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Merit Talks: Tis the Season

It’s nearing the holiday season; spirits are bright and you have to tell your star employee that they’re getting an increase that is lower than what they want. If you’re being honest with yourself, it’s lower than what you want it to be too. “Is there any way I can get a higher raise this year?” they ask. Do you say:

A. “No, HR wouldn’t let me.”

B. “Yes, I’m sure we can work something out.”

C. “Let’s talk a bit more about your overall compensation. While we don’t have any room to change your increase, there may be some other things we can do. What do you find really motivating?”

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In my time as a Comp and HR professional, I’ve heard some conversation doozies. Not every manager naturally knows how to communicate about compensation with those they supervise. That said, there are some typical conversation pitfalls I’ve seen. Here are the top five.

Comp Conversations Pitfall #1: Forget the compensation data facts

Too often managers talk with employees without all the information they need to have a detailed and fact-driven conversation. Millennials have always been interested in having all the information so they can come to their own conclusions. More and more, all generations are interested in understanding how the increase number was determined. Get to know what kinds of information will land with your employees and get familiar with the facts. Here is a list of the types of information that may be shared depending on your organization’s level of transparency:

  • Current pay, future pay, increase amount and percentage; prior pay history
  • Typical pay increase at the organization; organization performance or budget story
  • Pay range for the job and/or pay range for other jobs in the path
  • Market data for the job, possibly information about the selected talent market
  • Performance goals and metrics, including how they support organizational objectives

Market data is more prevalent online than it used to be. Not all online data is created equally, nor is all packaged for business use. Employees may come to review meetings with data from all sorts of sources, some better than others. If you think yours may come prepared, plan ahead and come with data of your own. The key is to be able to explain why your data matters more, aligns with company objectives and strategies, or from a more reputable source.

Comp Conversations Pitfall #2: Focus too much on the salary data instead of the person

One pitfall I often hear about is when organizations try to remove the human element and focus only on facts and data. Often companies ask me how they can create a formula for all pay increases. Here’s the thing: pay is personal. It can mean the difference between an employee moving into a larger apartment or enrolling their son or daughter in dance lessons. Remember that employees are people and try not to shy away from talking about their experience overall at the organization. Pay is also personal in that individuals have different impact on your organization based on a complex set of factors from goals to skills to experience, and more. Every conversation about pay is an opportunity to uncover what really motivates your employees, and what you find out may surprise you. It may not be money!

Comp Conversations Pitfall #3: Negotiate the wrong things (or not focusing on total comp)

I worked with one company who was struggling to get their merit process under control. They didn’t have clear guidelines about what managers could and could not approve. As a result, their managers weren’t confident about what they could and couldn’t do, and employees weren’t clear about where they had room to push back or not. They developed a legacy of employees negotiating pay increases, at the point they were being informed of their new increase.

In most organizations, there’s a logical and sound reason for doling out increases, the trick is to know that reason and communicate it clearly. Increases aren’t the best thing to negotiate as it undermines the comp strategy and rationale. That said merit review time is not completely without negotiation. It’s a great time to dig further into the perks, opportunities, skills, and other employee drivers. Would a regular work from home day help? How about work hours to develop a skill that will make the employee eligible for the next job up?

Comp Conversations Pitfall #4: Don’t connect the dots between performance and pay

Most companies do some version of pay for performance. In addition to linking bonus and incentive payouts, 50% of organizations surveyed in PayScale’s 2016 Compensation Best Practices Report said the main reason for giving raises was performance-based pay increases. Compensation reviews are a good time to connect the dots for employees. We talked about X during your performance review. That relates to Y increase. The other dots to connect may be between employee performance and company results, between employee performance and team results, and between company performance and employee pay.

Comp Conversations Pitfall #5: Make assumptions about the employee response

Perhaps one of the most uncomfortable pitfalls to avoid is when managers assume they know how an employee will respond to their increase… and are wrong. I worked with an organization whose managers were devastated. They had a few managers who worked particularly hard to champion their employees and advocate for the best increases possible. After all their hard work, the managers proudly announced to their employees the increase they’d won on their behalf. And… the employees’ face fell. Wah waah. Not having anticipated this response, the managers couldn’t smoothly handle the employee objections.

I’ve typically guided managers to anticipate employee questions, which is different from assuming their response. When they anticipate the employee questions, they take into account both what is likely to happen given the data and history involved, and the particular employee’s typical reactions to information.

I guess the choose your own adventurous answer I started with led to a clear preference for answer C. The season may be merry and bright, and there’s no reason your comp conversations can’t be too. What are some of the trickiest comp conversations you’ve successfully navigated? Let us know below.

PayScale Team guides HR and managers through the merit cycle without the need for complex spreadsheets. See how Team improves communication about pay between managers and HR.

Mykkah Herner
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Love this one, Mykkah!

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