The Importance (and Outcomes) of Flexible, Agile Rewards Strategies

People are the core of any business, but in today’s world of work, the right talent can be hard to attract and even harder to retain. Organizations are faced with ongoing disruption (e.g., a diverse labor market that’s expanded to include contingent workers, a tech landscape rocked by artificial intelligence, and national and global economies that are rapidly changing). As a result, they are continuously shifting how and where work gets done, making it increasingly difficult to source the talent necessary to meet objectives. In such an environment, agile rewards strategies have become critical to achieving corporate and workforce outcomes.

Suffice it to say that much has changed in the world of rewards since Deloitte’s first High-Impact Rewards (HIR) study in 2018, and practices that once helped organizations stand out from the crowd are no longer differentiating. With updates to the rewards maturity model, Deloitte’s 2024 High-Impact Total Rewards (HITR) research identified the practices most aligned with stronger business and talent outcomes.

In this new and evolving world, it may not be surprising to learn mature rewards organizations are more competitive and agile, and get there by using diverse data sets to sense market conditions and the workforce’s wants and needs, and incorporating those insights to regularly update rewards offerings to emerge from a crowded market. Simply put, set-it-and-forget-it rewards strategies generally won’t cut it in the current state of work.

This article is the first in a series for Workspan Daily that delves into the HITR research, explores key findings and explains what all this means for total rewards (TR) professionals.

An Agile Approach to Rewards

To maintain the effectiveness of TR as a critical differentiator, the HITR research showed it’s important that organizations remain nimble and responsive to both the state of the workforce and the market, and may achieve that by sensing market conditions and adjusting in the flow of business. To enhance their rewards agility, those organizations deemed as “high maturity” for total rewards (i.e., in the highest of four defined levels of characteristics and performance) are:

• 3.8 times more likely than those with low maturity to adjust their compensation strategy in alignment with changing market conditions; and,
• 5.7 times more likely to adjust their TR strategy to stay on top of evolving circumstances.

The research found mature organizations enable such adjustments in a variety of ways, such as by:

• Flexing targeted approaches to compensation and TR;
• Building agility into base-pay cycles, and reviewing and adjusting compensation strategy more frequently and as needed;
• Paying out broad-based short-term bonus/variable-pay plans more frequently than once a year;
• Aligning overarching job structures with new and evolving career and talent models;
• Paying attention to workforce needs and preferences to optimize benefits offerings;
• Implementing a robust employee recognition strategy with varied programs; and,
• Granting “on-the-spot” awards to quickly recognize performance in the moment.

A number of these levers relate to compensation, as that is often organizations’ first step in keeping up with the competition. Forty-nine percent of surveyed organizations now report targeting base pay above the market median (compared to only 36% in 2018), with mature entities almost three times more likely to do so. The motivations behind paying more than the median can differ — some organizations increase compensation to beat the competition, while others raise pay to acquire specific skill sets — but regardless of the rationale, mature organizations consistently are targeting pay above the average. Based on the research, this upward trend is seen as a temporary reaction to recent talent trends and inflation — a sign mature organizations quickly identify and adapt to changing circumstances. As conditions stabilize, some of those organizations likely will adjust back toward the median.

But it’s not enough to simply update compensation based on static review periods, especially as worker expectations evolve amid a competitive talent market and greater visibility into the offerings of various employers through employee review and networking platforms. Instead, mature organizations structure agility into their processes by increasing the frequency of their compensation cycles. These organizations are:

• 3 times more likely than low-maturity organizations to review and adjust base pay more frequently than annually; and,
• 7.8 times more likely to provide broad-based short-term bonuses and variable pay more frequently than annually to employees.

This agile approach to compensation allows organizations to better align strategy to current business results.

Think Beyond Compensation

For mature rewards organizations, agility doesn’t stop at compensation. The HITR research showed these organizations continuously integrate workforce feedback and market trends to refine and innovate their benefits offerings. In fact, mature organizations are almost six times more likely to use data and analysis to understand employee preferences. An up-to-date and nuanced understanding of worker sentiment, combined with acute insights on market conditions and internal and external data, can enable a truly agile approach to TR. Leaders among mature organizations are willing to try new approaches, such as broadening their scope for well-being or building a deeper recognition program, to understand what best fits workforce needs.

Mature organizations tend to have more robust approaches to recognition and are three times more likely to offer on-the-spot cash awards and provide nonmonetary rewards than their lower-maturity peers. A variety of recognition options can enhance the ability to differentiate high performers closer to moments of achievement.

Similarly, the research identified that 83% of mature organizations have a holistic well-being strategy that encompasses more than physical health. Mental health is one area where organizations are adding new types of support in response to changing workforce needs (e.g., hiring clinical or performance psychologists to help workers thrive at work and at home). Adding new options like these may improve the likelihood of rewards that better align with individual worker preferences.

Purpose and Practicality

As the world of work continues to weather torrents of change, the purpose of the rewards function has not wavered: TR serves as a critical lever for organizations to hire, motivate and retain talent in order to drive business outcomes. But while the purpose remains the same, achieving results amid so much flux can be hard. High-performing organizations understand that rewards packages must become as agile and flexible as the workforce itself if they are to truly support the business and deliver value to employees.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Employee Compensation
• Organizational Performance
• Total Rewards