Now that the economy is beginning to show signs of upward movement, executives and business owners are considering when and how to manage the reversal of cuts in pay and benefits that so many organizations resorted to during 2009. Although restoring such cuts may seem to be as simple as returning them to previous levels, there are important questions to consider. For example:

- Were the previous pay and benefits programs effective?

This might be a good time to question their underlying assumptions and to assess the value they provided.

- Will restoring the cuts support the organization’s current and future business goals?

If those goals have been modified over the last year or so, it would be wise to ensure their alignment with the proposed changes.

- Are key employees likely to react to the news by “forgiving and forgetting,” or will they jump ship as soon as they have alternative job opportunities?

I don’t think it’s an exaggeration to say that by cutting pay and benefits, employers seriously damaged their employees’ trust and violated perceptions of fairness.

Here are four key tactics that together help increase management’s credibility and trustworthiness when making changes to pay and benefits programs:

1. Align the compensation and benefit program objectives with organizational goals. Take this opportunity to review your compensation and benefits programs from top to bottom, and make sure that their objectives are aligned with desired results. If your business goals have changed, make sure the systems that support them are modified to ensure their successful achievement. For example, survey data indicate that many employers intend to adopt pay practices that reward good performance. Your total rewards system sends a message to employees about organizational values and priorities, so make a conscious choice about the message you want to convey.
2. Take steps to increase the likelihood that employees will accept the designated changes to the total rewards program.Although restoring pay and benefits cuts seems to be positive news, employees are likely to be wary because they remain distrustful of management. To accelerate the re-building of trust, ensure that the changes are transparent, involve employees to the extent possible, communicate early and often, and educate first-line managers and supervisors about how the changes will affect individual employees.
3. Incorporate procedural fairness into organizational processes and decision-making. Procedural fairness refers to the rules by which decisions are made. It is a key concept in the workplace, and it is especially critical in compensation-related decisions. You can increase perceptions that changes to the compensation and benefits programs are fair by ensuring that decisions and processes are free from bias, transparent, based on objective criteria, and provide meaningful opportunities for those affected by the outcomes to have a voice.
4. Communicate, communicate, communicate.There are two aspects to communication: actions and behaviors, and words. Employees believe what they see rather than what they hear. Thus it is critical that leaders’ behaviors and actions are consistent with their words.

What are you doing to ensure your pay and benefits decisions are effective in supporting organizational goals and accepted by employees? Let us know!

© 2010 Pat Lynch. All rights reserved.

This entry was posted on Saturday, January 23rd, 2010 at 10:38 pm and is filed under Aligning the Misaligned, Optimizing Business Results, Organizational Renaissance™. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.