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150УДК 331 21
F.Zh. Sagindykova*
THE IMPORTANCE OF COMMUNICATION IN COMPENSATION MANAGEMENT
Сагиндыкова Ф.Ж. Важность коммуникации в управлении вознаграждениями. - Статья
В этой статье автор рассуждает о важности коммуникации в управлении вознаграждениями с точки зрения вовлечения сотрудников, их производительности и улучшения бизнес-результатов Также в статье рассматриваются вопросы, вокруг ключевой роли, которую линейные менеджеры играют в коммуникационном процессе программ вознаграждений Автор также исследует роль функции управления человеческими ресурсами в нахождении эффективных способов использования роли руководителя, с целью успешной реализации поощрительных программ
Ключевые слова: вознаграждения, компенсация, коммуникация, линейный менеджмент, HR функция
Sagindykova F.Zh. The importance of communication in compensation management. - Article .
In this article author discusses the importance of communication in compensation management in terms of employee engagement, productivity of labor and business results improvement Also this article deals with the issues around the key role of line managers in communication process of reward program. It also explores how the human-resources management function helps to find better ways to leverage the manager's role for successful realization of rewards programs .
Keywords: total rewards, compensation, communication, line management, HR function
Сагіндикова Ф.Ж. Важливість комунікації в управлінні винагородами. - Стаття
У цій статті автор розглядає важливість комунікації в управлінні винагородами з погляду залучення співробітників, їх продуктивності та поліпшення бізнес-результатів. Також у статті розглядаються питання, навколо ключової ролі, яку лінійні менеджери відіграють у комунікаційному процесі програм винагород. Автор також досліджує роль функції управління людськими ресурсами в знаходженні ефективних способів використання ролі керівника, з метою успішної реалізації заохочувальних програм .
Ключові слова: винагороди, компенсація, комунікація, лінійний менеджмент, HR функція .
Employee compensation plays a key role in efforts to manage human resources better because it is at the heart of the employment relationship, being ofcritical importance to both employees and employers (Gerhart, Minkoff and Olsen 1995). Lawler (1995) reminds us that the main purpose of compensation strategy is to produce the behavior that ensures overall organizational strategy success [1, p . 14]. But companies cannot achieve that goal unless employees know what is expected of them and how their behavior affects the rewards they can earn . Studies show that the employee who understands his or her employer’s total
rewards program is more likely to be focused in the workplace . If employees do not perceive value, then companies do not benefit in terms of engagement, productivity, or improved business results (Hallock 2011). Unfortunately, very little excellent communication on total rewards exists. At best, companies tend to provide a list of what the elements are Hallock (2011) makes it clear that an effective communication approach will not only clear away the confusion for employees, but will enhance the perceived value of the program [2, p . 10]. A full range of advantages of reward communication for employees and employers shown in Table 1.
* Сагиндыкова Фариза Жанбековна - студентка магистратуры по специальности «Менеджмент», Казахстанско-Британский технический университет, Бизнес школа, г. Алматы, Казахстан .
Table 1.
The power of communication.
From the employee's perspective From the employer's perspective
• Provides necessary education • Provides timely information • Clarifies expectations • Increases awareness • Reinforces the decision to join and remain with the company • Helps achieve program goals • Streamlines administration • Meets legal requirements • Changes employee attitudes and behavior • Improves utilization, leading to improved return on investment • Increases ability to understand and respond to employees • Reinforces corporate philosophy, culture, and values
Source: Reprinted from The WorldatWork Handbook of Compensation, Benefits& Total Rewards (p . 55) by WorldatWork, 2007, New Jersey: John Wiley & Sons, Inc .
Research shows a relationship between reward-communications effectiveness and employee engagement and business results. Mulvey, LeBlanc, Heneman and McInerney (2002) found a positive correlation between the amount of knowledge employees have about their reward program and their satisfaction with their job and the organization . Studies conducted by both Hay Group and Towers Perrin found that the most effective organizations provide reward information more frequently and in greater depth than other organizations (McMullen, Stark, Royal 2008 and Gherson 2000). These studies found that high-performing organizations do a much better job than their respective peer groups in:
- Communicating the purpose and intent of total rewards programs with employees;
- Frequently communicating the value of total rewards;
- Engaging line managers more directly in reward-communications processes;
- Evaluating the success of reward programs [3, p . 12].
Recent research conducted by Hay Group, Loyola University of Chicago and WorldatWork shows that compensation professionals typically think more time and emphasis will be spent on most compensation programs and processes, from design to communication [4, p . 55]. As a result of growing
interest in compensation communication many management consulting firms and associations suggest their own guides for managers in reward communications The one of them is WorldatWork which is a global association for human resources management professionals and business leaders focused on attracting, motivating and retaining employees recommends a six stage process of communication, shown in Figure 1
Step 1 is defining the objectives of the communication program Is it to ensure that employees fully understand all the components of the compensation system? Is it to change performance expectations? Or is it to help employees make informed healthcare choices?
Step 2 is to collect information from executives, managers, and employees to assess their current perceptions, attitudes, and understanding of the subject
Step 3 is a communication program that will convey the information needed to accomplish the original objectives
Step 4 and 5 of the communication process are to determine the most effective media, in light of the message and the audience, and to conduct the campaign
Step 6 of the communication process suggests that the program be evaluated . Did it accomplish its goals? [5, p.662].
Figure 1. The Compensation Communication Cycle
Source: Reprinted from Compensation 11th edition (p . 661), by G. Milkovich, J. Newman, B . Gerhart, 2013, McGraw-Hill International Edition.
Fortunately, employers today have an array of communication tools to choose from, many unavailable in the past. Technology has enabled the creation of individualized reports informing employees about reward program eligibility and payouts . Computers at work and home and the Internet make dissemination of rewards information via e-mails, Web sites, Webinars, DVDs and a host of other electronic media fast and cost effective .
Table 2.
Rate method effectiveness for communicating reward strategy and philosophy.
Use method Not effective Marginally effective Effective Very effective
E-mail or letter from employee’s supervisor, human resources or senior management 90% 3% 3б% 45% 1б%
Intranet or Internet sites, CDs/DVDs or other digital information 78% 5% 39% 37% 19%
Printed materials, e.g., newsletters, brochures and leaflets 83% 2% 32% 48% 18%
Individualized compensation or total rewards statements sent to employees б9% 0% 12% 3б% 52%
Meetings led by human resources or compensation professionals 83% 0% 15% 4б% 39%
Meetings led by line management 77% 3% 30% 39% 29%
Blogs and electronic bulletin boards where an employee can react to statements others have posted 28% 25% 50% 20% 5%
Bulletin boards or other kinds of posting in the workplace (not electronic) 51% 24% 51% 21% 4%
Overall, how effectively does your organization communicate base-pay information? - 1б% 51% 2б% 7%
Note: Reprinted from 'A Study on Reward Communications: Methods for Improvement of Employee Understanding," by D . Scott, L . Sperling, T McMullen, B . Bowbin, 2008, WorldatWork Journal, 3, p . 11 .
As shown in Table 2, the most widely used methods to communicate reward strategy and philosophy are e-mails or letters, printed materials, e g , newsletters, brochures and leaflets and meetings led by human resources or compensation professionals Blogs and electronic and traditional bulletin boards are used infrequently and are most often rated ineffective or marginally effective While some of these methods are more involved than others, each can help employees acquire a better understanding about how their rewards are determined and why they are paid what they are paid . And one problem is to find the correct mix of methods can give organizations opportunity to increase the “total value” of the reward program without spending any additional reward dollars
According to Scott, McMullen, Sperling and Bowbin (2007), another problem which arises
in reward communications is the tricky balance between communicating enough information about reward programs for employees to understand them and the inevitable need for organizations to keep some information private [6, p. 16]. Proponents of open reward communications contend that without employee understanding, reward programs will not align or motivate employee effort toward achieving business objectives Secret systems cause some negative side effectives, including a considerable distortion of the actual rewards people receive and a low-trust environment in which people have trouble understanding the relationship between pay and performance (Lawler 1995) [1, p. 17]. Nevertheless, organizations cannot reject the reward communication importance, as communication effectiveness in the implementation of compensation programs scientifically proven by many studies in this area (Figure 2).
Effective reward amummkatioji
Successful implementation of reiv.inrt programs
EiiipMtt
Saiisfavtiou
and
engagijnent
I
Utisiiiew
Performance
aiul
results
Figure 2. The importance of communication in compensation management
Source: Compiled by the author
Line managers are key communicators
As was mentioned above a strong relationship exists between employees’ satisfaction/commitment and company’s rewards communication effectiveness, and according to recent research results front-line managers are the key in making this link
Hay group Line Managers Impact on Reward Effectiveness research (2007) shows that organizations need to look beyond the HR department if they want to make the most of their reward program implementation and instead start taking into account the impact line managers can have on the success of these programs [7, p . 7]. Of course, HR should still be heavily involved in designing and managing these initiatives, but successful ones that lead to more productive and engaged employees
take advantage of the relationships and direct lines of communication that already exist between line managers and their employees, because employees trust their immediate manager more than anyone else in their organization (Jensen, McMullen&Stark 2008). Employees expect a lot out of their managers and they tend to trust the information they receive from them (McMullen and Stark 2008).
Unfortunately, a majority of organizations get failing marks when it comes to effectively implementing their reward programs (McMullen and Stark 2008). In a study of 1,200 organizations in 80 countries, 30 percent of organizations are seen as effective at implementing their total rewards programs [8, p . 34]. Attention should not be limited to line managers in addressing these
shortcomings . However, the CIPD’s (2007) reward management survey found that most respondents don’t rate highly the reward decision-making or communication skills of their line managers [9, p. 34].
As the data in Figure 3 indicate, managers give themselves failing marks on communicating various aspects of rewards programs (brighter bars). Human resources also gives managers poor marks on communicating rewards programs (darker bars)
■ HR ■ Line managers
Using nonfinancial recognition programs Managing overall pay for performance relationship Communicating about what it takes to advance Coaching employees and providing feedback Communicating about benefits program Communicating rationale for variable pay program Communicating rationale for salary increases Communicating total rewards program Implementing total rewards program
% Effective/V ery effective
Figure 3. The Impact of Line Managers in Communicating and Implementing a Reward Programs
Source: Reprinted from "5 things I've learned about rewards communication," by T. McMullen, 2012, The Magazine of WorldatWork, 7, p . 46 . Copyright 2012 by WorldatWork.
While line managers are insufficiently prepared to take on these accountabilities, many HR functions are inadequately supporting their line managers in reward-program implementation. So, many organizations and their managers are insufficiently prepared to take on this critical role . This is reflected in the following findings in the Hay Group “Global Line Managers Impact on Reward Program Effectiveness Study” of 1,200 organizations:
• Less than 40 percent of organizations believe that their managers are effective at communicating reward programs (from base pay to variable pay, benefits, and financial and nonfinancial recognition programs) [10, p . 46].
The HR function has a key role to play: it can work with managers to educate them about how to influence employees in this area and execute reward programs effectively To use line managers as the main communication channel, companies must convince them that reward communication is a critical part of their job—and they must be rewarded for it To help evaluate their performance in this responsibility, organizations may want to ask employees
to assess how well their supervisors communicate about rewards . But before measuring how well supervisors are communicating, the organization must provide line managers with extensive training and communication tools (booklets, desktop flipcharts, etc ) to help them do their job effectively As Acley (1993) suggests, supervisors must learn how to provide good answers to such tough questions from employees as these:
- "Why is my pay increase only this much?”
- “What do I have to do to get more?”
- “Why don’t I get as much as the people doing the same job at the XYZ Company?”
- “Why don’t I get as much as the employees in other departments?”
- “Why don’t we get automatic cost-of-living increases?”
- “Why don’t we get higher salaries in
light of the profits the company earns?” [11,
p 19]
The Compensation Roundtable suggests three key areas of focus for organizations wishing to increase the effectiveness of conversations about pay:
• Help managers understand the value of their role in such communications;
• Hold managers accountable for effective communication; and
• Provide managers with the skills and confidence needed to talk with employees about pay [12]
Conclusion.
Effective communication really is the key to making sure that a reward program delivers what it was designed to do Make no mistake, effectively managing rewards communications is hard work, but it’s the kind of work that benefits those individuals and organizations that do it well After all, the reward program can only motivate employees ifit is understood and accepted by them. Done right, it will positively influence how employees perceive and value their total rewards programs, improve their engagement levels and enhance their impact on organization’s success
HR can help line managers communicate the program’s goals by making sure that its key parts are laid out in a clear, simple and easy-to-understand way It also needs to ensure that line managers are provided with a total reward framework that they can use to more easily explain the benefits of the reward programs to employees When HR and line managers come together in this way they can have a massively positive influence on how employees perceive and value the rewards program and help make sure it starts to deliver real value for money for the organization
List of References
1. Lawler E. The New Pay: A Strategic Approach / E. Lawler // Compensation and Benefits Review 1995. -№27. -p.14-22.
2. Hallock K The Disconnect Between Employer Costs and Employee Value . / K Hallock
II The Magazine of WorldatWork 2011 -№1 -p 10-11
3. Scott D., McMullen T, Sperling R. S., Bowbin B A Study on Reward Communications: Methods for Improvement of Employee Understanding I D Scott, T McMullen, R S Sperling, B .Bowbin II WorldatWork Journal . 2008. -№3. -p . 11-14.
4 . WORLDATWORK. The WorldatWork Handbook of Compensation, Benefits& Total Rewards New Jersey: John Wiley & Sons, Inc, -2007 -p 53-61
5 Milkovich G , Newman J , Gerhart B Compensation . (11th ed. ). McGraw-Hill International Edition, -2013 - p 659-663
6 Scott D , McMullen T , Sperling R S , Bowbin B Reward Programs: What Works and What Needs to be Improved I D . Scott, T McMullen, R. S . Sperling, B . Bowbin II WorldatWork Journal . 2007. -№ 3. -p. 14-19.
7 . Jensen D . , McMullen T. , Stark M . (2007). Managing Reward- Why Line Managers are the Vital Link I D Jensen, T McMullen, M Stark II Hay group . 2007. -№5. -p.6-9.
8 McMullen T , Stark M The Role of Line Managers and HR in Reward Program Effectiveness I TMcMullen, M . Stark II World-atWork Journal 2008 - №2 -p 30-43
9 Chartered Institute Of Personnel And Development Rewarding work -the vital role of line managers London: CIPD, -2007
10 McMullen T 5 things I’ve learned about rewards communication I T McMullen II The Magazine of WorldatWork 2012 -№7 -p 46-47
11 Ackley D What to Say About Pay I D Ackley II Compensation&Benefits Review 1993.-№1.-p . 18-21.
12 Grensing-Pophal L (2010, February 17). Helping managers Communicate on Pay Human Resource Executive Online Retrieved from http:IIwww. hreonline . comI HREIviewIstory jhtml?id=339549301
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