i’ve made a mistake

Compensation mistakes I’ve made:  

If life’s one big learning experience then I guess I should tell y’all: i’ve made my fair share of mistakes. 

TBH: Compensation mistakes are the worst. 

If compensation is one of the top reasons employees leave, HR must be like REALLY stinkin good at compensation stuff right??

Wrong. 

Hi! It’s me, I volunteer as tribute!

Today I’m supplying the 3 biggest mistakes I’ve made when it comes to compensation.

And bonus: I’ll even tell you the outcome of some of these situations! 

#1: Trusting the managers:  

You know the phrase “trust but verify?” It was about managers. JK it wasn’t but it still applies. 

Because truthfully, some (most??) managers can’t be trusted. 

I’m sorry!! I SAID IT. 

It’s HR’s jobs to:

✅Have a compensation philosophy 

✅To clearly communicate the philosophy and all processes to all relevant parties 

✅Help leaders and managers understand the role they play in compensation conversations 

It’s not HR’s job to:

✅Have compensation conversations in lieu of managers 

✅Be the only one who can answer questions about compensation 

✅Make all the decisions 

✅Resolve issues they are unaware of 

When I’ve made this mistake: I’ve trusted managers to talk to their team about compensation thinking I had provided them enough information, they they understood the rationale behind decisions, and that they could navigate these conversations well. 

I was ummm wrong. 

What happened: the manager botched the conversation, didn’t tell the employee any relevant information other than “HR won’t let me give you a raise” and I had a VERY angry employee in my inbox with total lack of context.  

Despite explaining the situation to the employee, how compensation was determined, showing the bands for their level/role, they were still very upset. They became disengaged over time and left within 3 months of that conversation. 

What I do differently now: 

Prepare the manager: Truthfully, its not enough to assume the managers will read your documentation, listen to your trainings, absorb the info and suddenly be able to navigate these very complex convos. I REALLY wish it was, trust me. Maybe, some day it will be. 

Here’s how you can do this: 

✍🏽Provide scripts: showing the manager what to say can be incredibly helpful and calm their nerves about the situation. 

📣Offer a practice session: make the manager prepare with you for the convo can help ensure it goes well. 

Truthfully, this situation happens more frequently than most people want to admit. 

Next time you think, my managers have got this! Just maybe consider one more layer of preparation. 

#2: Matching the competing offer: 

Imagine: You’re having a great day, the people aren’t peopling tooooo terribly and then you get a FRANTIC message from a manager… Someone on their team has another job offer for $20,000 more. The manager is full on panicking about losing someone on their team and asking what to do! 

What do you do? 

If you match the offer – go to page 42. 

If you don’t match the offer – go to page 86. 

JK this isn’t a Choose Your Own Adventure. I wish! 

For the sake of this bit, let’s go to page 42 and match the offer. 

We’ve arrived at mistake #2 I’ve made when it comes to compensation. 

Ahh, hello my old friend. 

Page 42 reads: Your employee takes the salary increase. Within 7 months they’ve submitted their resignation. You begin to backfill their role immediately. 

Now, I won’t go as far to say this is always the case. But most HR folks would tell you that matching a counter offer usually results in a bad outcome.

Don’t believe me? Data shows: 

• 9 out of 10 employees who accept a counteroffer usually leave within 12 months 
• 50% of employees who accept a counteroffer will be back searching for new gigs within 2 months. 

Why is this the case? 

Because while compensation could be a major factor, it’s rarely the ONLY factor. Things like growth, culture, leadership, industry can all play a role! 

When I’ve made this mistake: every single time i’ve offered a counter and the employee has accepted its resulted in the employee leaving before a year. 

What I’ve learned: there are few circusmstances where matching a competing offer is a winning strategy. 

Here’s when matching an offer can be worth it:

• Its a critical skill role, meaning without the talent, the biz could fail. 
• The employees possess a specialized skill set that is hard to find 

So the next time you’re faced with an employee throwing down a competing offer, maybe reconsider before hastily offer to match it. 

🎧Listen: Jessica Winder shares her take on the I Hate it Here pod. 

#3: Not educating the employees: 

Can your employees explain how their compensation is determined? 

If the answer is no, you may have a problem!

If I was a gambling woman (I’m not, it gives me anxiety) I would bet that most employees cannot tell you how their compensation was determined. 

Employees not understanding compensation can lead to:

👎🏽Perceptions of unfair practices

👎🏽Lack of engagement

👎🏽Increased turnover

👎🏽Employees struggling to advocate for themselves 

👎🏽Constant questions 

When I’ve made this mistake: I didn’t have a clearly documented compensation philosophy. 

What happened: Compensation decisions were made in vacuums, inequity was rampant and the exit interviews constantly stated compensation as the main reason for leaving. Turnover was HIGH. 

What I do differently now:

1) I always have a compensation philosophy on hand. I’ve drafted a few different ones but the key is to always: 

• Have alignment with the org’s values 
• Explain how compensation decisions are made
• Outline what factors are considered

This is an excellent place to start if you’re struggling with employee understanding!

Bonus: I also revisit the compensation philosophy quarterly to ensure it still aligns with the organization. This is crucial if you are growing rapidly. 

2) Train your employees on compensation. This can make a lot of folks uneasy because they believe it will open a can of worms and more questions will be asked. Every single time I’ve trained employees on compensation questions have actually subsided and employee trust has increased.

💡Don’t make the mistake of having your employees be in the dark.  

I have questions… 

You and every employee out there!!!

Next week, we’re doing it up. 

I’m covering common compensation questions & how to answer them. 

You’ll want to bookmark this edition and forward it to every manager out there. Just sayin’!