Total rewards enters the HR department’s lexicon

Bundling soft programs under the total rewards banner, combined with a strong compensation and benefits package, is the perfect recipe for happy, productive staff, says comp association
By Todd Humber
|Canadian HR Reporter|Last Updated: 05/20/2004

W

hat, exactly, is total rewards? Talk to any two HR practitioners and you’ll likely get two different answers. Mention it to employees and you’ll probably end up with a cynical raised eyebrow or two as they ponder what the latest buzzword to come out of the human resources department actually means.

In its simplest form total rewards is an umbrella term that covers everything an employer offers an employee, from traditional stalwarts like compensation and benefits to newer frontrunners including flexible working hours and workplace culture.

Firms that are adopting a total rewards philosophy aren’t necessarily adding revolutionary new and expensive HR programs. It’s more about putting everything the company already has into one package that is easy to communicate to help employees appreciate everything the workplace has to offer. It serves as a simple reminder to employees of the value of some programs they might take for granted or not fully appreciate.

Canadian HR Reporter

sat down with Jim Stoeckmann, senior practice leader at WorldatWork, a professional organization serving North American compensation professionals based in Scottsdale, Ariz., to talk about the concept of total rewards and how it has evolved.

CHRR: When did the term “total rewards” first cross your desk?

Stoeckmann:

That’s interesting. The term reward specifically is something from compensation and benefits that I recall crossing my desk back in the late 1980s, in thinking about what the rewards program is for a company.

Some people would respond to that and say, ‘What do you mean?’ Nowadays I think that is taken or accepted as second nature, certainly amongst the managers and HR professionals in an organization.

I think the concept of total rewards, just adding that adjective to rewards, came on the scene in the middle to late 1990s. It’s a two-fold question — when did the phrase come in vogue? Total rewards was probably mid-1990s or so but defining it as more than just compensation and benefits has been evolving. Now work experience has been increasingly thought of as just as important an influence to employee satisfaction.

CHRR: By “work experience” do you mean things like training and development, culture, recognition and good managers?

Stoeckmann:

Yes. One of the most significant indicators of employee satisfaction is who you work for, so I think employee management or organizational management is a key factor. Is it an open culture? Does it embrace open communication? Does it provide and encourage opportunities for employees to be involved in the way the company is run? Does the company support training and development and encourage employees to pursue those opportunities? Does it promote from within? Does it promote work-life balance?

In a sense, work-life experience is too broad a term and it covers too many things. I couldn’t give you a finite list. It really attempts to think about what’s going to contribute to employees’ well being and satisfaction and their productivity and creativity as they participate as members of the organization.

CHRR: Many firms have a lot of the components of a solid program in place — they just don’t wrap them together and call them total rewards or pitch them to employees in that manner. Where do they start?

Stoeckmann:

You wrap it together to begin with by thinking about your rewards in a holistic sense. One way to think about it is that compensation and benefits in isolation are not going to guarantee a company the ability to attract and retain the caliber workforce it desires. You can have 90th percentile compensation and benefits and still have difficulty in attracting or have high turnover and, when you peel back the onion, you usually find that it’s issues that apply to the work-life experience aspect. Employees are not happy with their supervision, not happy with their work-life balance equation, disappointed in communication programs — those sorts of things.

If you recognize that the critical enabler to the traditional compensation and benefits programs being successful in retaining (staff) is work-life balance, that gives you a powerful incentive to think about the total rewards equation and the importance of work-life experience.

CHRR: Where does recognition fit into the total rewards puzzle?

Stoeckmann:

It’s critically important. Being recognized for a job well done, knowing that your work is valued, knowing that you count in an organization is what makes all of us tick. And recognition is by and large free. If you add to it some symbols of that recognition — be they plaques or be they desk ornaments or tie tacks or whatever — that’s fine.

But fundamentally it’s about being valued and recognized and respected for your accomplishments and it’s also the mark of smart management or smart supervision. In some respects it’s a derivative or byproduct of good management selection programs, good management training programs and a culture that respects the individual.

CHRR: In your opinion, is total rewards just the HR buzzword of the moment or a legitimate concept that’s here to stay?

Stoeckmann:

It’s a part of the permanent scene. The language might change over time — whether or not it’s called total rewards in terms of umbrella language is hard to predict — but it’s here for the foreseeable future.

The idea of investigating what really drives and answers people’s affiliation needs and what encourages productivity improvements, that’s a frontier that organizations will continually investigate and try and develop to differentiate themselves from other employers.

The idea that work-life experience is a critical enabler to a successful company’s ability to attract and retain employees is here for the long term and I think we’re going to see more thinking and more innovations in that area.


What makes up total rewards?

There are three main pieces to the total rewards puzzle, according to WorldatWork. They are:

•compensation;

•benefits; and

•the work experience.

The importance of good compensation and benefits programs can’t be understated, and are well understood by employees and employers alike, but “work experience” is a murkier and mysterious realm. Here are the five key components:

Acknowledgment, appreciation and recognition:

Service, spot and achievement awards, feedback and other initiatives that achieve the desired result of fulfillment in employees.

Balance of work-life:

Family programs, financial and health counselling programs, convenience services, employee activities, non-traditional work arrangements and other factors that contribute to a perceived higher quality of life.

Culture:

Leadership, diversity, organizational formality, opportunity for innovation and degree of employee communications.

Development:

Learning opportunities, coaching, mentoring, feedback, opportunities for career advancement and education opportunities.

Environment:

The job (content, variety, context, tools, clear line of sight, stretch yet attainable objectives), the place (the physical work environment) and the company (products, markets, organizational stature and success — the opportunity to work for a thriving company).

Each of these elements must be taken into consideration as part of the reason why employees would want to work for an organization, why they would want to stay and what will energize them to perform at their best.

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