Soft side of rewards has hard impact

InSystems trying to capture value of total rewards program

Since late 2002, Markham Ont.-based business automation software company InSystems has been transforming its employee compensation and rewards system through the adoption of a total rewards program.

Some parts of the total rewards package may be considered intangibles, but Laurie McRae, vice-president of HR and organizational development says the goal is to turn those intangibles into hard data.

The guiding philosophy is: anything that employees take into account when considering the value of working at InSystems is part of the total rewards package. Improvements in any of those elements for the sake of raising employee satisfaction means improved customer satisfaction and therefore better business numbers, explains McRae.

While it has been difficult to quantify the impact of increased employee satisfaction — and consequently tough to capture the value of investments in areas like improved development opportunities — McRae is working with the company that conducts its employee satisfaction survey to establish statistical links between employee and customer satisfaction.

She hopes to be able to run some analysis in the next few months. “Human resources has to demonstrate its value and any investment has to be quantified,” she says.

The shift to total rewards at InSystems was precipitated by an employee survey in late 2002. “The (employee satisfaction) scores weren’t low, but then again I have some lofty goals for employee satisfaction,” she says. The survey also revealed a few areas of the traditional rewards programs that could, in the minds of employees, stand some improvement.

“They made comments about our incentive plan, about the way it was designed and structured. From their perspective it was too complex,” she says. Employees wanted high performance to be recognized, but it often wasn’t clear why some employees were getting incentives while others weren’t. “They wanted to see these types of direct financial awards really differentiate high performance, so people who were high performers could get more sizeable rewards.”

Employees only singled out a few issues for improvement, but McRae wanted to re-examine everything that comprised the employee value proposition.

“You have to step back and say we need to balance the cost and the effectiveness of these programs. We have to manage it as a whole portfolio.”

Before then, compensation and rewards were managed in isolation. Therefore, it was difficult for employees to understand exactly what they were getting from their employer, she says. “We really hadn’t effectively bundled and marketed our offerings.”

After recognizing improvements were possible, and with the objective of ultimately improving corporate performance, the HR team set to work with some external help to overhaul employee rewards.

“We went right back to the drawing board,” says McRae. A new job evaluation methodology was created to ease market salary comparisons, a retirement savings program was introduced for the first time, incentive programs were tweaked and new recognition programs introduced.

The survey revealed some employees felt training and professional development spending wasn’t being distributed equitably.

This year the focus is on improving staff training and development opportunities. A training needs analysis should ensure training dollars are being used to match organizational needs and employee expectations.

“We have a very educated workforce and the demand for professional development is very high. People expect, as part of the value proposition, continued learning,” she says.

“It really made sense to people,” she says of the move to total rewards. Employees are able to see exactly what they were getting from the company and, by the same token, the HR team makes every effort to remind employees of what they are getting and what they can expect in the future.

“We talk about it all the time. Any time we enhance our offerings we can say, ‘Here is the whole total rewards proposition. Here is the area we are tweaking. Here are the enhancements we made last year.’”

A total rewards package also makes it easier for employees to make comparisons when other opportunities arise. She is confident that the InSystems total rewards package is strong enough that when employees have a full picture of everything they get from InSystems, they won’t easily be lured away. “It is a very appealing value proposition,” she says.

As the HR team created its total rewards program, all elements were grouped into five categories:

•Direct financial, which includes base salary, bonuses and incentives;

•Indirect financial, such as group health benefits, retirement savings and service recognition;

•Role, which takes into account the challenge, complexity and variety of a position;

•Career development; and

•Affiliation, which includes the corporate culture, opportunity to work in teams and social environment.

The team then came up with a three-year roadmap, detailing plans for improvements. Importantly, cost projections were made for each initiative so that the executive team could see exactly how much the company would have to invest. “It’s the language of business,” she says. It’s what any other part of the company would have to do if it was introducing a new product or taking it to market.

That said, aside from the introduction of the retirement plan (InSystems will make contributions up to three per cent of an employee’s salary), the roadmap does not call for significant cost increases, she says.

For example, in 2003 the company made enhancements to the group health plan by introducing more flexibility. It doesn’t cost the company anything more, but it gives employees more choice in how they spend their benefit funds, which they appreciate, she says.

“It is not about spending more, it is about spending smartly and wisely,” says McRae.

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