Another case of the emperor having no clothes?

The promise of a satisfying work environment is part of the total rewards package. But too many organizations fail to deliver on good leadership and strong management

Arguing against the concept of total rewards may be tantamount to heresy for a human resource professional, so this article should not be taken as a condemnation of the efforts put into developing either the total rewards programs or the concept.

Rather, it is a constructive criticism of the leadership required to support total rewards in an organization. We in HR often pride ourselves on treating all employees fairly and equitably, and on being “strategic” in our approach to the business. But is that really the case?

The evolution from pay to compensation to total compensation and now to total reward has had less to do with rewards and everything to do with our search to find the right way to establish the value of our employment contract with employees.

Employers over the last several decades have been losing the battle for the commitment of their staff. In an effort to demonstrate to employees that they are valued and that their contribution is appreciated, companies have endeavoured to roll all of their employee costs together to communicate the value that they offer the employee. Are we communicating truth, or are we propagating a smoke-and-mirrors approach to employee management?

In Hans Christian Andersen’s children’s fable, “The Emperor’s New Suit,” two swindlers convinced the emperor and all of the townsfolk that they had woven a beautiful suit of fine cloth for him to wear, when in fact they had spent the money intended for the garment. By telling everyone that those not worthy or fit for their role would not be able see the suit, they were able to manipulate the perceptions of the adult population. The constituents all complied with the belief that there was a beautiful suit of clothes on the emperor, when in fact he was naked. It was only after an innocent child commented that “the emperor has no clothes” that the scam was revealed.

There are several embarrassing parallels between this fable and the way that we convey the value of working for the organization to new and existing employees. While we may be able to get staff compliance with the current approach to total rewards, we certainly will not get commitment. This is not to say that all organizations are guilty of swindling their employees. Many do live up to their commitments, but they are in the minority.

The total rewards model is intended to convey to stakeholders — employees, customers, investors, and so on — what the company stands for and how it conducts its business.

It incorporates the different components of the relationship between an organization and the employee — including compensation, benefits and work experience. The process begins with aligning the human resource philosophy with the vision and mission of the enterprise and then creating a total rewards philosophy that is consistent with it. All of the policies, procedures, programs and practices should support and reinforce the total rewards philosophy of the organization.

The concept is not only commendable, but makes eminent sense in getting employee commitment to the goals and objectives of the business. Why then doesn’t management take advantage of this opportunity to gain real commitment and employee buy-in through delivery on their promises and pledges? Rather than managing people against world-class standards developed for the business, providing feedback to assist subordinates to achieve at higher levels and actively participating in the design and development of programs needed to support the enterprise execution, managers shirk these responsibilities.

The people issues are the ones that are tough. There is no “right” answer; they require discretion and precise, clear communication skills. Consistency is the hallmark of good management. If managers were evaluated on their ability to lead others and clearly communicate the vision and mission of the organization — as they should be — most would fail.

As a result, HR gets tagged with the responsibility for developing and implementing programs to deal with the people issues. We become the ministers and the courtiers in the fable that support the illusion that the company values employee efforts. We help create these “bundles” of programs that are intended to communicate our values and culture and tell employees what they can expect from the company. A new employee who hasn’t worked for the organization can often be fooled into thinking that the nirvana presented to them in the recruitment process really does exist in the company. It is only after they are trapped in the employment relationship that they find out the real truth of what it is to work in the business.

Many employees will tell you that those who leave the organization to work for other companies often come back to much higher compensation than what they would be paid had they stayed. They are more appreciated and often promoted over those who were committed and stayed with the company. In order to keep the good employees (the ones that can always find another job), employers need to have a total rewards package that not only ensures fairness and equity in treatment but also differentiates levels of performance. That way, people can see that performing at a high level does have its rewards.

These issues are not issues for HR. They are business issues. They speak to creating the infrastructure necessary to compete in markets that are increasingly filled with stronger, often global competitors. They are issues that will affect the sustainability of corporate performance.

There are alternatives, however. Organizations can choose to maintain the status quo and wait to see what will happen, which seems to be the choice de jour. Many will throw money at initiatives that result in short-term fixes — for example, hot skill bonuses. Do not be fooled into thinking that continuing to “flog” the same old tired programs to an increasingly frustrated employee population will keep them committed. As soon as the opportunity presents itself the best will be able to move, particularly when supply decreases and demand increases. At the very least, price will go up and the organization will be paying top dollar to recruit new people.

Like the townspeople in the Emperor’s clothes fable, eventually someone will innocently ask the question, “What is really going on here?” If you have done the proper job of implementing total rewards as they were intended to be used, you will reap the benefits. If all you have done is continue the deception you will be forced to endure the embarrassment when the “naked” reality is exposed.

David Johnston is president of Sales Resource Group, a Toronto-based sales force effectiveness consulting firm that specializes in sales and incentive compensation plan design. He is on the faculty of WorldatWork, teaching the Total Rewards and Sales Compensation certification courses. He can be reached at (905) 845-0192 or [email protected].

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