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March 26, 2012 at 08:00 PM
Employees tend to view the amount they are paid as a statement about their value to the organization, rather than a reflection of the firm’s financial situation. In difficult economic times, this makes for an uncomfortable discussion with employees who also face financial pressures of their own. No matter what the firm’s management says about the employee’s value, each person has an expectation of what their compensation should be.
Having been both an employee and an employer, I can empathize with both sides of this dilemma. In my earlier days, I recall having fits of rage about my compensation, certain that if it were not for me the company would falter. When I became a manager I tried to reason with employees who threatened to leave because of dissatisfaction with pay raises and bonuses. While having points of view derived from different experiences may disqualify me for public office, it certainly helps shape my thinking about conversations with staff.
We strive for clear communication, but when it comes to compensation, employees often stew while employers grow resentful. Despite our best intentions, the dialogue can fail when each party talks past the other, convinced that their position is right and the other is wrong. Emotions run high yet neither has the courage to air the issue face to face.
This uncomfortable dynamic leaves many employees feeling taken advantage of and defensive, ready to fight for their hard-earned income. Meanwhile, stressed-out managers wonder why their staff can’t live on what they are paying them and get angry that employees seem to be focusing on themselves instead of the bigger picture. When suspicions and assumptions are allowed to brew, bad things happen.
The solution to this communication dilemma is to engage deliberately, clearly and without equivocation. Do not have this conversation via email even if you feel you’re a more articulate writer than speaker.
Recently, an advisor sought counsel from his Pershing relationship manager on how to get back on track with an important employee who was feeling undervalued. While this advisory firm is successful, it is still regrouping from the meltdown of 2008. It has had to manage costs and redefine the business in order to get back to the level of profitability it once enjoyed. The advisor shared an email he received from a key person in his firm after a review of compensation. The advisor had given this employee the highest percentage raise, the largest bonus as a percentage of base and some additional units of ownership in the firm.
The employee’s email said, “The pay raise you gave me, considering real inflation, means I am effectively flat or down from last year, and the bonus after tax gives me very little to cover the kids’ school let alone help pay my mortgage or put anything into savings. I literally switch the lights on in the morning and turn them off at night. It doesn’t feel right to have people like me who are passionate and committed to transforming this firm be given this kind of poor recognition. It is very demotivating.”
Wisely, the leader of this practice took a breath before responding. While instinct urged him to fire off a response attacking his employee for being ungrateful, he realized there was more to the story and more to be accomplished by having a reasoned dialogue—in person. He crafted a script of what he wanted to say, then invited the employee into his office for a conversation. Following the bullet points he had developed, the leader addressed the disgruntled worker:
