107: Coaching Managers for Better Compensation Dialogues

[00:00:00] Join us on a journey where we unravel the latest trends, tackle your burning questions and explore innovative strategies that are shaping the future of compensation, all with a cup of coffee in hand. Hello everybody and welcome to Comp and Coffee. As we recall this episode, it's the time of year when many of us are getting ready to communicate pay outcomes across our organisations.

[00:00:25] And it's that last part of the process that can often get overlooked. We're often tired by the time we get to the pay comms phase and sometimes we don't properly think it through. But it is a critical part of the overall compensation process because your employees may be left in the dark, unsure about how or why their pay has changed, which can lead to disengagement and dissatisfaction instead of motivation and appreciation, which is really what you want out of this process.

[00:00:51] So in today's episode, we wanted to focus on how to empower managers with strategies to confidently navigate pay conversations. So grab your coffee, settle in and join us for this insightful conversation. And to help me unpack these ideas today, we've got two of Payscale's experts from our services team. So welcome back, Kim. Kim Taylor, our VP of Compensation Services. You've joined me before on Comp and Coffee.

[00:01:19] And a new welcome to Roberto Molino, who's a compensation consultant. So welcome to both of you and thanks for joining me today. Thanks for having us. Okay. A question we always ask our guests on the podcast. What is your favourite brew and what are you sopping as we record this? Kim, you go first. Oh, okay. My favourite, I love a flat white. I, it's too cold today to have gone out for coffee. So I made my own at home.

[00:01:49] So today I'm just drinking, I think it's a caramel vanilla cream with a splash of milk. Very nice. Very nice. Roberto, what time zone are you in, Roberto? I'm in Seattle, so I'm in the Pacific time zone. It's very early for you. Yeah. You need to be on coffee at that time of morning, yeah. Exactly. And actually today I'm doing a chai tea. I like to do chai with oat milk if I can. Great. That's also one of my favourites. Well, it's four o'clock in the afternoon where I'm recording.

[00:02:20] So, and I'm in the UK. So of course I'm drinking tea as we record this. So, all right, let's get going. Let's start with some context. With the advent of pay transparency, pay conversations, I guess have never been more important. And employees have greater access to pay data. And we know many organisations are aiming to increase the information they share with their employees about pay.

[00:02:42] In our compensation best practice research, we see every year the percentage of organisations who are training managers to have pay conversations are increasing. In 2024, it was 51% of organisations. And I've had a sneak peek at our 2025 data that will be coming out in March. And the trend definitely continues upwards. So with that context in mind, can you start off by telling us how you work with customers on this topic?

[00:03:11] And are you seeing an increasing demand for support in this area? So, Kim, do you want to start us off? Sure. So in my role here, I work with a number of our clients as they work through their compensation conversations. Really soup to nuts. Starting with the creation of those salary ranges that they're going to be using to guide their pay decisions. Through some of the considerations they might want to think through when they're positioning their employees.

[00:03:38] And then we help them develop the talking points and maybe the answers to the FAQs that their employees are likely going to bring to the table when they have those conversations. And how about you, Roberto? How are you involved with our customers on this area? Yeah, I've been doing the same sort of work that Kim's talking about for about five years now at PayScale. So working directly with clients to talk about their pay philosophy, pay strategy, develop pay structures.

[00:04:07] But a lot of my work is specifically to train managers and now also ELT executives and even employees to to have not only COP 101 sort of base understanding, but more specifics on how to talk about pay. Especially with the new pay transparency laws coming through as well as just the changes in sort of the cultural idea of pay transparency.

[00:04:38] And is it an area that we're seeing an increasing demand for? I would say 100% because some of it is is legislative, like people are are having to do these things in a way they've never had before. But even without that, companies are seeing the benefits, I believe, of having that transparency when it comes to things like retention or engagement with their employees.

[00:05:07] Yeah. And we've been seeing in interactions on webinars when we ask them what their top challenges in terms of responding to pay transparency. Pay communications is kind of the one that everybody's arriving at now. I think since the advent of pay transparency legislation in the US, which really kind of started in Colorado back in 21, people have been doing that work, Kim, that you mentioned. They've been doing their benchmarking, they've been building their pay ranges, they've been thinking about their job leveling.

[00:05:35] And now it's like, how do you bring that to life in your organization? That is brought to life through these pay conversations. So we see it being flagged as one of the key challenges that many are facing this year. So it's a timely conversation that we're having today. So coaching managers to lead productive pay conversations is critical for trust and engagement. We know that. But what are some of the common pitfalls managers face when discussing pay? And how can we help them overcome those challenges?

[00:06:05] Ooh, I guess I'll start. I think first, one of the biggest challenges, and I don't know that there's any way to overcome this, is that it just tends to be an awkward conversation. So much of employees' self-worth is tied up in their salary that it's uncomfortable to bring what might be perceived as not the most ideal news.

[00:06:26] But, you know, putting that aside, I think what Reach strived to do is just arm the managers with as much information as possible so that when they go into these conversations, they have a wealth of detail to rely on. How did we build these ranges? How did we decide where you specifically are positioned? And then what can you do to drive yourself through that range to earn more money in your career? Yeah, and I'll add to that too.

[00:06:55] What we see a lot of in these trainings is, you know, HR is actually trying to help their managers by doing these trainings. Because what we see is when managers are not aware of what the why behind or the how behind these ranges and these decisions, they often will sort of cede their authority on how pay decisions were made back to HR and be like, you know what?

[00:07:24] HR asked them, they made the decision. I have nothing to do with it. When in reality, they did. They helped with the evaluation of the client or of the employees and of the, you know, all the ratings, all the different factors that go into their pay. Yeah, and I love that point, Kim, you made about, you know, how personal pay is to employees because you say, you know, your pay is really what drives your lifestyle.

[00:07:50] It can drive, you know, how you choose to educate your children, what you choose to do in your life. And so they can be very awkward conversations because pay is very personal. So I guess equipping managers, which is what we're seeing increasingly now is kind of with the what and the why behind pay. So it's much more about the theory. And, you know, as you say, where the employee fits in that can take away potentially some of that awkwardness. I did a webinar this week with three of our customers.

[00:08:19] And we also talked about this, like what are some of the pitfalls? One of them said, well, often not saying anything because quite often managers will avoid pay conversations totally. Failing to be prepared and really not prepared for the difficult conversations. So you can do a great job training managers on all the information they need to know. But if you haven't potentially done some role playing, for example, with them around difficult conversations or maybe the questions and objections that may come up,

[00:08:48] you know, then you haven't probably really equipped them for what the reality is going to be when they actually start having those conversations with employees. So what's the one thing, Roberto, that comes to mind when you think about the key to a great compensation conversation? I think one of the most important parts is to be prepared.

[00:09:09] So as a manager, come armed not only with some knowledge behind the what and the why behind the structure, the way that we do pay increases, but also about the specific employee that we're talking to. So what has it looked like previously when we've done increases for this employee?

[00:09:30] You know, to put things in context in that conversation, like last year you got 3% increase to sort of like frame their increase this year, or even organizational details like this year we've got 3% budget to spread across our increases. And that can help really paint a picture of how we ended up with the decision that we ended up with.

[00:09:59] Great. Kim, anything you'd add to that? Yeah, I would, I guess I would suggest, you know, you're not going to have compensation conversations all throughout the year usually, because typically those decisions are made at a point in time, but it's hard to separate performance from compensation. And the performance piece of this should not happen just once at a point in time. And so I guess if you are headed into a compensation conversation where you are sharing less than ideal news,

[00:10:29] someone is not getting as big of a raise as they would have liked or is not getting a promotion that they were expecting, that should not come as a surprise. That should not be the first time they're hearing that something that they are doing in their day-to-day job is not going to result in the compensation-related result that they're looking for. So make sure that you're having an open dialogue with your employees all throughout the compensation cycle, not just at the time of the increase. Yeah, great.

[00:10:56] And that's a segue really into the next area I wanted to explore, because we know performance reviews often go hand in hand with those compensation discussions. You know, they tend to happen at the same time of year. So what do we need to think about in terms of aligning these two different conversations and do that without creating that discomfort for employees? I like to separate them and have them be two distinct conversations.

[00:11:25] One where you just talk about performance and go into that conversation with the knowledge that it will not touch on compensation. We are just going to talk about how you met or didn't meet your goals in the last year. And we'll meet and talk about compensation next week or the week after. Because I think if you know that that compensation cut is coming, that's all you're going to think about. What's my raise going to be? What's my new salary going to be? I'm not going to listen to the content or what my manager is telling me.

[00:11:51] I'm going to be so focused on getting to that number that I'm not going to hear anything that they have to say. So they're related. There's no way to completely disconnect them, but they have to be, I think, two separate employee manager transactions. Yeah, and is that something you cover in training, Roberto, with clients? Yeah, especially if a company is trying to follow a pay for performance philosophy. We want to put that emphasis on performance

[00:12:20] because that performance drives your compensation, your increase. So by separating those meetings and those conversations, you can have a real discussion about performance. You know, how did you do last year on your goals? How did you do last year on meeting your various, you know, whatever you were supposed to be doing? Are you achieving your job? Because all of that, of course, informs the increase that you're going to get potentially,

[00:12:47] among other factors, but the performance is supposed to be one of the bigger factors. Yeah. And I guess back to your point, Kim, is, you know, there's a lot of fud around the annual performance review. And we know that where that works best is where there's continuous coaching, you know, going throughout the year. So at the same time, you're saying about the compensation conversation, that shouldn't be a surprise. You know, the performance review discussion also shouldn't be a surprise. It should be something that's really just like a summary of everything

[00:13:17] that you've been through in the year with the employee. And so I think, you know, that's something important to remember as well. Absolutely. Yeah. Okay. So let's talk about some of the tools and training. What resources or programs have you found most effective in equipping managers to handle pay conversations confidently? I like to put together an FAQ.

[00:13:45] It sounds so simplistic, but I think that just going into these conversations armed with an understanding of what is likely to come up and how they can address those questions or concerns gives managers the confidence that they'll be able to get through the conversation comfortably. And, you know, we kind of set the expectation. We know there could be some awkward moments. We know there might be some difficult conversations that come up. Here's how we propose that you handle them. Makes them feel supported.

[00:14:17] And what type of techniques, Roberta, have you used with customers when you've been doing this training? One of the things that I feel like this might even be more customer driven at this point is expanding these trainings to go beyond just managers and moving it to be aimed at employees as well. Usually the content is similar, a little less specific for employees. But what I see happening is when we equip both sides with similar language

[00:14:46] and similar understanding of these concepts, it does make those conversations easier. I think before we were more geared towards just arming the managers with this information and then they were feeling more confident with their conversations with employees. But I'm finding that if we give both sides a little bit more context to have that conversation, the comfortability level goes up.

[00:15:14] And obviously my background has been in compensation, but now I'm in marketing today. So I obviously think about audience segmentation. So one of the things I've thought about before when we've been doing comprehensive training is like, what do your different audiences need? So Roberta, you just that, you know, like managers need, like to kind of like the commercial background to help them contextualize what's happening with the pay conversations. Employees may need, you know, different types of information and different types

[00:15:41] of employee groups as well may need, you know, a different type of explanation as you're rolling this out. And I think we're very lucky today in terms of the different mediums we can use to roll out this training. You know, we're no longer in the days where you just have to send out an email. There are lots of different, more engaging platforms that we can use to try and get these messages across to employees, whether you're doing that through your

[00:16:08] employee internet, whether you're using like videos or, you know, all types of different like town halls or different communications to be able to kind of bring this training to life in your organization. Have you seen any really interesting training? Like if you've been working with customers, have you seen anything truly unique? Sorry to put you on the spot on that one, but anything unique that you've seen? No? I'll go.

[00:16:38] I'm trying to give you an example. Go on, you go. So what we've seen is sort of, especially I think when we move to a more remote environment for a lot of these types of trainings is in addition to kind of the typical webinar or town hall type of thing where we all get together in one meeting, people are able to chat or raise their hand and participate in that way. Q&A at the end.

[00:17:06] What I'm finding is more organizations want to make these bite size. So I think if you think about like TikTok or YouTube videos, people are, people's attention spans a lot smaller these days. It's hard to sit through 90 minutes of training sometimes. So maybe what we'll do is we'll break it up into a couple of sections. We'll make a 10 minute video. And what's nice about doing it that way is they can share it through the company intranet or, you know, space out trainings.

[00:17:36] So I think we can really focus in on the pieces that we want to share and we want to focus our organization on. Great. Great. Yeah. So I think a lot of it's around like toolkits, FAQs, finding interesting ways to deliver the training, giving people the opportunity to ask questions.

[00:18:00] I think that's always great as well in terms of like rolling out these types of training. Okay. So let's think about the future a little bit more. How can HR and compensation teams set managers up for long-term success? Do you think in leading pay conversations that are smooth, fair and productive? Kim, do you want to start us off here? Sure.

[00:18:24] I think I would like to see HR have compensation related communications or trainings with managers a little bit more consistently over the course of the year. I think it's very common that we just start to talk about compensation when we're heading into a merit cycle or when some sort of company-wide pay action is about to happen. And so it's easy to give it a lot of focus at that point in time and then forget about it over the course of the year.

[00:18:53] And I would rather, I think, have more regular touch points. Here's what we're doing in compensation. Here's where, you know, here's what the compensation team is doing at this point in the compensation calendar. I think it can feel a little opaque to those of us who aren't in compensation. What do they do when they're not in the middle of a merit cycle? What do they do with their nine months of the year? So just talk about all of the processes that go on over the course of the year and how all of that adds up to the cycle at the end of the year would be helpful.

[00:19:21] And Roberto, any tips from you? Yeah. I mean, I think in addition to pay transparency, the pay communication part is also about transparency. So we want to see that when things are happening, when things are changing, we want more communication from HR, not less. So having regular updates on things like the cycle and kind of looking more people into

[00:19:51] that process can help people feel like they're involved or that they're aware of things and they're not surprised when something happens once a year. And it's a good point to make because, you know, we're talking about pay conversations right now because this is the time of year when most people are doing them in relation to their merit cycle. But pay conversations increasingly happen throughout, you know, pay conversations happen more often

[00:20:20] than they did before because people didn't used to want to talk about pay. And we definitely never used to trust managers in HR to talk about pay. That was definitely, I think, you know, the mindset. But with pay transparency, with people being able to see pay ranges on job postings potentially from their employer or from an employer like them, and then they're wondering why their pay isn't the same as that. These difficult pay conversations are kind of happening every day now.

[00:20:48] So, I think it's, you know, we need to make sure that the managers are equipped to be able to handle this on a day-to-day basis rather than kind of passing this off to HR. Okay. Any other thoughts then? What would be, like, what do you think are the main components in terms of what needs to be communicated? If you were, like, putting together a program, what are the key things that you think need to

[00:21:15] be communicated in a pay comp strategy during the merit review? Well, I guess I'll tackle this to start. I would, I guess I would first, you know, start at the beginning. What do we think of as an organization when we think of our compensation? I think we've talked a lot about base salary, but there's certainly other things that we think we bring to the table as a company. So, understand the entire rewards package.

[00:21:40] I think it's important that we're able to articulate why we designed the package the way that we do. How did we make those decisions? Why do they think they're the right decisions for our business? What do we then think of when we're determining how to pay an individual job or an individual employee? And how can employees have some power over their own, their own salary? What can they do to move up in the organization, to move up in their range?

[00:22:09] So, what can we do to give our employees a sense of control over their own compensation? Great, great tips there. Roberto, would you like to add anything there? Something I'd like to highlight when we're training managers specifically is kind of reminding them that they are balancing, they're doing a balancing act because, yeah, they are basically the face of the company for their employees.

[00:22:34] So, whatever the philosophy and the decision making is behind pay increases and things like that, they have to communicate that to the employees. So, you know, they have to understand that as well to be able to make those, to have those discussions. But on the other side of it, they are balancing that they are the advocate for their own employees because they were closest with them. They know what's behind their performance. They know how their team works.

[00:23:03] And so, they are also going to bat for their employees when it comes to those increases and promotions and things like that. So, they're kind of doing a balancing act and having to weigh both of those, which isn't easy. And I always want to remind managers that it's not easy being a manager because if it was easy, anybody would do. Yeah. Yeah, that's a really good point. I think I've covered that in training before.

[00:23:29] It's just like how difficult the role is of the manager in this because they ultimately want to get their employees to, you know, be successful and contribute to the business goals. And it's always easier to pay people more money. But, you know, now we're trying to put more rigor behind compensation practices and really,

[00:23:53] you know, make sure the managers understand where someone should be paid relative to their pay range or relative to others in the organization. And, you know, it's a learning exercise for them as well. I always think of three things that, you know, if I was a manager, what do I want to know when I'm going into a conversation? What do I think the employee wants to know? I think they want to know why they're paid what they're paid. So, you know, what is it that has contributed to the pay increase or why they're being paid

[00:24:21] what they're paid, how they compare to others. So, you're going to have to, you know, because that's the inevitable conversation that's often going to come up is, you know, why am I paid this and why is, you know, John paid whatever? Or I've seen this pay range somewhere else. Why am I not paid? You know, like that. And then you touched on this, Kim, how can you progress pay? Because I think that's a really important part of the pay conversation. It's just not about where you are today.

[00:24:48] It is part of that development cycle, you know. Pay isn't just going to fall in your lap. You know, you can evolve as a person within the organization. You can further your career. And as part of that, obviously, pay progression comes with that. So, an important part of the discussion is, you know, what do I need to do to progress my pay or progress my career path in the organization? And I think being able to help the employee understand that's really important. Okay.

[00:25:17] So, I think you're doing a webinar, Roberto, I think, at the end of the month, are you? I was looking on our website. So, do you want to tell us a little bit about that? Yeah. You know, we kind of, I think we've been doing this for, I think, maybe twice a year. Maybe it's four times a year. But I'm basically taking over a webinar we've been doing for a long time.

[00:25:39] And the idea here is we just wanted to give those, like, comp basics, but also the really specific things that you need to have, especially in these conversations as a manager. We want to arm HR with that, too. You know, we want everyone to have an understanding about, you know, best practices with pay ranges, with pay increases, with market data.

[00:26:09] So, we kind of have a comp fundamentals webinar that it's been pretty popular in my understanding, so I'm pretty excited to take over it. So, if you want to listen into that one, that is going out on February the 27th at 10 a.m. Pacific time. And you can find that on the events page at payscale.com. That webinar is called How to Train Managers to Have Successful Pay Conversations. And as always, you can find lots of resources.

[00:26:37] I mentioned I did a webinar this week with Yale, New Haven Health, Life Care Services, and B-Swift. So, we had three amazing customers come to talk to us. That's now available on payscale.com as well as a video replay. So, if you're looking for more resources and you want to find out more about how to build effective pay conversations with your customers, you can do that. And Kim, if anyone listening in, because we know we have lots of loyal PayScale customers

[00:27:04] who listen to the podcast, if they want help with pay conversations and pay training, how do they access that? How do they get access to your team? A couple of different ways. They can get connected to us through their customer success manager, but they can also submit a request to talk to us through their connect portal, which they should be able to access from inside of their PayScale product. Great. And they reach out and then they find out more about the offerings that we have in order to support pay conversations. Exactly. And they can request Roberto.

[00:27:35] They can specially request Roberto. Okay. Well, thank you, Kim. Thank you, Roberto, for sharing your expertise today. We've covered a lot of ground from preparing managers for confident pay conversations to aligning performance review and compensation strategies, and then addressing fairness with the help of data. So we hope you found this discussion insightful and packed with actionable takeaways.

[00:28:00] And if there are topics that you'd like us to explore in future episodes, feel free to reach out at coffee at payscale.com and you can let us know there anything you'd like to hear in future episodes. So thank you very much for tuning in. Thank you, Kim. Thank you, Roberto, for joining me today. Thank you. Thanks, Ruth. See you, everybody. See you, everybody.