As we move into the second quarter of the year, I would like to share my reflections on working in Compensation & Benefits (C&B) in the first three months of the year. The first quarter can be akin to the holiday season for many HR departments. Not because they get showered in lovingly-selected gifts from their nearest and dearest, or invited to endless parties and celebrations, but because of the chaos. January through March is the start of a new year, new habits, new targets to hit and, normally, the compensation review season.
At Spotify, we embrace controlled chaos – it’s an inevitable result of hypergrowth and polarities, so it’s simply become part of our DNA. We also have a culture of growth. So, as we go through the annual comp review season we know that our employees will have high expectations, and we know that we also have a company culture to maintain. After all, an organization’s C&B strategy, and how it rewards its employees, is an extremely important touchpoint of a company’s EVP.
The best way to bring some control to this chaos is to underpin your work with your culture and to be intentional about your approach. Whatever you do, don’t just buy candy and throw it at the ones screaming loudest that they’re craving sugar. Do what’s right for the business and what’s right for your people in the long run. In our case (and we believe the case for all those at a people-first organization), that the focus should be on growth.
Regardless of whether an employee is new in the game, or has been round the compensation review block a few times already, they may well spend some time reading those rehashed articles and blogs that make their appearances at this time of year on How to negotiate compensation – 99 tips.
Even if you endlessly train, inform and teach employees, there will always be those who still spend a ridiculous amount of time building their case with a long write up on previous performance, sprinkled with (what they believe are) the golden nuggets from the standard tips like:
- Pick the top of the highest range you can find.
- Spend time with recruiters and ask what the highest premium that someone would pay to buy you out is. Then use that amount as the baseline for your request.
- Be prepared to leave the company if they can’t meet your expectations.
- Schedule the meeting on a Thursday.
- Paint a perfect future and ask for advanced payment.
- If you’ve been around for a long time, use that as evidence of your loyalty, and say that you just don’t want to fall behind the market.
- If you’ve recently joined the company, say that you took a huge pay-cut because you bet on this company, and now after six months you just want to be paid in line with the market.
The list goes on.
So, does it work? Well, we think those golden nuggets are more like nuggets of fool’s gold, and here’s why: this strategy that they consider smartly bespokely built, is absolutely generic. Their manager has read the same articles and the game plan is extremely obvious.
Of course, it would be a lie if we said it never works to gain you a higher compensation in the short term. Sometimes it does, specifically if your managers are insecure, or if you in the C&B team have not done the groundwork to tie your culture and your C&B strategy together, and communicate it across the org in a clear and concise way. If you do not do this ground work, your employees will have false expectations and your managers will be unprepared.
Focus on Growth
The most important thing for managers to do as this season approaches is to understand the thinking behind the compensation strategy. For this, there should be company-specific training offered. As a competent and strategic HR team, that delivers value to both the business and the people, your focus should be on setting a framework that helps your managers to help their employees. Managers should be able to guide employees to understand that using the above tactics can often backfire.
In a company with a culture of growth, it will not do the individual well to be labeled as the person who focuses more on money than growth. Not only does it highlight misalignment with the culture, but the journey towards substantial pay increases over time is usually promotions. And actually in this environment, the people who are more associated with a stronger focus on growth over money, are the ones more likely to be promoted.
Once a manager has that foundational understanding, they can also follow these tips to give themselves greater confidence, and to find the best way to manage conversations with their employees:
- Understand the dynamics of the process: even well paid employees that you have great relationships with might have a strategy to push you hard for higher compensation.
- Do your homework: you probably have a budget or at least some guidelines to follow. Use that to differentiate fairly among your team members. My advice is that you stick to your initial allocation, because if you add more to the person with the best negotiation strategy, you need to take money away from someone else. It’s almost impossible to execute on the pay fair promise if you let individual conversations guide you.
- Listen and explain, but also accept that you can’t make everyone happy, at least not during the comp dialogue.
- You don’t need to meet all the arguments, you are the boss, and at the end of the talk, it is what it is. You decide.
- Focus on growth in your team. Attrition is a natural part of your journey as a manager and as hard as it is to lose great team members, remember that it’s just as (or maybe even more) rewarding to see people stepping up into the roles that open up.
Are we saying that employees should not even discuss their compensation with their managers? No, absolutely not. We advocate for an open dialogue around compensation, but we advise that the main focus is on each person’s growth and how they can add more value to the company over time. Employees would do well to look at those paid significantly more than themselves and instead of trying to copy their compensation package by shifting focus and using what they consider to be the strongest negotiation tactics, they should evaluate that person’s growth and use that as inspiration to build their own journey. The simple fact is that developing and adding more skills will bolster their employability, especially if the skills they add are durable.
It can seem daunting to go into this season but just spending 30 minutes scrolling through blog posts on the subject of How to negotiate salary, will tell any reader that this situation is not unique. Let’s just say it straight: sustainable growth of a career is simple – Focus on your growth and the cash will follow.
It might not follow the textbook definitions of working with C&B, but the companies that are moving with the times, switched their mindset on the approach to comp review season a while back. Even though it sounds like a contradiction, those C&B departments that can offer support to the business, by showing them how to focus on growth over money, are indeed people-focused. They are helping their people in the long-term. And in turn, they are helping their businesses.
And it might seem like a challenge for ‘future you’, but our best advice would be to start the groundwork on the mentality switch now, and you and your organization will be more than ready to embrace the inevitable ‘chaos’ of next year’s compensation review season.