Do We Stink at Pay Communication?

Well, let's just say that there appears to be ample opportunity for improvement.

The results of a recent research study, Rewards Communication and Pay Secrecy, conducted by WorldatWork, Dow Scott, Ph.D. (Loyola University), and Hay Group, suggest that communication may indeed be the Achille's heel of our reward efforts. 

Select findings from the research indicate some troubling disconnects in the areas of base pay -

With respect to base salary practices, the majority of study respondents (WorldatWork members) indicated that "most" (60%-80%) to "all" (80%+) of their employees do not know or understand:

• The salary range for their own position, or
• The goals, rationale or intent of why base pay increases were distributed the way they were.

Further, 21% of study respondents reported that up to 40% of employees would not understand the amount of the increase they would receive.

The picture for variable pay practices is not much prettier -

While 70% of respondents do tell employees their variable pay targets, the remaining 30% either do not establish targets or don't make a practice of communicating them to employees.

And while a majority may communicate the variable pay targets few appear to communicate actual payout metrics, including:

• Payout based on performance targets (only 20%), or
• Payout for each level of performance (14%).

I find these results to be nothing short of stunning.  Recent research suggests that our number one priority for our reward programs is an increased emphasis on performance-based pay.  That being true, how on earth do we expect to drive employees' performance with pay when we are unable or unwilling to explain the basic mechanics of these pay programs to them? 

Clearly there is work to be done here, and the study does provide helpful information and insights on where to begin.  For example, respondents indicate that individualized compensation or total reward statements appear to be the most effective single method for communicating reward information - but that using multiple approaches (i.e., a combination of written, face-to-face and electronic) increases overall communication effectiveness.

The authors of the study will be examining results in more detail at the upcoming WorldatWork conference in Philadelphia (May 20-23), so if you're planning to attend, this might be a session worth checking out.  For more information on the study, contact WorldatWork.

Comments

[Dan McCarthy]

Ann -
Stunning indeed. And what a wasted opportunity. We seem to spare no expense when it comes to educating our employees about their 401Ks, health insurance, harassment policies, and other aspects of their work. But when it comes to what probably matters most to them – their pay – we shroud it in secrecy.
Transparency regarding compensation would be a good first step – then, if we really want to get crazy, actually help our employees understand how they are compensated.

[Ann Bares]

Dan:

Crazy indeed. Next thing you know, those employees will want information on how the business produces value and then -- gasp! -- they might start doing things to improve business performance.

Thanks, as always, for reading and sharing your thoughts.