Communicating pay keeps employees engaged

Culture determines how and how much pay information is shared
By Brian Reidy and Jean-Francois Vernier
|Canadian HR Reporter|Last Updated: 07/22/2010

When it comes to employers and candidates, money is one of the most important issues on the table — yet successful companies come down on both sides of the fence when it comes to how much information to share with jobseekers.

Some take the position it’s critical for future employees to embrace the corporate culture and, therefore, the pay package is almost irrelevant. Successful candidates are told the compensation levels are market competitive and it’s expected an engaged candidate is going to enthusiastically accept the offer with the details of the remuneration package unknown. Some firms also make it clear compensation is never to be discussed within the company and disclosure could result in termination.

Other firms opt to share virtually every piece of pay information with employees. Some go so far as publishing information about individual compensation on the intranet.

What is the best course of action? Knowledge of Pay, a 2004 survey of North American employees and managers by WorldatWork, found a direct correlation between pay knowledge and pay satisfaction.

In other words, the more employees know about how pay is determined and how they can improve their individual pay level, the happier they are with their pay, job and company overall. So being able to explain the credible process around how pay decisions are made is the key management variable.

How much information a company shares about pay is driven largely by its corporate culture and related employee communication discipline.

Firms classified as high performing consistently exercise courage, innovation and discipline around employee communication, helping to drive company performance — especially during tough economic times, according to the 2009-2010 Communication ROI Study Report by Towers Watson.

Companies that are highly effective communicators have the courage to talk about what employees want to hear. In the case of compensation, this means process explanations around pay, delivered by a credible source.

Highly effective communicators explain the rationale behind difficult business decisions, provide leadership training on sensitive communication issues and actively address the impact on employees, found the Towers Watson study. All of these actions can help keep employees engaged while improving their collective knowledge around pay processes.

High-performing companies are innovative with communication and make greater use of social media to reach a diverse workforce in real time. Effective communication — particularly around touchy subjects such as pay — requires a two-way dialogue, which is a strength of social media tools.

High-performing companies are disciplined around communication. They take the time to document communication plans, develop metrics to assess their success and identify areas for improvement. These firms focus special attention on:

• Articulating the employee value proposition, of which compensation is just one element.

• Treating managers as a special audience — offering additional communication and training to help them manage. This is crucial for compensation as people prefer to be given information about sensitive topics from trusted sources.

Ultimately, how organizations communicate to employees, including information about compensation, is one of the more interesting expressions of corporate culture. And culture is critical — it forms the foundation for the structures, systems, processes and actions that support business strategy and explicitly or implicitly define interactions among employees, management, customers and other stakeholders.

Innovative, entrepreneurial companies often encourage workers to make decisions quickly, by being completely transparent about sensitive information including pay, in an effort to keep bureaucracy and chains of command to a minimum.

Manufacturing companies, which typically prize efficiency over innovation, may have highly structured processes in place, including the approach to compensation communication, to ensure people carry out their tasks consistently. Decision-making is typically far slower in such businesses.

Many high-performing banks and retailers tend to differentiate themselves on customer service. To achieve this strategic goal, these companies build cultures that emphasize values and integrity. They clearly communicate codes of conduct. They empower employees, involve them in problem-solving, break down departmental goals into clear responsibilities for employees and inform employees about company performance. Managers are expected to model desired customer-facing behaviour in their interaction with employees — including the process of pay communication.

In contrast, a number of pharmaceutical and information technology companies prize innovation. Those cultures seek to accelerate the speed of decision-making, support risk-taking, build stimulating work environments, value information sharing, and encourage diversity of thought. In these environments, open communication around compensation programs can be an effective driver of employee satisfaction with pay.

Brian Reidy and Jean-Francois Vernier are consultants at Towers Watson. Brian is based in Calgary and can be reached at brian.reidy@TowersWatson.com. Jean-Francois is based in Montreal and can be reached at jean-francois.vernier@TowersWatson.com.

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