Whether you want one or not, every organization has a pay brand. Your pay brand is the way employees feel about the pay and the rewards that your organization and their experience working for you. How would you rate your pay brand among employees and existing candidates?
If you’re thinking that there is room for your organization to strengthen your pay brand, you’re not alone. In PayScale’s 2019 Compensation Best Practices Report, we found that 60 percent of organizations feel that their pay brand is not good among their existing workforce.
In this video, I chatted with Tim Low, Senior Vice President of PayScale, about the concept of crafting a pay brand.
Prefer to read instead? Below is a transcript of our conversation.
JC: Hi. I’m joined today by Tim Low, Senior Vice President of Marketing at PayScale, and we’re here to talk about the concept of crafting a pay brand. Hi Tim.
Tim: Hi JC.
JC: So, whether you want one or not, every organization has a pay brand. Your pay brand is the way employees feel about the pay and the rewards that your organization and their experience working for you. So this year in our Compensation Best Practices Report, we talked a little bit about this concept and we asked organizations to self assess their pay brand. We found that actually, 60% of organizations feel like their pay brand is not very good among their employees. And so I wanted to talk to Tim about how do you craft your pay brand and make improvements there? Last year, you actually wrote the foreword to the Compensation Best Practices Report, and in there you said that, “To win today organizations need to realize they’re playing both a talent game and a perception game.” Can you talk about what sparked that for you and what do you mean by that?
Tim: Yeah, sure. Thanks for having me. I think, you know, talent and perception, I think what sparked it was really was I had had a whole series of conversations with customers and actually maybe some people that I met at the Total Rewards Show. And we ended up having really deep kind of functional conversations about the mechanics of compensation management and of course, that matters a lot, right, that’s the business that we’re in. But what struck me was that there is this sort of business imperative for companies right now, especially in this talent economy which is so, so tight and so, so competitive and that was really, it kind of boiled down to those two things. It’s, you’re managing perception about how you treat people and it needs to be part of sort of how you think about attracting talent and keeping the people you’ve worked so hard to bring in already.
JC: So we’ve welcomed a bunch of new customers to PayScale over the past few years. What’s your thought on what really matters in compensation today?
Tim: Yes, that’s true, we’ve grown quite big, and we’ve helped a lot of companies build compensation programs. I think the thing that really matters in 2019 is this idea that we’ve been kind of formulating for a few months, and it’s the idea of values-based compensation and what we mean by that is that a little bit how we were talking about building your pay philosophy and then communicating it clearly to employees.
This idea of values-based compensation is just matching up what you say you care about with the way you’re actually treating your employees and kind of making that promise to the market too. So it encompasses the ideas of fairness and transparency and some of those things that are important in and of themselves, but we think that employees are looking for an organization that’s going to value them and appreciate them and an organization that is authentic, and a lot of those concepts are encompassed in this idea of values-based compensation.
JC: So I found it really interesting when we asked organizations to self-assess their pay brand. You know, 40% of them said their pay brand is neither good nor bad. What do you make of that?
Tim: I mean, I think 40% is a relatively modest number, and I think that, you know, just like your corporate brand or your employer brand, the way that it’s perceived is in the eye of the beholder. So I think that for 40% to sort of respond that their pay brand is pretty good but for 60% to feel differently is sort of a shockingly low number. And I think what it says is that most organizations are in a position to do some better work and to guide the perceptions of their company as a great place to work with a little more intent than they are doing today.
JC: Okay then, let’s dig in. What does it mean to be more intentional about your pay brand? How do you go from bad to good or from so-so to great?
Tim: Yeah. I think there’s a little bit of a misconception amongst our customers sometimes in the market broadly that the only way to do better at this is to pay more money, and that’s actually not the message. I think that we’ve seen organizations make some poor choices, sort of spreading three percent raises across their organization, the same for everyone, and missing out on a chance to actually really reward those people that are high performers or really take care of people that are in competitive jobs and things like that. So I think that’s one example but it really is sort of this idea that you can shape the perception by sharing some information about the way you run your whole compensation program.
JC: Can you give us some examples of companies that have been good about sharing information, that have been good about crafting their pay brand with intention?
Tim: Yeah. I mean, a couple of them spring to mind. One of them is a PayScale customer that I got to know a little bit last fall, Patagonia. They have a really, I think a holistic approach to their compensation program and they’ve thought with a great deal of care about the message that they want to send to their employee population and to the market about, you know, which is where they recruit from, about the way they pay.
And in particular, I think Patagonia did some very good thinking about understanding where they operate in some high-cost markets and making a choice to actually pay above the prevailing wage or the sort of minimum wage for those markets because they wanted all of their employees to have jobs where they could support themselves even if they were sort of entry-level positions. That’s one example.
I think another example that springs to mind is, you know, Costco is quite well known for paying their employees well and then expecting a lot of their employees in terms of how they take care of their customers. And I just think that that philosophy and the fact that they are very explicit about the fact that they value their employees first and then they trust that their employees will take care of their customers is also another really smart example of paying a particular way and hoping to get a better outcome.
JC: Yeah. So you’re saying: “whatever you want your employees to do, you should find a way to incentivize them to do that through your compensation practices”?
Tim: Yeah. I think a lot of companies feel like the only thing that matters is what they pay, you know, the number, you know, they’re paying higher, they’re paying lower, they’re paying sort of at market or above market. And of course that matters, you know, people are going to pay attention to what you’re paying but what we’ve seen is a huge opportunity to kind of build rapport and relationships and employee engagement and commitment by sharing also the why and the how of pay.
So the why is, what do you value as an organization? If you have a list of corporate values or things that you care about that you try to train all of the employees on, you know, what are those. And then how does your pay reinforce that, right? So if you say you value lifelong learning, well what does that mean? Are you rewarding people who actually acquire additional skills at work or through educational programs or their own initiative? And so that’s an example of kind of the why. How do your paying practices support what you say you believe in and what you want to reward as a company?
We also have found it quite compelling for employees to comprehend better, and the how is “what are the mechanics of this”? Do you benchmark your jobs? How do you come up with your initial salary ranges, right? And if you are using data from different providers, whose data do you use and why? How did you evaluate that and do you share that information with your employees? We find that building sort of that type of detailed information can build rapport and employees are, then they start to feel confident that you know what you’re doing and then they feel differently about the way that you’re paying. And so each of those elements sort of the what, the why and the how play a role in building kind of that trust and engagement with employees about the way that you pay people.
JC: Do you think it would be a good idea to have organizations write this down and share this with employees?
Tim: Yeah, I do, and we encourage our customers to do that. For one thing, it’s just a really good exercise in, we call it your pay philosophy and thinking through and sort of talking with your executive team, your management team about those things that you say you value, that you want to value, that you want to encourage. It’s a very good management exercise, and then as is the sort of exercise of saying, “Does our pay align to these things that we sort of publicly espouse?” Right? And so we do think that’s a really great exercise for companies to go through so that they can be authentic. I think there’s nothing that breaks trust more between an employee and employer for the employee to experience an action that is sort of incongruous with the company’s stated objectives. And so by sort of co-creating that paying philosophy document, you’re ensuring that the way you act is actually aligned with what, the story that you’re telling to your employees.
JC: Yeah. I think that’s a really great point. I really like that. So in terms of communicating pay decisions and rationale to your employees, what advice would you give to HR leaders to improve the way they communicate especially coming from a marketing perspective?
Tim: Yeah. I think there are some kind of some experiences from marketing that lend themselves to being practiced a little bit more in HR. One thing that we discovered in our primary research over the past several years was that there was a lot of organizations — particularly in our customer base — that are doing a good job with building their compensation programs, with the mechanics of their compensation programs, they’re very now top of the market dynamics for the different roles and they’re conscious about pay equity and fairness and things like that.
But a lot of them haven’t taken that to the next level where they’re communicating better with their managers and really with the employees as effectively as they could be. So that’s kind of a big “aha” for us was to find out that even organizations that are doing a good job on paper with their compensation program are sometimes not benefitting, because their employees don’t know that they’re doing a good job. They haven’t told them, they haven’t explained it, they haven’t actually walked through the what, the why and the how in any detail and so a lot of their employees still feel like they’re underpaid. And it’s really a communications challenge and a communications job as much as it is an actual compensation challenge.
JC: Right. Well, thank you so much for joining me today. Before I let you go, are there any…do you have any last word of advice for HR leaders and business leaders who are trying to get pay right for their organization?
Tim: Yeah, a little bit. I think that, you know, compensation is one of these topics that has felt taboo for a long time, and for companies that are willing to kind of step into it to communicate actually more about it not less, I think there’s a real opportunity to show your authenticity and to make your company a place that really is attracting to top talent.