How to Talk about Compensation

In my experience, most company leaders struggle to find the right way to communicate to their workforce in a manner that is both pragmatic (defines clear expectations) and inspiring (provides a compelling vision). Most are still steeped in old models of communication that have them talking "to" employees rather than "with" employees. If this is an issue with general communication, it is only compounded as a CEO, business owner or other leader attempts to explain the latest and greatest compensation strategy that is about to be rolled out. Usually, such plans are introduced without proper context or linked to a broader picture. As a result, they often fall flat, are misunderstood or otherwise come up short of their intended purpose.

A recent Harvard Business Review article provides a good template for how corporate leaders should approach communication in general and which, in my view, has particular relevance to discussions of remuneration. In their article entitled Leadership is a Conversation, authors Boris Groysberg and Michael Slind address what they refer to as the four elements of conversation and how a "new model" of communication should treat each of those components:

  • Intimacy--how leaders relate to employees
  • Interactivity--how leaders use communication channels
  • Inclusion--how leaders develop organizational content
  • Intentionality--how leaders convey strategy

The authors offer the following guidance relative to the each of these elements. Following their insights, I offer my own observations as they relate to the compensation conversation.

  • Intimacy (HBR)--Communication should be personal and direct. Leaders value trust and authenticity.
  • Intimacy (VisionLink)--The compensation discussion is an extension of a larger conversation about how the company's future depends upon the unique abilities of its key people. Growth is only possible because of the contributions of the company's people. Consequently, the rewards conversation must convey a sense of partnership with employees--especially key producers. It should be personal in nature and center on the idea that the company wants to share value with those who create it. It must be an approach that builds trust and reinforces the commitment company leadership has to those who make a significant contribution.
  • Interactivity (HBR)--Leaders talk with employees, not to them. Organizational culture fosters back and forth, fact-to-face interaction
  • Interactivity (VisionLink)--Business leaders must make themselves continually aware of the "mindset" issues that grow out of the compensation arrangements they set in motion. Do employees feel more connected to expected results and have a sense of stewardship about them? Do they feel empowered to achieve the results because the dialogue with management surrounding expectations has been both pragmatic and inspiring? Is the reward meaningful enough to evoke the right level of purpose and passion from employees? Soliciting feedback through both formal (surveying) and informal (conversation) is critical to finding out the answers to these kinds of questions.
  • Inclusion (HBR)--Leaders relinqush a measure of control over content. Employees actively participate in organizational messaging.
  • Inclusion (VisionLink)--Companies must initiate ongoing mechanisms for employees to be reminded of what they have, how rewards values are maximized and where to go for answers to questions. In addition, their views must be solicited and measured in a way that allows the company to assess whether a proper link is being forged between vision, business model and strategy, roles and expectations, and rewards.
  • Intentionality (HBR)--A clear agenda informs all communication. Leaders carefully explain the agenda to employees. Strategy emerges from a cross-organizational conversation.
  • Intentionality (VisionLink)--Leadership adds context to any rewards discussion. They view compensation as a strategic tool to communicate what's important to the organization and to eliminate "silos" and other barriers to building a promise-based management system--one in which all parts of the organization work together in delivering on the company's brand promise and value proposition to the marketplace.

When companies begin to adopt this kind of framework for communicating rewards, they find that it becomes almost more important than the nature of the compensation strategy itself. Companies can have a top-tier rewards program, but if it isn't communicated and reinforced properly, it will never fulfill it's purpose. Many times, this is the biggest element that keeps a business from achieving breakthrough results and having its pay strategies build a unified financial vision for growing the business.

For more ideas on this subject, view our webinar entitled "Five Success Factors Every Compensation Program Must Fulfill."

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