Understanding the drivers of effective total rewards

By Claudine Kapel

What does it take to ensure your company is deriving optimal value from its investments in total rewards?

A recent survey on total rewards practices by Aon Hewitt offers some interesting insights. In its survey findings, the consulting firm compared the practices of high-performing organizations in its sample against those of the remaining organizations. High-performing organizations were identified as those achieving the highest levels of revenue against objectives, innovation and employee engagement – and represented about 20 per cent of the total sample.

Understanding the points of differentiation provides interesting insights on how to unlock the real power of a total rewards offering.

For example, 69 per cent of the high-performing sample indicated total rewards is an area of focus for them, compared to 42 per cent of the remaining sample. Further, high-performing companies reported having a clearly stated total rewards strategy at almost twice the rate of the other sampled organizations (41 per cent versus 22 per cent).

According to the survey findings, high-performing companies have clearer goals regarding the focus and targeted position of programs. These companies are “purposefully differentiating in the areas that are hard to replicate: culture, leadership, learning and development and work/life balance.”

The survey results also show that high-performing organizations pay more attention to how they connect their total rewards strategy to the business and employees.

As Aon Hewitt notes in its report: “While most companies seem to be declaring similar directions in planned investments, the high performers are simply executing better.” And the survey results highlight three areas in particular where the high-performing sample did better – in aligning programs with business objectives, in being innovative and flexible, and in communicating effectively.

In fact, the high-performing group emphasized alignment with business objectives to a much higher degree than the other organizations (74 per cent versus 51 per cent), which may help explain their stronger results.

There were also differences between how the high-performing group measured success versus the balance of the sample group. For example, the high-performing group placed more emphasis on employee engagement (69 per cent versus 55 per cent) and employee satisfaction (45 per cent versus 30 per cent) as measures used to gauge the success of total rewards programs.

In contrast, the broader sample placed more emphasis on measuring the rate of cost increase, relative to the high-performing group (48 per cent versus 33 per cent).

Despite the higher prevalence of effective practices among high-performing companies, the survey results suggest that most companies still have room for improvement. For example, when it comes to communicating effectively around total rewards, neither group had particularly high ratings, although the high-performing group had higher scores (49 per cent versus 29 per cent).

In the end, what the survey results make clear is that it takes focused effort to ensure a total rewards offering delivers.

It requires attention to both the big picture and the details. And above all, it calls for all the pieces to be thoughtfully connected so there are clear and meaningful links between programs, the requirements of the business, and the needs of employees.

For only then can the whole become greater than the sum of its parts.