Do you think that generational differences don't matter when it comes to total rewards strategies? Think again...
Differences in core values between generations influence our view of ourselves, the work we perform, and how we expect to be compensated for that work. Part 1 of this series focused on how generational differences in these core values impact base salaries and pay increases. In this post, we'll talk about the implications of those differences for incentives and benefits, and how to incorporate these differences in a comprehensive total rewards strategy.
To give you a quick recap, CEO Magazine's article "Meeting the Challenges of Tomorrow's Workplace" summarized the differences in core values as follows:
Traditionalists crave appreciation, and they like memorabilia. For this group, plaques and trophies and conventional "employee of the month" programs can be successful. Other groups - particularly the Gen Xers - view these kinds of incentives as cliche and would be turned off. But for the Traditionalists, getting a gold watch upon retirement still means something. "Old school" incentive programs can be quite effective.
Boomers crave recognition, and status symbols are effective. They tend to be concerned with personal rewards, and anything that differentiates them from others - from a corner office to being asked to present the company's strategy at a trade show - is likely to be effective.
For Gen Xers, it's all about performance. Incentives tied to results tend to be most effective. Xers are unique in that they like better technology, and having access to the best office tech is high on their list. Being an Xer, I can personally attest to this! Results-based incentives tied to technology can be very effective - Xers would rather have the best computer than the corner office. When thinking about incentives for Xers, think "tech", rather than "employee of the month" or status symbols, and be sure that the incentives are tied to performance and results.
Gen Y employees crave constant feedback. Because of this, spot bonuses are very effective within this group. And staying true to their collaborative nature, non-financial incentives such as group outings can ben very effective. Taking the sales team on a group zip-line adventure works for Gen Y. It won't work for Traditionalists, and Boomers won't see what's in it for them. Xers are likely to view it as lame, and just want to get back to work.
When it comes to benefits, different groups prefer different benefits structures and kinds of benefits offered:
Not surprisingly, Traditionalists prefer traditional benefits packages. Defined benefit retirement plans, conventional vacation and time off policies, and typical kinds of benefits are most appealing to this group.
Boomers place the most emphasis on benefits, and often make employment decisions based on benefits. They're willing to make some salary concessions to get a better benefits package. Like the Traditionalists, Boomers are more comfortable with conventional vacation, time off and retirement plans.
Gen Xers, on the other hand, want options. One-size-fits-all benefits packages don't work for this group. They want the freedom to choose and the option to be self-reliant when it comes to benefits. This self-reliance is consistent with the "hired gun" perception; because they may move from employer to employer, Xers are more comfortable taking responsibility for their own benefits and developing their own plan that can move with them.
Gen Yers are more interested in creative benefits. Flex time, cafeteria benefits plans, company-provided gym memberships, tuition reimbursement, on-site medical care, and free meals and beverages appeal to this group. The more creative the benefit, the more it will appeal to Gen Yers.
So, what does all of this mean for your total rewards strategy?
All of these differences with respect to base salary, pay increases, incentives and benefits may make you feel like there's no chance of developing a total rewards strategy that works for everyone. The truth is, you can't make 100% of your employees 100% happy 100% of the time. There is no "perfect" strategy. But there are three things you can do to move your total rewards strategy closer to that "perfect" point:
- Be flexible. Offer your employees choices. Give Gen Y employees constant informal feedback, but make sure that you still have a formal performance evaluation in place that covers everyone. Consider offering, for example, a health benefits plan with options. Employees can choose one of a variety of employer-sponsored plans depending on their needs, the size and makeup of their families, etc., or they can receive an "employer subsidy" if they choose to purchase private insurance on their own. It's easier to be flexible with incentives and benefits than with base salaries and pay increases. Use this to your advantage, and offer incentives and benefits options that are likely to appeal to all of your employees, regardless of generation.
- Be transparent. Take the time to craft well-written policies and procedures, and ensure that your workforce understands how the total rewards strategy works. It may not be possible to completely reconcile the differences between Boomers who think pay increases should be tied to seniority and Xers who think pay increases should be tied to performance. Some employees may not love the policy, but if they understand it, they can make an informed decision about whether it's something they can live with, or whether they should explore other employment options.
- Be equitable. Remember that all employees, regardless of generation, are concerned about equity. If there are disparities in base salaries and pay increases, or incentives and benefits are offered to some employees and not to others, you're setting yourself up for trouble. You can't restrict who's eligible to participate in an incentive or benefit program because you think a particular age demographic of your workforce won't be interested. You need to offer it equitably, and let the employees make the choice whether to participate or not. An equitable total rewards strategy can lead to increased employee engagement, reduced turnover, increased productivity, and a lower risk of compliance investigations and discrimination litigation. All of these things lead to a healthier organization and an improved bottom line.
When thinking about your total rewards strategy, keep these generational differences in mind. But also remember that there are some common themes that transcend generation. Everyone wants to be respected in the workplace. Everyone wants to be valued - and rewarded - for the contributions they make.
Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics and is the host of The Proactive Employer Podcast. Follow her on Twitter at ProactiveStats.