7 Ways to Cultivate a Culture of Trust Through Compensation Communications

Employee compensation is a sensitive topic, and conversations about pay can be tricky. Clear communications are key to ensure that your people understand their compensation. We recommend 2 key times to talk to your people about compensation: (1) throughout the ongoing performance cycle and (2) during compensation design changes. Here are 7 tips that will help you achieve just that.

Communicate Through the Ongoing Performance Cycle

1. Proactively Manage Expectations Around Pay

You can help your people understand your organization’s compensation and total rewards philosophy by explaining your approach to annual increases and outlining how they work. By providing this information, you can help manage employee expectations. Be clear about what will happen, as well as why you follow a certain approach. When employees understand what’s within their control and what’s outside of their influence, annual increase conversations become easier.

Even if employees are not thrilled with the outcomes, they’re more likely to accept what’s happening when they’ve been properly informed, because they’ll better understand the factors that determine their pay and how they can influence them.

2. Ensure Your People Understand Their Bonus Plan

Start with strategy. How do you want your people to feel? If, like most annual bonus plans, the intent is to motivate your people to produce the best results, detail what an individual can do to maximize their bonus potential. Be as specific and straightforward as possible, so there’s little room for confusion when bonus time rolls around. Here are a few things to include in any outreach:

The incentive formula—How are annual bonuses calculated? How much influence does each individual have on the outcome? What percentage of the bonus is contingent on organization-wide performance versus individual contributions?
Measurement metrics—What can an individual keep track of to understand how they’re performing against the formula? Are there revenue-related requirements? Is it based on billable hours or another contribution metric? Share everything you can, to give your people the most information possible.
Clear communication on the revenue targets and bonus pool funding—A lot of organizations try to dance around this issue, but avoiding reality creates frustration and unwanted turnover. Be transparent about what’s not in an individual’s control, and share frequent updates about the company’s financials. When a quarterly report comes out, consider sharing how the outcomes stack against the annual bonus pool. For example, “For Q2, we’re below our revenue target. If we continue on this path, annual bonuses will be paid out at 30% of the maximum.” This can help in 2 ways: (1) Individuals who can influence the outcomes understand the level of effort needed to move the needle, and (2) it’s less likely that the bonus-eligible population will be shocked when final results are shared.

Establish and Build Trust Through Compensation Design Changes

3. Take Command of the Narrative, Especially When Things are Changing

Helping people understand the purpose and goals of what you’re trying to accomplish from the start of a project builds trust and dispels rumors and disinformation. To explain what you’re doing, you’ll want to say something like, “We’re modernizing our job descriptions and levels to create clearer career paths for our people. These updates are critical to the sustainability of our organization and will be designed with your future here in mind. There will be a lot of changes, but we can promise you now that no one will lose their job or experience a pay decrease because of this initiative.”

Of course, only say these things if they’re true. Setting the tone early in the project will squash the grapevine rumors before they begin to grow, eliminating unnecessary distraction and productivity issues as your organization works through updating job descriptions.

4. Communicate Early and Often About Potential Changes to Job Levels or Pay

Again, this is a time to get in front of any assumptions your people may make. Set reasonable expectations for any pay increases that may be implemented, so you have enough time to communicate about what’s changing, why, and when.

You may say, “As you know, we’ve been benchmarking our job levels and pay. We plan to share the results soon, as well as a timeline on what to expect next.”

Then tell your people when to expect an update. Consistent communications help build trust with your population. If they know when to expect news—and you provide updates as planned—they won’t be swirling around your silence. They’ll be focused on the task at hand and ready to receive an update at the planned time.

5. Brand Career and Compensation Communications

If your organization is going through a compensation modernization study, make sure communications are part of the plan from the beginning. This can help get your people engaged in the changes that are happening and build trust through consistent, recognizable outreach. When keeping people informed is not part of the plan, the misalignment of expectations can lead to anger, frustration, and a drop in engagement. Keep your people in the know by planning ongoing communications to manage expectations, as well as to provide opportunities for questions and feedback.

6. Communicate Without Confirmed Information

When communicating about potential changes to pay or job levels, none of the decisions must be finalized before you communicate. It’s tempting to wait until the changes have been defined before you say anything, but when 5, 10, 50, or 100+ stakeholders know about what’s happening in your organization, it’s just a matter of time before the whispers begin and unwanted attrition starts. Keep your people engaged by sharing what you know and committing to keeping them informed.

7. Get Feedback

Ignoring pay issues won’t make them go away. It’s important to listen to your people when making any updates. Give your people a way to share how they’re feeling by conducting focus groups and surveys. These insights will help you design your compensation strategy and will help ensure that your outreach is effective. Don’t assume that you know what your people want and value without asking them.

By guiding expectations about your compensation philosophy, approach, plans for the future, and how your people can influence their pay, you’ll build a deeper appreciation for the investment you make in your people.

We’re proud to work with organizations that value their people. If you want to learn more, we’d love to talk.