The Benefits of Creating a Total Rewards Philosophy
Total Rewards, as defined by WorldatWork, is “all of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”
Formalizing your philosophy does the following:
- Defines human capital strategies and aligns with strategic goals and objectives, business model, and company culture
- Attracts, motivates, and retains employees by providing transparency on how the organization approaches compensation
- Provides guidelines and a system of accountability that drives consistency across the organization so employees perceive fairness and the company mitigates legal risk
- Allows the organization to balance market competitiveness and cost control
Developing a Total Rewards philosophy is a critical element in ensuring that you, as an organization, have a tool to help you drive human capital decisions and communicate those decisions to employees. Your transparency will go miles when it comes to building trust with your employees. When they understand that you have a philosophy and they feel they are being paid fairly, you will have a much easier time attracting, engaging, and retaining your workforce.
SET REWARD PROGRAMS BACK TO THE FUTURE
Getting started on a next-generation approach to total rewards begins with a fundamental shift in philosophy: Treat your workforce programs as a portfolio of integrated investments with different yet complementary purposes and desired outcomes — rather than as a set of disparate plans that don’t relate to one another.
Making this shift provides the foundation to take three steps essential to meeting your cost and talent objectives:
- Accurately determine and size your total investment in workforce programs to ensure it’s in line with both financial realities and business needs.
- Improve your value-to-cost relationship by allocating the desired total investment across your portfolio in ways that drive the right employee behaviors.
- Create a framework that adapts quickly and efficiently to changes in your business strategy and workforce composition over time, and across countries and employee segments.
CREATE A FRAMEWORK TO DEVELOP YOUR TOTAL REWARDS STRATEGY
Towers Watson’s framework for developing a total rewards strategy positions total rewards front and center in the EVP — as the most tangible element of the broader employment deal.
It also organizes the full array of workforce programs into three core categories that reflect how employees themselves typically view their rewards. These include:
- Foundational programs provided to employees as a condition of employment
- Performance-based programs offered for superior performance to drive a high-performance culture
- Career and environmental programs that enrich the EVP and help employees manage their careers and efficiently navigate their work environment
CORE PRINCIPLES OF REWARD PROGRAM DESIGN AND DELIVERY
Most critically, the total rewards framework is grounded in three core principles of sound design and delivery that hold true regardless of whether your organization manages its programs holistically or continues to operate in discrete functional areas. These include:
- Align the total rewards strategy with your organization’s business strategy and related workforce goals. Effective workforce programs are an extension of the business strategy, explicitly supporting key priorities and goals, and clearly communicating the level and nature of the contribution your company expects from its people.
- Optimize your total spend by allocating it among those programs that matter to employees, and deliver the right return relative to cost and risk objectives. Despite the magnitude of spend on reward programs — upward of $2 billion to $3 billion for a typical global organization with 20,000 employees — many organizations don’t consistently measure returns, or clearly understand the relationship between program costs and the value employees attach to them.
- Design, communicate, implement and deliver rewards that drive the specific employee behaviors you need to achieve your business strategy. At one company, employees’ technical skills and knowledge might be a key factor in driving customer loyalty, leading to, among others, an emphasis on deep technical training and development. At another organization, rapid turnaround, flexible problem solving, or fanatical attention to store cleanliness and point-of-service assistance may be far more important influences on customer behavior, leading to a very different mix of programs to shape employee behaviors and attitudes. Identifying the right mix is not only a function of cost versus value, but also of the culture and work environment your company is building and sustaining to meet strategic goals.