I have been working with an employer client on their communications for the merit increase, bonus payment, and equity grant cycle.

They tie these rewards to performance. They have 6 performance ratings. (Don't get me started on the ridiculousness of 6 performance ratings!)

Very few of the employees get a 1 or 2.

They anticipate having 3s and 4s who will be frustrated that they aren't going to get a merit increase equal to the budget which is 5%.

They have so many employees getting 3 - 6 that to reward the 5s and 6s (the high performers) with more money and equity, the 3s and 4s need to get less.

I've done this type of modeling in Excel over and over. I know how the math works.

But in Q1, what will matter is what the manager says to the 3 or 4 rated employees.

"You're a solid performer and I appreciate your contributions in the last year. You are receiving a merit increase of 3%. Your individual performance bonus is based on a 90%. Your equity grant is going to be 85% of target. Keep doing what you've been doing. We are glad you are on the team. "

Ugh. Not exactly inspiring.

And in the employee's head they are thinking...

"Why do I stay here? I'm a solid performer and I didn't get a 5% merit increase. The bonus I'm getting is less than 100% and so is my equity grant. Time to update my resume and LinkedIn profile. Geez. Why do I even try?"

Their manager didn't give them anything significant to change in the performance discussion.

And more importantly, their manager didn't explain WHY they weren't getting the merit increase and other rewards they were expecting.

It is this missing part - the WHY - that so often is not covered in the conversation.

My client and I are writing talking points for the manager that will cover the WHY. And we will be sharing this in our training with the HR team so they can support the managers as they have these pay and performance conversations.

An employee doesn't have to like what you say. Stop avoiding the difficult conversations.

When you don't say WHY, the employee fills in the blanks and that story motivates them to make a change.

Can you afford to lose your 3s and 4s?

#pay #compensation #communications #humanresources #leadership #performancemanagement