GEO Texas Chapter Luncheon September 2018

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1 GEO Texas Chapter Luncheon September 2018

Rewards Optimization Discussion Allyson Kuper Allyson Kuper Deloitte Consulting, LLC

3 Today s Discussion Bersin High Impact Rewards and Human Capital Trends What are companies doing now to address Rewards? What are some outcomes we are seeing? Copyright 2018 Deloitte Development LLC. All rights reserved. 3

Bersin High Impact Rewards and Human Capital Trends This year, trends align to an overall leadership mindset, supported by three key themes, and 9 individual trends.

4 Bersin High Impact Rewards and Human Capital Trends This year, trends align to an overall leadership mindset, supported by three key themes, and 9 individual trends Human Capital Trends: The Rise of the Social Enterprise Leadership Mindset The symphonic C-suite: Behaving as a social enterprise demands an unprecedented level of cross-functional vision, connectivity, and collaboration from C-suite leaders. 3 Key Themes 2018 Human Capital Trends The Power of the Individual The workforce ecosystem: moving beyond the enterprise From careers to experiences: New pathways New rewards: Personalized, agile, and holistic Filling Society s Leadership Gap The longevity dividend: Work in an era of 100-year lives Citizenship and social impact: Society holds the mirror Well-being: A strategy and a responsibility Leverage Technology for Sustainable Growth AI, robotics, and automation: Put humans in the loop Hyper-connected workplace: Will productivity reign? People data: How far is too far? Copyright 2018 Deloitte Development LLC. All rights reserved. 4 Copyright 2018 Deloitte Development LLC. All rights reserved. 4

5 Bersin High Impact Rewards and Human Capital Trends This year, trends align to an overall leadership mindset, supported by three key themes, and 9 individual trends Human Capital Trends: The Rise of the Social Enterprise Leadership Mindset The symphonic C-suite: Behaving as a social enterprise demands an unprecedented level of cross-functional vision, connectivity, and collaboration from C-suite leaders. 3 Key Themes 2018 Human Capital Trends TODAY S FOCUS The Power of the Individual The workforce ecosystem: moving beyond the enterprise From careers to experiences: New pathways New rewards: Personalized, agile, and holistic Filling Society s Leadership Gap The longevity dividend: Work in an era of 100-year lives Citizenship and social impact: Society holds the mirror Well-being: A strategy and a responsibility Leverage Technology for Sustainable Growth AI, robotics, and automation: Put humans in the loop Hyper-connected workplace: Will productivity reign? People data: How far is too far? Copyright 2018 Deloitte Development LLC. All rights reserved. 5 Copyright 2018 Deloitte Development LLC. All rights reserved. 5

7 2018 Human Capital Trends 10 Trends: Importance & Respondent Readiness Importance is apparent. Very few organization are ready to address the importance of these HR issues. Copyright 2018 Deloitte Development LLC. All rights reserved. 7

2018 Human Capital Trends Personalized, agile, and holistic 37% Rated rewards as very important 8% 9% yet only 91% companies still follow the conventional practice of conducting a salary reviews once

9 2018 Human Capital Trends Personalized, agile, and holistic 37% Rated rewards as very important 8% 9% yet only 91% companies still follow the conventional practice of conducting a salary reviews once a year or even less often organizations said their rewards program were very effective at creating a personalized, flexible solution were very ready to deal with this challenge In today s workplace a personalized, agile and holistic rewards system is essential to attract, motivate and develop talent Copyright 2018 Deloitte Development LLC. All rights reserved. 9

Bersin High Impact Rewards Current effectiveness in driving business outcomes Rewards Perceived Effectiveness in Driving Business Outcomes

10 Bersin High Impact Rewards Current effectiveness in driving business outcomes Rewards Perceived Effectiveness in Driving Business Outcomes Rewards programs are NOT effective: In motivating, growing and developing talent In attracting & retaining talent In aligning rewards with business goals Only 21% would recommend their program to others The rewards function is alienating employees and undermining employment brand with organizations rating their rewards program with a net promoter score of -15 Copyright 2018 Deloitte Development LLC. All rights reserved. 10

Bersin High Impact Total Rewards Study Top Findings

Bersin High Impact Total Rewards Study Top Findings Effective Communication

Philosophy Greater Frequency Team Rewards Employee Focus Mature rewards

High-performing rewards teams effectively collaborate with other internal

Mature rewards organizations take a broad and holistic view of rewards.

12 Bersin High Impact Total Rewards Study Top Findings Effective Communication Aligned Strategy 6 Factors that influence Total Rewards maturity Holistic Philosophy Greater Frequency Team Rewards Employee Focus Mature rewards organizations listen, learn, and design offerings for their customers. High-performing rewards teams effectively collaborate with other internal functions, especially talent acquisition. Mature rewards organizations take a broad and holistic view of rewards. High-Impact Total Rewards is about best fit, not just best practice. Copyright 2018 Deloitte Development LLC. All rights reserved. 12

13 Question for the audience What percentage of the workforce do you think believes they could get a better rewards package elsewhere? 90% 70% 50% 30% 10% Copyright 2018 Deloitte Development LLC. All rights reserved. 13

14 Question for the audience What percentage of the workforce do you think believes they could get a better rewards package elsewhere? 90% 70% 50% 30% 10% Copyright 2018 Deloitte Development LLC. All rights reserved. 14

15 Why do these trends (and Rewards) matter? Rewards are critical to organizational performance, but employer spend does not always lead to a positive return on investment This is because many organizations have not aligned their rewards programs to the needs, preferences, and priorities of their workforce. Copyright 2018 Deloitte Development LLC. All rights reserved. 15

17 Glassdoor Top 20 Companies Benefits & Perks of 2017 Genentech Genentech offers unique on-site amenities, including car washes, haircuts, childcare center, mobile spa and dentist USAA USAA offers a strong 401k program with an 8 percent matching policy. According to SHRM, the average company in the US matches 6 percent. Microsoft Microsoft offers an annual $800 StayFit reimbursement program to help cover the cost of gym memberships and fitness programs. Source: Glassdoor.com s Top 20 Benefits & Perks for 2017 Ikea Offers up to 4 months of paid parental leave to both part-time and full-time employees with at least one year of experience at the company, regardless of whether they work at a retail store or the corporate headquarters. Scripps Health Scripps Health cares about the wellbeing of its employees furry family members, offering pet health insurance for cats and dogs. Swiss Re Insurance company Swiss Re s Own the Way You Work program encourages employees to embrace flexibility with their schedules and work remotely. Fortune s 100 Best Companies Copyright 2018 Deloitte Development LLC. All rights reserved. 17

18 Understanding Worker Preferences Previous organizational steps were not enough to understand workers preferences wholly FINANCIAL IMPACT COMPETITIVE ASSESSMENT PEOPLE STRATEGY Copyright 2018 Deloitte Development LLC. All rights reserved. 18

19 Understanding Worker Preferences Asking employees about their concerns is the last piece of the puzzle FINANCIAL IMPACT COMPETITIVE ASSESSMENT PEOPLE STRATEGY EMPLOYEE NEEDS Employers are starting to ask about the employee s concerns not just benchmarking and a race to the middle for their rewards programs. Copyright 2018 Deloitte Development LLC. All rights reserved. 19

20 Understanding Worker Preferences The transition from strictly standardized to highly personalized of companies in the 2018 Human Capital Only 8% Trends Report said their rewards program were very effective at creating a personalized, flexible solution Why is this? Only 9% of companies in the 2018 Bersin High Impact Rewards study reported that they use data and analysis, such as conjoint analysis, to a great or very great extent to understand employee preferences Companies must consider what employees want: agile compensation programs that provide raises, bonuses, and other customized incentives more than once a year and beyond narrow tenure requirements. Copyright 2018 Deloitte Development LLC. All rights reserved. 20

Workforce Insights Survey Typical Rewards programs do not address the needs of employees Aggregate results from example survey indicate that Medical Illness is the largest concern for the employee

21 Workforce Insights Survey Typical Rewards programs do not address the needs of employees Aggregate results from example survey indicate that Medical Illness is the largest concern for the employee population, relative to all other items tested. =Needs not addressed by typical rewards programs =Needs often addressed by typical rewards programs Copyright 2018 Deloitte Development LLC. All rights reserved. 21

22 Importance of actionable data When you think about your rewards program, what is most important to you? Base pay Bonus opportunities Time off Retirement programs Medical benefits All of the above Copyright 2018 Deloitte Development LLC. All rights reserved. 22

23 Importance of actionable data When you think about your rewards program, what is most important to you? Base pay Bonus opportunities Time off Retirement programs Medical benefits All of the above Copyright 2018 Deloitte Development LLC. All rights reserved. 23

Preferences can be measured through a simple trade off-survey Methodology provides richer, more actionable data Below is an example of a survey interface.

24 Preferences can be measured through a simple trade off-survey Methodology provides richer, more actionable data Below is an example of a survey interface. Through a simple series of trade-off questions, you can gather rich insights into employee choice and preference. Rethinking Employee Preferences to Drive Engagement and Minimize Burnout Copyright 2018 Deloitte Development LLC. All rights reserved. 24

Rewards Optimization A more strategic view of Rewards strategy Understanding Employee Value Through Multi-Phased Conjoint Analysis Optimizing Employer Cost Through Portfolio Analysis Rewards

25 Rewards Optimization A more strategic view of Rewards strategy Understanding Employee Value Through Multi-Phased Conjoint Analysis Optimizing Employer Cost Through Portfolio Analysis Rewards Optimization Align preferences with cost for understanding of ROI Determines the optimal level of spend for rewards Opportunity to explore Custom Package scenarios Efficient Frontier outlining the optimal combination of potential reward features Ask employees to make trade-offs through a series of surveys to determine what is most important Determine the level of savings or investment required for making potential rewards program changes Identify drivers and sensitivity of preferences across the employee experience and for different reward elements Reflect that cost constraint as a part of the data analysis Cost analysis is conducted through a working partnership Copyright 2018 Deloitte Development LLC. All rights reserved. 25

26 Rewards Optimization Efficient Frontier Prioritization of investments and program focus results in an opportunity to deliver more value and improved engagement Copyright 2018 Deloitte Development LLC. All rights reserved. 26

28 Consider this In your opinion, to what extent does your organization use data and analysis to understand employee preferences (e.g., conjoint analysis)? To a very great extent To a great extent To a large extent To a moderate extent To a small extent Copyright 2018 Deloitte Development LLC. All rights reserved. 28

29 Maybe it is as simple as changing a perspective Re-communicating or re-framing an existing rewards offering can be just as powerful as introducing a new reward 5x life vs. 50% of pay for 10 yrs. Copyright 2018 Deloitte Development LLC. All rights reserved. 29

30 Case Studies Practical applications of understanding preferences and rewards strategy Turnover Retirement Millennials Work Pressures Significant turnover in key workforce areas (such as skilled nursing) Ability to retire & Debt were the biggest concerns for respondents due to immediate financial obligations Assumption that the youngest cohort of workers do not value the pension benefit Workforce that has felt like they have been asked to take on more responsibility with fewer resources Implemented a unique solution to address the challenge of aging parents Implement an opportunity to shift 401(k) match dollars to a one time bonus Realization that the pension benefit is recognized as a value driver even in the Millennial generation Implemented flexible schedule after realizing that this was something that could help address these issues Copyright 2018 Deloitte Development LLC. All rights reserved. 30

31 2018 Human Capital Trends The C-Suite has action items CEO CIO CHRO CFO CRO The Role of HR Recognize that overhauling talent management is not complete without a corresponding overhaul of rewards Use analytics to determine what workers value in their rewards to appropriately align rewards programs and generate a market advantage for your organization Revisit your rewards approach on an ongoing basis to reflect the continuing evolution of the workforce and their priorities The CHRO plays an important role in capitalizing on new rewards. As leaders, managers and contributors we have a role to play as well Copyright 2018 Deloitte Development LLC. All rights reserved. 31

Financial Wellbeing Joseph Rapanotti Joseph Rapanotti Deloitte Consulting, LLC

34 Unified Wellbeing Empowering employees well-being is a strategic imperative in today s social enterprise and is a significant contributor to building an organization s social capital 1 43% of organizations surveyed agree wellbeing reinforces their organization s mission and vision which is essential for younger generations 60% of organizations surveyed report a well-being strategy improves employee retention 46% of organizations surveyed say that well-being programs are a critical part of their employment brand 61% of organizations surveyed believe a well-being strategy improves employee productivity and bottom-line results 86% of surveyed employees value a flexible schedule, with half of the organizations surveyed offering a flexible working program Deloitte Consulting LLP Human Capital Trends Report Copyright 2018 Deloitte Development LLC. All rights reserved. 34

broad definition: Everything an employee thinks about in terms of attraction and retention 2018 Deloitte

35 Unified Wellbeing Rewards is a critical part in the evolving definition of Wellbeing In many cases, the rewards function is alienating employees and undermining employment brand Some organizations use a very broad definition: Everything an employee thinks about in terms of attraction and retention 2018 Deloitte Consulting LLP Bersin High-Impact Rewards Study Copyright 2018 Deloitte Development LLC. All rights reserved. 35

36 Unified Wellbeing We believe employers need to address all four pillars Body, Mind, Wealth and Purpose to maximize impact, empower continuous employee engagement and drive long-term sustainable performance Body Helping employees manage their physical health through vendors, programs and policies that are designed to promote: Health Awareness and Monitoring Chronic and Preventative Disease Management Forming Healthy Long-Term Behaviors Unified Wellbeing Mind Companies are now focusing on relieving stress in the workplace along with assisting employees to achieve a work-life balance through: Employee Assistance Programs Management of Mental Illness Mindfulness and Resilience Programs Wealth Employees require more than just a paycheck and retirement plan to manage their financial commitments, so organizations must expand their financial wellbeing programs to assist with: Financial Planning Assistance Debt / Problem Management Benefits Optimization Purpose Employee are looking for a diverse, inclusive and accepting environment, creating a fulfilling experience at work, and outside the office, with programs focused on: Rewards and Recognition Career Coaching and Leadership Trainings Community Involvement and Volunteerism Copyright 2018 Deloitte Development LLC. All rights reserved. 36

37 Financial Wellbeing is a continuum Many organizations find themselves in the early stages of providing Financial Wellbeing to their employees, but additional efforts can pave the way to an engaged Financial Wellbeing platform Early Stage Transitioning & Maturing Integrated, Managed & Productive Education and Training Developing communications linking benefit programs to Financial Wellbeing activities Providing employees access to limited education materials Offering general financial education sessions Providing financial incentive for employees to actively participate in various wellbeing programs Delivering carefully constructed resources and communication by lifecycle (Hire-to-Retire) Offering education is one-on-one, as well as one-to-many Services Offering 401(k), but all responsibility lies with the employee around education and enrollment Providing enhanced 401(k) with some additional/optional feature; auto-enrollment, auto-escalation Integrating health, financial & retirement programs into one holistic wellbeing program Engaging employees with incentives; Program outcomes measured; Direct focus on outcomes vs participation Technology and Tools Offering retirement provider website tools via existing Defined Contribution (DC) vendor Offering financial advice online through selected vendor Making available basic retirement planning tools Providing an integrated tool set that compiles full financial portfolio and can progress and show big picture and track progress Copyright 2018 Deloitte Development LLC. All rights reserved. 37

38 Understanding employee s Financial Wellbeing needs Employers today should consider creating a Financial Wellbeing program that consider the different generational perspectives and situations of a multi-generational workforce Recruitment (Ages 20-25) Early Career (Ages 25-35) Mid-Career (Ages 35-50) Retirement Preparation (Ages 50-65) Retirement (Ages 65+) Objectives Communicate value proposition Educate on available resources Emphasize focus on financial literacy Build awareness and educate about financial / retirement planning Establish prudent spending / saving habits Leverage financial planning resources Begin retirement planning Offer financial planning Execute prudent spending Maintain savings for retirement Determine retirement income needs Consider optimal retirement age Identify potential roadblocks to retirement Envision personal retirement scenarios Maintain income stream over lifetime Stay connected to employer Minimize financial risk Factor in likely healthcare costs Challenges Messaging from other employers Current debt (e.g., student loans, housing, car) Potential information overload Desire to spend on nearterm purchases Busy establishing one's home, family, community life Current debt (e.g., student loans, housing) Current debt and increased costs (e.g., mortgage, cars, child s education) Establishing and maintaining focus on retirement Allocating financial resources to meet retirement goals Current debt (e.g., child s education, elder care) Psychology of retirement Maintaining contact with employer Managing income spend down Psychology of retirement Relevant Topics Budgeting and saving Debt Budgeting and saving Savings/investments (building cash reserve, IRA, savings plan) Managing debt (student loans, credit card debt, mortgage Retirement planning Investments Basic estate planning Insurance Tax planning Education funds Retirement planning Retirement election and sourcing Investments Tax planning Psychology of retirement Advanced estate planning Tax planning Investments Budgeting and saving Copyright 2018 Deloitte Development LLC. All rights reserved. 38

39 Question for the audience What percentage of companies that issue stock awards and options do you think cite financial wellness as the objective of the Plan? 42% 27% 15% 7% Copyright 2018 Deloitte Development LLC. All rights reserved. 39

40 Question for the audience What percentage of companies that issue stock awards and options do you think cite financial wellness as the objective of the Plan? 1 42% 27% 15% 7% 9% state financial wellness as a top 3 priority Deloitte Consulting LLP and NASPP Domestic Stock Plan Design Survey Copyright 2018 Deloitte Development LLC. All rights reserved. 40

Understanding the role of stock-based compensation in wellbeing While stock-based compensation is one part of the total compensation package, it s an important part in short and longterm wealth

41 Understanding the role of stock-based compensation in wellbeing While stock-based compensation is one part of the total compensation package, it s an important part in short and longterm wealth planning Financial Wellbeing Vision Make compensation a deliberate part of the organization s employee financial wellbeing vision Base pay such as hourly rate, annual salary Variable cash such as short term incentives, commission payments, spot bonuses Long term incentives such as equity (SO, RSU, RS, PSU) programs, stock purchase programs, deferred compensation When asked what helps to lower their financial stress, equity compensation is favored amongst the majority of employees Schwab Stock Plan Services, Inc. Equity Compensation Plan Participant Survey Deloitte Consulting LLP Bersin High-Impact Rewards Study Copyright 2018 Deloitte Development LLC. All rights reserved. 41

43 Question for the audience On average, how many companies do you think offer an Employee Stock Purchase Program? 70% 52% 33% 15% Deloitte Consulting LLP and NASPP Domestic Stock Plan Design Survey Copyright 2018 Deloitte Development LLC. All rights reserved. 43

44 Case Study: What can organizations do to differentiate themselves? Employers can differentiate themselves by providing impactful support across unified wellbeing creating and supporting a culture of engagement Identifying opportunities to maximize the investment of wellbeing programs focusing on value and utilization Pinpointing programs to targeted groups of employees to achieve a personalized experience which promotes sustained engagement Finding the correct vendors and programs to support the needs of the workforce Creating a single program, containing all wellbeing services, applications and communications which fulfills all pillars of wellbeing Copyright 2018 Deloitte Development LLC. All rights reserved. 44

About Deloitte As used in this document, Deloitte means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure.

46 About Deloitte As used in this document, Deloitte means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. Copyright 2018 Deloitte Development LLC. All rights reserved. 36 USC