Five minute salary and compensation conversations.: The Good, The Not so Good, and the Really Ugly

Salary and compensation can be the source of continual problems if the initial communication and core message is garbled

Be very clear about salary and compensation. What you say now as well as what you say later when you’re in a better situation, it vital to both your credibility as a manager and the employee’s continued performance

So let’s start with the good news and how do you talk about salary and compensation. If you break salary and compensation conversations away from performance evaluations, we believe you ought to be able to have a really meaningful and provoking conversation with somebody about their career, where they’re at, where they’re going, what they would be most benefited by and what the company would benefit by most in terms of their focus, improvement efforts. That’s a separate conversation. That ought to be a very powerful, direct conversation that’s very encouraging and gets a lot of behavior change.

A five minute conversation on salary and compensation.

Make this conversation take very little time even when it’s good news. Here’s how it goes. So, you’re going to go to somebody and you’re going to say to them – the very first words out of your mouth ought to be, “Congratulations! Your new salary is $38,500. That is an increase of 3.5%, which puts you for the first time in the second quartile but well below the midpoint, which means you got a lot of room to grow on the future, okay? Keep up the great work.”

On the other hand, you go into somebody and you say, “Congratulations! Your new salary is $59,800. That an increase of 1.5%, which puts you – or keeps you in this case, in the fourth quartile among the top paid people we benchmarked ourselves against internally or externally. Now, we keep you at that high rate of compensation because we totally appreciate your effort and your contribution here. Keep up the great work.”

Now, I can tell you you can give a 1% increase and make it sound and feel good if you don’t tie it to a stupid evaluation. Now, let’s talk to the flipside, “Congratulations! Your new salary is $58,500. That’s an increase of 1%. You need to know that I have the ability to give you much more but for performance reasons we held back. I think you would expect that based on the conversation we’ve had. Now, it keeps you in the second quartile and well below midpoint which means you got a lot of room to grow if you get your act together. I’ve seen progress. I hope next year if you continue to work hard, we’ll have something better to talk about this time.”

Any of those are okay, okay? There’s not a dollar figure or a particular situation in salary and compensation you can’t make turn out okay. Most will not leave the meeting doing high fives and cart wheels down the hallway. But on the other hand, they probably won’t leave, you know, giving you a single digit salute either. They’re probably going to think that’s okay.