Growing Employee-Employer Disconnect on Compensation?

In its recently released Emerging Workforce Study (the fifth iteration since 1997), Spherion Corporation calls our attention to a significant divide between employees and employers on compensation.  Three quarters (75%) of the employees surveyed cite compensation as the thing most crucial to retaining them, but only 26% are currently satisfied with this aspect of their job.

I think the statistics are revealing of a general and potentially growing disconnect between employees and employers around pay.  I see evidence of this in my own consulting work, especially with organizations that are dominated by younger workers. There may be a host of factors at play behind the trend: from the unlimited availability of comparative pay data (widely ranging in quality and validity) on the Internet to the different attitudes and priorities of Gen X and Y employees in and entering the workforce.  Good or bad news, what it adds up to is an employee population that is more inclined to challenge and/or disbelieve an employer's pay data, practices and policies than in the past. 

We - as HR and reward professionals - need to appreciate and be prepared to respond to this challenge, and I think one of the best tools is transparency.  I'm not talking about necessarily sharing everyone's personal compensation information with everyone else, but rather openly sharing how the pay program is built, where the data used to build it comes from, how it is designed to operate, and what its philosophical underpinnings are meant to be.  And - certainly - I think individual employees should fully understand how the program applies to them (i.e., their salary range, etc.).

Today's (and tomorrow's) employees are not inclined to believe and accept a pay program that is shrouded in mystery.  And while management does reserve the ultimate right to set salaries and salary opportunities, it is best done in an open and well-explained manner.      

Comments

[The Career Encourager]

Great post! And the good news is that this sound advice to organizations is in agreement with "best practices" for individuals who are seeking new employment and/or a promotion - be clear about your salary requirements and have a sound rationale for them. If the orgnization is "secretive" and the individual is focused on personal financial desires rather than trying to connect to the marketplace, you have a recipe for disaster in the relationship. If both are focused on market data and the demand for particular skill sets, you can have a productive conversation about pay.

[Ann Bares]

Thanks, Peggy! You're right - clarity and a sound rationale should be the baseline for both sides of the table, employee and employer.

[FrankGiancola]

Ann,

The differences noted may be due to several factors:

The employers were surveyed in 2005, the employees in 2007.

The employee sample was not taken from the same companies as the employers surveyed, except by chance.

A national sample of employees like this one will show employees from all types of employers---small employers and those that pay minumum wage, like fast food or retail. We know that these people will have a great interest in better pay. The surveys that HR professionals use, from major consulting firms, survey large employers and professionals, where pay is less important.

Frank

[Ann Bares]

Frank-

Thanks for the comment and for pointing out some of the potential flaws in this comparison. They are worth noting, but I believe that the disconnect phenomenon is a real one - based on what I have been encountering "on the ground" in working with a range of organizations over the past several years. It might be interesting to watch for other studies with data that either supports or refutes the existence of the increasing disconnect.

[Wally Bock]

Wonderful post, Ann. There are a host of issues circling this one.

We've spent so much time talking about how "money isn't the most important thing" that we've started to believe that "money isn't important." For some people, compensation is a scorecard. I think that's the driver of many super-stratospheric CEO packages.

But for most people, compensation is a hygiene factor. It doesn't provide positive motivation, but it is a negative force when it's not "enough" or "fair."

There's the issue of transparency. The generation now entering the workforce is going to push hard on that and it will be a good thing.

[Ann Bares]

Wally:

Thanks for the comments. I agree, particularly with your last remark - the days of trusting a pay system because "management says so" are disappearing - if not already gone. Best we accept that fact and act accordingly!

[RayC22]

Ann,

"And while management does reserve the ultimate right to set salaries and salary opportunities, it is best done in an open and well-explained manner."

Right on the nail on this!

When there's lack of communication, by default, people usually assume the negative. Which is precisely like you say, open communication is key!

[Ann Bares]

Ray:

Thanks for reading and sharing your comment. I agree - when we fail to be open, people assume the worst.

[Michael Haberman]

Ann:
I have long been an advocate in my jobs and with my clients and in my classrooms of transparency in the pay system. I blogged about your blog and in it I mentioned that most people figure out what others make, and if they don't they typically inflate the figure, which is not a good thing for the company. However, many companies still have the secrecy policy on compensation, which could potentialy violate the NLRA, depending on circumstances. Thanks for a nice blog.

[Ann Bares]

Michael:

Thanks for the comment! I agree that there is little to be gained by secrecy, for employers or their employees.

Thanks for introducing me to your blog as well. Readers, check out HR Observations at
http://www.omegahrsolutions.blogspot.com/