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Compensation & Benefits

Published March 2010

Compensation Conversations

  Marcia G. Rhodes

Most talent managers know that effective rewards communication helps motivate employees, build commitment and drive business performance. But that understanding doesn't always translate into action, and discontent and turnover are often the results.

Imagine the following scenario: A hard-working professional in the consulting industry laments, "I have not had a pay raise in seven of the nine years I have worked for my firm." When pressed on how she could make ends meet with the rising costs of groceries, utilities, fuel and general living, she said, "Well, I do get a performance bonus tacked on to my final paycheck each year. And my employer still pays the majority of health care premiums. But still, don't I deserve a raise?"

This conversation is all too common, and this employee isn't the only one unaware of the huge dollar amounts organizations spend on cash and non-cash compensation. An organization's total expenditure in rewards — pay, benefits, work-life, training and recognition programs — adds up quickly. In years past, employers would communicate the compensation and benefits package while recruiting an employee and again when that employee earned a promotion. But with the current prevalence of pay freezes and benefits cuts, focusing communications on pay and benefits alone is no longer enough and could even backfire.

Conceptually, most talent managers know effective rewards communication helps motivate employees, builds commitment and drives business performance. Unfortunately, this conceptual understanding does not always translate into action. In fact, the Watson Wyatt "2009-2010 Communication ROI Study" of 328 employers found that many companies apparently will scale down their communication to workers. During the next 12 months, 28 percent of companies plan to increase communication to employees about business performance, yet only 19 percent plan to increase communication to employees about pay. Whether a company is enjoying an economic recovery or still struggling, other organizations are recovering, and they're competing for the best talent. When the economy picks up, employees will have more options for employment elsewhere, making this an important time to express what's what with employee pay.

Show Them the Value

A 2009 Prudential Financial study, "Show Them the Value," found a clear linkage exists between the effectiveness of employee communications and employees' perceived value of benefits. Yet despite the need to communicate with employees, study after study has found that employers and workers think communications are not as effective as they could be.
Symptoms of communication problems may include:

• Lack of understanding — employees ask the same questions repeatedly.
• Lack of participation in benefits such as 401(k) accounts, flex spending programs and work-life or voluntary programs.
• Employees perceive they are not paid competitively or are not rewarded based on job performance.
• Perplexing or unintended behaviors occur, such as employees leaving to join the competition for a negligible pay hike.
• Line managers communicate programs to employees in a way that suggests even they don't understand some or all elements.
• Messages from leaders are complicated or convoluted.
• Comments posted on internal blogs are mostly negative.

Communicate at All Levels

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