Your employees are hoping for a raise this year.
And for compensation professionals, the bad news is that you may not have good news to give them.
Yes, the average budget for salary increases in 2019 is holding at 3%, according to WorldatWork and Willis Towers Watson. And yes, there’s more for star employees and bonuses.
But even though total compensation is up, wages aren’t keeping pace with inflation. Reasons for this lack of wage growth are complicated, but the fact is that raises won’t be enough to close cavernous gaps in salary satisfaction. In its 2018 Labor Day Survey, the Conference Board reported that only 43% of employees are satisfied with their wages, and a paltry 27% were satisfied with their bonus plan.
Together, data like this signals a ripe opportunity to improve employee satisfaction — which we know drives retention, performance, and productivity — by means other than upping compensation.
Start with Managers
The most direct line to an employee’s satisfaction runs through their manager.
In its State of the American Manager study, Gallup found that managers account for at least 70% of the variance in employee engagement, a key measure of satisfaction at work. And much of this variation can be tied to a manager’s communication skills.
The arguably dismal state of manager communication is difficult to overstate. In its survey, the Conference Board found that only 38% of employees are satisfied with communication they receive at work.
Given that employee understanding of your pay structure is a product of how well managers explain the system, investing in a comprehensive training program focused on managers makes good sense.
Here are five steps to empower your managers to bring your compensation philosophy to life and elevate employee understanding and satisfaction.
1. Find Out What Managers Know and Meet Them Where They Are
Reaching managers is no simple feat. First, they’re busy. According to recent research, 59% spend more than three hours each day on administrative tasks and 44% frequently feel overwhelmed at work. Second, they’re intimidated by tough conversations. In fact, a 2015 survey led by Harris Poll found that 69% of managers are uncomfortable communicating with employees at all.
Any resources and training you develop should be tailored to a manager’s needs and accessible within the context of their responsibilities and work environment. If you can, survey managers to find out what they know, how they feel about talking compensation with their staff, what they need to support better conversations, where and when.
Their answers will give you a clear vision of what’s needed to close knowledge gaps, correct misperceptions, counter negative emotions and otherwise meet their needs.
If a survey isn’t an option, you can still prepare broadly applicable training materials and resources.
2. Assemble a Manager Toolkit
Prepare a resource packet for managers that gives them all the information necessary to both understand and explain their compensation decisions, including:
- Your written compensation philosophy. If you’re among the 38% of organizations who haven’t yet documented your comp philosophy, now is the time to do so, as this is the cornerstone of your manager toolkit.
- The basic elements of compensation. Define merit, bonus and incentives, as well as key concepts like comparatios and the difference between a merit increase and market adjustment.
- Factors that determine compensation. Clarify how things like roles and responsibilities, market data, internal data and performance metrics influence pay grades, comparatios and merit raises, as well as other elements of an employee’s compensation.
- Written employee communication. An individualized total rewards statement gives employees the ability to better understand the factors determining compensation decisions. In addition, it can serve as a prompt, to ensure managers don’t leave out important elements in their employee conversations.
- Relevant data. The best decisions are informed by relevant data. Providing managers with things like historical pay progression, performance indicators, talent assessment (potential, loss impact, etc.) and internal or external bench-marks helps managers make unbiased decisions that align with your comp philosophy, and it helps them convey that alignment to employees.
Find out what managers know, how they feel about talking compensation with their staff, what they need to support better conversations, where and when.
For example, one of our clients generates custom reports with clear graphics that compare average merit and salary adjustments for a given manager with aggregate data for their business unit. By seeing how they stack up, by salary band or by gender and ethnicity, junior managers can ensure their decisions are aligned with budgetary and equity targets — and then explain that alignment to their employees.
Together, the data and context in your manager toolkit will define your principles and programs, clarify the connection to market and business drivers and establish a foundation of fairness and transparency that will underpin manager communications.
3. Develop Training to Maximize Retention
Obviously, if your organization has a learning and development (L&D) team, engage them early as your strategic allies. But if not, don’t despair. The means to create effective training for managers across your organization are within your reach.
As you consider what type of training to develop, remember that learning styles vary and that reinforcing messaging improves retention. The classic benchmark for retaining information — known as the Forgetting Curve — tells us that people forget 40% of what they learn the day after they learned it. By 30 days out, they’ve forgotten it entirely.
With that in mind, consider using multiple channels or tactics that give managers the option to learn their way. Examples include:
- Interactive e-learning courses
- In-person instructor-led training
4. Embrace the Power of Video Microlearning
While in-person training, webinars and sophisticated e-learning programs have certain advantages, they can be fairly resource intensive.
In contrast, short (aka microlearning) videos are comparatively inexpensive yet offer the same or greater advantages, such as:
- Flexibility: Managers can work training into their schedules and, with the right video platform technology, on their preferred device.
- Efficiency: Video training can — and should — be broken into short microcourses that deliver specific answers to common questions or challenges.
- Timing: Managers can take the training during the compensation cycle, right when they need it.
- Retention: The content- and context-rich experience of video makes it easier to remember information.
- Peer-to-peer knowledge sharing: Experienced managers can create short videos themselves, connecting managers to managers across your organization and fostering a culture of collaboration, mentoring and peer coaching.
Democratizing the creation of video training adds significant value, but absent that capability, you can engage seasoned managers to develop the training or serve as instructors on a video series created by your HR or compensation team.
Some video platforms further enrich the learning experience by enabling auto-captioning and translation to support your global management team, as well as facilitating and recording live or asynchronous Q&A and retaining it as part of the video course.
5. Embed Training Resources Within Your Compensation Process
A comparatively new technique for workplace training, embedded learning delivers information right in the flow of work.
For example, a manager accesses the compensation management system to assign merit increases and is prompted to watch a video outlining the comp philosophy. Or when preparing to meet with an employee, the manager can access a guide for how to frame the conversation.
Empower your managers to bring your compensation philosophy to life and elevate employee understanding and satisfaction.
Embedded learning is both effective and efficient. In another client example, Schwan Foods — a U.S. food manufacturer with 11,000 employees —combined total compensation statements with embedded learning within their compensation process. This approach not only raised employee understanding of compensation, but also decreased the training time by 40%.
Embedded learning also aligns with employee preference. In its 2018 Workplace Learning Report, LinkedIn noted that nearly half of employees prefer to learn at the point of need.
Creating a Virtuous Cycle of Understanding and Trust
With modest investment and the right technology, your compensation team can develop effective training that will help managers shift away from emotional conversations about salary and raises and toward compensation logic, total rewards, growth, and advancement.
By elevating manager understanding and training them to communicate accurately and consistently about compensation, you can build a foundation of employee understanding and trust, which raises satisfaction, engagement and motivation — the classic virtuous cycle.