The beginning of a new fiscal year triggers a review of business results, performance evaluations, payments into retirement accounts and a time to reflect.
Along with strategy reviews, managers should be very clear on how they approach compensation discussions with employees. Here are some tips to make the process go more smoothly.
Speak with each employee individually.
There are a handful of companies that communicate compensation decisions in a group or very openly. Most employees still want to know what it means for them individually, and want to have the opportunity to ask about it privately. They may want to know if they could have done better or how much of their compensation is related to the company’s performance versus their own. Those questions are best handled one on one.
Be consistent about rewards and benchmarks.
Managers need to communicate compensation decisions and what drives them clearly. Employees are often anxious about compensation (for good reason), and blurriness on the topic only increases that anxiety and leads to dissatisfaction. When delivering information about compensation, you are rewarding behaviors (or not). Lack of clarity destroys some of the behavioral impact you aim to message. Some employees may be shy about asking compensation questions; others may ask a lot of questions. Clear statements help both types of employee.
Giving an employee the context of their compensation message also helps. To explain that the firm did poorly (or well) in a year is not an excuse. It is a key driver that directly affects compensation. Employees value honesty in these situations and they will value the directness of why a compensation decision was made. Give them context to help them understand.
Keep the conversation short.
A key to talking about compensation is not to do it often. Businesses that focus on an employee’s compensation every single day attract employees who are focused on compensation more than anything else. Very few businesses succeed that way. Yes, compensation should be discussed on a regular schedule, but talking about it too often doesn’t help. Set goals, talk about what potential compensation could be if those goals are hit, and then review once goals are measured.
Delays around compensation messaging add to employee anxiety and make them doubt what’s coming, potentially increasing your retention risk. Be on time with this communication.
Compensation messages are some of the most serious messages you will send to your employee. You may be light-hearted or strive for a "fun" company culture, but this is a serious moment for most employees. As in all important conversations, invest the time to prepare well. Because you are providing data to an employee, it’s ok to have a few notes in front of you to help you get the message exactly right. And remember, even when the message is a difficult one, the right approach can make a big difference.