As businesses maintain a healthy growth mindset, company leaders face a tricky environment of globalization, unstable economic conditions, and unique demographic trends. Today, CEOs seek to better manage their human assets to capitalize on new business opportunities. According to PwC’s US CEO Survey, in which talent transformation is a main theme, 70% of respondents are very concerned with the availability of key skills, and 62% plan to grow headcount in the next twelve months. Businesses need to attract the best talent, but they also need to motivate and retain employees.
One of the best ways to build a culture of dedicated, passionate employees is through workplace rewards. The total rewards program is a set of available tools an employer can use to attract, motivate and retain employees, including Compensation, Benefits, Work-Life, Performance, and Recognition. From the employee’s perspective, rewards are all the things perceived to be of value from the employment relationship. The greater that perceived value, the more likely an employee is to remain loyal to their current employer.
The following five best practices can help global organizations move towards a rewards culture that attracts, motivates and retains the best employees.
In the current talent environment − where reward budgets are often flat − compensation programs must be differentiated. Differentiation is a strategy that segments the workforce into defined categories such as individual performance, key skill sets, key geographies and/or business units. This approach allows for the disproportional distribution of compensation budgets to the highest achievers, and to the most strategically important areas of the business.
Differentiated compensation is a major step toward creating a high-performance culture. It also promotes the efficient use of compensation resources, and mitigates the risk of losing top talent, which can be expensive. For an in-depth best practice guide on designing and implementing a differentiated compensation program, see Oracle’s White Paper entitled: Differentiated Compensation: The Corporate Talent Insurance Policy.
Pay-for-performance is a tried and true motivation tactic practiced around the world. In some studies upwards of 90% of companies say they use pay for performance. Unfortunately, in practice these programs often fail to deliver. According to Mercer’s 2013 Global Performance Management Survey, just 3% of organizations worldwide believe their overall performance management system provides exceptional value.
The same Mercer study reveals that the top reason pay-for-performance programs fail is lack of manager skills. Managers are generally uncomfortable assessing their employees and speaking openly about performance issues. This may stem from the traditional “command and control” management philosophy, which deemphasized coaching and development. Managers today lack skills regarding constructive feedback and goal setting, which both are essential to successful pay-for-performance programs.
One negative result is the overuse of mid-point performance ratings, which undermines program value and hits top performers the hardest. To remedy this problem, management training programs are needed to instill collaboration, coaching, continuous improvement, and meaningful goal setting.
To be successful, HR leaders must drive a balanced total rewards strategy that aligns with business goals, motivates staff, controls costs, and demonstrates a return on program investment – no easy task. Companies that are serious about driving performance through rewards need to dispel the perception that rewards management is solely an HR function.
Total rewards should be part of the organizational culture and embraced by all employees, starting at the top. Without a commitment from the C-Suite, it is difficult to create a total rewards program that achieves its goal of reinforcing the talent management strategy and driving business success. The HR department’s role is not to own the program, but rather to provide tools and guidance to enable the organization to leverage rewards successfully.
Providing a good customer experience in the context of company rewards means addressing the needs and preferences of highly diverse employee populations. Deloitte reminds us that “this is the first time in history where four generations of people can be seen in the same workforce.” HR leaders are challenged with how to communicate efficiently with such a diverse population, to understand which rewards they value, and how they want their rewards information delivered.
Thanks to the Internet, most employees have grown accustomed to immediate access to information. Yet many organizations have not integrated Social Media tools into total rewards communication campaigns. This shortfall can frustrate millennial workers, who are 75% less likely to go to a website if is not mobile enabled. Many companies are offering employees a menu driven mix of benefits that they can customize based on personal preferences and individual needs. This technology helps employees from different generations and geographic regions make informed decisions about their personal rewards mix.
Employees seek both tangible and intangible rewards that will help them live better lives. Allowing them to customize their “work-life fit” is a highly valued employment reward today. When asked which tactics will be most effective in attracting, retaining and rewarding the best employees over the next 10 years, respondents to the SHRM® Workplace Forecast report offered “providing flexible work arrangements” as the top answer.
Several well-documented demographic trends are driving employees’ demand for greater work-life balance, and flexibility is key to addressing this demand. For example, a growing number of employees are looking for more family time; others need to care for aging parents or prefer working from home to avoid productivity-killing commutes. Still others desire opportunities to volunteer outside of work as a way to derive more purpose in their lives. Companies can offer benefits that support these needs, such as flexible work schedules, free food, on-site fitness centers, laundry services and wellness programs. These rewards help people lead better lives, reduce stress and increase productivity, all of which create happy employees.
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