More Plan to Focus on Employee Engagement in Rewards

Companies seek rewards programs that are motivational as well as cost-effective

By Stephen Miller Jun 10, 2009

Most global companies (57 percent) plan to increase their focus on employee engagement in measuring their rewards programs’ success during the next two to three years, while 64 percent will increase their focus on the motivational value of rewards programs, according to a study by consultancy Hay Group and WorldatWork, an association serving total rewards professionals.

The Reward Next Practices Survey, released in May 2009, includes responses from approximately 763 organizations in 66 countries from a cross section of industries to determine the rewards practices of global organizations during the next two to three years.

“Tough times mean that companies are still maintaining a sharp focus on costs,” says Anne Ruddy, president of WorldatWork. “We are seeing a strong future trend in achieving a better balance between the financial management and motivational aspects of reward.”

Metrics Matter

According to the study, current rewards program performance metrics are more heavily weighted toward financial performance than employee engagement:

71 percent of companies report that they measure the success of their rewards programs primarily by using financial performance measurements.

Just 40 percent say their focus is on employee engagement.

However, 57 percent of respondents report that they intend to focus more on employee engagement to measure their programs’ success.

“The global downturn has prompted organizations worldwide to shift to an increased focus on how to engage and motivate employees,” says Tom McMullen, U.S. reward practice leader for Hay Group. “However, during times when budgets are tight, maintaining an engaged workforce is more difficult than ever. When times are tough, employers are looking for ways to improve engagement — and it’s essential they remember the motivational power of intangible rewards, the role of the line manager in establishing a great work climate and the importance of communicating effectively with employees.”

Rewards ROI

The study found that 57 percent of companies plan to ramp up their focus on regularly measuring the return on their total reward investment, while only 20 percent of respondents currently regularly measure the return on their reward investment.

“Non-cash financial rewards such as benefits and pensions often represent a third or more of an organization’s total remuneration costs, but few employers understand the total value of their packages. As organizations continue to tighten their belts, they’re recognizing the importance of getting the most bang for their rewards program buck and putting their mouth where their money is in terms of effectively communicating the reward program’s value,” comments McMullen.

Other key findings from the Reward Next Practices Survey:

Two-thirds (67 percent) of respondents will focus more on improving the ability of their line managers to manage the overall pay-for-performance relationship with employees effectively and on the role of line managers in communicating total rewards to employees.

Close to half of the respondents (44 percent) plan to increase their focus on using rewards to reinforce a culture of creativity and innovation, while creativity and innovation is a current focus for only 25 percent of companies.

More than half (57 percent) will increase their focus on managing pay "holistically" at a total remuneration level (as opposed to managing reward elements separately and independently).

Leveraging important nonfinancial rewards, such as career and development opportunities (60 percent greater focus), improving work climate (53 percent greater focus) and nonfinancial recognition (52 percent greater focus) will be key components of rewards programs.

“The erosion of financial capital has led to a renewed focus on the value of human capital,” says Ruddy. “Organizations are learning to treat employees as assets, not costs — and to invest strategically in talent using a broad range of total rewards.”

Stephen Milleris an online editor/manager for SHRM.

Related Articles:

SHRM 2009 Benefits Survey: Economy Impacted Benefits, SHRM Online Benefits Discipline, June 2009

Study: Rewards Programs Not Tied to Business Objectives, SHRM Online Benefits Discipline, June 2009

Employees Staying PutFor Now, SHRM Online Employee Relations Discipline, June 2009

Communicating the Benefits value Calculus, SHRM Online Benefits Discipline, April 2009

In Hard Times, Employees Place More value on Benefits, SHRM Online Benefits Discipline, March 2009

Most Workers Underestimate Employer's Health Benefit Costs; value 401(k) Matches, SHRM Online Benefits Discipline, March 2009

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