The Compensation Disconnect: Do I Believe You?

My colleagues and I recently completed a research survey with our customers on the topic of compensation. This article shares a few insights from the survey; in particular, our discovery that there is a disconnect between employees and employers on compensation.

SAP SuccessFactors Compensation Infographic
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The survey data points to something many of us have experienced. When compensation numbers, messaging from managers, and the overall performance of the organization we work for do not align, this raises questions and doubt. Based on our research findings, I think the problem regarding compensation is that employees might not believe what they are told. More on that later. Here are the learnings from the research and an infographic with survey specific themes.

Expectations Do Not Match Execution

Organizations want to get compensation right and pay their employees for the value of their contributions. They want to communicate how decisions are made so that employees understand the numbers they receive. But this isn’t working as well as it could for most organizations. Seventy-six percent of our respondents believe compensation decisions are made fairly and equitably, yet only 48 percent of those organizations believe employees perceive compensation decisions as fair and equitable.

Employees want transparency and clear and open communications on compensation. Fair enough right? Again, this doesn’t exist in many organizations. Fifty-one percent of organizations rated their training for employees on how compensation decisions are made as effective, while only 25 percent of organizations believe employees understand how compensation decisions are made.

Back to the Basics

The fundamentals of compensation are not as solid as one might think. For instance, we found only 60 percent of business leaders agreed that compensation decisions positively impact overall company performance. Forty percent are not seeing the value in it. HR experts told us they are held back from improving compensation processes and realizing more business impact because of the following challenges:

  • Ineffectiveness of compensation decisions
  • Ineffectiveness of communications of those decisions and
  • Lack of transparency around the entire process

Why after all this time and focus on compensation are we still saying it’s not making an impact and that communications and transparency are still the problems? There is no singular solution for this, but much of what is wrong here may rest with the answer to one simple question – “Do I believe you?”

The Question: Do I Believe You?

All the manager training in the world will not solve this problem. It’s bigger than that. Let’s not put all the burden and blame on managers. I think it’s an organizational problem. If the organization you work for has a culture of trust, transparency and doing the right things because they are the right things, and if leadership is genuine and you’re on board with their messaging – then compensation discussions will be more believable. Compensation newsletters, pay tables and market surveys or HR guidelines will be more readily accepted as useful information.

Conversely, if an organization has a lack of alignment, says one thing while doing another and values other elements of business in lieu of or at the expense of paying employees fairly – any compensation conversation will be suspect. This is mostly about culture. Changing the design and communication of compensation methods can help, but ultimately people will not believe compensation is fair if they do not trust their organization to be honest about how compensation decisions are really made.

Tangible Takeaways

Here are a few suggestions for you:

  • Do more live manager training and fewer email packets. Help managers communicate a genuine story that reflects your organization’s culture and values.
  • Help managers get more comfortable with the “messy conversations” versus relying on excuses such as “the HR guidelines I have are X so I have to give you Y percent.”
  • Have continual compensation and performance related discussions throughout the year including quarterly business results, the influence of key business events that have happened and the individual’s contributions and development. This will help shape a culture of transparency and honesty versus the year end “here’s what happened this year and here’s your raise, thanks.”
  • Walk the talk every day with sincerity. Every manager’s messaging must align with the messages that come from top management in newsletters and press releases. None of this “sorry there isn’t more money for raises,” then in the Sunday paper it gets published that the CEO makes a record high salary and profits soar, to the employee’s surprise.
  • Employees need metrics. How can they achieve more and make more money? Help employees see the path or options for success through more details and fewer vague statements. Best performers and millennials in particular might not tolerate a lack of clarity for long and could choose to work elsewhere.
  • Equity rules. Everyone thinks they are probably worth more than they are to their employer, but we all want to feel like we are paid fairly. That voice deep inside each of us knows what that fair number is though we won’t admit it very often. The goal of each compensation conversation is to try to get close to that fair value and keep things real as pay information does get out and we all know employees talk. And when they do, would you prefer they complain how cheap the organization is or brag about what a great place it is to work?

These six steps can help minimize the compensation disconnect that still exists and will help enable a culture of “I believe you.”

Greg Selke is vice president and HR thought leadership executive for SAP SuccessFactors.