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The Salary Dilemma: Should You Be Open About Employee Pay?

Should your company’s salary information be transparent?

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Salary-Dilemmas

When you start a new business and have just one or two employees, it’s both easy and practical to make salary decisions on a case-by-case basis. As your business grows, however, this approach likely will cause staff to speculate, often inaccurately, and gossip about who earns how much. This dynamic can distract them from doing their jobs.

In an effort to avoid such fallout, some entrepreneurs make all their employees’ salary information available to everyone in the company. At the other end of the spectrum are those business owners who think this approach is completely crazy.

So who’s right? Should your company’s salary information be transparent? In my experience, many entrepreneurs debating transparency don’t see the underlying issues.

When you look at employee complaints about salary, they usually stem from at least one of the following three core issues:

  • Employees perceive salary decisions as arbitrary and presume they’re unfair.
  • Employees view their performance differently than you do.
  • Employees are confused about how the performance and compensation system works.

Here are three ways to address these issues:

1. Develop a salary formula.

Stop making case-by-case salary decisions. Instead, define every job in the company and develop a salary formula for each one. To eliminate any perception of arbitrariness, the formula should take into account factors like an employee’s skills, experience level and performance.

For example, say the salary range for a customer service agent is $20 000 to $30 000. An employee with average skills, experience and performance would earn $25 000. You can then rate the employee on a scale of -10 to +10. For example, if the employee had no experience, they would receive a -10 for experience. The combination of these ratings would then determine where in the salary range the employee falls.

With this formula, employees will stop asking “Why does Mary earn more than me?” and start asking “What do I need to do to become a senior customer service agent like Mary?” Instead of complaining about seemingly arbitrary salary decisions, employees will focus on improving their skills to earn more. It’s a subtle, but important distinction.

2. Regularly tell employees where they stand.

Every job in the company should have a written set of objective performance expectations. Employees should know how their performance compares to those standards. In addition to an annual formal review, it’s critical to provide frequent informal feedback.

Let me illustrate this point with a personal example on a smaller scale. I have three daughters under the age of nine and they all have “jobs” (household chores) around the house. If I gave them feedback on their “job performance” only once a year, they certainly wouldn’t keep up with their chores. While employees don’t need the hourly feedback my kids seem to need, a single annual review just isn’t enough.

When you provide frequent performance feedback – say, monthly – employees have no reason to be resentful about salaries because you give them ample time and guidance to improve. Conversely, when you tell an employee on 31 December that he or she has been doing a bad job since 1 February and, as a result, won’t be getting a raise, expect him or her to be rightfully resentful.

3. Educate employees on your performance and compensation system.

Once you’ve adopted a systematic performance and compensation system, communicate it to all employees, department by department – even if employees don’t (or are afraid to) ask about it. In a department-wide meeting, explain the hierarchy of job titles, the skills needed to qualify for each level and the performance criteria for each job level. (Also be sure to include the same information in materials for new employees.)

For example, you might announce that the customer service department now has only two job titles – Customer Service Agent, and Senior Customer Service Agent. To qualify for the latter, one must have mastered computers systems X, Y and Z; be certified on product lines A & B; and have a quality rating of 9+ for the last two years.

Before the new system goes into effect, give each employee a “sneak preview” performance and compensation review, based on the new guidelines.

This gives everyone a chance to get used to the new system and to identify any conflicts without salary changes at stake.

Once you’ve followed these three steps, you’ll have an objective, systematic and well-communicated approach to inform your company’s performance and salary decisions. At that point, whether or not you make salaries transparent will be a moot point because you’ll have effectively eliminated the underlying issues.

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Managing Staff

How To Listen To Your Employees Better So You Can Improve Your Business

Create ‘Hero relationships’ with your workers so you foster a team environment that helps fix mistakes and makes your business stronger.

Jeffrey Hayzlett

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Years ago, I was in a business where we were shipping product constantly to get things out on time: “Get the stuff out the door so we can make revenue and meet our quotas now.” With our Operational Excellence seemingly hanging in the balance, we did what we were told.

We forgot about our dedication to quality and our promise to do the best for our customers. We also forgot about what it was doing to our people, from the top of the organisation to the floor. Concerns about what was going on were acknowledged, but never pursued. Head down, pedal to the metal, nothing to see here.

We’ve all lost our way like this at some point. The question is, does anyone have the courage to speak up, and will anyone listen before it brings the culture and the company down? Our company culture had been good up to this point. We were a “Good Co.” But no one was listening to our people anymore. We were now “Bottom Liners,” and if we kept going, we would soon be sliding toward “Zero.”

Then we had a company meeting with the CEO, and I watched as the senior leaders turned on their people and told the CEO what they thought he wanted to hear. They spoke about how great things were going and how everyone was stepping up. That’s when one of our people – an hourly worker – had the courage to speak up. He said things weren’t great — that we were breaking our brand promise and cheating our customers:

“We’re not doing the right things, and we might be putting a product out that’s not quite ready or not checked for quality in packaging and shipping. Is that OK if I raise my hand and say, ‘No, that’s not acceptable’?”

Related: The Value Of Employee Growth

The senior leaders were shocked, and I wondered what the CEO was going to say. He had to be surprised, given this was the first he had heard of this. I wondered: Would he be willing to listen, really listen to what this person had to say? “Absolutely, that’s OK,” our CEO said, looking around the room at everyone but focusing hard on the leaders. “Does that mean we’re going to lose revenue and make customers unhappy short term? Yes. But we’re going to fix this. And in the end, we’ll get a better customer for any we lose, because we did the right thing.”

Our CEO was right. The company took a hit but recovered within the year to achieve record revenue and profits. And what if we hadn’t recovered? Well, at least it wouldn’t be because we failed to do the right thing and listened.

What can you do to listen? Start by doing what that hourly worker had the guts to do:

Speak up and ask questions. Get your butt out of your chair, walk over to a desk, and ask a question to someone’s face.

Not a demand, like, “Where’s the report I asked for?” or a yes/ no question. One that opens people up and requires a thoughtful answer – the more personal and less work-driven, the better. Anything that shows you care about their well-being. Maybe try to find out one thing you don’t know about them:

  • What did you do this weekend?
  • Who’s that in the picture on your desk?
  • Where do you like to eat dinner when you go out?

Then listen to the answer and ask at least two more follow-up questions before saying anything about you. This is what’s called “active listening.” But it only works if you stop thinking about yourself and genuinely care about others – and let them ask questions of you, too.

A big part of listening is asking questions to understand. You want your people to do that, so you need to model this behaviour, which is why I’m always happy for my people to ask good, thoughtful questions when we launch a new program so they can execute better.

Related: Dealing With Employee Misconduct

The more you do that, the more you not only show your people you care but also connect and begin to form real relationships with them. When an employee feels that connection, it makes them want to work harder to serve you and deliver better results. By listening to others, you also learn to put yourself in the other person’s shoes to ask bigger and more important questions, like:

  • What does this potential customer want?
  • How can I help my boss do more?
  • What is the other party in our joint venture or partnership trying to accomplish?

Of course, questioning can cross a line. Leaders can never tolerate questions designed to undermine authority, prove what they don’t know, or make excuses. I’m intolerant when my people keep questioning why the company is doing what we’re doing and attacking it, as if I didn’t consider all sides before making the decision. Any question like that sounds like it’s really saying, “Jeff, you know that makes you an idiot, right?” is the worst kind of entitlement: Thinking you know better.

This article was originally posted here on Entrepreneur.com.

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Managing Staff

How To Make Your Team Feel Safe Bringing You Problems

Advertising an ‘open door’ isn’t enough.Team members need to truly believe that you’ll hear them out and take action.

Liz Kislik

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Plenty of leaders say they offer an “open door policy” to encourage employees to bring them problems or concerns. Many of these leaders also ask that employees voicing concerns come prepared with solutions in order to take responsibility for the problem rather than just “dump” or “vent.”

But employees in those scenarios may get the idea that it’s unacceptable to raise problems in the business if they don’t know how to fix them. In fact, in a study of a phenomenon  they dubbed “employee silence,” professors from New York University’s Stern School of Business demonstrated that 85 percent of their respondents felt they couldn’t raise important issues to their management at all.

Is this happening at your company? If you’re not regularly hearing about your team members’ challenges and frustrations, you can’t conclude that all is well: In fact, you might be missing out on vital information that could help you make crucial decisions about your business. You might also end up losing employees who would otherwise be able to make significant contributions.

The good news is that there are ways to reduce these risks. Try the following techniques to encourage employees to speak their minds and feel confident that you’ll take their comments into account.

Tell them why you need to hear from them as a matter of business

Emphasise that your openness isn’t because you’re nice or merely want to placate them. Instead, explain that you recognise the downside of not understanding employees’ opinions or acknowledging the risks of having a disengaged workforce, i.e., high turnover.

Research backs up this concern: A Harvard Business Review study by James R. Detert and Ethan R. Burris found that”

“When employees can voice their concerns freely, organisations see increased retention and stronger performance.”

Teach employees to use code words

These will signal to you when they’re coming in with an important matter and want you to hear them out. For example, many of my clients now tell one other to “put their seatbelts on” to signal that they need to have a tough conversation and want to cue the other party that it’s important to keep cool and maintain an open mind on the issue.

Research from Fierce Conversations and Quantum Workplace found that although about half of employees studied didn’t speak up regularly, the employees who always or almost always “speak their minds reported being more engaged at work than those who said they never or almost never did so.”

A mutually agreed-on process for ensuring attentiveness goes a long way toward helping employees speak up.

Go and seek them out

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If you haven’t heard from crucial individuals for a while, or you suspect there’s an issue brewing no one has talked to you about, create the forum for a discussion yourself.

This doesn’t have to mean summoning people to your office. One of the CEOs I work with says, “I don’t know what I don’t know,” and periodically walks the floor, chatting with everyone and lingering longer and probing more deeply with influencers and opinion leaders to learn what’s really going on.

Show that you act on their input

Refer to times when you took someone’s opinion and were able to improve a situation. Be explicit, so that the participants and other employees can tell you mean it. You could say something like, “Once Sally told me what was going on, it got me thinking. So I reevaluated that supplier’s performance, and asked them to improve their level of service. Now we’ve got a better deal.”

Use a meeting and report structure

One of my clients was slow about taking action on employee concerns. As a result, her employees stopped informing her of problems altogether, and instead ratcheted up the conflict among themselves.

This outcome matched the findings of the Journal of Business Ethics study, When Employees Stop Talking and Start Fighting, whose authors wrote that:

“Negative consequences are particularly likely to occur when employees perceive the opportunity to voice opinions to be … given by managers who do not have the intention to actually consider employee input.”

To correct the problem, this leader started holding weekly meetings to ask employees what was new or bothersome and to make public lists of the issues that needed attention.

Create an advisory group or process

Another of my clients knew he wasn’t hearing enough candid feedback from his team. He created an advisory council that collected concerns from the entire group and met with the leader quarterly to share them. This felt less risky personally to the individual employees and helped create a consistent feedback loop.

Overall, employees may always have some nervousness about raising tough topics to their leaders. But if you take the time and trouble to make clear that you care about their feedback and intend to take it seriously, they’ll be much more likely to share their concerns and deepen their commitment to you and the company.

This article was originally posted here on Entrepreneur.com.

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Managing Staff

Reduce Turnover Of Hourly Workers With These 7 Tips

Employee turnover can be costly for businesses that rely on hourly workers.

Desmond Lim

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Hourly workers play a significant role in today’s economy – from running operations at restaurants, to transporting goods from one place to another, to getting people to their destinations. Companies from Amazon, Uber and Instacart to local retail, food and logistics businesses are raising wages and offering better benefits in order to attract and retain hourly workers. At the same time, the demand for hourly workers has increased significantly, as the number of job openings in the United States has exceeded the number of job seekers.

At the same time, companies face the challenge of high turnover of hourly workers for their businesses. In a survey of 1,200 hourly workers by FSG and Hart Research Associates, the majority of respondents wanted to leave their current positions within less than 12 months. The average cost of a turnover in the company includes the cost of interviewing and screening, the cost of on-boarding, cost of training and lost productivity and engagement of current employees, which can be significant.

Therefore, it is important for business owners and entrepreneurs to recognise the importance of engaging hourly workers, to reduce turnover and to increase productivity. Therefore, in this publication, I hope to offer some tips to reduce the turnover of hourly workers for your business.

1. Start with a great onboarding process

Onboarding is a prime opportunity for employers to win the hearts and minds of new employees. It is important to have a well-structured onboarding process to provide employees with the information to succeed in their work, and to also integrate them into the culture of the company. The few weeks before employees start and after employees join is the best time to engage with new hourly workers, as they are most receptive to new structure, processes and ideas.

As an employer, it is important to come up with a well-structure onboarding process to share the values, mission and processes of the company and to ensure that each manager reinforces them. Hourly workers who experienced a robust onboarding process are more likely to stay with the company for a longer period of time and also exhibit higher productivity.

Related: HR Management Basics For The Small Business

2. Offer professional development opportunities

Many hourly workers may only have finished high school or community colleges and are often eager to learn new skills, obtain new knowledge and broaden their horizons. One example is Starbucks’ College Achievement Plan, which was introduced in June 2014 in partnership with Arizona State University, to create an opportunity for all eligible employees in United States to earn their bachelor’s degree with full tuition covered.

On a smaller scale, local businesses can offer mentoring sessions with managers, or provide opportunities for hourly workers to go to community classes on sales, marketing or communication skills. They could also turn to online courses such as Coursera or Khan Academy, where employees will be able to access resources from leading universities at minimal or no cost.

3. Offer flexibility in work scheduling

uber

With the growth of on-demand companies like Uber, DoorDash, Instacart and more, it has become increasingly important for companies to be able to offer the flexibility that the gig economy presents. Uber drivers are able to have complete flexibility in their schedule with a few clicks on the mobile app, and hence the trend has evolved that employees value their control over their time allocation. Therefore, business owners and entrepreneurs should adopt scheduling software to increase efficiency and allow employees to readily select the time slots that may best fit their weekly schedule, increasing loyalty and engagement.

4. Work toward inclusion, not just diversity

Hourly workers come from many different backgrounds and having a more inclusive work environment and hiring for a more diverse team will benefit the company significantly. In order to attract more talent and reduce turnover, it is important to work toward both inclusion and diversity to better engage hourly workers.

One of the leaders in this is Gap, which created a program called “This Way Ahead,” which helps younger workers who face employment challenges. Coming up with programs and career initiatives focused on a wider range of people is also an effective talent strategy for companies as different demographics of workers may have lower turnover rate, and hence be a better source of talent pipeline.

Related: An Excellence Approach To Nurture Star Performers

5. Communicate with your team by having periodic check-ins

It is important for managers and owners to have periodic check-ins with their employees of all levels and backgrounds. Hourly workers increasingly seek engagement and having a clear line of communication is essential. Many hourly workers are not satisfied with their work because they do not feel supported or recognised in their workplace. In a Randstad report, 27 percent of employees surveyed said that a lack of recognition is what causes they to leave the company. The more engaged workers are, the more committed they will, in turn reducing the turnover of hourly workers for companies.

6. Provide a clear path to progression and promotion

Local businesses should have an employee of the month in place to increase competition, to motivate employees and to reward the ones who excel. Hourly workers want to have a clear path to progression and promotion, and there should be a clear career road map. In the case of a restaurant, hourly workers should have the opportunity to progress from a server, to team lead, to manager and to other functions within the company.

Employers can further break down the different role hierarchies to allow more space for employees to progress in their work. Companies can also tie annual bonuses to the performance of employees, and incentive schemes like this can greatly motivate hourly workers.

High turnover for a business is detrimental and can significantly impact the morale, productivity and operations of any company. As the competition for good hourly workers increases, it has become ever more important for companies to focus on increasing engagement for their entry-level workers, to further motivate them and to reduce the turnover for workers. Companies need to take a more structured approach to communicating with entry-level workers, to better onboard them and to better reward them. Lower turnover will lead to a higher output for businesses, and benefits created from reducing turnover will surely outweigh the costs and resources allocated to it.

This article was originally posted here on Entrepreneur.com.

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