Total Rewards is among the most critical functions for a successful business.
In today’s marketplace, where a highly educated and talented workforce is in high demand and has significant bargaining power, employers must offer a unique and compelling employment value proposition to maintain a competitive edge.
While the CEO, Board of Directors and Executive Leadership team undoubtedly work tirelessly to chart an organization’s business direction and strategy, they will not be able to execute on that strategy if they are not also engaged with and supportive of a Total Rewards strategy.
In fact, a 2012 Total Rewards Survey by consulting firm Aon Hewitt found that 69 percent of top performing companies made Total Rewards an area of strategic focus for their company while just 42 percent of non-top performing companies said they made it a focus.
In today’s interconnected world, where more information than ever is shared and open, employees know what they are worth and expect competitive compensation packages. However, overpaying for talent is not the best way to recruit and retain top candidates. In order to avoid a profit-less salary race for top talent, employers need to look beyond compensation.
The following tips offer strategies for embracing Total Rewards in a UNIQUE and authentic way that will resonate with your workforce and help your company win the talent war
1. Understand your business strategy
Towers Watson research (HR Matters January 2014) suggests that offering the right employee value proposition is a critical link between business strategy and execution. This begins with understanding how your organization is going to compete and win.
Businesses need to have an overarching strategy that’s so clear that anyone in the organization can articulate it. If employees can’t explain how the organization is competing, you can’t possibly have a talent and Total Rewards strategy that aligns with it.
How might a Total Rewards plan differ based on business strategy?
You might choose to offer a different pay mix, promote more flexible working arrangement, offer more liberal time off, or emphasize a growing number of targeted benefits that will appeal to a particular segment of your workforce and encourage the results you are looking to achieve.
2. Network, network, network
It’s important that Total Rewards are connected to leaders throughout the organization and is meaningful to them. Businesses should spend as much time communicating the value proposition to managers and employees as they do getting the benefits and policies in place and administering them,
This constant dialogue can be exhausting and not every employee is going to like every aspect of your Total Rewards portfolio. However, if you aren’t networking internally, you are likely to miss out on key opportunities to learn and adapt to what’s going on around you.
The lines of internal communication about Total Rewards should be open enough that if an employee sees an article about a new benefit another company is offering, i.e. a new milk shipment benefit for working moms, they can share the idea internally and expect that the leadership team will look into the benefit and seriously consider implementing it. This requires a strong and open business network where Total Rewards and HR play a strong role.
3. Invest in Total Rewards programs first
Investing in a Total Rewards portfolio is critical to long-term business success.
Organizations should view human capital as an asset that requires continual investment. Far too many organizations allocate just 2-3 percent to their salary budgets, allow their Finance team to determine how much of the benefits budget to cut or cost-shift to employees, and call it a day.
This approach typically results in a cynical and distrustful workforce because employees are keenly aware of changes that leave them worse off in some way.
Now that skilled workers have more options than ever before, investments in Total Rewards are necessary to execute business strategy. The company needs to inform managers and employees of these investments and then begin figuring out how to manage the far less important budget items to tie out to the bottom line the organization is trying to achieve.
4. Question why you’re doing what you’re doing
One of the biggest TR pitfalls is the tendency to continue to offer the same benefits year after year.
This approach may make sense if you view certain aspects of the TR portfolio as critical to employee engagement. Even so, it’s a good exercise to question the TR portfolio on a periodic basis.
For instance, companies that already provide rich medical and prescription benefits should still continually question and update this plan to take into consideration new benefits such as telemedicine and health care advocacy that could both improve the plan.
5. Understand your markets for talent — and differentiate
Michael Porter, one of the great minds in business strategy, emphasized differentiated products and services as key to business success. Similarly, a unique, tailored Total Rewards portfolio will attract the talent that organizations need to achieve business objectives.
For instance, a company that oversees a predominantly male, rural workforce that is passionate about the outdoors might want to get creative with working hours during hunting and fishing season to encourage employees to enjoy what they are passionate about.
Or, imagine an organization that has just expanded its research facility and is aggressively recruiting veterans with advanced technical training.
Veterans are accustomed to traveling and working anywhere in the world, so why should they come work for this organization? Does the company even have Veterans Day off, or do anything unique if they are open for business that day? What would it mean to veteran talent if the company added an additional day off, or had the HR staff organize an event in the office and maybe even let veterans out early that day?
The Total Rewards portfolio doesn’t need to dramatically add costs to the bottom line, but it should resonate with an organization’s talent pool and serve as a differentiator. Implementing unique benefits also serves as a tool to enforce an organization’s cultural DNA, helping to foster success.
6. Empower managers with flexible frameworks
Managing an entire portfolio of benefits can be a challenge for organizations that span a large country or have a global footprint. Having a framework for Total Rewards is fine, but attempting to control it from a central location or installing rigid rules that all regions must follow can be problematic.
Total Rewards frameworks need to be flexible and adaptable enough that management is empowered to address the unique needs of employees in a given region. Otherwise, the portfolio will miss the mark with your target audience: current and prospective employees.
No company can afford that.