Preparing for Pay Conversations

As we move through 2023, annual reviews may be on the horizon or the current season in your organization's performance management process, which means compensation conversations will need to be held. Money can be emotionally charged and deeply personal.

Without proper preparation and clarity on the message to deliver, compensation-focused conversations can feel especially delicate. As a manager, it can feel unempowering when you aren't sure how to have a conversation with a direct report about pay and performance. Getting these conversations right is important for many reasons, and one way to develop more comfort and confidence with conducting pay conversations is simply to practice having them!

Some scenarios to consider practicing with a fellow manager are below. Practice with a peer by taking turns being the manager delivering the message and being the employee who is receiving it.

1. Employee met expectations and is getting a standard merit increase of X%.
2. Employee did not meet expectations and is not getting a merit increase this year.
3. Employee exceeded expectations, but they are at the top of their salary range and will not be receiving an increase or additional compensation this year.
4. Employee exceeded expectations and is getting a standard merit increase of X% in line with their peers.

Some general tips to think about when conducting pay conversations:

1. Be clear and specific.
2. Be honest and patient.
3. Listen actively.
4. Prepare! Prepare! Prepare!

Using vague language or leaving things open to interpretation can cause confusion and emotional tension. Practicing for potential reactions can help with an appropriate response when the conversation is happening in real-time. Verbal and non-verbal cues are important to be attuned to. Try to listen to what the person is saying in their responses or reactions to the information you're sharing, not listening to respond to what you think they are saying without digesting the message.

There’s no silver bullet to these conversations! Think about approaching them as a method to develop your own capabilities for having difficult conversations and being open to developing and nurturing the relationship(s) you already have with your direct report(s).