As an independent advisor, I am often called in to help with situations where compensation has become a very emotional and even intractable problem. Having the opportunity to work with — and through — many of these situations over the years has taught me a lot.
The biggest lesson is probably this: Clarity, process and structure are the most effective remedies for compensation angst. This is true whether the pay concern involves an individual or a group of people.
In the absence of clear, explicit process and structure for addressing and making a decision about the compensation concern, you must go about creating these things.
Sometimes, it’s plodding and methodical
Process first — determining who will be involved in what role, what steps will be taken and in what order, and what timeline will be followed to a final decision. Then, you follow the process to create and apply the structure — the information and rules which will frame and guide the decision. If a process and structure already exist, it is important to step back, clarify them, and then track carefully through the roles, steps, information and rules in order to revisit, adjust and/or confirm the decision.
Plodding and methodical? It can seem that way in today’s fast moving environment, particularly to executives and entrepreneurs accustomed to making decisions on the go with the best information available. It can also fly in the face of custom and tradition when managerial flexibility and discretion have historically reigned supreme over compensation decisions.
Certainly some level of flexibility is important in a world where organizational agility and responsiveness are at such a premium. But sometimes flexibility is just another word for reluctance to commit oneself.
At the core, it’s about fairness
Flexibility and discretion rarely resolve acute compensation distress. For that, you need clarity, process and structure.
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This is because compensation angst, at its core, is usually about fairness. Compensation decisions made without context or explanation behind closed doors and/or entirely inside the heads of executives, unless they are utterly in sync with or in excess of an employee’s expectations, will rarely be perceived as fair.
Fairness, contrary to what many seem to believe, is not about paying everyone the same. It is not even about paying people enough to take money off the table (just try devising and executing that approach in a way everyone agrees is fair!). It is about having everyone’s pay subject to a clear, logical and explainable set of rules and information.
Which is exactly where the application of clarity, process and structure aims to take you.