A Manager’s Messaging on Money Matters
Preparing Managers for Employee Compensation Meetings
58% of Businesses are Missing a Major Opportunity
Business leaders / Managers… If you could increase the return on your company’s largest investment with a few small adjustments to your existing processes, would that be of interest to you? What if you could also increase the long-term motivation and engagement of your employees while decreasing risk?
One of my primary areas of focus within HR has been Total Rewards which typically includes compensation, benefits, recognition and development. The focus of these combined elements is to help attract, engage and retain high performing employees. For years, studies have shown that higher engagement results in higher levels of performance.
Recently, I read a statistic that 57.8% of organizations do not provide manager training on how to communicate with employees about pay. This is a huge opportunity to drive engagement and, most often, it’s missed because people don't understand how to properly structure these conversations. So let’s change that. Here’s a phrase I want you to remember… “A Manager’s Messaging on Money Matters”.
I want to share a few ideas about communicating compensation changes but there are some initial assumptions we have to make before we begin. In managing compensation activity, organizations will typically have some basic structural practices:
- A compensation policy that outlines its pay philosophy, the basis for increases, approval requirements, etc.
- Pay practices that are tied to the market (perhaps within a certain industry if the industry has unique characteristics that affect the supply of qualified talent)
- A series of pay grades that contain pay ranges. The pay grade represents the level of each position relative to others and the range includes a minimum, midpoint and maximum. Midpoint typically represents the median rate that is being paid for that position in the market.
- A merit increase budget. This is a figure that serves as the basis for decisions on the amount of an increase. Once combined, all increases will need to average out to this figure.
The Preparation
The first thing to remember is that it’s important to prepare ahead of time. This is part of ensuring that your employee perceives you value both their contribution and them personally. I can’t stress this enough. Everyone is busy with competing priorities but these conversations are critically important to employees. Taking the time to prepare helps you to communicate that value.
As part of that preparation, review your company’s compensation policy (assuming there is one in place). Ideally, it will contain information about the organization’s compensation philosophy. Some will choose to lead or lag the market. Most will set the midpoint of their pay scales at the market rate.
Remember that the market rate for a position represents the pay an employee should receive if they are completely proficient in their responsibilities and are making a solid contribution to key business results. Employees with less directly-related experience will often start lower in the range. As the employee’s base compensation passes the midpoint of the pay range, the size of future increases should be lower unless their contribution level is greater than what would otherwise be expected.
It’s also important to realize that the combination of compensation (base, bonuses, incentives) and health and welfare benefit premiums may need to be considered. If the company pays a lower base but also includes a strong bonus potential or an above average premium contribution, the combination may be comparable to the market.
Next, give yourself time to identify several key points that you want to share with the employee about their contribution and value to the organization. Are they performing at the expected level? Are they needing further improvement or are they blowing the doors off? The overall merit budget for the period, the employee’s performance and their current pay in comparison to the market will typically be the basis for the pay decision. Whether they ask or not, be prepared to explain how they can increase their skill set, raise their pay and progress further in their career over time.
Finally, set aside at least 15 minutes of uninterrupted time for the meeting. Extra time should be added if the employee is a high or low performer or if you believe the approved action will surprise the employee.
The Presentation
Once you meet with the employee, share the pay decision and help them understand how that decision was made. If a formal compensation structure is in place (pay grades, ranges, etc.), let them know. If an increase budget has been set, explain that it’s the final average of all approved increases. For example, if its a 3% budget, some employees should receive higher than 3% because of their performance and others lower but the overall average should be 3%.
Tactfully discuss whether the employee is below, at or above the market rate IF it is relevant to the decision that was made. If they are not receiving an increase because of poor performance, there is no need to cover it. If they are not receiving an increase because their current pay is well above the market, that’s a relevant factor that they should understand.
Acknowledge the fact that pay is an important element of an employment relationship and the organization wants to do what it can to retain high quality talent. Pay is part of that equation. Discuss the performance factors that were considered. If they are eligible for other pay programs, they need to understand the program’s function, objectives targets, their progress against those targets and their potential payout.
I realize this may be a tough pill to swallow, but if you happen to disagree with the pay decision that was made by leadership, own it anyway. I have sat in meetings where a Manager told the employee that they had recommended a higher increase but it was not approved by leadership. This does nothing but undermine the employee’s perception of both the Manager (because they were unable to get it approved) and the leader (because they didn’t perceive the same value). It is not appropriate to give them additional detail on the increases that were provided to other employees, the reasons behind them or the impact on the budget.
Provide whatever context you can as much as it relates specifically to that employee. Remember that a lack of context for the decision will lead the employee to create their own narrative and that may be significantly different than the truth. Reinforce their strengths and achievements, sharing any additional feedback on their contribution or value to the organization.
Promises and Potential Predicaments
As you present your views on the employee’s performance and the two of you explore opportunities for them to progress, it may be tempting to promise (or hint) that they will receive an additional increase if they follow through. Unless you have a signed check with you that you can turn over to the employee at that moment, do not do this. Promises such as these have the potential to create something called an implied contract and, if the increase isn’t delivered, legal trouble can follow. If you believe that additional increases need to be considered in the future, explain that you will ask Human Resources or your leadership to continue monitoring the situation and then follow through on that statement.
Remember that the media is currently overflowing with commentaries on pay equity and unfair pay practices. There is much work to be done. But do NOT make any comment that could insinuate that a pay decision was in any way impacted by race, age, religion, national origin, disability, gender, sexual orientation or anything of the sort. Pay decisions are to be based on market comparative practices, employee performance, structured compensation programs and the like. Even if the decision is made to provide a female or minority employee with a larger than normal increase because of their classification, leave that out of the conversation. If that’s the sole basis for an increase decision, have Human Resources or your leadership team provide you with specific talking points.
Following Through
Finally, remember that communication related to compensation and career growth should not be a one time event. Employees need to understand the total compensation package that they are receiving, including base compensation, incentives, benefits, development opportunities, etc. Discussions on business performance should also be happening on a regular basis, enabling you and the employee to adjust performance objectives and developmental plans as needed.
Keep in mind that compensation and benefits are only part of the full engagement equation. But if they are supported by effective communication, they can make a huge difference.
Do your compensation or communication practices need work? Are they driving higher levels of performance effectively? If not, let’s prepare to win. Contact HR Strategies Now.
July 12, 2021
Improve Your Decision-Making Processes
Are you ready for the next leadership transition in your organization? In today's fast-paced business environment, ensuring you have a strong succession plan in place is more important than ever. Organizations that neglect this aspect may face skills gaps and leadership shortages that can significantly impact their competitive edge. But how can you effectively integrate performance management into your succession planning strategy to ensure a seamless transition? Let's explore how these two processes can work together to empower your organization. Identifying High-Potential Employees A fundamental part of effective succession planning is the ability to identify high potential. Performance management processes open lines of communication and observation that reveal it. Clear performance measurements, delivered through fair and regular appraisals, enable managers to identify people who have the skills, experience, and qualities required to succeed as leaders. For example, an organization will conduct performance reviews to evaluate its employees based on their ability to solve problems, work in teams, and make decisions. The sooner these high-potential candidates are identified, the better it is for organizations as they work to build a strong pipeline of future leaders. It’s a practice that enables organizations to avoid significant disruptions when key positions become vacant because competent candidates are immediately available to fill the roles. Developing Future Leaders The development of identified high-potential employees is truly crucial. Performance management systems are useful for this purpose, enabling the organization to tailor training and developmental programs to their specific competency gaps. For example, a strong performer with little experience or exposure to leadership can work under a development plan that includes leadership workshops or mentoring programs. Organizations that invest in these individuals not only enrich their talent pool but they also foster employee loyalty and retention. Employees who perceive they are supported and valued are more likely to fully engage and remain with the organization. Setting Clear Goals and Expectations Effective goal setting helps ensure the proper alignment between individual and organizational performance. Performance management clarifies roles and prioritizes responsibilities to ensure that individual, unit, and organizational goals are achieved. Constant review and updating of these goals keep employees focused on their development while keeping an eye on organizational success. Employees often seek more than just a job—they want to be part of something bigger, a vision or initiative they can rally behind. Performance management processes play a critical role in preparing future leaders to recognize, embrace, and actively engage with that greater purpose. Understanding how their role fits into the bigger picture and contributes to the organization’s success is essential, especially for those transitioning into leadership. It provides them with a clear roadmap for personal development and growth. Fostering a Culture of Feedback and Coaching Performance management plays a crucial role in shaping a culture that nurtures and prepares future leaders for succession. By setting clear expectations, providing ongoing feedback, and aligning individual goals with organizational objectives, performance management helps employees understand how their contributions fit into the bigger picture. This creates a sense of purpose and engagement, fostering an environment where individuals are motivated to grow and develop. The process encourages continuous learning, guiding employees to take ownership of their development and positioning them for leadership opportunities. Through structured conversations and development opportunities, employees gain not only technical competence but also the leadership behaviors and cultural awareness necessary for future roles. Over time, this process builds a talent pipeline of individuals who are highly aligned with the organization’s values and capable of driving the company’s vision forward. Conclusion Integrating performance management with succession planning is essential for organizations that want to build sustainable leadership pipelines and maintain long-term success. By identifying high-potential employees early, developing their skills, and aligning individual goals with the company’s objectives, performance management ensures that future leaders are prepared to step into critical roles when the need arises. This proactive approach not only minimizes the disruptions caused by leadership transitions but also strengthens the organization’s ability to stay competitive in a rapidly evolving business environment. Moreover, performance management fosters a culture of growth and continuous learning, empowering employees to develop both personally and professionally. When employees understand how their roles contribute to the organization’s success and feel supported through coaching and feedback, they are more engaged and motivated to grow within the company. This alignment between individual development and organizational goals creates a foundation for effective succession planning—ensuring that each leadership transition builds on a legacy of competence, purpose, and cultural alignment. So, are you ready to take your succession planning to the next level? If so, consider contacting HR Strategies Now . We’ll help you create a customized approach that ensures your organization is prepared for future leadership changes. HR Strategies Now – HR consulting in Cypress, Houston, The Woodlands, and beyond.
Handling employee departures well is just as important as managing their onboarding. While it’s challenging to celebrate the loss of high-quality talent, it pays off in the end. Off-boarding provides a powerful opportunity to strengthen relationships, even as they move on. By investing in a thoughtful and positive exit process, you can leave lasting impressions and even turn former employees into brand advocates. Here are four unique and creative ways to create a smooth off-boarding experience that shows your genuine appreciation to departing workers. 1. Celebrate Their Contributions with a Personalized Farewell Event Instead of just an obligatory goodbye email or a quick handshake, you should make their last days memorable by hosting a personalized farewell event. Tailoring the farewell to match their preferences shows you care deeply about them as individuals, not just employees. If they love casual, laid-back settings, organize an office party or a lunch at their favorite restaurant. For those who enjoy formality, a heartfelt speech and gift presentation can make a big difference. Involving their team members in the process is another great way to celebrate their contributions. Encourage co-workers to share stories or moments that highlight the employee's impact on the company, making them feel truly valued. This simple, but effective act of appreciation can leave them feeling positive about their time with you. Even better, it turns the departure into a celebratory occasion rather than an awkward goodbye. 2. Create a Meaningful Alumni Network for Continued Engagement Employees may leave the company, but they don’t have to completely disconnect. Establishing a strong alumni network fosters ongoing connection, giving departing employees the opportunity to stay engaged. You can build a structured alumni program that includes newsletters, exclusive events, or access to ongoing professional development resources. This helps former employees stay in touch with current trends at your company, as well as offering valuable networking opportunities. Beyond formal networks, invite them to contribute to company projects on a freelance or consultancy basis. By keeping the door open, you send a clear message that their expertise is still appreciated. You might even invite them to share insights with your current staff through webinars or guest blog posts. An active alumni network not only shows that you continue to value their talents but also encourages them to remain advocates for your brand long after their official tenure has ended. It also pays to remember that new employment opportunities sometimes appear better than they actually are, prompting the employee to re-think their decision and explore the possibility of returning. 3. Offer Comprehensive Career Transition Support with a Personalized Touch When an employee leaves without a defined employment plan, a truly considerate off-boarding process may include helping your employees to transition smoothly into their next career chapter. Providing career transition support such as résumé reviews, interview preparation, and job search guidance is an extremely valuable resource. To take this a step further, you can personalize these services based on the employee’s future aspirations. Consider working closely with them to understand their next steps. For instance, if they are pursuing a career shift, connect them with relevant industry contacts or provide them with educational opportunities, like free online courses. You could also create a tailored LinkedIn recommendation that highlights their unique skills and strengths, further supporting their career goals. This level of personalized attention shows that you’re committed to their future success and fosters a positive relationship long after they leave. Departing employees who feel supported are more likely to speak highly of your company, which could also lead to potential future partnerships or referrals. 4. Capture and Act on Honest Exit Feedback in Creative Ways Exit interviews often feel like a formal obligation, but you can make them an engaging and creative experience that benefits both parties. Instead of the typical question-and-answer format, make the process more interactive by using storytelling techniques. Ask departing employees to share their experiences in the form of stories that capture their key moments within the company. This allows them to provide more honest and nuanced feedback, which can offer invaluable insights into your company’s culture. You could also offer anonymous feedback channels, such as digital platforms where they can submit their thoughts post-exit. Implementing changes based on their feedback, and then sharing those changes with them, shows that you genuinely value their input. This ensures that they leave with a positive perception of your commitment to improvement. Additionally, consider using creative feedback tools, like interactive surveys or video exit interviews. Letting them record their responses on video adds a personal touch and gives them more flexibility to express themselves. It’s a modern approach that can leave a more lasting impression than the traditional written format. Plus, reviewing these videos allows you to better capture the emotional tone behind their words, giving you deeper insights into their experience. Conclusion A positive off-boarding experience ensures that employees leave your company with good feelings, even after their departure. By celebrating their contributions, offering continuous engagement, providing personalized career support, and having exit feedback, you can create a meaningful and lasting relationship with your former employees. However, if you are still confused then you may approach a good HR project management consulting firm to help you in creating the right off-boarding strategies.
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Cypress, TX
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Improve Your Decision-Making Processes
Are you ready for the next leadership transition in your organization? In today's fast-paced business environment, ensuring you have a strong succession plan in place is more important than ever. Organizations that neglect this aspect may face skills gaps and leadership shortages that can significantly impact their competitive edge. But how can you effectively integrate performance management into your succession planning strategy to ensure a seamless transition? Let's explore how these two processes can work together to empower your organization. Identifying High-Potential Employees A fundamental part of effective succession planning is the ability to identify high potential. Performance management processes open lines of communication and observation that reveal it. Clear performance measurements, delivered through fair and regular appraisals, enable managers to identify people who have the skills, experience, and qualities required to succeed as leaders. For example, an organization will conduct performance reviews to evaluate its employees based on their ability to solve problems, work in teams, and make decisions. The sooner these high-potential candidates are identified, the better it is for organizations as they work to build a strong pipeline of future leaders. It’s a practice that enables organizations to avoid significant disruptions when key positions become vacant because competent candidates are immediately available to fill the roles. Developing Future Leaders The development of identified high-potential employees is truly crucial. Performance management systems are useful for this purpose, enabling the organization to tailor training and developmental programs to their specific competency gaps. For example, a strong performer with little experience or exposure to leadership can work under a development plan that includes leadership workshops or mentoring programs. Organizations that invest in these individuals not only enrich their talent pool but they also foster employee loyalty and retention. Employees who perceive they are supported and valued are more likely to fully engage and remain with the organization. Setting Clear Goals and Expectations Effective goal setting helps ensure the proper alignment between individual and organizational performance. Performance management clarifies roles and prioritizes responsibilities to ensure that individual, unit, and organizational goals are achieved. Constant review and updating of these goals keep employees focused on their development while keeping an eye on organizational success. Employees often seek more than just a job—they want to be part of something bigger, a vision or initiative they can rally behind. Performance management processes play a critical role in preparing future leaders to recognize, embrace, and actively engage with that greater purpose. Understanding how their role fits into the bigger picture and contributes to the organization’s success is essential, especially for those transitioning into leadership. It provides them with a clear roadmap for personal development and growth. Fostering a Culture of Feedback and Coaching Performance management plays a crucial role in shaping a culture that nurtures and prepares future leaders for succession. By setting clear expectations, providing ongoing feedback, and aligning individual goals with organizational objectives, performance management helps employees understand how their contributions fit into the bigger picture. This creates a sense of purpose and engagement, fostering an environment where individuals are motivated to grow and develop. The process encourages continuous learning, guiding employees to take ownership of their development and positioning them for leadership opportunities. Through structured conversations and development opportunities, employees gain not only technical competence but also the leadership behaviors and cultural awareness necessary for future roles. Over time, this process builds a talent pipeline of individuals who are highly aligned with the organization’s values and capable of driving the company’s vision forward. Conclusion Integrating performance management with succession planning is essential for organizations that want to build sustainable leadership pipelines and maintain long-term success. By identifying high-potential employees early, developing their skills, and aligning individual goals with the company’s objectives, performance management ensures that future leaders are prepared to step into critical roles when the need arises. This proactive approach not only minimizes the disruptions caused by leadership transitions but also strengthens the organization’s ability to stay competitive in a rapidly evolving business environment. Moreover, performance management fosters a culture of growth and continuous learning, empowering employees to develop both personally and professionally. When employees understand how their roles contribute to the organization’s success and feel supported through coaching and feedback, they are more engaged and motivated to grow within the company. This alignment between individual development and organizational goals creates a foundation for effective succession planning—ensuring that each leadership transition builds on a legacy of competence, purpose, and cultural alignment. So, are you ready to take your succession planning to the next level? If so, consider contacting HR Strategies Now . We’ll help you create a customized approach that ensures your organization is prepared for future leadership changes. HR Strategies Now – HR consulting in Cypress, Houston, The Woodlands, and beyond.