How to Run the Most Excellent Merit Cycle Possible

As we navigate the time of year that attrition tends to be highest, retention is top of mind for people leaders. 

On the latest episode of High Growth Matters, we spoke with Jamy Conrad about the science of helping top employees thrive and stay in seat longer — by running a merit process that's transparent and empowering. Jamy Conrad is the Senior Director of People at TrustRadius and boasts an impressive track record of HR and people leadership roles in tech and healthcare companies.

This blog has been adapted from that conversation and covers:

• What makes an excellent merit cycle
• Where some merit cycles go wrong
• Supporting underrepresented employees
  
  

To hear the full episode, visit this page, or subscribe to the show on your favorite podcast player, such as Apple Podcasts or Spotify.

Don’t miss the full episode: How to Run the Most Excellent Merit Cycle Possible

What makes an excellent merit cycle, and where some go wrong

Before implementing a successful merit cycle, the right infrastructure must be built — the root of which is a strong compensation philosophy. Once your organization has established an ideal philosophy, communication becomes critical. 

“We try to lean into our core value of transparency,” Jamy says. “At TrustRadius, we focus on communicating why people make what they do.”

While certain core pillars of compensation will vary between organizations, it’s vital to consider how each fits into the overall philosophy considering total pay and rewards, before defining benchmarks.

Applying philosophy and career progression in an understandable way

Taking a practical approach to compensation is necessary to ensure that your philosophy is actually applicable to your business practices. When building a merit program, consider your comp data source, how salary bands will work and what that means for employees' career progression.

“If your employees can’t use it, what’s the point?” Jamy says. “Make it user-friendly and flexible. Ensure everything you put in place will make people successful.”

Infrastructure should also include avenues for genuine feedback, enabling a two-way relationship between employees and managers. This stance of constant improvement requires an environment of psychological safety, where each employee feels safe and confident to have conversations as issues and gaps arise.

Where many merit programs go wrong

Companies' biggest mistake when developing merit programs and their underlying infrastructure is failing to properly educate and empower managers to understand the why behind decisions. (Comp data matters, yes, but even the best pay programs fall on their faces when passed to managers and recruiters!)

“Companies communicate the budget with managers — they know what they can and can’t spend,” Jamy says. “But they fail to enable managers to have tough conversations and explain the why behind comp data and decisions.”

Leaders and those that work heavily with the compensation philosophy and merit program must invest time in managers, helping them to understand how to navigate difficult conversations. When managers can explain compensation decisions, employees are more likely to clearly understand their own performance and potential, ultimately leading to higher satisfaction and lower attrition rates.

But even when managers are informed, merit discussions can be challenging, particularly for those new to leadership. Fortunately, there are a few things HR and business leaders can do to enable management.

“Take away the subjectivity and have managers focus on objective, measurable goals,” Jamy says. “If they can start with the metrics, it eases some emotional struggle.”

When you build a structured performance management mindset, managers can push employees to grow and feel the impact they are making within the organization.

It’s also important to foster communication and feedback regularly. When managers can frequently provide constructive feedback throughout the year, merit reviews will not include any unforeseen comp data and employees will enter the conversation with an idea of what they need to improve.

Looking for more great tips on how to build a merit program, enable and empower your managers to drive success, and lower attrition rates? Listen to our full conversation, where Jamy shares all the details.

Supporting underrepresented employees, particularly in a tough economy

According to TrustRadius’s latest benchmarks, the organization currently does not have any pay equities — a challenging feat, especially in the current economic climate. However, equity wasn’t achieved overnight. It took intentional action from leaders across the organization.

Jamy shares insight picked up throughout TrustRadius’s journey to pay equity.

“Don't assume anything,” she says. “Don't assume the hiring practices are fair. Don't assume your management teams have been consistent. Don't assume people understand how their compensation is structured or where those numbers come from.”

Start from the bottom, ensure that practices are fair and consistent, and be ready to be transparent when inequities arise. While avoiding inequities altogether is ideal, ensure that as a leader involved with compensation adjustments, you’re confirming existing practices are being fairly and equitably applied.

Ultimately, Jamy urges organizations to practice transparency and clear communication regarding comp data and merit programs, starting with the hiring process. 

“Whether you’re looking at compensation, career development, career paths, frameworks — it doesn't matter. People need to be able to talk to each other candidly and openly without fear,” Jamy says. “The psychological safety associated with that will remove many common issues.”

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