In our more literal moments, it is easy to think of employee compensation as simply a value exchange. The employee provides a service in return for a particular (and hopefully fair and competitive) combination of cash remuneration. When sorting through the evidence of a malfunctioning pay program, however, I find it helpful to think of compensation as a communication tool.
Compensation plans, and the way that they are managed, send loud messages about an employer's values and priorities. Sometimes these messages are at odds with the signals being sent through more traditional channels. For example, companies full of rhetoric about teamwork and collaboration send conflicting messages when they talk cooperation but focus all employee rewards on individual achievements. Or, an organization claiming to "pay for performance" creates mistrust and cynicism if there is a widespread reluctance to treat employees differently when handing out pay raises and bonuses.
An effective compensation program is consistent with an employer's intent and rhetoric. (Of course, first we want to be sure that there is alignment between the organization's intent and rhetoric, but that is a topic for someone else's blog.) Why is this important? Because most of us, given the choice between what our employer says and what it actually rewards, are hard pressed to ignore the messages that are directly wired to our paychecks. And, really, it isn't a choice we should be forced to make.
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