Keeping up with the total reward Joneses

Questions to ask to ensure programs meets changing business, employee needs

The development of a total rewards strategy is a priority for organizations looking for a more integrated approach to managing their investments in people.

To deliver optimal value, however, a total rewards strategy must continue to evolve in accordance with changing business and employee needs. Regular monitoring of key indicators can highlight when changes may be required.

An effective strategy gives shape to an organization’s employment deal by defining its desired approach to such elements as pay, benefits, learning and development, leadership, communication, performance management and the overall work environment. It establishes a blueprint to support decision-making on HR programs, processes and policies that consider:

•the types of elements to be included in the employment deal;

•the level of investment to be made in each element;

•the design of each element;

•how each element is to be administered; and

•how the different elements — and the overall employment deal — are communicated.

Organizations typically engage in extensive diagnostics when they first develop a total rewards strategy. But to ensure the strategy has met, and continues to support, the achievement of business and people objectives, it must be revisited periodically to ensure it still makes sense.

Therefore, key indicators that could signal the need for changes should be monitored. This can be done by:

•checking in with leaders (through leadership interviews or discussions) to test for issues or concerns;

•getting regular employee feedback (through ongoing employee surveys or through tailored surveys designed to measure the effectiveness of the total rewards offerings);

•reviewing statistics and feedback related to the recruitment and retention of staff (time required to fill jobs, feedback from job candidates, feedback from exit interviews and turnover statistics);

•reviewing patterns in employee enrolment selections (benefits and training);

•assessing the market competitiveness of the total rewards offering (by assessing the market positioning of pay and benefit programs as well as the prevalence of various types of programs in the market);

•reviewing costs and areas where costs are escalating (increases in the cost of particular benefits, such as prescription drug costs and disability costs); and

•reviewing changes in the characteristics of the employee population (shifts in the average age).

When conducting employee research, an organization can gain valuable insight by examining the results by demographic group. Employees in different age groups or organizational levels may have different needs and expectations with respect to total rewards. Further, employees’ needs and expectations will shift over time as they get older or experience changes in lifestyle or family status.

Spotting trouble

The following are some questions that can help highlight potential issues.

•Have there been changes in the business strategy or the key business priorities? Do these changes call for different types of measures or results?

•Have there been changes in the external environment (market, regulatory changes or changes in government policy)?

•Have there been changes in the talent requirements of the organization?

•Have there been changes in the organization’s demographics?

•Is there a sense the current total rewards offering is missing the mark or not delivering as expected?

•Is the organization getting feedback from leaders or employees that some desired elements are missing?

A new business direction can have significant implications for a total rewards strategy. It can result in new types of measures and business objectives that need to be reflected in the performance management process and linked to pay programs such as incentive plans.

Similarly, changes in the public health-care system may create new needs and expectations that are not being addressed in the existing strategy.

It is also possible the initial strategy missed the mark, and time and experience are highlighting opportunities for improvement.

Level of investment

•What is the organization’s total spending on total rewards? By element? Is the cost of each element in line with the organization’s budget for the program?

•To what extent have costs been increasing year over year? Which elements have experienced the most significant escalations?

•Does it appear some elements of the total rewards offering or employment deal are not adding any value?

Sometimes the feedback offered by leaders and employees (including job candidates) may suggest that investments in total rewards need to be remixed to create a higher perceived value. An organization may find it is investing in elements that have only minimal value to employees, while making only limited investments in elements that are of high value.

Employers need to look beyond traditional reward programs — pay and benefits — and assess the importance and effectiveness of factors such as leadership, employee development, communication, and the overall work environment. Such factors can have a significant impact on employee retention and engagement but may get overlooked if the definition of total rewards is limited to monetary considerations.

Design issues

•Are programs, processes and policies driving the desired types of behaviours and results? Are any falling short of initial objectives?

•Do programs, processes or policies send conflicting messages about what is expected of employees or what matters most to the organization?

•Are there current or emerging cost risks or liabilities that need to be addressed?

•Are any of the programs being affected by changes in the external environment (market or regulatory changes or changes in government policy)?

A total rewards strategy calls for the organization to think about its many programs in an integrated manner, both in terms of total investment and how it supports attraction, retention and engagement of workers. When a misalignment arises, strategy needs to be revisited to re-establish the link between the business strategy and how employees contribute to the achievement of that strategy.

Administration issues

•Are internal administrative processes and policies clearly understood? Are they being followed appropriately?

•Is management getting all the necessary statistics to monitor and evaluate each program on a regular basis?

•Are managers fulfilling their administrative roles effectively?

•Are third-party administrators meeting the organization’s needs in an efficient and cost-effective manner?

•Have employees raised any issues or concerns with respect to how managers, HR or third parties administer programs, processes or policies?

Ineffective or inappropriate administrative processes and policies prevent a total rewards program from achieving its full value. Poor administration generates more work for HR staff, creates confusion and frustration for employees and line managers and adds unnecessary additional costs to the program. Poorly administered plans also have a lower perceived value among employees.

Communication issues

•How effective are current communications on total rewards? What types of vehicles are used (print, web, face-to-face)? How effective are they?

•Do employees understand what is expected of them and how their contributions will be rewarded?

•Are some elements better understood than others? Which are least understood? Why?

•Is there unifying communication that helps employees understand the full total rewards offering in a complete and integrated manner?

Even the most brilliant strategy and programs will deliver less than optimal results if not supported by effective communication. Organizations that understand the power of effective communication invest time and resources to ensure employees understand the many facets of their employment deal. “Employer branding” strategies can ensure the organization is as attractive to employees and prospective hires as it is to the customers who buy its products and services.

Claudine Kapel is a principal with Kapel and Associates Inc., a Toronto-based HR and communications consulting firm. She can be reached at (416) 422-1636 or at [email protected]. Heather McNab is a principal with McNab and Company, a group benefits consulting firm. She can be reached at (416) 239-4406 or at [email protected].

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