The Dreaded Performance Review and Pay Conversation

Oh boy, it’s that time of the year again when managers are gearing up to discuss year-end performance reviews. And if those conversations weren’t bad enough, you can now add the slew of talks that will be imminent because of new pay transparency laws.?

In just a few short days,?a fifth?of all U.S. workers will be covered under pay transparency laws, a trend that experts predict will continue to grow. Both California and the state of Washington will have new pay transparency laws going into effect on January 1st, 2023.

These new laws will likely result in more employees discussing their compensation with co-workers and more requests to managers and supervisors for pay adjustments to correct differences that employees do not readily understand or accept.

Let me ask you something.

Are your managers prepared to have some of the most challenging conversations they’ve ever faced?

Few managers know how compensation is determined in their organizations, which will be a huge problem come January 1st. Those of you who operate in states that are not covered by these laws may be mistakenly believing you’ll get to take a pass. Not so fast.?If you have remote employees in states with pay transparency laws, you'll need to comply.

Here’s how to prepare your leaders for a difficult conversation on performance and pay.

Set an example.?If you’re the CEO or a senior leader in a company and you’re not forthcoming about performance and pay, don’t expect your leaders to be transparent when discussing these matters with their employees. If no healthy straight talk or quality communication comes from the C-suite, that pattern cascades throughout the company.

Start by being direct and kind. Straight talk doesn’t have to be mean. Making someone feel bad about something isn’t going to motivate them to do better. Include specific examples of desired behavior to help the person get back on track.

Listen deeply. It takes two or more people to have a conversation. Pause to listen, and don’t be afraid to give the other person time to respond. Ultimately, you’re going for a conceptual agreement—where both parties align on how to best move forward.

Knowledge is power.?One of the main reasons why managers are uncomfortable discussing performance and pay with their employees is because they’re unsure what to say. They know there are some things they shouldn’t talk about. However, they’re not quite sure what those things are. They also don’t fully understand that their people want and need honest feedback.

The only way to bring salary talk out in the open is to talk about it. Start by acknowledging that addressing performance issues and discussing pay is challenging for many. Then give managers the tools they need to get comfortable with uncomfortable conversations.

Explain in layperson’s terms how your company determines compensation. Consider putting together a simple guide that managers can use to educate themselves and their team members. Take this one step further and provide coaching on how to conduct difficult work conversations.

Anticipate questions managers will be asked.?In my book,?Can We Talk? Seven Principles for Managing Difficult Conversations at Work , I include examples of some of the more challenging conversations managers face and scripts to help guide leaders through these conversations. When you’re prepared to engage in a tough conversation, you’ll fare much better than if you try and wing it.

Consider creating a list of commonly asked questions around performance and pay, along with scripts managers can use for guidance.

Here are some questions that managers may be asked:

• Why am I being paid at the bottom of the salary range?
• My co-worker is making more than me. Why is this so?
• How come this is the first time you’re telling me you’re not happy with my performance?
• Why am I receiving a small raise when you’re telling me my performance is exceptional?
• Why is the new hire making more money than me?
• What do I need to do to increase my pay?
• Who do I speak with if I’m unhappy with my salary?

As the year winds down, let us all do our part and commit to making 2023 the year that leaders finally give their employees what they’ve been yearning for—a culture of transparency, where people are encouraged to discuss what’s on their minds, and leaders are equipped to handle these conversations.

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