. Distancing - This one is about culture. As an employee begins to feel undervalued, or underpaid, they often end up disengaging from the culture. They may take part less in company activities. They don’t want to be emotionally engaged, in fact, they are trying to be emotionally disengaged. That often shows up in very tangible, recognizable (even if unintentional) ways. Sudden increase in negativity - Often an employee will begin to be seen having negative conversations, or making negative comments. It’s a natural emotional reaction, and a way for them to ease the cognitive dissonance caused by value misalignment. In short, it’s the “sour grapes” syndrome. They want to convince themselves (and others) that where they are working isn’t a good place to work.
- #19 PayScale Some organization leaders are hesitant to do a market assessment when they’re unable to give out increases. I would argue that it is almost more important to arm yourself with the knowledge of your market position when you don’t have readily available funds. As the saying goes, knowledge is power – and having the knowledge of where you stand gives you the power to address issues before they become a problem. Many of the organizations I work with are already paying fairly to the market. When we start their projects, they admit that they haven’t looked at the market in a long time, thinking that if they don’t look, they won’t find something they don’t want to see. The fact is, assuming folks were in good standing in 2009, they’re probably not too too far behind now. Some things have shifted, sure, but it’s better to know by how much so you can be prepared to answer questions and communicate your position appropriately to your employees. Once your employees have a sense that they’re underpaid, even paying at the 90th percentile for the next 10 years won’t make them change their minds. And, if you haven’t been able to afford increases in a while, your employees will feel underpaid whether they are or not. Practically speaking, if you have positions that are paid low relative to the market, target these for increases as soon as you do have funds available. Consider non-monetary rewards as a means for retention of employees in your hot jobs.
- #20 PayScale Leaders don’t want to be told what to do - typically leaders are leaders b/c they lead. While they vary in style, generally they’re in the habit of telling vs being told. Leaders can be distrustful of change – Change, especially from HR, traditionally has meant more hoops, more paperwork, more expense without incoming $ Leaders are decision-makers – Give them options & choices, and they’ll select the appropriate path forward for the org Many leaders have access to information – Their peers are leaders at other organizations. Often they’re already talking about these things with their peers. What matters to your leaders? Ultimately, you know what will work best for your leaders. The key is to put yourself in their shoes and think about *what* and *how* they want information about comp.
- #21 PayScale 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.
- #22 PayScale
- #23 PayScale 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…
- #24 PayScale
- #25 PayScale Know what to listen *for* (behavior & words) – absences, etc Self Reflect – Values-Driven Dialogue begins internally, and internal awareness forms the background to a Values-Driven Dialogue. Listen Actively – Each party commits to being present and seeking to understand the other party. Communicate Assertively –Active listening is paired with assertive communication, where each party commits to being honest, direct, and respectful of both themselves and the other party. Agree & Act –Values-Driven Dialogue results in shared understanding and action that is agreed upon by both parties.
- #26 PayScale
- #27 PayScale
- #28 PayScale Mykkah
- #29 PayScale
- #30 PayScale
- #31 PayScale Scenario A Thank you for all your contributions this past year Your position is gaining in market value You are below last year’s competitive range Last year you earned an increase of 3%, which was the organizational average I’m going to give you a bump of X% OR a one time bonus of Y%, which is above this year’s organizational average increase Scenario B Thank you for your contributions this past year Your position is gaining in market value, however we don’t feel that your skill set is current to what we’re seeing for similar positions in the market You are currently below range, but I think that’s fair given your current skillset. Last year you earned an increase of 2%. I’m giving you a small increase this year of Z%. In order to earn a larger increase next year, I’d like to see…. Let’s check in in another quarter to see how you’re progressing – so we can keep you on track for next year.
- #32 PayScale
- #33 PayScale
- #34 BambooHR It’s a table where HR belongs, even though often they struggle to get there. Compensation is one of the primary instruments you can use to earn that seat and influence the organization proactively. It’s a great first-step to moving into a more strategic position in your organization. Employers don’t remember what the market rate is, especially if their hiring slow. Keep them updated, be a consultant.
- #35 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?