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Not So Totally Rewarding

Total-rewards programs are designed to attract and motivate employees. But it appears many companies -- thanks to poor execution and lack of communication -- aren't seeing much of a return from their investments.

Monday, June 25, 2012
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Engineers at a large aerospace firm were expressing concerns about something, and it wasn't their pay or their working conditions -- they were worried about the "half-life" of their skills and knowledge.

Given the rapid pace of technological change, these engineers were worried that half of what they'd learned would be "useless" within five years, says Richard Kantor, senior vice president in Aon Hewitt's human capital consulting division.

Mindful of the need to retain these highly skilled employees, the company looked at the best practices of its industry competitors and found that its own learning programs stacked up well against them. But when it pulled back and compared itself to companies ranked "world class" in learning, its own offerings didn't fare nearly so well, he says.

The company responded not only by strengthening its learning programs, but by ensuring that the engineers were fully aware of the opportunities available to them, says Kantor.

"They helped the engineers understand that, by staying with the company, they'd have plenty of opportunities to replenish their learning and stay at the forefront of technological change," he says. "The company realized what a great retention tool this could be."

Companies spend lots of money on their total rewards programs -- the combination of pay, benefits and development opportunities that keep employees sticking around. Yet a recent survey from Aon Hewitt finds that, despite those investments, few companies seem to be getting much out of their programs so far.

Aon Hewitt's Total Rewards Survey of approximately 750 organizations reveals more than half (58 percent) use total reward programs to foster employee engagement, while 48 percent want the programs to strengthen their ability to retain and attract top talent. However, 60 percent describe their employee-engagement levels as low and two-thirds say it's either holding steady or trending downward.

Other research also suggests a disconnect.

    

"Our studies suggest there's a significant divide between what employers think employees want and what the employees actually want," says Peter Gundy, a managing director at Towers Watson in Stamford, Conn.

Companies tend to rank base pay, organizational mission and being rated as a "best place to work," respectively, as the things valued most by employees in terms of what drives them to join and stay with an organization, he says. Conversely, employees tend to value job security, base pay and healthcare benefits as the most important factors.

"As the concept of total rewards has evolved, the challenge has been for employers to clearly articulate what they expect from employees, and what they're prepared to give in return," says Gundy.

What to do? Aon Hewitt analyzed the total-rewards programs of companies it identifies as "high performers" -- companies with the highest levels of innovation, engagement and revenue -- and compared them with the rest of the surveyed companies.

According to the results, top performers distinguish themselves by articulating clear strategies and goals in their total-rewards programs, using data and input to drive decision-making, connecting the program to the business and employees, and defining the effectiveness of their programs differently.

One of the most important things top-performing companies engage in, says Kantor, is "disaggregation," or the process of separating data into component parts.

"The data suggests leading companies understand that attraction, retention and motivation -- which are first and foremost what companies say they're trying to do via their total rewards -- should be disaggregated," he says. "We know from our research that the elements that attract candidates to a company are different from the elements that retain and the ones that motivate."

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A company focused on retaining skilled employees -- like the aforementioned aerospace firm -- should use its total rewards strategy to emphasize things such as learning and development, which tend to be moderately strong attractors but very strong retainers, he says.

Another best practice? Listening to employees, says Kantor.

"It's ironic that the overarching goal of total-rewards programs is to attract and motivate, yet more than half of organizations don't seek out employees to find out what they find compelling and motivating," he says.

Doing this can also head off potential problems. At this year's WorldatWork annual conference in Orlando, Fla. Cindy Jorgensen and Ron Steele Jr., two compensation specialists from the Boeing Co., presented a case study on how their company reached out to the employees at its South Carolina facility to determine why they had such a low opinion of the aircraft maker's pay practices.

After a survey revealed the employees' dissatisfaction, Jorgensen and Steele dug deeper into the data and held a series of employee focus groups to get a better understanding of what they found objectionable.

The results revealed that much of the workers' frustration arose from a lack of understanding about Boeing's pay practices rather than the actual pay levels. As a result, the company invested in managerial training and employee education to bridge the gap. (Read more about this on our Leader Board blog.)

"Many companies have fallen into the trap of thinking that they just need to provide what the competition is offering," says Kantor. "But if you look at what's going on in the world today, with one out of every two employees disengaged, I think it suggests we could be doing a better job of trying to understand what it is that employees want."

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