If January, February and March are all about performance appraisal, April, May and June (for the laggards) is compensation review time—and then of course, it’s time to set goals and objectives for the year ahead. Employees are fitted into curves, Bell or otherwise, increments, bonuses, promotions are decided, and expectations and emotions run high.
The comp review cycle, as it is popularly known, is a corporate minefield. There’s no one on the ladder who is stress-free at this time—harassed managers, “I’ve-been-treated-unfairly” employees, the HR folk. Plus, there’s the possibility of it all playing out via vituperative social media posts.
Organisations make valiant attempts to navigate this review swamp with instructions and guidelines with varying degrees of success. Here’s what happens on the other side of the review, what HR managers deal with, and what smart companies can do to mitigate disappointment on the floor after the letters have done their rounds.
The be discreet guideline: HR departments are advised to cloak the compensation review processes in secrecy. In deference, worker bees from the HR team marshal conference rooms, hijack printers and, in the old days, secretarial talent from common typing pools. Sometimes this goes a tad too far. One friend recounted how a compensation team member set out in search of caffeine, ‘locking’ the rest of the team in the room. The break ran longer than intended and another member wanted out for a bio-break. All in the service of the cause of secrecy.
The don’t discuss diktat: This managerial mantra—‘your compensation is no one’s business but your own’—is naively simple. It is given with the fervent hope, that tough discussions and meltdowns may be avoided.
Decades ago, in the era before corporate email, a colleague travelled continents to distribute increment letters. Each employee was individually called and the letter handed over with the ‘do not discuss’ instruction. Afterwards, my colleague walked out to the cafeteria. And there were the employees, seated round a table, each studiously poring over a letter. Not one person had his or her own letter. So much for The Diktat! Sharing compensation data is demanded, and refusal to part with it could spoil a healthy friendship.
We don’t entertain comparisons: Easy to say, but how it tears the employee apart. Two freshly confirmed employees once came to me in tears. After the review, they had discovered that they were the only two from their batch to get a lower increment. When they realized there was going to be no change, their solution was: ‘Don’t change the numbers; just help us save face by publicly announcing to the team that we too were in the higher band’. Not something we could do.
Clarifications? ask your manager, not HR: This is indeed a slippery slope—because the manager has already sidestepped the issue of unmet expectations by saying he did his best. ‘The powers that be’ are to blame for the predicament, he convinces the employee. In all fairness, at most times such decisions are beyond the immediate manager’s control and so they pass the buck to superiors or to HR.
Don’t divulge details outside the organization: This one is laughable especially today. With the sites such as Glassdoor and LinkedIn, the temptation to share details is huge, especially if you are disgruntled, or want to flex your compensation muscle after a particularly hefty increment.
We could go on with organisations’ comp review travails, but let us look at some tips from smart organisations.
Be proactive with your own communication. To avoid rumors, and control the narrative, flood employees with communication. Invest in an internal communications team focused on the employee. Start creating communication collateral when the increment review process is 75% done so that by the time it is ready to roll, FAQs and presentations are ready. Segment and have communication bytes tailored for C-Suite leaders, first line managers and HR business partners. Scan social media for discussions around the comp review and address them promptly and gracefully. A comp review disaster recovery kit is a good one to have.
Set realistic employee expectations on compensation increases at the time of appraisal discussions. It is a commonly held belief that the appraisal discussion should not be desecrated with money talk. The argument has merit. The appraisal is a time to review achievements, provide feedback and set future goals. At this time, final increment budgets are many spreadsheets away. Yet, there is an elephant in the room that cannot be wished away: and it’s called moolah. Employee wonders: what do all these ratings mean in terms of money? Manager thinks: I don’t know what to say about the increment, so best to avoid that discussion. Wrong.
Encourage first line managers to have a mature discussion with the appraisee on how the organizational process of performance appraisal translates to the compensation review, the process of relative ranking, market parity considerations and probable timelines. Also, what is in the manager’s control and what beyond.
Share information with the employee in stages, between the appraisal and the increment communication. This helps prepare employees for what is to follow. Of course, this too needs well-informed managers, prepared to address queries.
As we saw, confidentiality in compensation reviews is unlikely. So, prepare leaders, managers and HR business partners for it, and sensitize employees too. Outline typical situations and how to deal with it. The more they discuss and debate it, the better prepared first-line managers will be to handle the post increment dramas.
Remember that in-camera discussions rarely remain that. They may in fact go viral via the camera. Training to handle sensitive communication is therefore important.
Don’t have all your eggs in the increment basket. Diversify the reward policies: deputations, mentorships, lucrative postings, trainings, retention bonuses. All this and the promise of a mid-year review if clearly articulated, and fairly deployed, will go a long way to address disappointments.
Choose your HR business partners wisely. They need to have a strong world view on industry and business performances to hold their own and support line managers in conversations with employees on the whys of the compensation decisions, not just the whats and the hows.
And finally, never ever launch a ‘culture survey’ or an ‘employee satisfaction dipstick’ at this time. Hyperventilating employees and high engagement scores just don’t go together.
Hema Ravichandar is a strategic human resources consultant. She serves as an independent director and an advisory board member for several organizations.