This is an excerpt from our recent ebook collaboration with BambooHR entitled Everything You Need to Know About Communicating Pay. Download the full ebook here.
In yesterday’s post, we looked at manager talking points when pay is low due to market forces. Today, we talk about how to frame the conversation when performance is the problem.
When Performance Doesn’t Warrant an Increase
This is a scenario in which an employee has not met expectations on their performance review, and they will not be receiving a pay increase. Likely, most of this conversation has already happened, and the employee is on a performance plan.
Still, they’re probably noticing their peers having compensation conversations, and it’s useful for the manager to go ahead and have the conversation with this employee — it’s another opportunity to talk about performance, reiterate goals and continue to coach them.
First, your considerations:
- How can they get up to par? You need to come to the meeting with info on what steps the employee can take to improve their performance
- What future potential is there? Perhaps they can move into a different role in the organization, or it would motivate them to hear what moving up a level or two in their current track would be like
Then, the conversation might go something like this:
- Start with appreciation – Thank you for your contributions toward XYZ (successful things) this past year
- Mention market movement – As we’ve been discussing, your performance in such and such areas can be improved
- Explain position in range – At this time, your pay is in the bottom third of your job’s range
- Share this year’s situation – Because of your performance, you are not eligible for an increase this go-around
- Open the door – Let’s set some goals and talk about how to bring you up to par with the expectations for your position. If you make significant improvements, you’ll be eligible for an increase next year. Let’s get something on the calendar in the next month or so to review your progress toward these goals
Even if an employee is on a performance plan, it's useful to talk about comp in the context of goals.
When Perception of the Increase Is Unfavorable
This is a frustrating situation: A manager works hard as an advocate for their direct report, secures what they believe is a fair and attractive increase for the employee … and it falls flat. The employee feels it’s unfair or not enough. This is a particularly tricky scenario because there are high emotions on both sides: the manager is frustrated and the employee is disappointed.
Quick aside on “negotiations” during increase/compensation review meetings: This should not be happening between manager and employee. Managers are advocating for their employees up front, even before the increase is approved. If the door is open to negotiation during this conversation, it becomes a detractor from the main message, which is, “We value you and here’s what we’re doing about your pay to reflect that.” Encourage managers to make it clear that this is an increase, they’ve advocated on the employee’s behalf and it’s not open for discussion (if that’s true for your organization). Doing so will help managers avoid the vicious cycle of negotiating every little thing, and ultimately it saves time and the employee’s moral/satisfaction/engagement.
Okay, so the considerations:
- Will they perceive their adjustment as fair?
- How connected are they with others? How likely are they to talk with other employees about their raise?
Have the manager make note of any employees they think may not be happy about their raise, so they can head off any attempt to negotiate early. Ideally, they’re not caught off guard when an employee expresses disappointment.
Some talking points:
- Reiterate accomplishments – Start the conversation by reiterating their accomplishments
- Re-focus on individual objectives – Focus on what they’ve done and how their pay is linked directly to those accomplishments. Explain that individual increases are based on each employee’s accomplishments relative to their goals
- Remind of market value – There is market value for your job
- Discuss why their pay is fair – Again, you’ve already advocated for this increase amount and should be able to articulate how it relates to their performance and where they are at in range. Some things to mention in this regard might be performance, their experience and their position in range (maybe they’re already at the top and based on your tiered increase policy, their raise is small)
- Open the door – Dig deeper to determine what they’re really concerned about
The key is focusing on the employee in front of you and not attempting to explain for what another employee shared. Make sure the manager understands that.
Want more tips and tricks for effective compensation communications? Download the ebook Everything You Need to Know About Communicating Compensation today!
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What’s the best advice you’ve ever received about communicating compensation when the news will be tough to hear? We want to hear from you! Share your story in the comments.