How important are compensation and benefits when it comes to employee satisfaction? 6 CFOs answer that question.
Graydon, president and CFO, Fibernetics
The telecom company has 150 employees and is based in Cambridge, Ont.
Having an employee ask for too high a raise can be a difficult scenario, but when Roy Graydon, president and CFO of Fibernetics, was faced with this dilemma, he took a creative approach.
It turned out the employee had an old car and couldn’t afford to buy a new one, so she was looking for extra income. As an alternative, the telecom company asked to her to research financing options over five years, and then paid for her car allowance.
“She had a specific problem… we addressed that problem rather than allow it to be a discussion about base salary,” says Graydon.
If Fibernetics had raised her salary, it’s possible the employee still would have left the company anyway. This kind of approach helps with retention, he says.
When it comes to employee engagement, compensation is an important part of the recipe — but it’s only a single ingredient, says Graydon.
“You can’t fix all problems through compensation and you can’t create engaged employees simply through compensation. But it’s a very important part of the overall package, for sure.”
And there’s a huge correlation between happy or satisfied employees and happy customers, he says, which affects a company’s performance.
“Our employees are all, at one level or another, impacting or interacting with our customers and if they are happy and engaged, that shines through in the interaction and our customers get a different experience as a result, which creates more happy customers.”
But that doesn’t mean employee engagement is a huge factor when it comes to determining compensation levels, says Graydon.
“We determine compensation levels based on what our understanding of the description of the job is and what kind of total compensation that position can support in terms of the cost to the organization. We’re looking at paying a very fair base level of compensation and we’re looking at adding to that perks and benefits that round out the overall package,” he says.
“But I don’t think we approach it from the perspective of ‘We need to offer more money so employees will be happier.’ What we want is to create a culture or environment where people are happy and, as part of that, they feel they are fairly compensated.”
Benefits, on the other hand, are more important than compensation when it comes to employee engagement, says Graydon. Fibernetics wants employees to be impressed by its offerings, with interesting aspects that may not be offered elsewhere. For example, the company funds the costs of massages, with no limit.
“There are a lot of little things you can do from a benefits point of view that stand out and are highly valuable to employees, and help us with attracting the right kind of people and keeping those people,” he says.
“In many respects, spending a little bit of money enhancing a benefits plan goes farther than spending a little bit of money to give everybody a raise — ideally you want to do both, you hate to be in an either/or situation — but I think a benefits plan can be a huge competitive advantage to attracting employees.”
People feel that a good, strong benefit plan is part of a fair total compensation structure, says Graydon, who is based in Cambridge, Ont.
“Giving people money and saying, ‘Go self-insure’ or ‘Pay for your drugs directly because we’re paying you more money’ doesn’t work for people. Part of the whole perception of fairness is the understanding that we understand the importance of those kinds of benefits, and also we’re there to protect employees when the costs of those benefits exceed people’s expectations.”
While the 150-employee company offers primarily health and dental benefits, it hopes to offer some kind of employee savings plan in the future, such as a group registered retirement savings plan.
“None of us put away as much as we’d like and the idea that the organization is helping (employees) with that and providing an incentive to do that is an important part of that total compensation package,” says Graydon.
Human resources and finance review Fibernetics’ benefits plan each year and discuss what changes need to be made along with reasonable allocations of the budget. That can mean no longer offering benefits that don’t make sense, such as on-site massages because participation is low, he says.
And, of course, HR is involved in establishing compensation levels for new positions and reviewing compensation levels for each individual.
But when it comes to staying on top of trends and forecasting, the HR industry probably could do better, says Graydon.
“There are parts of HR that can be absolutely strategic to an organization’s ability to attract and retain the right people and I think there’s an opportunity for HR in general to propose things that could be a little bit creative.”
Oftentimes, people are only concerned about budget dollars, so they won’t consider alternatives, he says.
“A company’s most significant competitive advantage is an engaged workforce and anything that can help with that ought to be considered,” says Graydon. “There’s an opportunity for HR in general to push for a more detailed look at that side of the business — how does our compensation and benefits plan drive satisfaction and engagement?
“I don’t want to talk about salary, I don’t want to talk about benefits, I want to talk about the total compensation of a position, ‘What are all of the things that are going to go into that plan?’... And that goes for everything from health and benefits to life and disability insurance to car allowances and cellphone allowances — I want to know it all because I think that’s an important part of the package as well.”
William Keen, CFO and vice-president of finance at BlueShore Financial in Vancouver
The financial institution (previously called North Shore Credit Union) has 320 employees
Engaged employees really contribute to performance, according to Bill Keen, CFO and vice-president of finance at BlueShore Financial in Vancouver.
“It’s a truism that when you have engaged employees, you do perform better… and it’s important because we see that being the differentiator that we have in many respects,” he says. “We see our employees as owners rather than renters… they take ownership of the business decisions that are made, but we need productive employees as well who actually can deliver, so engaged employees become a lot more productive and a lot more able to contribute.”
Employee engagement is one of the organization’s four major goals, he says.
“It’s a significant component so we believe that our return on investment, ROI, is delivered by high engagement scores and by employees that are engaged. So, in some ways, it’s not a cost, it’s an investment, and the return on that investment we see in spades.”
Compensation is certainly a contributing factor to employee engagement, along with others such as corporate culture, work-life balance and earning and development opportunities, says Keen.
“Compensation is… really a component that has to be at the right level to maintain satisfaction but beyond a certain level, it doesn’t actually drive or motivate — but it can be a demotivator if it’s not at the right level. So we see it certainly as an important element but it’s not necessarily a big driver or motivator of employee performance and engagement.”
Benefits need to be tailored for individual needs and employees should see the value of those benefits, he says.
“We have flexible benefits, we give them choice, and that’s terribly important, not only because it delivers to their particular needs but also if we can get the value communicated well and they’re fully educated and aware of what those benefits are, we can certainly get the reward in terms of contribution and performance from them.”
BlueShore uses an employee opinion survey to gather feedback from employees and employees are given a good orientation of how the business works and makes money, says Keen. That includes a quarterly update showing the organization’s performance, along with regular communications with branch managers and financial advisors about the economic environment.
“We want to build in our staff a knowledge level of our business to really develop their business acumen, and we’re very transparent, we share a lot of information with our staff, financial information, which some of the major publicly traded organizations probably don’t do,” he says. “If they understand how we make money, they can see how they fit into the equation.”
The finance and HR departments regularly interact at BlueShore and are closely aligned in their objectives, says Keen. And the HR team has a deep understanding of the business and helps convert measures such as employee turnover into potential savings and measurable benefits, he says.
“If we can help, through our joint efforts, our employees understand our business model, what we are trying to achieve, they are aligned with our values… ultimately it leads to improved performance and a more engaged and therefore more satisfied team or workforce in the organization.”
In general, HR should get to know its business well, stay in front of the curve in terms of knowing what’s happening in the industry and employment world, and keep abreast of best practices, says Keen.
Rod Ancrum, CFO and senior vice-president of finance and HR, Credential Financial
The Vancouver-based wealth management services firm has 250 employees
A continued focus on employee engagement has helped Credential Financial’s engagement scores rise 10 per cent in the past year, according to Rod Ancrum, CFO and senior vice-president of finance and HR.
“At the executive level, we are fully committed to driving engagement simply because our people are our biggest asset, our people will drive our ultimate success. That realization really brings home the point that we need to make this a really great place to work and that will, ultimately, lead to our success.”
A national wealth management services firm for credit unions, Credential is based in Vancouver, with offices in Toronto and Montreal. It has about 225 credit union partners, 1,300 financial advisors and 250 employees.
And engagement is a direct driver of its financial performance, says Ancrum, who is based in Vancouver.
“Our business is providing value-added services to our credit union partners and other clients, and when we look at our employees and see engagement, when we see that they are engaged and connected to the company and see that they are enjoying what they do, we directly see the positive benefits of that.”
In addition to a formal annual survey of employee engagement, Credential monitors employee engagement through town hall meetings, executive breakfasts, small group meetings and peer-to-peer discussions, says Ancrum. This gives the company an idea about areas of strength or weakness to focus on.
And compensation is not the primary driver of engagement, he says.
“For many people, the more money you make, the happier you are about that, for sure, that is important, but it doesn’t mean that you’re going to be happier overall with where you work and the work that you do,” says Ancrum.
“We’re trying to build a company where people that work here are happy with the work they do and they’re connected not only to their colleagues and our customers, but they also feel valued for what they bring to the table.
“And when we have success in driving these things home and people feeling engaged because they feel connected to where they work and their contribution to the company overall, pay becomes less of a factor.”
When setting compensation levels, the overall market, the type of role and an individual’s performance are the important drivers, he says.
“If we address those items properly upfront and continue to focus on making this a great place to work and driving engagement, then the satisfaction or engagement really becomes an output rather than an input to compensation.”
In terms of benefits, Credential offers standard ones such and health and dental, along with a bonus plan for staff, a company-matched fund for group RSPs, support for education and training, recognition for various milestones and paid time off to volunteer.
“In terms of engagement, what’s important here is that employees value different things at different stages of their life and we strive to build our benefits packages around that, so that there is some flexibility for staff to be able to choose the benefits that meet their current situation,” says Ancrum.
But it’s also important for employees to understand what those benefits mean, beyond the usual bunch of pamphlets that are given out, he says. So, a few years ago, Credential started giving each employee an annual compensation statement that details every component of their compensation package, including benefits.
“We have found since we’ve done that, people’s appreciation of their overall compensation package has increased substantially because now they understand it and why it is of value to them,” says Ancrum.
In looking at compensation and benefits, finance and HR don’t generally work together because they look at the world differently. But since Ancrum joined Credential five years ago, the two groups have come together, and that’s helped drive a lot of success at the organization, he says.
“We’ve been able to create a really good balance between driving employee engagement and fulfilling the needs of our employees, with the flipside being the need to drive financial performance.”
And HR is learning about what measurements are needed, whether for recruitment or benefits and compensation, says Ancrum.
“Working together has really helped to drive that. Our HR team has taken on a bit of an analytical role and when they look at benefits, they assess the costs of the benefits to both employees and the company. And that has worked really well and they’re starting to take initiative because they see the fuller picture of what the employee needs are versus what the company is striving towards.”
Sheri Lucas, CFO and executive vice-president of finance at SaskCentral, Regin
The trade services organization acts on behalf of credit unions and has about 90 employees
Being a knowledge-based organization with a small owner and client base, SaskCentral requires a very client-centric focus, according to Sheri Lucas, CFO and executive vice-president of finance. And when it comes to employee engagement and the organization’s financial performance, there’s a direct correlation, she says.
“If you’re a knowledge-based organization, you do need an engaged and productive organization, and you need a lot of employee retention. We can’t afford to have a high turnover rate when it takes years, sometimes, to build up the required skill set.”
In a very hot job market, there are costs to not having an engaged workforce, says Lucas, who is based in Regina.
“If you have a disengaged workforce, you pay for it,” she says. “The price of disengagement is higher salaries, more turnover, less satisfied customers and that impacts your bottom line in a very real way.”
Like many organizations, 90-employee SaskCentral follows the balanced scorecard methodology, and it can’t have employee engagement and productivity with a dissatisfied client base.
“You need one for the other; you can’t have satisfied clients when you have an unproductive and disengaged workforce. All of that, of course, leads to the bottom line,” says Lucas.
Compensation is at least half of the equation when it comes to employee engagement, she says, while the other half consists of things such as culture, business model and management style.
“When you have a good compensation package, that helps get the right employees through the door, helps retain them because Saskatchewan’s a hot job market — we’ve got headhunters calling some of our employees on a fairly regular basis — and when you’re looking at compensation, it probably matters when you get the employee through the door and on an annual basis,” she says.
Engagement is not used as a direct input to compensation — it’s more of a given, says Lucas.
“When you’re doing market assessments for overall compensation, if you’re market- competitive, that’s really what determines it and the employee engagement factor will result. Employees understand that there’s a fair and unbiased system in place — that assists the compensation and the culture.”
When it comes to benefits, a degree of flexibility is required, she says, especially with a workforce that is not one-size-fits-all.
“We have individuals close to retirement, we have brand new university grads… so the key there is to have a flexible compensation package, and I think our HR department does an excellent job of trying to keep on top of market trends in terms of what are the options and flexibility that we can afford,” says Lucas.
And HR is becoming more mature in terms of looking at flexibility, whether that’s in working hours, benefits or compensation, she says.
“I do see that evolving, so I think there is a greater deal of maturity. Even the concept of flex hours was extremely rare and exception-based even five years ago — it’s not so much the case now.”
Wayne King, CFO and vice-president of administration and corporate services at SAIT Polytechnic
The Calgary-based institute has 1,525 full-time employees and 500 to 800 seasonal employees
SAIT Polytechnic is all about people teaching people, supported by people, according to Wayne King, CFO and vice-president of administration and corporate services.
And the people who work at the institute “drink the Kool-Aid,” he says, meaning they are passionate about the work they do in looking to transform lives.
“The bottom line to us is the number of students that we turn out, so (it’s about) the commitment of people to give their best effort and to really get into teaching/training people,” he says. “We get great value from them.”
SAIT not only surveys students, but it surveys employees about their satisfaction levels, says King, who has been at the 96-acre institute, which has 1,525 full-time employees, for six years.
There are always negative comments about pay, while benefits rank fairly well, suggesting people are there for different reasons, he says.
The Calgary-based institute can’t compete with oil and gas companies when it comes to compensation, but does it best with other industries and institutions, he says.
“It’s important to us to make sure that we understand the compensation component and that we understand the impact of it so it doesn’t become a detriment and a reason for (employees) to leave,” says King. “We always look to make sure we’re market-competitive.”
Benefits are very important when it comes to employee engagement, and SAIT offers competitive health-care and dental plans, says King, along with a health spending account, a “robust” vacation plan and a credential enhancement plan.
But communicating those perks is also important to ensure people are aware of them and using them, he says.
“Sometimes, historically, we haven’t done a good enough job of making sure we do get that (message) out to employees — we obviously do a very good job for new employees, convincing them to come here and we’re showing them all the benefits — that’s always a work in progress for us.”
Compensation and benefits are discussed with HR largely on a quarterly basis, says King, with an executive committee approving all major compensation plans and union agreements.
“Generally, most HR people are very aware of what’s going on out in the industry; certainly, I know here we are, we’re aware of trends, we have (providers) come in and give presentations to us,” he says.
“You’ve got to look out a year or two and say, ‘OK, if we’re looking at some benefits we don’t have, how do we weave that into it?’ Because, generally, you can give benefits to employees, you can’t take them away. You can only do it if you’re forced to and you don’t want to get to a financial situation where you’re having issues that you have to deal with and you’re forced to do things you don’t want to do.”
Howard Donaldson, CFO, Vanedge Capital, Vancouver
The 6-employee venture capital fund is focused on investing in digital media
While Howard Donaldson is currently CFO of a small company with six employees, he’s also worked at larger companies such as EA Canada and Disney Interactive Studios — so he knows the importance of employee engagement and its connection to financial performance.
“Your people need to be passionate about what they’re doing, so they have to come into work with a lot of energy and passion and willingness to work with other people. If they’re not highly motivated, then it’s probably going to affect the performance,” says Donaldson, CFO of Vanedge Capital in Vancouver.
“The world’s very competitive today and your products and services have to be at the top — they can’t be average or just above average, they have to be really, really good — so you really need people who are engaged and really want to be there.”
And when it comes to compensation and employee engagement, people have to feel like they’re being fairly compensated — though everyone has individual preferences, he says.
“Some people are more interested in the company that they work for and the projects that are assigned to them; some employees are looking for skills training, in other words, they want to walk away with a set of skills from that experience; and then there’s other employees who are looking to get ahead, they want advancement potential and, with that, compensation,” says Donaldson.
“Some people aren’t quite as motivated by money, but the vast majority of people want to know that they’re being treated fairly in terms of compensation.”
On the other hand, the better the performance of the business, the more you can reward people for their efforts, he says.
“That’s really what, in my opinion, retains employees and gets them to work together and builds a real team, working together on achieving various milestones,” says Donaldson.
“Sometimes that’s overlooked a little bit and sometimes when the business isn’t doing so well, that kind of interferes with being able to reward people for the efforts they put in.”
The most important benefit is health care, while retirement savings plans or bonus plans are effective when it comes to retention, he says.
Some companies, such as EA Canada, choose to offer a variety of benefits that include a soccer field, indoor basketball courts, a fitness centre and video games. But those aren’t really essential for employee performance, says Donaldson.
“Some employees (at EA Canada) actually took it to an extreme and overused those services and some employees don’t use the services much at all, but it’s a great selling feature when you’re hiring and recruiting and so forth.”
While Vanedge Capital doesn’t have an HR department and Donaldson handles HR duties, he has worked with HR when it comes to annual compensation reviews or regular benefit plan evaluations.
And human resources departments have become more sophisticated, with more data available, he says.
“They can benchmark themselves against that and they can put people in ranges so they’re not either overpaid or underpaid. The performance process is getting better, where it includes a self-assessment as well as assessment by the direct boss and other people that they work with indirectly.”