Last Thursday, Dan Walter mentioned in his Compensation Cafe article that, “reporting the CEO Pay Ratio . . . will seldom be reasonably comparable from company to company. . .” I’m glad he said it, because it’s part of what is so hard to accept about this situation: There is no single communication solution for communicating the CEO Ratio. (Let alone any other aspect of compensation when it is so tightly linked to your company’s unique business strategy and culture.)
But don’t stop reading yet! We may not have faced an identical employee communication challenge in the past, but there are some basics that will apply across the board.
Don’t overdo it. Don’t underdo it. Each company is different, so begin now to discuss the pros and cons of various approaches. It would make sense to talk it over with an executive advisory group, too. While I agree with Willis Towers Watson’s advice that, “…the proxy disclosure is not the place to be re-litigating the question of why executives are paid what they are . . .”, in the real world you will need to align that principle with your company’s culture and values.
For example, I imagine that communications in Bay Area companies will be more extensive than in some other parts of the country because social justice is a much-discussed issue in our community and many employees will expect to hear some insights from their leaders. Companies that have been hierarchical over their history may have cultures in which CEOs have not been questioned, especially about their motives. While that shouldn’t brand them as companies without open communication, the CEO’s communication patterns should certainly be taken into account (so you don’t overdo it, using an unfamiliar approach).
Prepare your employees. If you don’t, the CEO Pay Ratio and median employee information is bound to be a shock. Yes, they must know in their heart of hearts that the CEO is making a bundle, but the numbers will send a harsh message that is up to you to soften. You can embed short descriptions of the upcoming announcement in your Q4 and Q1 communications, along with other organizational issues. No matter how you deal with the actual announcement, leading up to the announcement over time with quiet, basic communications covering what employees can expect will create a more positive context and help tone down the histrionics when the actual numbers are reported.
Improve executive visibility. Encourage your CEO to be more prominent in day-to-day communications and operations to build and/or strengthen support for her/his leadership. Unlike other years when employee communications did not refer to executive compensation administration, look for opportunities to embed basic administrative references about their focal review etc. in regular employee compensation communications to defuse the mystery a bit, sending the message that we are all in this together.
Use end-of-the-year focal review and merit pay communications. Articulate, repeat and reinforce what you do to make sure employee pay is competitive, how your practices are fair and how employee salaries are only one part of your company’s whole reward package. If you have made changes based on employee input, be sure to point this out,too. Evidence of a solid relationship based on responsiveness to employee needs will go a long way towards defusing employee disdain for select policies and practices — as long as employees would agree that you’ve been responsive.
Use people not technology. Distancing the message from the personal will leave your company open to employee claims that leadership is ducking responsibility. Identify a spokesperson to present the details of the CEO Pay Ratio, back it up with email or intranet information, but be sure that your communication strategy gives employees a chance to discuss their reaction with someone that they can open up to.
Train your managers. Whether or not you choose to use them as a primary communication channel, they will be. Every bit of research going back decades indicates that managers are employees’ preferred and trusted information source. Be sure they are able to handle employee questions well and that they are not afraid to talk about the findings in a group. If they have employees whose salaries fall near the median, odds are they will receive tough, candid questions that they will need to handle well.
Keep reading, thinking, discussing, adjusting, discussing. If you do this right, you will be working on your communications down to the last minute. Remember that the CEO Pay Ratio announcement will be made publicly as well as internally. Be sure you’ve got the timing down so employees hear it from you before your local media jumps on it. There’s bound to be a lot in the national media as the time approaches, too, so recognize that your employees will be self-educating unless you track what’s out there and respond appropriately.
My earlier blog addresses how to strategize, and this Willis Towers Watson article should be of immense help to you, too. And if you’ve run into any other resources that you’ve found helpful, could you share them in the Comments section? We’re all in this together!
Margaret O’Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.
This post originally appeared on Compensation Cafe
Author: Margaret O’Hanlon