How Bad Communication Can Kill Good Compensation Packages by Discouraging Employees

August 24, 2011 by  Filed under: Management 

It was a Monday morning and John showed up early for work to catch up with his e-mail after enjoying a nice long weekend off as he left early on Friday. He first took the compulsory swipe by the coffee machine and grabbed his snail mail from the rack next to the machine before heading back to his cubicle. About a third of the mail slots were filled with the similar looking item. The snail mail consisted of a single thick envelope with the company logo on it. He ripped it open and took a sip of his coffee before pulling a booklet out of the envelope. On the front side of the booklet it read in big fancy letters: “Loyalty Bonus for our Most Valuable People.” John instantly smiled with a warm and fuzzy feeling as he understood this would mean more money.

The loyalty bonus was a new scheme thought out by the corporate management, in order to retain valuable workers with some experience. It was directed at those with 3-5 years of experience after graduation from university. Less experienced colleagues were not included and more experiences seniors were also not included. The package was in itself quite attractive – for the next four years John would receive an extra 15% of his annual salary in a bonus to be paid out in December, just before Christmas. All he had to do was to not resign. There was no word about these compensation packages from the mid-level managers – they had only been briefed the same day the envelops found their way to about a third of the mail slots in the department.

As John did not pay too much attention to the other mail slots, he did not reflect over the fact that not every slot had an envelope. When his coworkers started showing up about 30 minutes later he quickly approached Susan, the attractive new analyst sitting in a cubicle not far form John’s to talk about the bonus scheme. – “Great news! They are increasing our pay just for not resigning – they are giving us loyalty bonuses. I think I’ll get 12000 bucks more a year for the next four years! Not bad, huh?” He radiated self-importance and confidence. Susan, however, had not gotten any loyalty bonus because she had graduated just the year before.

This clearly sets the stage for conflict at work. Especially that communication of the intent and reason for this loyalty bonus was missing, not to mention any word of the program being continued such that younger coworkers would be eligible for similar packages a year or two later. The reason for trying to retain these employees was quite clear. From a business perspective, things look like this:

* less experienced employees are easy to replace with other inexperienced workers

* those with 3-5 years of experience are attractive on the job market and can easily change employer, and at the same time they are producing great value for the company being able to produce work of high quality but not yet being as expensive to utilize as the more senior resources with more than 5 years of experience

* those with more than 5 years of experience are typically less mobile than their younger peers and they typically have greater job satisfaction as they have matured into positions they like.

What happened at our case study company ACME Industries? Well, let’s see what Susan did.

Susan went straight to the mail rack while John radiated back to his cubicle for actually starting the e-mail cleanup he had planned to do in the morning. As Susan approached the rack she noticed her mail slot was empty as usual – she wouldn’t normally even check it because who sends regular mail these days anyway? She was disappointed and immediately feared she had screwed up and was about to get fired as she did not get the bonus that John had said was for “the most valuable coworkers.” She was clearly not one of them. She noticed that her friend Ronda had also not gotten any letter from the corporate overlords. As Ronda entered the office seconds later, Susan ran to her to complain about the outrage. Ronda was appalled, not that Susan did not get the bonus, but as she noticed she did also not get one – even though she had been with the company for almost ten years by now. Was she also not among the most valuable coworkers? And such the anger spread among the juniors and the seniors….

This situation is hardly a picture of a motivated organization moving forward – the loyalty bonus has effectively destroyed the team feeling and degraded work morale. What could management have done otherwise? The answer is that they should have communicated the program. Such a loyalty scheme may not be the best of ideas in the first place, but place yourself in the shoes of the mid manager, responsible for the department where John, Susan and Ronda work. What would you do?

You would probably not do what the department manager, Vlad Hanson, in our story did – he had distributed the letters in the mail slots after office hours on Friday, and on Monday he went to join other mid managers in a company leadership development seminar. What Vlad should have done was to communicate the reasoning behind the bonus scheme as well as allow employees to ask questions and vent frustrations to him. That way, he could have been in control of the situation and perhaps avoided the destruction of the group feeling.

Such communication is not an easy task to do – in fact it is one of the more difficult types of communication a leader can be expected to do, as he has to turn something that is easily perceived as a categorization of some employees as more worth than others without any regard to their actual work performance. People don’t usually like that. To manage such a situation well, there is only one thing that counts – and that is preparation. A typical preparation does not need to take a lot of time – just a bit of empathy and a few minutes to structure facts and thoughts. By answering the following questions to himself, Vlad could have been prepared for reactions and arranged a department meeting to avoid the degrading group morale. The questions are:

* what is the intent for this action (the loyalty bonus) and how do I communicate that to the employees such that they understand the reasoning?

* who will benefit from this and who will not?

* what are the likely questions that I will receive after explaining the reasoning and background for this scheme?

Then Vlad could have been well prepared. The answers to the questions are not very difficult to find – this is not rocket science. Anticipating questions, would probably include the following kinds:

* will the bonus scheme be available to me next year when I’ve been here for 3 years?

* why are the mid-level coworkers more valuable than me when I’ve been here for 15 years?

* and so on…

Then, of course, thinking a bit about non-provocative answers to those questions you anticipate will also help control the situation. The first question is a factual one – if you don’t know whether the bonus system will last until Susan is eligible, you should take a phone call to corporate and ask about it. If yes, all is well. If no, you should probably not just say no, but try to wrap in some uncertainty like saying it depends on the market in about a year, and if the market situation is the same as today you cannot see why the program should not last. Anyway – keep it honest and polite, and it will be possible to avoid the divide between employees from widening. Good communication is essential to achieving results. Good communication requires preparation and empathy. All you need to do to be a good communicator as a leader is to put yourself in the place of the receiver for your message, anticipate questions and feelings and adapt the way you deliver the message accordingly.

Next time, if the leadership seminar was any good, Vlad would know what to do.

Herrman Rock is a specialist in group management and communication. He writes articles about managing people and human behavior. He has also written the booklet “The Multichannel Job Seeker” – a how-to for job seekers in the modern business world on using social media, tactful communication and cloud computing methods to expedite the job hunt – to read more about this, see for free advice and great resources for job hunters.

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