In this article, OMNI Senior Consultant & Compensation Practice Leader Jon Binder explores the critically important role an organization’s supervisors play in creating successful pay transparency practices. As organizations finalize budgets for next year amid predictions that inflation will drive increased employee appeals for higher pay, now is the time to ensure supervisors and managers fully understand pay practices and policies. (Image courtesy of ShutterStock)
Much of the recent media coverage about pay transparency has suggested that a great deal of resistance to the concept remains. And to the uninitiated – or to employees on the front lines – decisions about how organizations will pay their workers do seem shrouded in secrecy. Several of my previous blog posts (click here and here) have discussed the importance of pay transparency, and in this post, I’d like to focus specifically on how critically important it is to grant supervisors a far more active role in this process than has been traditional practice. As many organizations work to finalize budgets for next year, experts also predict that inflation will drive increased hikes in salaries. This makes educating supervisors and managers on pay practices and policies more important than ever.
Research shows that a major gap exists in generational beliefs about the necessity for pay transparency, increasing the potential to create discord and mistrust in the workplace on this very sensitive issue. When that gap collides with the disparity in access to information about how pay is determined, things get even more complicated. According to an article that appeared in “Fast Company” on August 4, 2022, “younger generations of workers aren’t shying away from discussing compensation anymore. And they expect their employers to welcome–or even lead–these conversations.”
As decisions about compensation continue to occur at the leadership level (usually older generations), younger frontline workers feel disappointed by their low access to information about how their pay is determined, and to those making the decisions, fueling the problem. Consider this recent finding from Vizier: compared to the 90% of respondents in the C-Suite who felt their companies did a good job promoting pay transparency, only 60% of employees in analyst- or associate-level roles trusted that pay transparency existed.
The higher level of trust by C-suite occupants in their companies’ pay transparency may be fueled by the fact that they are actually making those decisions and are privy to all of the factors that drive their decisions. A breakdown of the process begins as soon as leadership passes on the task of communicating final decisions, including the unpalatable ones, to supervisors and managers. The single point of failure is failing to educate supervisors about the factors and process that drove the decision in the first place.
The natural, and unsurprising, result is for supervisors to look for reasons to avoid candid discussions about pay. They may even resent being put into the very uncomfortable position of being forced to deliver news that employees won’t welcome. Employees read this avoidance as a lack of concern for them as individuals and a preoccupation with profits and overall business success. The leads to feelings of frustration or anger over not just the lack of information, but also the perceived callous and uncaring attitudes of management. Worse, they may feel information is being deliberately withheld, culminating in a loss of trust among frontline employees about whether or not they are receiving fair pay.
Supervisors who are ill-prepared for conversations about pay are also more likely to prefer giving everyone exactly the same pay rate and increases, regardless of experience, performance, or motivation. Though it feels safer not to have to defend a decision, the consequences for teams and organization success can be harsh. High performers that don’t feel recognized and appreciated, and compensation ranks high as a means of showing appreciation, are far more likely to become frustrated. This is particularly true if they see less efficient, motivated, and productive peers getting the same rewards they do, making it an organization’s top performers far more difficult to retain.
This very slippery slope can be avoided with strategic preparation at all levels to facilitate open and honest conversations about pay and the factors that go into leadership decisions about how employees will be paid. Employees are much more likely than in the past to have frank discussions about pay with one another, and unless leadership prepares all supervisors to set a consistent tone, the resulting vacuum will allow employees to set and control what will most likely be a false narrative.
In working with my clients on compensation related projects, I share these fundamental messages with c-suite leaders on how to prepare supervisors to talk openly about pay with employees:
The single most important relationship in your workplace is the one that exists between a direct supervisor and an employee. So don’t expect your HR professional to carry the water in communicating pay-related decisions; leverage those (hopefully) strong and trusting relationships to promote success.
Don’t leave the conversation to chance. Create talking points for supervisors to communicate to employees how pay is set. It’s natural for employees to ask for more pay. Employers must approach this issue proactively by preparing ahead for the conversation at every level.
And don’t just prepare your supervisors to discuss pay openly; encourage them to actually welcome pay-related conversations and to view them as a means of building greater trust with employees. Consider these discussions as foundational to business success.
Dispense with outdated beliefs that discussion of compensation is taboo. Traditional ways of shutting down all conversation about pay makes supervisors’ jobs more difficult.
At the same time, recognize that these conversations will be challenging for those who grew up in careers where pay was not openly discussed, and help them with this sometimes difficult transition.
Know what you can discuss. While you can’t disclose individual salaries, you can talk about what impacts an individual’s pay. Whatever the factors, whether performance-related, the economy, or something else, help the employee understands where and how they can affect their own pay outcomes.
Employees who know more about the business, its mission, and the variables impacting success are far more likely to be fully engaged and eager to promote the organization’s success.
The process of educating everyone about an organization’s pay structure begins with having a philosophy, a good plan, and being knowledgeable about market pay. But execution is where the rubber meets the road. Not having a mechanism for measuring performance, e.g., tracking goals and measuring outcomes, means failure in building transparency and trust within an organization.
With the tendency for decisionmakers, who often feel they have the most to lose, to limit the access to information to a small number of people, they may overlook the importance and value of sharing more information with supervisors. Given that supervisors are often inadequately prepared for their roles, limiting their access to critically important information that will strengthen them in their roles is counterproductive. As they become more comfortable with helping to promote pay transparency, and with discussing pay openly with front-line employees, everyone will begin to benefit.
View the process as a journey. Open dialog about pay may start out feeling uncomfortable for everyone, but with practice, it will become second nature. And consider that your employees will be so excited to be able to discuss pay openly that it will be an immediate success. Still, continually assure any employees who may be struggling that you will continue to discuss, and inform, and raise the comfort level for everyone. Don’t give up.
With greater transparency and education—at all levels of an organization—about how pay is determined; however, along with a good performance management system, leaders can look at goal fulfillment, distinguish excellent performers from mediocre and poor ones, and adjust their pay structures accordingly.
Jon Binder, Senior Consultant and Compensation Practice Leader at OMNI Human Resource Management, has over 25 years of human resources experience, including more than 15 years of compensation design and consulting experience. Jon assists clients of all sizes, both for-profit and nonprofit, in furthering their mission goals through the development of compensation strategies and processes. He also provided expert support in employee relations, leadership development, and related areas. Prior to joining OMNI, Jon enjoyed a successful career in finance and as a human resources executive with Sprint.
Jennifer Gross-Statler, Marketing & Communications Manager, comes to us with over 20 years’ experience as a nonprofit professional. Her background includes four years as Executive Director of a Connecticut nonprofit with a state mandate to evaluate state-funded mental health programs, assess strengths and unmet needs, and make recommendations for improvements. She brings valuable expertise to OMNI in community and media relations, marketing and branding, project management, and strategic planning. Jennifer is a graduate of The College of William & Mary.