Leveraging Total Rewards During Economic Turbulence
By Barbara D. Morrow, MBA, CCP
As an employer, you should continue to engage your workforce, even in the face of economic uncertainty. Chances are good that your organization has deferred or reduced salary increases, instituted a hiring freeze, or cut budgets. In response to the economic turbulence our country is experiencing, there will be opportunities for you to improve your ability to attract, retain, and motivate top talent by utilizing a total reward strategy.
Total rewards encompasses a combination of compensation, benefits, work environment, performance/recognition and career development that are provided by employers to their employees in exchange for their contributions to the organization’s success.
As a business leader, you should always be thinking about your long-term workforce needs and remain focused on the elements of your total reward program that are working well. It is important to engage your workforce by recognizing individual, team, and organizational achievement through cash, noncash, and other performance-management approaches.
Sound compensation practices means that your company has to determine what it is paying for talent, what it is getting in return for that pay, and what type of talent it might attract if it increases or decreases pay for a particular type of position. Related to this is your organization’s strategy to pay at, above, or below market rates of pay for similar positions. To reward your employees through cash compensation, there are a number of pay approaches including merit increases, team-based pay, skilled-based pay, and incentives.
Another pay strategy is to determine the functional areas that are most critical to your company’s success and target those employees at a higher market position. It is worth the investment in programs to retain critical employees in order to avoid having to spend money later on to hire replacements. Each approach can contribute to performance with varying degrees of effectiveness. In troubled times, the ability to pay bonuses will decrease rapidly as bonus pools get much smaller. That means there needs to be much stronger differentiation in compensation schemes among your key employees.
Benefits are another way to provide overall rewards to employees. Besides legally-required benefits, you can voluntarily offer benefits as a means of attracting, retaining, and motivating employees. You can also offset lower salary increases by preserving relatively small extras like spot bonuses and offering low health care premiums and generous vacation schedules. Like cash compensation, benefit and bonus programs should be tied to both the needs of your employees and your organization’s ability to pay. You should review and update these programs on a regular basis.
Work Environment Strategy
As already mentioned, pay and benefits are two important requirements for rewarding and recognizing employees. One far cheaper approach is developing a work environment that is satisfying and enjoyable. Freedom, autonomy, giving employees credit and recognition for their ideas, and allowing them to customize or personalize their workspaces are recognition approaches. You and other leaders play a large role in ensuring that your work environment is satisfying. A good work climate allows your employees to feel a sense of personal achievement and feel that the job is challenging.
Engaging your workforce in identifying opportunities to increase revenues is a way of reducing cost. Infusing the work environment with a fun and innovative culture can unleash creativity and productivity while recognizing individual difference and approaches to work. Providing workforce flexibility through approaches like telecommuting, flexible work schedules, and offering four-day work weeks can differentiate your employees’ experiences. A good work environment is a plus because it helps you retain good employees and can boost morale. It also builds the reputation of your company as an attractive employer.
Beyond pay, benefits, and work environment, you need to identify relevant dimensions of employee performance; set challenging and meaningful expectations; monitor and evaluate performance, and provide regular and constructive feedback to your employees. Being accessible to your employees, giving adequate recognition and feedback, providing professional development opportunities, and allowing appropriate control over their work are ways your supervisors can create the kind of work environment employees seek. A simple “thank you” from a supervisor or recognition of his/her anniversary with a handwritten note, signed by a senior leader in your organization, has a great positive impact on your employees.
Development and Career Strategies
There are additional ways that you can recognize employee contributions in the workplace. Use of career ladders, giving employees rotation assignments, awarding greater responsibility, discussing advancement potential and personal growth opportunities are intangible rewards that can have longer term impact for employees. Your focus should be to keep the right talent, in the right job, for the right amount of time. Communicating opportunities to high potential employees to try stretch assignments in preparation for future leadership roles is essential.
Understanding each element in your total reward toolbox and how best to use them effectively will be your organization’s greatest competitive advantage in having an effective, efficient engaged workforce whether the economy lags or rebounds.
Source: Workforce Engagement – Strategies to Attract, Motivate and Retain Talent by Stephen P. Hundley, PhD, Frederic Jacobs, PhD, and Marc Drizin.
Barbara Morrow is a Compensation Consultant with Strategic Workplace Solutions. She helps all size organizations understand total rewards strategies and develop appropriate base and incentive compensation programs.