Blog: Let's Talk Compensation - Part 2

Compensation & Benefits

Let's Talk Compensation - Part 2

Why don't most organisations actively engage in conversations around compensation, and how can they make their compensation philosophy more 'open'? Read on, for some answers.
Let's Talk Compensation - Part 2

In the previous article, we looked at why Management and HR need to be prepared to talk about compensation openly. Let’s now explore the question of: Why do organisations and HR not engage in this conversation?

The simplest answer is: because it is still approached as a technical, mathematical conversation. ‘Why’ is not mathematics, that’s ‘how’. ‘Why’ is a conversation based on transparency, openness and willingness to adapt. It is a ‘philosophy/purpose conversation’. Employees trust Managers and their Leaders more than HR. Hence Managers and Leaders need to be equipped to have this conversation and not HR. This means HR has to start by showing the way but focus on building this capability with business in long term. Following are some typical objections/apprehensions that I have heard in leadership conversation,

1. Our compensation philosophy is not competitive and hence it’s a ‘no win’ conversation 

I laugh at this because this is nothing more than a ‘confuse’ strategy. If you are not competitive, then you better get competitive. There is no other way. However, don't conclude you have a bad story unless you have looked at your data. Competitive means different things to different people and hence talking openly about it only means more work upfront in defining it. Based on my experience, employees have different expectations at different stages and you may be surprised with it once you start encouraging conversation. They also tell you what is working well as much as what is not. 

2. You are opening a Pandora’s box, employees will be upset and our attrition will increase 

This largely comes because you are not sure about what will be linked in the conversation. Leaders worry about the conversation around career development, benefits, performance evaluation, selection and the list goes on. You cannot stop your brain from creating all these linkages and worrying about them. This is where you need to take a rational view and a bold bet. I have not seen an attrition rate double, just because you encourage conversations around compensation. On the contrary, I have seen internal scores on engagement surveys go up, and feedback from employees improve. Employee’s don’t leave for the next best shiny job just like that. You have to do bad things to them consistently over a period of time to push them out. I am always reminded of something that a young manager shared with me during a conversation drawing a parallel to personal life - if you love someone, set them free, if they come back they are with your for life, if they do not, they were never meant to be. The underlying point here is “choice”. Let employees make an informed decision. Amazing things happen when you encourage conversation and are open to a dialogue. Employees like transparency and being treated fairly more than anything.

3. We don’t have time for all this 

I do not argue with this view. Talking about compensation needs time and effort. If you do not have the energy, then stay away from it. You will do more harm than good if you are not prepared. Also, this is a one-way street. Once you start, you cannot turn around. This needs commitment and a long term investment. There is nothing like an ‘appropriate time to do this’. The time is ‘now’. This is all that matters. Once you make the decision, there is for sure a process to mitigate the risks involved and ensure success. You need to trust and engage with your in-house or external experts and frame your execution strategy.

There are a few learnings from the trenches that I would offer if you are thinking about ‘openness’ in your compensation philosophy:-

1. Be clear on ‘why’ you are doing it 

While I have outlined reasons why I think this is an absolutely critical decision to make now, You need to be clear about its long-term benefit. It is more cultural rather than functional. This will mean a lot of introspection and work on other areas of your ‘employee value proposition’. Spend time articulating your ‘compensation philosophy’ together as a leadership team. This document is worth its weight in gold during the execution phase. 

2. Understand its strengths and limitations 

You need to fully understand what this can get you and what it will not. This is not a silver bullet for all your problems. Compensation is a risk management tool. It works best when you are clear about why you are doing it. Set goals upfront and measure them regularly. Always remember that you are building a capability around this conversation. 

3. Be in it for the long haul; Communication is a two-way process 

The best place to start is saying “I do not have all answers, however, I am prepared to work towards them with you.” There is huge learning in every conversation and managers get better with time and exposure. It is important to capture key discussion points and keep improving the communication. Avoid knee jerk reactions or rapid change in direction. This conversation builds over time and needs ‘soak time’. 

4. Stay away from ‘convincing’ business and drive towards ‘the way we do it’ 

Remember the ‘choice’ conversation. You should not be out there convincing people. They will get convinced on their own if they understand the rationale and internalise it. You do not have to answer ‘all’ the questions, involve others in ‘getting to it’. Stay positive. 

5. Don’t get personal, stay at organisational level 

Do not breach the trust by bringing up a personal or one off situation in public forum. Protect people’s identity and dignity at all cost. be clear about this boundary in all public conversations. Nothing damages this journey more than a personal assault on someone. 

Your success will depend on how confidently your employees can explain the compensation philosophy to their friends and colleagues. If they talk positively, you are on the right path. You will never arrive at your destination and be done, because the journey is all that matters. The numbers, like the candidate acceptance ratios, engagement scores, attrition numbers, social sentiment will improve. The annual ritual will continue; however, the conversation will be much more enriched and welcoming rather than painful and avoidable. 

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Topics: Compensation & Benefits, Strategic HR

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