Is Your Total Rewards Strategy Still Effective?

7 key aspects of total rewards to ensure the rewards program is working

Compensation or Total Rewards planning requires an annual check-up just as we humans need to get a physical check-up to gauge the level of our health. As each year passes, we need to be evaluated against the wear and tear that was experienced in the past 12 months. Accordingly, a company’s compensation approach, strategy, and design need to be evaluated to assess its effectiveness, performance, and efficacy. The right team needs to be assembled, charters developed; roles defined; data gathered; vendors engaged and facts presented; and, finally, performance targets, goals and financial metrics re-determined.

The 7 crucial elements of total rewards—compensation, benefits, work-life effectiveness, recognition, performance management, culture, and talent development—are what collectively define your company’s strategy, design, and approach to attract, motivate, retain and engage employees.

This is why it’s necessary to keep your compensation programs fresh, exciting, and competitive, especially with today’s shifting workplace where multiple generations sit and work under one roof. What was important to your Baby Boomer employees may not be as important to the vastly-different Millennials who currently are storming modern workplaces. A quick review of your company’s labor force and demographics will tell you whether your compensation and benefits programs are truly in alignment with general trends in the labor force, as well as in sync with the expectations of the various generations under the work roof.

Similarly, each of the aforementioned attributes needs to be meticulously reviewed for cracks in the total rewards armor. For example, how can we tell what the general health of your company is vis-à-vis benefit costs? Are we spending more than is necessary to have benefits programs administered? Are we getting the best process and does the health – yes, the actual health, and well-being of our employees collectively – of our company has a negative impact on our costs?  

Can we determine which group of employees are the unhealthiest and thus need more help from our benefits strategy or, even better, can we get them to become healthier through our rewards design? Can we enable our healthy employees to remain on a good health trend? There is a plethora of data that companies have at their fingertips to answer these important questions.

So, let’s take a look at the 7 key aspects of total rewards to ensure that our rewards program is working as we expect: 
 

1.    Compensation (Pay) is what your company pays its employees and keeps them motivated for their work, including both fixed and variable pay (stocks, bonuses, etc.) tied to performance. It is also a vital element in attracting the best and brightest to come and work for you.
 

 

2.    Wellness and Benefits are health, wellness, income protection, savings and retirement programs that you provide to your employees. This, arguably, is the most important component of your rewards strategy and it literally keeps your employees physically, mentally, and emotionally at their best.
 

 

3.    Work-Life Effectiveness programs and policies help employees achieve success at both work and home. The design element is gaining greater recognition – no pun intended – as younger employees with different expectations of work and life dominate a workforce. These employees literally see no line between work and life and expect their employees to be blind to it as well.

 

4.    Recognition programs (both formal and informal) that acknowledge employee efforts, behavior and performance can support business strategy. Human nature dictates that we all want to be recognized for the good things we do. There doesn’t have to be any pecuniary reward for this but a mere acknowledgment of their goodness. Too often, managers focus on what bad or wrong things employees have done and not the vast majority of good things present and evident to them.

 

5.    Performance Management includes establishing expectations, skills, assessments, feedback and continuous improvement. Employees want to know what they need to do and how they should do it. They want to know how there are measured and against what criteria. They want to know immediately when they should change anything they are doing and want that feedback quickly and in pulses and on a regular basis.

 

6.    Culture is the glue that keeps employees engaged and the company flourishing as it adheres to norms, values, and stated objectives while achieving or surpassing financial and strategic performance objectives.

 

7.    Talent Development provides tools for employees to evaluate and grow their competencies and abilities. The best talent management begins by hiring the right and best talent for all jobs especially for critical jobs that are hard to fill. The company also has a fervent view toward succession planning and knows which employees are ready to assume key roles now, in the next year and in two to five years. In addition, there are key processes such as that ensures employees are given the tools, learning opportunities, and experiences necessary to excel in current and future roles. Every employee knows or should know why they do what they do and what the strategic imperatives are for their company and, most importantly, their role in advancing that agenda.

After gauging whether you have sufficient programs in place to support all 7 elements, consider the following questions to evaluate whether your compensation or total rewards package needs realignment this year:
 

1.    Did market pay shift in your industry and your peer group? When was your last market analysis? Did your company perform up to expectations and thus how much of that reward should be shared with employees? Was any position hard to fill or saw a lot of turnovers? Perhaps a special market analysis and assessment need to be conducted.
 

 

2.    What are the country, state, city-level market salary rates for all key jobs? What are the expected salary budget movements, if any? Remember, pay analysis and pay increase budgets should only be done on a country-by-country basis and job-by-job basis.
 

 

3.    Is your company experiencing a transformation brought on by a shift in strategy, market position, accelerated growth, acquisition or divestiture? If so, what are the implications for high performers in the company?
 

 

4.    Has the articulated pay and rewards philosophy ben reviewed and updated as necessary? If so, is it in line with processes, strategy, tools and tactics? For example, are systems in place to address strategy effectively?
 

 

5.    Is pay-for-performance in place? Does the analysis show differentiation in pay in accordance with pay-for-performance philosophy? Are the very best performers seeing pay differentials that honor their high performance?
 

 

6.    How did your external benefits partner/administrator perform last year? Are they financially solvent and are their values in alignment with your company’s? Have their prices changed and are they still competitive? Are you confident that they will implement a benefits program that delights your employees?
 

 

7.    Finally, has a culture survey been conducted to assess the engagement levels in the company? Do the employees know the value of this culture and are they intimately involved in stewarding and harnessing it?

If your compensation package is missing any of the necessary two sets of the aforementioned critical attributes, it could use more sustainability in it or, if any of the above questions raise deep issues, it may be time to take an objective, unbiased, and thoughtful look at your compensation planning. As we, humans, would do when we are ill, call a qualified total rewards professional to help.