Recent data suggests that an alarmingly high percentage of Australian workers (almost 40%) are considering leaving their jobs this year in what’s being called “The Great Resignation”.
They’re citing reasons such as non-competitive salaries, lack of promotion opportunities, poor management style and toxic workplace cultures. COVID-19 also forced many companies to introduce new flexible working conditions including WFA (work from anywhere) arrangements that employees aren’t ready to let go of, even now that the pandemic is beginning to wane – and they’re ready to resign from their roles if not accommodated.
It’s apparent that companies worldwide are struggling to address this problem of a restless workforce, and many will continue to struggle. Why? Because they don’t really understand what their employees value.
The pandemic has caused many people to reflect on their careers and what’s really important to them. Yes, everyone values their salary – but some people value things like spare time, flexibility and opportunity just as much. If their current working environment does not offer those things, they are likely to contemplate alternatives.
Develop a deeper understanding
When it comes to remuneration and benefits programs, most companies adopt a ‘one-size fits all’ approach. They often assume that generic ‘market practice’ is the answer when it comes to reward. When experiencing retention problems for example, companies may test out well-intentioned fixes like pay increases, financial perks or “thank you” bonuses, but such strategies are likely to fall flat in the long term. This is simply because employee motivations will vary beyond pay, and if not, there is always another organisation who will pay more than you do – guaranteed!
Organisations that take the time to discover what their employees want out of their employment will have an edge when it comes to attracting and retaining talent in the times ahead – but don’t panic! It’s not a one-sided exercise and making revisions to your current remuneration and reward practices can bring the added benefit of improving your ROI on employee costs in addition to improving employee satisfaction.
It’s really about striking that perfect balance between what motivates your employees and what benefits your business. Develop a deeper understanding of both to improve your position.
Your total reward strategy
Everything you offer employees in exchange for their time, skill and effort sits under what we call “Total Reward”. Organisations can use interdependent reward elements (remuneration, benefits, career development, and work / life) to offer an attractive remuneration package for employees that also aligns with business priorities. Figure 1 below provides an overview of the total reward offer which will vary from one organisation to another and vary in perceived value from one employee to another. The trick is finding the most optimal mix of reward programs that is right for both the company and employees.
Figure 1 – the Total Reward elements
Uncover, Define and Deliver
So how do you find out what your employees actually value and then ensure reward programs are adapted to these preferences whilst maintaining or even reducing cost to the company?
Here’s how we approach optimising employee reward programs with our clients.
Step 1: Uncover the opportunity
Firstly, we need to determine if there is an opportunity for changing the current total reward offering. This initial step aims to understand if the current reward programs have the potential to provide greater value for the same or less cost.
We probe the current reward programs seeking key insights providing a clue for opportunities:
- What is the current portfolio of rewards? i.e., consider both tangible (cash and non-cash such as paid time off) and intangible rewards (job related and social rewards such as recognition)
- Who is eligible for each reward program? i.e., profile the workforce and how they access rewards
- What is the rate of take-up for each reward program? i.e., are some programs more popular than others?
- What do the individual reward programs cost? i.e., direct and indirect costs to the company such as managing a program
- How do the current reward programs compare with companies who are your key sources for talent? Are there opportunities to differentiate in the market?
The outcome of this high level analysis highlights potential areas that warrant further investigation.
Step 2: Define the Solution
If Step 1 suggests there is an opportunity, we dig deeper to uncover the gold! We consult with key stakeholders to define the reward principles, conduct an employee preference survey and through the application of simple but proven techniques used by marketers, we determine:
- What aspects of a company’s current reward program are most/least valued
- What could be added to improve the value proposition
- Where the company could shift resources for better ROI
Part of our employee survey process is to offer a hypothetical choice of reward package to determine preferences. Then, we examine those preferences further based on different groups or segments. This helps us to understand the employee’s perceived value of the package which can often be remarkably different to what the company expects.
To illustrate, Fig. 2 below shows an example preference survey outcome for a resources company where employees are presented with various reward packages and asked to indicate the extent it would encourage them to stay. For example “a new bonus scheme encourages me to stay with the company” Agree? Neutral? Disagree? Looking at responses from all employees vs a segment of engineers we can see variations to assist in developing a more optimal reward program to benefit both employee and the company. For example this cohort of engineers are seeking improved training & development which may be funded by savings achieved through not providing access to the employee share scheme.
Figure 2. Predicted effect of reward program on retention
Importantly, optimising the reward portfolio is not about being ‘all things to all employees’, but rather creating tailored reward packages for specific segments of employees. (e.g. key skills & capabilities, high performers, management).
We design the most optimal reward packages based on the analytics and employee preferences and gear them towards the key priorities of the business. If you’re interested in reading more about about how we achieve this, read our blog Why Have a Remuneration Strategy?
Step 3. Deliver the new reward portfolio
We then assist the company with implementing the program to:
- Develop clear and consistent messages about the employment deal and total rewards Philosophy
- Communicate messages frequently through organisation-wide, localised and manager based channels to create alignment between employer and employee expectations
- Support managers in their role by providing frequent education and training on effective goal setting, performance measurement, and making and communicating remuneration decisions
- Take steps to increase line of sight for employees into performance goals, metrics and results
- Ensure that conversations between managers and employees increase understanding of performance expectations and remuneration decisions
Over time, the return on investment from the changes made is measured. Key indicators we look for from the revised reward portfolio may include:
- Higher productivity per employee
- Higher acceptance of job offers
- Lower resignation rates
- Lower levels of absenteeism
- Higher levels of talent progression and promotion
We’re standing at the edge of a great sea of change and it presents a fantastic opportunity. Set your business up to become an employer of choice for the times ahead by developing a reward strategy that speaks to what your employees desire most.
Contact us today for a discussion about your company’s total reward strategy.