Compensation review cycles are nerve-inflaming festivals of anxiety.
No matter our relative levels of self-assuredness, few of us are able to resist internalizing feelings about self-worth, job fulfilment, future prospects, and basic dignity according to how our compensation changes over time.
And maybe that’s okay.
Because compensation is definitely a clear signal from employer to employee.
From that signal, an individual can infer a lot about their future viability with a company, and can frame expectations and make decisions accordingly.
But only if we first melt through the thick layers of deliberately opaque and confusing bureaucratic lacquer applied to the compensation process.
Because maybe it’s not okay to import feelings of self-worth, job fulfilment, future prospects, and basic dignity from an act by your employer which bears little or no relationship to what you have actually done.
This conversation is preferred after the unfolding of recent antics over at Amazon, my former employer.
The company froze the salaries of its mid-level and senior managers despite record profits and cash flows.
The move felt like an ambush. Totally unexpected, and delivered by surprise in the media rather than via adult conversations.
This caused many to express their feelings, which can be summarized thusly:
Some of the comments really saddened me. Many people were wrongly inferring two things.
(a) that the pay freeze had anything to do with anything they did, and
(b) that they’d been working for a “good” company, which made this bad treatment surprising.
But a few of them nailed it. They understood the real signal behind Amazon’s move, and knew it had little to do with either of the above.
Let’s [bracket] that for a minute.
Our organizational cultures these days have come to mirror broader society in undesirable ways.
One such way is the ceaseless multiplication and accumulation of bullshit, which clogs the flow of honesty and straight talk.
Companies, especially large ones, suffer from mass infestation of corporatism. This means they employ various crafty artifices to protect the corporation’s share price and profits, which I’m told are more important than anything.
Often they do this at the expense of their own workforce, without openly admitting what they are doing.
Since doing so would, you guessed it, alienate the workforce they need to generate said profits and share prices and pile the results into mountains of idle cash. Which I hear is very important.
Where we find such pathology, we will find processes that pretend to be about something while being about something else.
Compensation is a great example.
Throughout a given compensation cycle, employees are fed heavily seasoned word casseroles designed to persuade them that how much of a raise they get is about a lot of things.
(These casseroles are not baked by executives or HR teams, but by “internal communications” teams trained to craft propaganda. Which itself is quite revealing.)
Said propaganda seeks to make a raise or the lack thereof a creature of myriad interrelated variables, most of which are beyond the employee’s influence.
Which of course makes the employee feel powerless. And also provides infinitely broad justification for any decision the company has already made.
Compensation is purportedly about:
Company philosophy
Macroeconomic conditions
Inflationary pressures
Energy costs
Encouraging an ownership mentality
Wars, famines, and pestilences
Regulatory pressures
What you made last year or will make next year
Corporate strategic objectives
How many angels can balance on the head of a pin
But it’s got really nothing to do with all of that. Such things are ex post rationalizations for a cold-eyed financial decision already made. And that decision is about exactly one thing.
How much your company wants to retain you.
That’s it. That’s what your raise means.
It doesn’t mean anything else.
Most often, it bears zero tether to your actual performance, which is a lot less important than profits, share prices, and piles of money I am told.
The good news is, you don’t need to know a lot to understand what your company has said to you.
If you know the company’s basic financial health and how well you basically performed, you can use the handy chart below to clarify the message.
No more word casseroles. Just a noodle or two of truth. Have a look starting at the top left, discussion after.
Situation A.
If your company is not in healthy financial position, the meanings it transmits in compensation will not be as clear.
A strong raise in this circumstance almost certainly means your retention is desired. But a low raise or pay freeze might not mean your company is ambivalent about you or wants you to leave. The cash might not be there.
Situation B.
If your company is in solid financial position but your contribution was mediocre or below the bar, the meaning is again a bit unclear.
A good raise in this case almost certainly means the company perceives retention as a risk and is eager to hold onto everyone, even those with bumpy performance.
A low raise or pay freeze in this situation does not necessarily mean your retention is undesired. It could reflect that for your role and level, there’s enough organizational health to justify withholding a raise based on your performance.
Or in a related way, it might mean the company chose to prioritize raises for higher performance at the risk of losing some who had a less stellar year. This contradicts most companies’ stated policies of taking a multi-year view of performance in compensation reviews.
But like I said before, contradictions abound in this space.
Situations C/D/E.
Now we arrive at cases of total clarity.
If you get a strong raise off the back of strong performance in a company with a healthy financial position, the company wants to retain you.
If you get a token raise in the same situation, the company is indifferent about whether you stay or go. It is making a position bet. The financial logic is that the token raise will pacify roughly the necessary percentage of people. Therefore, enough will stay to balance out those who leave.
If you get no raise in this situation, your company no longer desires your retention. You earned more. The company can afford to pay more. But they don’t see themselves needing to retain you. They expect you to be alienated and to move on, and they are happy with that.
Notice how in all three of these situations, the signal from the company to you has absolutely nothing to do with your performance or its ability to recognize that performance.
The simple truth of what raises mean and don’t mean gets lost in an ocean of deliberately chaotic messaging.
But within all that noise, hear the signal.
If your company recognizes your performance to the extent it is in position to do so, they want you to stay. You have a future, at least for now.
If not, they are either ambivalent about you quitting or quietly hoping you will quit. You cannot rely on a future in the company because it already views you as surplus to requirements.
If you think this entire approach is no way to treat anyone, much less the people who generate your profits, which I’m told are really important, you’d be right.
It’s dumb. Because before people quit, they get alienated and withdraw discretionary effort. Performance drops.
It’s manipulative. Because they could just tell you with words instead of leaving it to you to draw your own conclusions out of vagary.
It’s cruel. Because it causes people to lose self-worth, esteem, confidence, and dignity when their employer takes from them and doesn’t give back. Especially when this happens contrary to expectations.
It’s disrespectful. Because lack of transparency always is.
But it is also reality.
And once you arm yourself with this reality, you are more empowered.
You know where you stand.
You know how to spot a dangling carrot.
You know what it means when that carrot disappears.
You can control your expectations.
You can decide your own commitment level.
You can start, stop, or continue discretionary effort which competes with other mandates of life and happiness.
But only if you tune out all the noise and hear the signal.
Ultimately, that signal can help you decide whether to proactively seek other opportunities or wait until the company decides it’s done with you.
Because at some point, no matter how good and dedicated you are, no matter how relevant you feel today, the company will be done with you.
That will be a cold-eyed financial decision made in a boardroom which will have little or nothing to do with your performance or anything you did.
If you are operating under false beliefs when that moment comes, the psychic damage and life consequences can be cataclysmic.
If I had a nickel for every colleague I’ve known who got shell-shocked by the instant dissolution of a falsely imagined future based on a relationship that was never really there, well … I would never need another raise.
Amazon’s intent with a blanket pay freeze, we must conclude, was to signal that it no longer wants to retain those employees.
If they choose to leave, Amazon will be pleased by that. If too many leave, the calculus will shift and the dangling carrot will reappear. If not enough leave, coercive nudging will become less subtle.
Eventually, when the financial analysis says to do so, the company will forcibly discard what it perceives as surplus talent. Citing: wave after wave of layoffs.
Compensation is communication, nothing more or less.
And that knowledge is power.
TC is a former Amazon ops director and retired US Air Force lieutenant colonel. These days, he writes and speaks independently on the dying art of organizational leadership.