How may you use a Compensation Communication matrix to support engagement at your organisation ?
In today’s uncertain economic climate, most organisations indicate that retention of employees, and “making more with less” are among their top priorities. And as we all know, one of the best ways to foster engagement lies in communication.
In a previous article, I listed the pros and cons of keeping compensation information confidential. Once you accept that at least some degree of transparency about pay and benefits practices will be useful to your organisation, what exactly can you or should you communicate about, and to whom ?
You should use a Compensation Communication matrix to ensure that you have a consistent and coherent C&B communication approach across your organisation. This will help deliver a consistent experience in your organisation, and foster an atmosphere of trust and engagement.
In this post, I’ll show you to create the matrix, how you can use a Compensation Communication matrix for various purposes, and the value its brings to your company.
How to build a Compensation Communication matrix
1 – In the columns, list all stakeholders.
All organisations will have these categories : employees (with maybe some sub-categories such as : employees as individuals, employees in general, specific categories of employees by grade or function…) – line managers – senior management – Board, and of course, HR.
Think about other people who might need access to some form of compensation information, such as for example : recruiters – hiring managers – finance (for budgeting purposes) – strategic planning (for long-term workforce planning) – IT (for maintaining the HRIS) – any other population who may need aggregate pay information such as the pricing team in companies that participate in major bids for long-term contracts such as in real estate and infrastructure, or the team participating in due diligence for a merger or acquisition.
In some countries or types of organisations, you may have to think of trade unions / employee representatives, and external constituents such as the general public and shareholders (for instance in the case of joint Ventures, or through the Remuneration report, or CSR initiatives).
2 – In the rows, list the elements of pay
This includes the components of the packages you offer to your employees : basic pay, allowances, 13th month, incentives, profit-sharing, company cars and other perks, benefits such as health cover, pension schemes etc…
This is the classic list that many organisations use when they implement Individualised Remuneration Statements to communicate the value of their total package to employees. Don’t forget to look into country-specific schemes and benefits !
My advice : Go beyond this list-building exercise, and also include information about the tools and processes related to Compensation & Benefits. You’ll get to a comprehensive overview which will ensure you don’t forget anything when revision time is coming.
This can include salary ranges, salary increase budget, merit matrix, rules of eligibility to promotion, rules around incentive calculation, eligibility to specific rewards, recognition schemes, performance management system and process, outcomes of the performance appraisal and salary review cycle, pay philosophy (target position to market etc)…
The resulting matrix will sit in a large Excel sheet with all stakeholders in columns, and the different pay elements and processes presented one per row.
3 – How to fill the Compensation Communication matrix
Use a 4-step approach to produce the 2 versions of the matrix that you need.
Step 1 : Write down, in each cell, whether that specific information is shared or not with that specific stakeholder.
For example, employees as individuals may know the salary range for their grade, or all ranges up to their own grade included, or up to one grade higher, or the whole salary range structure for their job family, or the whole salary structure for the company across all functions.
You’ve created your “as-is” version of the compensation Communication matrix. Even if nobody outside the Rewards team ever sees it, you’ve already created value for yourself, as you now have a single repository listing who knows what about each element of C&B that your team is covering.
Step 2 : Consider whether you have some inconsistencies.
For example you may ask your internal recruiters to set hiring packages but don’t give them access to salary ranges or to a tool indicating an acceptable range of pay as per your C&B philosophy. Is this intentional, or simply the legacy from an older approach ?
Step 3 : Ask whether this approach fits the degree of transparency that you think is appropriate for your organisation today.
For example, as an organisation gets more mature in terms of performance management, an overall communication on the results of the performance appraisal process might be a good idea.
Step 4 : Using the results from steps 2 and 3, define your ideal degree of communication
This will lead you to produce another version of the matrix, with the targeted state of communication that is specific to your organisation.
How to use a Compensation Communication matrix
These Compensation Communication matrices can be used as tools in different circumstances.
1 – Reference tool
Use the targeted state matrix as a reference point when an employee or manager asks for information, to train new HR (as a tool supporting their decision-making at the local level), or when you expand to a new country for example. This can also be useful if you have a complex organisation with many HR Business Partners etc as this will help ensure consistency of pay communication in the different areas of your business.
2 – Internal Policies & Procedures tool
When you introduce a new pay component, or wish to change how you communicate around a specific C&B process, it will be quick and easy to update the matrix. The new pay component will be treated in a way that is consistent with the rest of pay elements for each targeted audience.
3 – Project prioritization tool
Use the current and targeted matrices as a project template : identify the gaps between the two, then start designing the tools, processes and templates that you will use in order to spread the required information to its targeted audience.
The value of the Compensation Communication matrix
The Compensation Communication matrix is a powerful support to your organisation as it fosters clarity and consistency of approach and will help you make decisions regarding how to address the needs of the various stakeholders.
In return, when communication is consistent, employees and line managers perceive the organisation as more “fair” because they have more clarity on processes, the purpose of these processes, and the outcomes – even when you don’t communicate all details.
Just knowing there are processes, and not everything is discretionary, will often have a positive impact on the perceived fairness of the organisation. This in turn leads to greater trust and engagement.
So, whichever degree of transparency you feel is right for your company at this point in time, do use a Compensation Communication matrix to make sure you approach all elements of your pay packages and processes in a consistent manner.
Related posts :
- The pros and cons of keeping compensation information confidential
- Full transparency about pay : is it right for you ?
- Are you constrained to say bonus is discretionary ?
A slightly different version of this post first appeared as a guest contribution on the Teneo blog.