Money may no longer be the ultimate differentiator, but getting your reward package right can boost retention and attract a wider pool of recruits.
When asked to name the whys and wherefores of talent management programmes in their organisations, most HR professionals would say their goal would be to become the ever-elusive ’employer of choice’.
But while creating an enjoyable, inclusive working culture is crucial, the ‘hygiene’ factors, such as salary and benefit schemes, can make or break whether employees stay with your organisation.
These days, employers focus more on pragmatic benefits that keep staff motivated – a recognition that people now care more about job stability and longevity. This is in stark contrast to the mid/late 1990s, when companies promised flash cars, games rooms and gourmet meals in a battle of corporate one-upmanship.
In fact, research suggests that it is not just money but more practical tools for balancing work and life, such as extra holiday days, childcare schemes and flexible working, that are the rewards most valued by staff.
“Reward is undoubtedly changing,” says Justin mcavoy, director of HR consultancy Reflect. “This is chiefly because of the changing demographics and diversity of organisations. People want more out of life than just professional status and flash rewards.”
A new breed
Forward-thinking HR departments are embracing this new environment. The annual reward survey by the Chartered Institute of Personnel and Development (CIPD) shows more than one-third of organisations now have a clear reward strategy.
“Commercially-driven HR departments are looking at their strategy, and reward is a very important part of that,” says mcavoy.
Asda is considered to be a leader in its sector when it comes to employee benefits. Its workers across 300-plus stores can now take advantage of shift-swapping schemes, job-sharing, grandparents’ leave, and even IVF leave, to name just a few.
Sarah Dickins, Asda’s head of reward and recognition, says that all these initiatives were introduced in response to employee feedback. “We talk to colleagues about their package and feed that into our reward strategy. The whole philosophy is built around listening to people,” she says.
A flexible approach to reward has enabled Asda to achieve the lowest staff turnover in the supermarket industry, according to Dickins.
But for reward programmes to complement your talent management efforts – for example, by boosting retention or incentivising good performance – they need to be well communicated.
Employees are generally not that adept at calculating the real value of their reward package, according to mcavoy. He says this is usually down to line managers failing to explain how reward schemes work.
Stephen Moir, HR director at Cambridgeshire County Council and reward lead for the Public Sector People Managers’ Association, agrees.
“There is an issue with line managers talking to their staff,” he says. “Do they understand all the benefits on offer and take time to explain these to staff? I don’t think they do.”
This means there is real work to be done among HR and communications departments in presenting that information and getting the message across, he adds.
In the public sector, where pay levels are broadly lower than in private firms, Moir thinks organisations need to take a more proactive approach to telling staff the full value of their benefits.
“Annual reward statements, as well as pension statements, are something that more local authorities are looking at,” he says. “Unfortunately, there are varying levels of sophistication when it comes to this.”
Show me the money
The importance of cold, hard cash should not be underestimated, though. A separate CIPD study looking at recruitment and retention revealed pay as the top reason people leave organisations, behind a career change and promotion outside the company.
Employers potentially pay a high price for failing to keep hold of their best performers. As well as increasing recruitment costs, there is likely to be a knock-on effect on organisational performance and ability to meet strategic objectives.
A study carried out earlier this year, by Innecto Reward Consulting, suggests that cultural, economic and technological changes in the past 10 years have made financial reward a greater motivator than challenging work or personal pride.
Nearly three-quarters of the 690 UK executives aged under 40 years old polled said they now expected a pay rise every year. And two-thirds claimed that financial reward is now the number one career motivator.
In contrast, just 15% of 189 HR professionals also surveyed believed financial reward to be a key motivator. Given this mismatch in ideas, it is unsurprising that three-quarters admitted their businesses had lost at least five talented staff in the past year.
“All company levels, including HR, should become more proactive and flexible when considering financial reward,” says Deborah Rees, director of Innecto. “Options such as variable pay and bonus schemes should now be considered central to strategies to recruit and retain key staff.”
So what will reward look like in the future? Mcavoy thinks graduates will look at learning and development prospects, as well as salary and other benefits.
“Organisations have an opportunity to show potential employees that there are other benefits and it’s not just about money,” he says.
Benefits that strike a chord with the individual will also become increasingly popular, says Gina Arthur, a consultant at incentives specialist Maritz. “Firms need to find out more information about their employees so they can make rewards more customised. Managers must understand what makes their people tick,” she says.
Freedom of choice will help to determine whether you recruit or retain the staff you want, concludes Moir.
“More flexible benefits and a menu of options – such as being able to buy annual leave – is what will attract and retain people,” he says.
Case study MBNA
Credit card company MBNA was looking for a more innovative way to motivate its 2,600-strong sales team and increase productivity.
The firm approached awards consultancy Maritz, which designed a programme called HITS!, offering weekly, monthly and bi-annual music prizes based on performance. These ranged from ipods and cds to live concerts and ‘showstopper’ events. The campaign was supported by posters, weekly e-bulletins and promotions at team meetings.
Gina Arthur, incentives specialist at Maritz, believes the programme had universal appeal for the firm’s high proportion of younger workers, plus employees in the 45-55 age bracket. “People were talking about the campaign and there was an anticipation of what the next event would be,” she says.
By creating strong, themed communications, MBNA felt the buzz had returned to its teams and competitiveness to its customer service operations.
In the first three months of the campaign, entrants and subsequent winners made up one-quarter of all participants – far exceeding previous qualification rates of 12%. The company also achieved its revenue targets and stabilised its retention rates.
Andy Grannell, internal communications manager at the firm, says: “The programme has provided MBNA with an opportunity to reward our people to the next level. The money-can’t-buy prizes on offer have re-invented the whole incentive genre within our corporation.”
How to reward talent
- Don’t work on assumptions. Take the effort to canvass and understand your employees’ views and perceptions of their current benefits.
- Maximise employee appreciation. Ensure that staff appreciate the ‘true value’ of their benefits. Total reward statements may help, but good ongoing communication is essential.
- Start with the offer letter. Make sure that employees’ benefits and their values are communicated in their employment offer documentation. Too often, employees are only aware of their non-direct pay benefits after they start.
- Align benefits to business objectives. Ask the question of whether a given benefit is supportive, neutral or destructive in helping the company deliver its business objectives.
- Communicate, communicate, communicate. Little, often and varied communications on benefits is more effective than ‘big bang’ approaches.
- Brand your benefits. Research shows that branded HR benefit arrangements and employee communications can add additional value to flexible benefits schemes.