Yesterday’s Advisor featured consultant Tom McMullen’s take on the new total rewards; today, he lays out the drivers that get your employees to engagement.
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:
- Discretionary effort
These drivers of employee enablement …
- Performance management
- Authority and empowerment
- Work, structure, and process
… will result in:
- Optimized roles
- Supportive environment
And the overall result will be employee effectiveness shown by:
- Financial performance
- Attraction and retention of talent
- Customer loyalty
- Enhanced corporate reputation
- 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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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
Incentive payouts between top and average performers
Sixty-eight percent of respondents said their top performers’ salary increase differential is 1.5 times or less than 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:
Attracting and retaining A players—Important, to be sure, but not the only challenge on your plate. “Maintain internal equity and external competitiveness and control turnover, but still meet management’s demands for lowered costs.” Heard that one before?
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