PayScale’s 2017 Compensation Best Practices Report suggests that managers’ skills at communicating with employees about pay are a blind spot for many organizations, Mykkah Herner, PayScale’s modern compensation evangelist, writes at TLNT:
The research revealed a number of interesting insights when it comes to managers, including:
- Only 11% of respondents strongly agree that employees have a great relationship with their direct managers.
- A mere 17% strongly agree that there is frequent, two-way communication between managers and employees.
- Just 19% were very confident in managers’ abilities to have tough conversations about pay.
- And yet, 38% of managers are communicating compensation information to employees; that number jumps to 53% among enterprise organizations.
Even with low confidence in manager’s abilities to talk effectively about pay, only 30% of respondents said their company offered managers training about conducting compensation conversations. And, of those 30% who do offer training, most organizations still lack confidence in their managers’ ability to talk about pay successfully.
“Talking about pay is important,” Herner adds, “because it establishes the groundwork for a trusting relationship,” but there is a bit of a chicken-and-egg problem with that statement: The best managers are those who maintain frequent performance conversations with their direct reports, which both builds trust between manager and employees and better situates each party for the pay conversation. However, for most employees and managers, the first formal meeting of the year is the performance and pay conversation, which is the best opportunity to establish that foundation of trust. So while it makes sense intuitively that effective pay conversations lead to more trusting relationships or merely coincide with them is harder to prove.
However there is a far more important reason for managers to be good at pay conversations, which is that effective pay conversations improve employee pay perceptions and strengthen the link between performance and pay.
Our brief on Optimizing the Role of Managers in Pay Conversations (which CEB Total Rewards Leadership Council members can read here) finds that when managers focus on communicating the highest-impact themes to employees (e.g., your total pay can grow over time, you can influence your pay through your performance, you can affect collective outcomes that determine your pay), they can increase employee perceptions of pay by 14.3 percent, which translates to positive talent outcomes. Another CEB Total Rewards study, Rewards in the Era of Performance Management Transformation, finds that when managers focus pay conversations on employee contributions instead of the pay/performance process, employees are 48 percent more likely to understand the link between their performance and pay.