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How Resolving Pay Inequity with Pay Transparency Restores Trust in HR

This article is part of our series on sessions presented at Compference19. You can learn more about Compference20 here

Highlights from the Compference19 Session: When a Great Culture Doesn’t Cut It Anymore with Katie Webber, Senior HR Manager of Snagajob

 

2018 was a difficult year for Snagajob, the largest online marketplace for hourly workers in North America, particularly for restaurants and retail. The company had been through two rounds of layoffs, a new CEO, and the closure of an office in San Francisco. The best talent was walking out the door.

Knowing that something had to be done, HR dove into a compensation project that included rebuilding compensation structures from the bottom up, getting executive approval for a multi-million-dollar market adjustment to address pay compression, and becoming a more vulnerable and authentic organization through commitment to pay transparency and pay communications.

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PayScale was the backbone of the project’s success, helping the organization overhaul its compensation strategy and advocating for how pay transparency is a simple yet bold tool that can be used to make employees and HR teams feel like they are on the same side of the field.

The result? Turnover slowed, employee referrals rebounded, and the company experienced a radical shift in authenticity, ability to act, and trust in leadership and HR.

Here’s how it happened.

When Culture Doesn’t Cut It Anymore

Snagajob had a great culture, as demonstrated by having been on Fortune Magazine’s Great Places to Work list eight times in eight years. It was a company built on respect for workers with a worthy mission, work-life balance, generous benefits, team outings and events, and a commitment to making a social impact in the community.

But a great culture wasn’t enough.

Due to some market challenges in 2018, Snagajob decided to scale back operations and focus on one product line. Although this decision was strategic, it resulted in two rounds of layoffs, the closure of the San Francisco office, and the departure of the CEO.  Morale took a hit. And when word got out, employees started getting poached by competitors.

Soon, the company was bleeding top talent.

Why Employees Were Leaving

In exit interviews, employees revealed startling information. HR assumed that employees were leaving because they were concerned about the stability of the business, but in fact, most people supported the strategic decisions being made by the company. Instead, a significant number of people were leaving because of compensation.

Although chaos in the company was a catalyst, the real reason people were leaving was because they were more willing to listen to the recruiters reaching out to them on LinkedIn. When they did, they realized that unless they had joined Snagajob in the past year or two, there was a good chance that their pay was below market.

Snagajob had a problem with pay compression, meaning that employees who had been with the company longer were being paid less than new hires. A joke started circling around the office that to get a good salary bump at Snagajob, you either had to threaten to leave with another offer in hand or you had to actually leave and come back.

A lack of pay equity and unclear career progression coupled with aggressive outreach from competing offers made leaving an easy decision.

Getting Executive Buy-In to Explore Pay Inequity

Snagajob was challenged in how to address the pay compression problem. As a small company, they didn’t have much of a pay program to start with and it had been years since their salary bands had been updated. A market adjustment was sure to be costly and the company had just been through an extremely painful downsizing.

However, replacing all the lost talent was also hugely expensive. Instead of asking the CEO for a market adjustment outright, the SVP of People began socializing a need to explore the situation. HR presented data on business-critical roles leaving Snagajob for competitors because of higher pay and showed anecdotes from exit interviews and stay interviews that brought the numbers to life.

The evidence made it hard to deny that compensation was a problem. Getting executive buy-in to explore the situation further was essential as the CEO was the main influencer with the Board and the Board would need to approve any budget allocation for pay increases.

Learning to Think Strategically About Compensation

As an SMB with around 300 employees, Snagajob did not have a dedicated compensation specialist for managing employee pay. Once executive buy-in to explore the situation was achieved, HR had to learn how to do comp in a more modern and sophisticated manner. They started by speaking with colleagues and reading articles from PayScale, WorldatWork, and SHRM. For example, they learned about target percentiles and how to use bonuses and other forms of incentive pay to reach total comp targets according to a pay philosophy.

Snagajob had previously not explored the concept of total rewards. In order to understand what  employees valued most in their compensation and benefits packages, they launched a Total Rewards Survey. The survey was intended to assess three things:

  • Employee views on the company’s compensation program
  • How much employees valued each reward
  • How satisfied employees were with each reward

Snagajob chose to make the survey non-anonymous in order to collect deep demographic data so they could make educated decisions. Although employees were initially hesitant, some informal nudging and dialogue resulted in a 50 percent completion of the survey with representation across demographics.

The results of the survey showed that the top five rewards were the same across offices, teams, and age groups, which helped the organization define its pay brand with an emphasis on the importance of work-life balance, the company mission, flexibility, career opportunities and competitive compensation.

Because they had also tracked satisfaction, Snagajob was also able to assign a grade or performance score to each reward to determine the biggest pain points and opportunities. For example, if the average value for Base Compensation was 4.8 and satisfaction was 2.2, that reward received a 45 percent score, which was equivalent to a failing grade. That analysis showed how important it was to adjust base compensation in order to attract and retain talent.

Through this experience, Snagajob learned how central a compensation philosophy is to success in building a valuable comp program. A comp philosophy forces an organization to analyze its talent market and make foundational decisions based on what type of companies they compete with, how competitive they want to be with pay, and what role bonus pay and performance play in total rewards.

Getting Budget Approval for Compensation Adjustments

Snagajob turned to PayScale’s Customer Success Managers to help them build a new compensation structure that was more closely aligned to what their job positions were earning in the open market. Although the organization had previously partnered with PayScale to create benchmark jobs, they had only been using them to set new hire pay. The new compensation structure was to align all positions to the market.

The goal was to present a compelling business case to the CEO to make compensation adjustments. One key aspect of success was working with the finance team early on in the initiative. As the CEO had already blessed the endeavor to explore the situation, getting support and approval from the finance team was straight-forward. Indeed, the finance team supported the initiative by developing a model to tie compensation to tenure and performance, thereby influencing where an employee should objectively be in the pay band for their position based on their longevity with the company and the quality of their work.

Once Snagajob had a compensation philosophy, a revised compensation structure, and a compelling business base for adjusting pay based on both market value and business value, HR was ready to present to the board. The presentation included the findings of the total rewards survey, the current turnover rate, and the proposed solution to increase pay according to the new compensation structure.

Because the work had been done so thoroughly and with the blessing of the CEO and the participation of the finance team, this was relatively painless.  Although the board did not approve the total amount requested, they approved enough to apply substantial merit increases across the workforce.

Implementing and Communicating Compensation Adjustments

Now that they had an approved budget to work with, the organization needed a plan for communicating the adjustments. HR began to put together a pay communication plan with an emphasis on pay transparency for the whole organization. Communications kicked off with an all-hands meeting revealing the philosophy, specific elements to their new compensation program, and education around comp mechanics.  HR took the stance that more was better since pay is such a deeply personal topic.  Finally, during this meeting, employees were encouraged to go to PayScale’s online pay calculator to check pay themselves.  HR wanted to stress that they had nothing to hide, that they were on the same side as the employee.

Second, they scheduled follow-up conversations with individual employees and their managers about how their individual compensation would be impacted.  In the meetings, employees were given a compensation statement, showing their pay band, where HR thought they should fall on the band based on proficiency and tenure, and what they could do to increase their compensation.

Out of 250 meetings, only five didn’t go well. Overall, the transparency with which Snagajob communicated their approach to compensation helped set expectations. Employees had an idea of how the conversation would go coming into the meeting and the pay bands became useful tools for talking about career progression within the company. Now, leading up to our salary adjustment cycle, employees are empowered to have proactive conversations with their managers about how they can grow with the organization.

Thanks to a dependable, data-driven compensation structure, the organization is confident in their ability to get pay right, especially for their business-critical roles, such as positions in engineering, analytics and finance where the labor market sees more fluctuation.

Expanding on Transparency with Employee Engagement

Although compensation was a critical factor in employee turnover, pay wasn’t the only area where the organization was struggling. Interested to know how to increase engagement with remaining employees, the organization invested in a deeper employee engagement survey that plotted engagement drivers against engagement measures. Some of the questions were light and some were tough, such as “do you have confidence in executive leadership?”

The HR team promoted the engagement survey heavily and achieved an 85 percent response rate, which got the attention of the C-suite. The survey also showed that two areas of concern were executive leadership and communication. To get a more detailed understanding that would stand up against dismissal, HR initiated focus groups. When the results were presented to executive leadership, they understood the implications and resolved to make necessary changes.

HR led another all-hands meeting in which the results of the engagement survey were shared, putting the executive leadership team in a vulnerable position. Although the meeting was somber, there was a lot of head nodding. A concrete plan of action was put into place with the understanding that it would be iterative, with changes taking place one quarter at a time. At the end of each quarter, HR held another all-hands townhall to go over the survey and plan of action, recounting the successes and misses from the last meeting.

The transparency, vulnerability, and action were all tremendously well received. In combination with adjustments to employee pay, turnover slowed down, employee referrals rebounded, and people approached HR with admissions that that they finally feel comfortable advocating to their network that Snagajob is once again a great place to work.

Conclusion

It’s not easy to convince leadership to make big changes in an organization, especially when those changes are expensive and uncertain to produce the desired result. Success depends on two things: data and transparency. Snagajob would not have been successful in their initiative to increase employee retention and engagement without reliable salary market data and employee surveys.

But you can’t just stop there. True transformation requires participation and in order to get employees to participate, you have to be transparent about how you are addressing organizational problems, especially when they are as impactful to employees as pay. Regardless, you have to demonstrate to employees that you are on their side, that you want them to be rewarded for choosing to remain with you, and that you are committed to their career progression. Ideally, rather than just give them a pay adjustment, you will show how you got to that adjustment. This is what builds trust in HR.

With transparency, you can do so much more. Being a truly people-driven company requires vulnerability. It requires authenticity. It requires humility. Your employees are smart, so trust them. Don’t be afraid of fear or discomfort. Leverage data and tell a story. But above all, care about the relationships you have with employees and the experience employees have with your organization. That is the core function of HR.


Developing a new compensation strategy to attract and retain talent? Compensation management software with professional services from PayScale can help you assess the market, formulate a compensation philosophy and price jobs fairly and competitively to reduce turnover and build trust between employees and HR. Request a demo of PayScale’s compensation solutions to learn how.

Amy Stewart
Sr. Content Marketing Manager at PayScale
Read more from Amy

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