TOTAL REWARD
Employers plan to adopt total reward approach
Almost 80% of employers in future intend to take a more holistic approach to managing their reward programmes, according to a survey by Watson Wyatt.
The research suggests that the non-financial elements of the reward programme -- such as career development and promotion prospects and increased flexibility, as well as a pay structure truly aligned to performance -- have the greatest influence on positive employee behaviours and commitment levels.
The findings of the report challenge the appropriateness of providing "above market levels of traditional rewards". It shows that there is no material impact on employee turnover levels in doing so and suggests that perhaps greater value could be found by reinvesting additional funds available in some of the intrinsic elements of reward.
"As the people issues facing organisations change, resulting in different reward objectives, companies are beginning to challenge the appropriateness of the traditional reward model where each element was designed and managed almost independently of the others," says Eddie Hodgart, head of total reward consulting at Watson Wyatt. "A total reward approach ensures an integrated approach to managing reward programmes both in terms of market benchmarking, the design and interaction between each element of reward and the communication of the overall package to employees."
Retention issues
The survey found two out of five employees are actively considering leaving their current employer within the next 12 months. The main reasons given include a lack of career development and promotion prospects, a poor working relationship with their manager and a lack of opportunity to be creative.
"This contrasts with the more politically correct reasons given by employees when they actually leave such as job satisfaction, better pay and better opportunities," says Hodgart, "Rather than develop a retention strategy geared to these latter points, is there not more value in companies focusing their efforts on ensuring employees do not feel the need to look elsewhere?"
A final word
"The perceived skills shortages -- rather than labour shortages -- of tomorrow will bring an interesting challenge. Perhaps the first step is to identify those employees who are critical to the business going forward -- which is not necessarily those currently performing well. The second challenge is gaining a better understanding of their needs and what they value. Finally, how easy will it be to differentiate between these individuals and others without 'levelling up'? As our survey shows, the retention of these individuals goes beyond the provision of traditional rewards and more and more innovative approaches will be required to recruit and retain these key individuals going forward." -- Eddie Hodgart, head of total reward consulting at Watson Wyatt.
Want to know more?
Title: Total Reward Survey 2004, Watson Wyatt.
Survey sample: Survey undertaken in June and July 2004. Responses received from over 220 large private sector employers and nearly 3,000 employees of such organisations.
Availability: To purchase the report contact Rachel Brown rachel.brown@eu.watsonwyatt.com.
Watson Wyatt is a global consulting firm focusing on human capital and financial management. It specialises in employee benefits, human capital strategies, and insurance and financial services. Watson Wyatt has more than 6,000 associates in 88 offices around the world. To find our more visit www.watsonwyatt.com
Posted 18 October 2004