For compensation professionals, each new year means reviewing salaries, making market adjustments, determining merit awards, and calculating and paying out bonuses.
How about trying something new? That is not to suggest stopping any of the traditional compensation routines. They are imperative to keep our organizations running. However, what can a compensation professional do that is new and delivers premium results? What can make a big difference?
Enhanced Employee Experience = Higher Engagement
Organizations of any type strive to be market leaders. These companies win. How can compensation directly contribute to business success? What can be done differently to accelerate or increase that success? Consider using compensation and rewards to strengthen the employee experience.
The research is clear: Engaged employees lead to greater business success. Compensation and rewards play a major role in developing engaged employees and driving the success of market leaders. To a large degree, the level of engagement realized is a result of the employee experience. Of course, many factors go into the employee experience. Elements include the type of work, company culture, commute time, co-workers, leadership, compensation and rewards. Enhancing the employee experience leads to higher employee engagement. Engaged employees create better products, deliver stellar service and enhance customer loyalty. This helps build a strong brand and outsize performance, including greater revenue and profitability. Highly engaged employees are a competitive advantage.
So where does comp and total rewards come in?
Executives across all types of organizations want comp professionals to step up and use their skill and creativity to make a difference in the business. This is leading comp professionals to pay attention to how compensation and rewards can enhance the employee experience and contribute to greater success.
Compensation and Payout Elements: The Available Mix
In bonus and incentive plans, we usually think of the payout in cash. Sometimes equity for senior management. Beyond cash, employees find value in other forms of rewards, e.g., extra time off, training programs, career development opportunities and tuition payment. These forms of rewards can be used in part or in whole as the payout in variable pay programs. Some employers are starting to give associates a choice of how they want to take the payout realized from incentive plans.
The impact of offering rewards choices can be meaningful for the employer and employee. An employer is telling associates that they understand what is of value to them, their preferences when it comes to rewards. At the same time, associates feel a stronger link to the company for demonstrating support for their efforts and results. Allowing associates to have a choice in how to be rewarded strengthens this feeling. The employee experience is enhanced.
With some comp plans, the payout can be awarded to the team rather than an individual. For example, when a team achieves set goals at certain progressive companies, they can choose between a cash payout divided up among the participants or a set number of days off to work for a nonprofit in their community. The team decides what to take as their reward.
As comp managers make other rewards elements available to associates in some incentive plans, careful consideration must be given to how to structure those arrangements. Who is eligible? How are the awards selected by associates? What plans are involved?
Reviewing the popularity of award selections over time and correlating them to groups of employees can be useful data. For example, if additional time off is frequently chosen by programmers, it indicates the level of value placed on time off in the overall employee experience for this job category. What happens over a longer span of time also can produce important data. Do those rewarded employees stay with the company longer? Do they get promoted with the same or greater frequency than other employees? Using such proof points, comp professionals can have confidence they are making the right recommendations and decisions.
With creativity and an eye on the stated company goals, comp professionals can design or refine plans that make the most sense for their organization.
Compensation Transparency and Understanding
Many employees expect to have a full understanding of how comp plans are structured and how comp decisions are made at their company. A clearly stated and easily understood plan goes a long way in creating a trusting relationship with employees. This boosts the employee experience. However, getting that information is not always easy for an associate.
Comp professionals address the desire for transparency and fairness about how people are paid by communicating directly with employees and managers. Many comp professionals have a prepared document or presentation summarizing how the company views compensation — goals, plan structure and other details that are shared with employees. Consider it the Compensation Field Guide or Compensation Handbook.
It may be worth investing time to review that document or presentation to make sure it is current and hits all the right notes. Comp managers can use the new version as a catalyst to emphasize the main points with colleagues.
The revised Compensation Field Guide can be distributed to managers to refresh their knowledge and support discussions with team members. Those one-on-one conversations between leader and team member can help associates understand how compensation and rewards are determined. In addition, conversations can address the potential pay in their current role and how to earn more with the company. Comp professionals can help managers be sharp and well prepared for those conversations.
Compensation managers at top-performing organizations use their experience to support managers on how to communicate with associates about the composition of plans and how employees are rewarded. This includes the company’s policies and culture. Communication about the organization’s compensation philosophy and strategy should be aligned with the organization’s core values.
Building awareness about compensation and how it aligns with the company culture can elevate the employee experience.
Total Rewards Communication
Compensation and total rewards are key elements of the employee experience. At best-in-class employers, comp professionals develop and communicate total rewards information that attracts and retains talented associates.
They also make sure the communication is relevant to employees and supports the company’s overall goals.
Awareness and understanding of total rewards by employees present an opportunity to enhance the employee experience. It’s a chance to:
- Relate compensation and rewards to the company’s operating model.
- Show how associates advance the company’s principles and values.
- Clearly communicate how employees help the organization achieve and sustain dominance.
Modern total rewards communication is more than a printed list showing the value of compensation and beneﬁts. Instead, it is used to promote the company’s culture and purpose. It shares fresh information that matters to associates. It is delivered how employees want to receive their communication, which often means on their smartphone or iPad — anytime, anywhere.
Technology today easily allows compensation professionals to up their game in total rewards communication. Putting that next level of communication in place can help drive improved business results by strengthening the employee experience.
Using Compensation to Accomplish More
Comp professionals can improve business results by making sure aspects of the organization’s compensation plans support and enhance the employee experience. Senior leaders have always expected a great deal from comp professionals. The next question posed to comp professionals at top companies: How can we use compensation to accomplish more? Now might be the time to try something new.