Total Rewards for the New Digital Economy

Transcription

1 Total Rewards for the New Digital Economy

2 Why are we here? 1. To help you understand the common workforce challenges emerging in organizations today 2. To provide you with an overview of the various non-monetary factors that contribute to the calculation of the return on investment for modern total rewards programs 3. To share with you some of the leading practices in rewards functions as practitioners prepare for the changing workforce 4. To consider how total rewards programs are impacted by a ratingless performance management approach

3 Polling question Our organization values and rewards the most. a) Driving efficiency b) Innovation c) Customer/client focus d) Strengthening our brand e) Collaboration and leadership Click here for poll results.

4 Total rewards Change needed due to recent trends Purposeful work environment Cost reduction and agility Office space viewed as value generator Automation removes mundane Just as our workforce is changing dramatically, our total rewards program needs to transform. Increase in global gig workers Employee experience and wellness Digital experience at work and on personal devices More data availability to drive strategy Collaboration and teaming

5 Gig economy trends* Trends in the workforce 17% 50% 25% 28% employer s workforce is contingent workers of employers have seen an increase in their contingent workers of employers expect to use 30% or more contingent workers by 2020 increase in self-employed workers in the UK in the past 10 years Employer Drivers 56% Employ new skills 55% Control labor costs 42% Respond to seasonal fluctuations 50% Drive culture change Gig Workers Pros 80% Flexibility 49% Control 33% 20% Ability to work from home Unable to find permanent permanent role 58% Gig Workers Cons Feel permanent workers are are treated better 63% No paid leave 48% Lack of job security 60% Lack of benefits * Gig workers don t usually get employer-paid benefits, e.g., premiums on health insurance and contributions to retirement plans. Working in a gig economy, Bureau of Labor Statistics (BLS), May and page 24 notes - 1. The Push Against Performance Reviews The New Yorker, 24 July 2015.

6 Rewards for gig economy workers* Current state Shift in market Outcomes of shift ~20%-30% workers involved in the gig economy in ~50 million Freelancers Union workers seek to detach benefits. Portable benefits Contingent workers are not covered by minimum wage, safety, or union laws. Seattle passed legislation allowing ride-share drivers to bargain with their employers. Companies starting to offer certain benefits. Gig workers don t usually get employer-paid benefits. $20 million proposed experiment for benefits to freelance and Gig economy workers. 73% of contingent workers had health insurance coverage, which is up from 59%. * Gig workers don t usually get employer-paid benefits, e.g., premiums on health insurance and contributions to retirement plans. Working in a gig economy, Bureau of Labor Statistics (BLS), May and page 24 notes - 1. The Push Against Performance Reviews The New Yorker, 24 July 2015.

7 Total rewards are more expansive than ever Where do you fall on the rewards spectrum? Professional development Free parking Proven and reliable Retirement, health, dental, life, incentive plans Jeans every day On-site childcare Healthy snacks Parking reimbursement Free lunches Creative talent sabbatical In vitro fertilization coverage Lunch with the CEO Leading edge Mind clarity Nap rooms Portable benefits Meditation rooms Purpose-driven days off Pay to quit Sporting event tickets Innovative but tested Educational reimbursement Gym subsidies Floating holidays Open office environment Domestic and international Flexible schedules department rotations Remote working stipend PTO for birthdays Maternity/paternity time off Flexible summer schedule Paid tuition for skills training/ Elder-care PTO secondary degree PTO after major deadlines Paid days to volunteer Working remotely/telecommuting Pet sitting Unlimited vacation Pay for sleep Personal travel stipend PTO to train new pets Student loan debt reimbursement Pay for weddings

8 Exceptional rewards for your organization One size does not fit all Desired company objectives Exceptional rewards Valued benefits versus cost Motivate employees Manage cost Attract and retain Narrow benefit alternatives to align with desired culture Company culture Retain employees Align with company goals Compensation and benefits package Gain tax-efficient benefits

9 Connecting Rewards to Culture Examples of Questions to Consider Does your organization have a specific focus to attract/retain certain types of workers (e.g., younger workers, skillsets, contingent, diverse workforce)? No focus Thinking about focusing Targeting specific types of workers Do you want to encourage a culture of employee ownership? No emphasize employee ownership Has some focus on employee ownership Strong focus on employee ownership

10 Connecting Rewards to Culture Examples of Questions to Consider Does your organization place a high value on leadership or teaming? Most focus on leadership Some focus on teaming but no focus on team interaction Strong focus on highfunctioning teams Which is more important Efficiencies or Innovation? Primary focus on efficiencies and cost management Want to be efficient and follow the leader in innovation Want to be a leader in innovation

11 Which innovations are we seeing? Leading practices in the rewards space Measuring cost and value How are you measuring the cost/value of your rewards program? Differing expectations Are your rewards one size fits one or tailored to the majority of your population? Aligning rewards to culture Have you considered how your rewards align with your company s culture? HR data analytics Are you using your data to its fullest potential?

12 Polling question Our organization leverages data analytics to assess the impact of our total rewards offerings. a) Disagree b) Unsure c) Agree Click here for poll results.

13 What innovations are we seeing in performance? Feedback apps Robotic process automation Artificial intelligence Behavioral economics

14 Polling question Our organization regularly assesses its total rewards offerings to enhance our investment in rewarding our people. a) Disagree b) Unsure c) Agree Click here for poll results.

15 Why do I need to regularly evaluate my total rewards program? Total rewards is often the largest cost for an organization, but it is not a sunken cost expenditure. It is an investment. Positive returns productivity Greater productivity could be readily achieved according to employees surveyed. Financial incentives Work/life balance Nature of work 3rd Ranking of financial incentives in motivating employees Source: EY (2013). Ernst & Young Australian Productivity Pulse (Wave 4); EY (2012). Ernst & Young Australian Productivity Pulse (Wave 2).

16 HR function needs to derive understanding based on data driven business decisions Are you guessing, or do you know? 27% 26% 14% Cost 59% 57% Value 43% 71% Preferences 3% We are guessing We know for some We know for all Source: EY survey of general industry companies (2014)

17 Employee rewards based on strategic inputs Apply market research techniques to rewards Total Reward Investment Optimization (TRiO) Advise on the perceived value of rewards components Help clients address cost goals strategic objectives Combining cost, value and strategic inputs

18 Employee rewards based on strategic inputs Current rewards Efficient frontier Clients aim to: increased value and decreased cost Increase value to employees Efficient frontier Decrease cost Decrease value to employees Increase cost EY TRiO helps clients to address: ª Reward alternatives for your employees ª Derive what employees value for each reward dollar spent ª Rewards that are strategically aligned to corporate goals

19 Understanding the impact of your rewards programs Enhancing your investment in rewards through analytics How might organizations understand the impact of rewards on Turnover Job offer acceptance Employee engagement Productivity Data analytics can leverage real employer data to help organizations understand the impact of rewards on key outcomes. Alignment with culture and strategic goals Using data most organizations possess today You can calculate the ROI on rewards beyond only the direct cost savings Validate hypotheses and identify areas for targeted interventions And track how these changes impact the outcomes.

20 Understanding the impact of your rewards programs Sample data analytics use cases Turnover Alignment with culture and strategic goals Problem Retaining talent Inconsistent behaviors with desired culture Hypothesis Data Outcome Monitor for results Pay hasn t kept up with the market, driving people to competitors Payroll, Human Resource Information System (HRIS), benefits enrollment, exit interviews Targeted pay adjustments made for high performers with high flight risk Confirm whether pay adjustments affect turnover of high performers People aren t incentivized to do the right thing for the company HRIS, and calendar, activity survey Realign incentives to drive the right behaviors for the company Monitor behaviors on an ongoing basis to confirm whether change occurs

21 Equal pay Fixing pay gaps with data analytics Trending topic Equal pay has seen a 260% increase in web searches since Demographic shifts 66% of US workers are women, minorities or both. Shareholder activism Three times the number of shareholder proposals related to equal pay between 2015 and Regulatory developments Federal contractors face loss of contracts. State laws have expanded across the country. Figures used are for illustrative purposes only and are not quoted facts.

22 Fixing pay gaps Through data analytics Unadjusted gap $0.88 Gender pay gaps shrink as model accounts for: + Experience + Tenure + Hours + Performance + Location + Job type $0.91 -$3,729,000 $0.94 -$2,600,000 $$0.97 -$1,255,000 Actual gap $$0.99 $0.99 -$222,000 -$222,000 $0.81 -$8,000,000 Unadjusted gap An average woman earns $0.81 for $1.00 earned by a man. Closing the raw gap would cost $8 million. $0.84 -$6,823,000 -$5,132,000 Experience (in years) Men have more experience, which explains part of the unadjusted pay gap. Women Men Hours The average man is working more hours per week than the average woman. Avg. hours per week 38.9 Women 43.7 Men Problem area The average woman earns $0.99 for every $1.00 earned by a man after controlling for employee differences. Legitimate factors explained 97% of the initial gap. The remaining $222,000 gender pay gap could be discriminatory. It should be fixed. Figures used are for illustrative purposes only and are not quoted facts.

23 Polling question Our organization has/is/will redefine its performance management process. a) Disagree b) Unsure c) Agree Click here for poll results.

24 Total rewards are more expensive than ever but do they drive higher performance? Money motivates but may not be the primary motivator The cost of performance evaluations, presumably both financial and psychological, is hardly worth the benefit, echoes complaints made by other managers, not to mention employees. Issues Talent implications Performance management bias Concerns about trust and objectivity of compensation allocation Organizational transparency Inconsistent culture Lack of integration Technology Lack of openness and explanation from leaders Resistance to change Performance management not integrated across HR Disconnect between processes and current systems Source: The Push Against Performance Reviews The New Yorker, July 2015.

25 Traditional approach Subjective single numeric rating Total rewards team # Ratings are used to determine compensation recommendations. Leader communicates compensation results to the individual. Management assembles: - feedback reviews - business metrics - manager recommendations Business leaders determine ratings based on: - manager input - business metrics - application of rating distribution curves Numeric rating Manager has a discussion to close out the year and discuss the final rating.

26 Option 1: A subjective approach with better data, but still a single category Total rewards team Categories: Strategic impact Differentiating Progressing Not progressing Compensation recommendations are based on categories and other relevant inputs. Leader communicates compensation results to the individual. Dashboard is based on quantitative feedback and metrics. Client determines performance category. Manager has a discussion to close out the year and discuss the final rating.

27 Option 2: Data-driven objective approach Multiple data points: 72.5 Single data point composite score to determine salary

28 Option 3: Blended approach balance of objective and subjective Blended approach Dashboard data provides most of the answers. Homework 20% Weekly quiz 20% Midterm 20% Final 20% Class participation 20% Final grade 100% Judgment factor Client provides additional recognition (upward or downward): Exception basis Recognizes exceptional teamwork, non-engagement activity, adjustment for bias, etc.

29 Challenging the traditional mindset and assumptions Career Development Performance A Traditional focus lifts the edges Mean B Shifting the mean, enabling the majority to be engaged and reach full potential

30 Questions?

31 Juliette Meunier Partner People Advisory Services Ernst & Young LLP Tel: Scott Thoresen Manager People Advisory Services Ernst & Young LLP Tel: