Your Total Rewards Investment Is a Waste, Unless...

Do you have a Total Rewards strategy?

Do you communicate your Total Rewards strategy to all employees in a way that gives them a true sense of your organization's total investment in them?

If you answered "no" to the second question, then by default the real answer to the first question is also "no."

No matter how well defined or constructed your Total Rewards program is, if your employees don't know about it in terms that matter to them, then your Total Rewards strategy doesn't really exist.

In research introduced earlier this week, the Chartered Institute of Personnel and Development (CIPD) revealed:

"The CIPD/Benefex Reward Management Survey 2012 found that more than a third of companies plan to increase their spend on employee benefits this year, but few (17.8 per cent) provide 'total reward statements' and 8 in 10 offer no financial education to help employees understand the value of their pensions and other financial benefits. What’s more, the survey revealed that the majority of organisations have not adopted a transparent approach to communicating information about pay scales, the provision of benefits and allowances, grading systems, job evaluation, performance-related pay schemes and how pay decisions are made for different individuals or groups of employees."

Let's be honest. Rewards or benefits packages can be as half as much or more than an employee's base salary. Why, then, do we so often leave employees in the dark about the full extent of their entitlements? 

Too often, the term "reward" is linked to an employee's performance against corporate goals. In reality, "rewards" encompass so much more, including everything from healthcare benefits to retirement plan contributions, to recognition and incentives received.

But if the total value of these rewards isn't communicated effectively to employees, then its intended benefit will not be felt. Moreover, if reward is to be both truly meaningful to the recipient and provide valuable insight to the HR department on the key performers across the organisation, it absolutely must be closely linked to recognition.  This is a sentiment echoed in a recent Gartner report (Gartner 2012 Strategic Road Map for Employee Performance Management - March 2012, membership required) recommending  organisations test a social recognition policy alongside their existing pay-for-performance programs to improve the success of its reward program.

Charles Cotton, rewards adviser at the CIPD, commented on this research:

“If rewards are used to motivate employees, or to encourage higher performance, then being reticent about reward communication does not make sense. Employers shouldn’t take it for granted that potential candidates and existing staff appreciate or understand the value of the pension scheme or perks such as subsidised meals, life assurance and critical illness insurance. Many employees will not look beyond their base salary and how far they can make it stretch from month to month. As we embark upon the biggest shake up to pensions since the state pension was created, employers will have a duty to communicate with employees about these changes and how they could benefit from saving for their retirement. What’s more, if employers apply that duty of care to their entire reward strategy, by improving employee understanding and awareness around the value of the entire breadth of benefits they offer, employers are likely to reap the benefits in terms of recruitment, retention, engagement and productivity.” (emphasis mine)

To ensure the success of a total reward strategy – incorporating strategic employee recognition – communication is vital, particularly in light of changes to employee entitlements through mounting economic difficulties.  Once the strategy is communicated appropriately and fully understood, it will be embraced by employees and the program will grow – ultimately delivering improved performance across the board and a more satisfied and engaged workforce.

How well is your Total Rewards investment understood by your employees?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Comments

[Marco Bernardi]

I fully agree on the above. Especially during these uncertain economic times and reduced reward budgets it is more important than ever to have the employees fully understand the value they are getting. Paradoxically the investment on reward communication could be very limited but provide a very significant return.

However there could be some reasons for an HR Director for NOT implementing a structured company wide reward communication program (besides the usual lack of time). Some of them could be:

1. Not ALL part of the reward programs are well managed. If I start talking about them and expose myself all kind of problems will come out and fireback to me.

2. There is no internal equity

3. My pay curves are well below market

4. I will get back so many questions that I will not be able to handle them and especially my line managers won’t.

Etc.

In other words before communicating openly the machine must already run smoothly enough. Personally I believe that all reward programs should be clearly posted “on the walls” because I believe that reward secrecy has more costs than advantages. But it must be recognized that, IN SOME CASES, some secrecy “advantages” are there.

[E. James (Jim) Brennan]

Marco accurately listed a few of the many reasons some decline to communicate their reward strategy. Those are also excellent reasons to improve and enhance your reward strategy in order to make it both worthy of communication and validly defensible. Recognizing the flaw is the first step towards solution.

Also, some "negatives" are simply realities which can't be fixed and are better honestly conceded rather than ignored or hidden from view. Folks know when you pay below market, so communicating a deliberate strategy of lower base salary in order to assure superior job security or better fringe benefits can be a reasonable tactic. Likewise, declaring that internal equity is not a policy consideration may defuse complaints and silence critics who will quickly realize that their desires are not shared by management.

The perfect is the enemy of the good. If you allow imperfections to silence you, nothing would ever be communicated and everyone would be treated according to the mushroom school of management.

[Derek Irvine, Globoforce]

Excellent comments and insights, Marco and Jim. This is whyI enjoy blogging - the conversations and the learning.

I, too, am a fan of the concept "perfect is the enemy of the good." Unless we start communicating better, too often we assume everything is okay for employees. With communication comes conversation.

That is critical.

[Marco Bernardi]

Hello Jim and Derek and txs foryour point of view. I particulary like when Jim says that "folks know when you pay below market, so communicating a deliberate strategy of lower base salary in order to assure superior job security or better fringe benefits can be a reasonable tactic".

However I think it is important to point out a difference between the USA and Europe for what concerns market data availability. I was thinking about Europe where, generally speaking (some differences country by country) remuneration data availability is lower than in the USA. So not all employees really have in mind the correct value of their jobs. The exceptions are those employees which, due to their responsibilities, have more external relations (for ex. sales)