There is no truth. There is only perception.
How to make sure your reward practice is seen as fair.
The word ‘fairness’ can mean so many different things. As reward consultants, we often focus on the difference between internal equity - the perceived fairness compared to others doing the same or similar jobs inside the same organisation, and external equity - the perceived fairness compared to others doing the same job in other companies. While these are important, the sense of injustice brought about by perceived ‘unfair’ reward practice can be the undoing of any well intentioned reward strategy.
Working with a client recently, we discussed the hardest challenges they face implementing a new organisation culture and reward road map. The word that came out time and time again was ensuring it was seen as fair. Previously well intentioned decisions had been undermined by poor application in practice. For example, to encourage team building and recognise team effort they had developed the idea of reward lunches paid for out of a dedicated budget. But poor communication meant that not all managers knew about the concept, and bad feeling was generated when some teams felt that they were losing out when their manager didn’t reward the in the same way as others. Other examples were cited where pay awards were distributed to seemingly ‘high performers.’ However, because no-one understood the rationale or what being a ‘high performer’ constituted, it was seen as unfair in application.
So, how do you ensure you don’t unintentionally create unfair practice when developing new reward frameworks or implementing your annual pay review? The answer is you can’t always get it 100% right - individuals will always perceive things differently. But one thing you can improve is the perception of fairness. Ensure you look through different lenses when managing reward, testing against these key factors:
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Confidence & trust in the intent – has the intent been explained and what has been put in place to engender confidence that fairness is important in your organisation.
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Manager capability to support the process – have line managers been involved and trained to manage the process fairly? Do they understand it and can they explain to their teams on what basis pay or bonus is decided?
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Ability to influence the outcome – anything seen as a foregone conclusion will always attract criticism of being unfair. Do employees understand how they can influence their pay? Do managers feel their input matters or counts?
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Communication – most often a sense of unfairness comes from lack of understanding about the true picture. What do your employees feel about reward in your organisation? How well do they really understand how things work? How well do you listen to employee concerns that things are unfair?
For me the two most underestimated things in any organisation are the impact managers can really have and the power of communication. If you want to create a true sense of fairness in your organisation, help your managers and employees to fully understand how pay works in your business and make sure you keep the conversations going.
