When we have the opportunity to talk with executives and managers about their
compensation programs, it can be surprising how many don’t understand the complete picture. While they are usually well-versed in the plan mechanics, such as metrics and targets, they are often in the dark when it comes to the broader rationale behind the overall pay structure.
This suggests that senior leadership may not spend enough time in direct one-on-one communication with executives and managers explaining not only what they are paid, but why the plan is structured the way it is. We believe that by shortchanging these critical conversations, the company is missing a tremendous opportunity to reinforce the organization’s strategy and priorities that are embedded in the pay programs, and the role that each executive and manager plays.
In the course of a year, much time is spent reviewing, understanding and deciding pay for senior management. Yet when pay decisions are communicated to the people that are affected, the focus is on the math, rather than the narrative.
Additionally, by limiting the discussion surrounding the decisions, the company loses the opportunity to better understand concerns and motivations. Executives become uncertain about the value they bring to the organization and what they can do to personally increase that value because conversations are focused on results, rather than rationale. And even if there is no negative internalization as a result of a rushedconversation, executives and managers are likely not to have a clear picture of the rationale behind their pay program–what is intended strategically and what they are being asked to do as leaders.
This missed opportunity and possible unintended misstep is easily addressed by:
- Prioritizing the conversation by setting time aside to do it right and allowing time for two-way conversation.
- Knowing enough about the person to anticipate her/his point of view and possible questions.
- Crafting a big-picture story that the senior manager can recognize and understand.
Contact Us
We welcome your feedback on our Compensation Alert eNewsletters. Please contact me at (847) 864-8979 or nlappley@lappley.com to discuss communicating pay programs. Please also forward this email to anyone you feel will be interested.
