Culture Case Study: Handling a Compensation Confrontation
During one of my recent enculturation workshops, I was approached by the plant manager of a manufacturing firm who confided in me that he had an urgent need to fix a volatile workplace environment.
He discovered that some of his employees, mostly of the Millennial generation, were openly sharing the details of their individual compensation plans with one another. And as much as he was dismayed by the breach of employer/employee confidentiality, he found himself struggling with a much larger issue – individual employees were confronting him, crying foul and demanding an explanation for the variances in compensation structures among others sharing similar titles. And, it wasn’t just the lower-paid employees who were complaining – it was also those with premium-level compensation packages sticking up for their counterparts.
He explained, “I’m stuck on the defensive line, and as much as I explain to these guys that compensation packages are supposed to be confidential, and that each employee is paid based on a variety of different factors, they either don’t care or aren’t listening. What other people make is none of their business. It’s affecting morale and our culture is in trouble”.
Perhaps you can empathize with this manager’s situation. Aside from the trend of employees sharing such professionally intimate details with each other, information once considered private and confidential is rather easy to access despite password-protected CRMs and accounting software.
Such unintended and unwanted transparency is forcing organizations to rethink how to onboard, train and manage employees who know too much.
Given this manager’s urgent need to defuse his tense, volatile environment, I offered the following advice:
- Schedule a department-wide meeting with everyone on the team to let them know he was aware of the sharing of information, and then proceed to explain the many complex variables and considerations that go into structuring individual compensation packages. Typical elements include:
- Scarcity (supply and demand) of skills required for the job
- Leadership potential
- The value of additional skills the employee brings to the company
- History/track record of productivity
- Level of responsibilities
- Level of expectations
- Career path
- Market forces
- Factors of negotiation (salary/incentives/benefits/schedule flexibility/hours/time off/etc.)
- Other considerations
The success of the meeting would not only be based on the clarity and communication of the information, it would also be based on giving everyone the opportunity to engage in time for Q&A. And although not everyone may agree with how compensation packages are structured, they will appreciate and value the explanation.
- Rework the way offers are created and presented to prospective employees so that each understands the logic and rationale behind the offer. Ideally, all offers would include the same level of detail as provided in #1, above. The purpose of this approach is to minimize, or even avoid contentious confrontations on compensation packages going forward. It’s a fact that the more employees know how decisions are made in an organization, the more likely they will respect and accept decisions even if they do not completely agree with the decisions.
There is a push for organizations to become more transparent and upfront not only with customers, but also with their employees. Employees know more than we care to believe, and can gain access to confidential information easier than we realize. For these reasons, along with several others, some organizations are beginning to witness the value of becoming more transparent to build trust among employees and their customers.
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