Benefits and Compensation

Engagement and Enablement—Keys to Comp Effectiveness

McMullen is Reward Practice Leader for Hay Group in Chicago. He was joined by Dow Scott, Professor of Human Resources in the Quinlan School of Business Administration at Loyola University Chicago and president of Performance Development International, a management consulting firm. Their remarks came at the WorldatWork conference in Philadelphia.

McMullen offers the following “equation” to show how the drivers result in the desired behaviors:

Engagement + Enablement = Effectiveness 

These drivers of employee engagement

  • Clear and promising direction
  • Confidence in leaders
  • Quality and customer focus
  • Respect and recognition
  • Development opportunities
  • Pay and benefits

… will result in these employee behaviors:

  • Commitment
  • Discretionary effort

These drivers of employee enablement

  • Performance management
  • Authority and empowerment
  • Resources
  • Training
  • Collaboration
  • Work, structure, and process

will result in:

  • Optimized roles
  • Supportive environment

And the overall result will be employee effectiveness shown by:

  • Productivity
  • Financial performance
  • Attraction and retention of talent
  • Customer loyalty
  • Innovation
  • Enhanced corporate reputation

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Differentiation in Pay

Pay differentiation is not what it should be, and companies expect to put more emphasis on that in the future, says McMullen.

 

Increases and Incentives

% saying this is a current focus % saying this will be a greater focus in future
Salary increases between top and average performers 21% 50%
Incentive payouts between top and average performers 30% 44%

Sixty-eight percent of respondents said their top performers’ salary increase differential is1.5 times or less that of average performers, while 32% said the differential is 2 times or more.

Interestingly, in most-admired companies, 53% had differentials of 2 times or more. Most-admired companies find a way, says McMullen. He quotes Jack Welch:

“The A’s (the top 20%) should be getting raises that are two-to-three times the size given to the B’s. B’s should get solid increases recognizing their contributions every year. C’s (the bottom 10%) must get nothing.” (Jack Welch, former chairman & CEO, GE)

Impact on Reward Professionals

Finally, says McMullen, everyone involved in compensation planning should consider the following:

  • Doing more with less.  As the agenda becomes more strategic, reward professionals need to utilize limited resources to accomplish even more.
  • Communications. Sustained communication of the entire reward package with reinforcement of key performance messages is very important.
  • Coaching line managers. There should be more focus on coaching line managers on how to best communicate and implement rewards.
  • Differentiating rewards. In coaching line managers, reward professionals need to ensure top and poor performers’ rewards are appropriately differentiated.
  • Nonfinancial rewards. Given its renewed focus, reward professionals must be creative in the nonfinancial reward space and how these are leveraged.

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