the importance of pay transparency to...

PERCEPTION IS REALITYTHE IMPORTANCE OF PAY TRANSPARENCY

TO EMPLOYEES AND ORGANIZATIONS

Rena Rasch, PhDLena Bottos, CCP

To us, business is personal

Copyright Kenexa®,an IBM Company, 2013 2Copyright Kenexa®, 2013 2

WORKTRENDSTM REPORT

Download your free copy from Kenexa.com


SPEAKERS

Rena Rasch, Ph.D.Research ManagerHigh Performance Institute by Kenexa, an IBM company

Rena Rasch is the manager of the High Performance Institute’s Minneapolis team, which she joined in 2008. She also manages the Institute’s WorkTrends™ study, an annual employee opinion survey of over 33,000 workers in 28 countries around the world. Rena strives to provide empirically-based solutions to HR practitioners’ biggest questions. Topics of interest include employee engagement, generational differences in the workplace, trust in leadership, work-life balance and work stress, unionization intent, why employees join and leave their organizations, and many others. Rena received her Ph.D. in I/O psychology from the University of Minnesota.


SPEAKERS

Lena BottosVice President, Compensation

to research on trends in compensation practice and spends time meeting with customers and other compensation professionals to understand the challenges that HR professionals face in today’s market. In addition to numerous interviews with media outlets such as NPR, CBS MarketWatch, and the Christian Science Monitor, Lena has contributed to several books and has spoken at conferences for World at Work and the Society for Human Resource Management.

As Vice President of Compensation at Kenexa, Lena is responsible for managing client relationships and assuring accurate and timely delivery of services. Leveraging more than ten years experience in compensation and benefits consulting, she contributes


HOW DO YOU KNOW IF PAY IS “FAIR”?

• Objective measures– Market alignment– Internal equity

• Subjective measures– Perceptions

Do I feel valued? Do they respect me?

• Which matters more?


A FEW QUESTIONS…

Do you believe your employees are paid fairly?

Do you believe you are paid fairly?


REALITY PERCEPTION

corporate culture

coworkers

friends & family

articles/publications

the internet

• Aligned to the market (median)

• Equitable across similarly situated employees

• Compliant with relevant statutes

• I’m not paid enough for the work I do

• I don’t know why they pay me what they do

• My co-workers who do the same thing make more than I do


KENEXA’S WORKTRENDSTM SURVEY

• Administered annually or bi-annually since 1984• In 2012, taken online by 33,000 employees in 28 different countries• Representative sample of workers across the globe• > 200 questions about:

– Employee opinions and attitudes– Manager and leadership behaviors– Organizational practices– Demographic variables– Compensation practices


PERCEPTIONS OF “FAIR” PAY OVER TIME

51%

55% 55% 54% 54%

49%

57%59% 58%

53%50%

20%

30%

40%

50%

60%

70%

2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012


PERCEPTION MATTERS

33%

64%

70%

49%

54%

78%

85%

85%

15%

17%

% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Employee Engagement

Mental/Physical Health

Personal Life Satisfaction

Turnover Intentions

Unreasonable Work Stress

Percent Agree

Fair Pay Unfair Pay


DRIVERS OF BELIEF IN PAY FAIRNESS

Understanding how pay is determined

Knowing how to maximize pay

Believing pay is related to performance


DRIVERS OF BELIEF IN PAY FAIRNESS

15% 18%

31%

62%67%

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Understand How PayDetermined

Know How to Maximize Pay Pay Related to Performance

Perc

ent B

elie

ving

Pay

is F

air

Unfavorable Favorable


BUILDING BELIEF IN PAY FAIRNESS

Pay isrelated to

performance36%

Know howto maximize

compensation28%

Actualpay level

10%

Understandhow pay isdetermined

26%


PAY FAIRNESS AND ENGAGEMENT

32% 33%40%

67%73%

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Understand How PayDetermined

Know How to MaximizePay

Pay Related toPerformance

EEI S

core



CURRENT PERCEPTIONS


COMMUNICATIONBREAKDOWN?

69% 72% 73%

86%

53%60% 63%

78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IndividualContributor

Front-Line Supervisor Mid-Level Manager Executive/SeniorManager

Understand How Pay Determined Know How to Maximize Pay


REALITY PERCEPTIONREALITY

DRIVESPERCEPTION


TRANSPARENCY


BUILDING BELIEF IN PAY FAIRNESS

• Address the key drivers

– Understanding how pay is determined

– Knowing how to maximize pay

– Believing pay is related to performance


FACT: THEY WILL SELF-EDUCATE

• Understand their sources• Recognize the

opportunity for dialogue• Don’t be defensive• Silence does not equal

understanding


INSTITUTIONALIZE TRANSPARENCY

• Field HR visibility• Manager training• Employee education

• Go beyond base pay

• Respect your organizational culture!


PAY FOR PERFORMANCE

• Define what high performance looks like

• “Pay for Performance” vs. “Increase for Performance”

• Merit matrix


PAY TRANSPARENCY AND COMMUNICATION CULTURE

56%

37%

81%72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

I have a good understanding of how mypay is determined.

I know specifically what I need to do tomaximize my compensation.

Perc

ent F

avor

able

In my organization, there is open, honest two-way communication.



BELIEF IN PAY FAIRNESS…

• Impacts engagement (which impacts business results)

• Can make or break our programs

• Susceptible to external forces

• Driven by transparency• Is within our control


QUESTIONS?

the importance of pay transparency to...

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