Creative Total Reward$
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1 PHRMA Strategic Management Conference Creative Total Reward$ Presented by: Judy Clark, SPHR HR Answers, Inc.
2 Ground Rules Keep this casual and comfortable. No such thing as an interruption - ask questions. Cell Phones can ring - for a price. If you disagree, you MUST speak up. You are all the experts on your organizations, let s all learn together. 2
3 If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier beneath them, you almost don't have to manage them. Jack Welch 3
4 The Power of Compensation If you are trying to change the way an organization runs, one of the most visible things you have to change is the way you compensate, reward and recognize people. -Paul Allaire Former CEO of Xerox 4
5 Michael Armstrong s Definition of Total Rewards Total rewards include all types of rewards non-financial and financial, indirect and direct, intrinsic and extrinsic. It is a value proposition which embraces everything that people value in the employment relationship. They need to be developed and implemented as an integrated and coherent whole. 5
6 The Positive Impact of Rewards Corporate Leadership Council Connecting pay to performance has the greatest effect on discretionary effort Guzzo et al. Financial incentives had a greater effect on commitment than a wide range of motivational levers: training, work design, etc. The Work Foundation The higher proportion of staff getting PRP, the higher organizational added 6 value
7 Positive Impact (cont.) The WorldatWork PRP s impact on engagement Improved for 57% among top performers Improved for 30% for average performers Improved for 12% for low performers 7
8 WorldatWork s Total Rewards & Employee Engagement Model Total rewards strategy Organizational culture Business strategy HR strategy compensation benefits work/life performance & recognition development & career opportunities attract motivate retain employee satisfaction & engagement business performance & results 8
9 Components of Total Compelling future Vision/values Growth/success Positive brand Rewards Positive workplace People focus Leadership Collegiality Trust/recognition Involvement/openness Individual growth Development/training Career enhancement Total remuneration Base Variable Benefits Adapted from Schuster and Zingheim,
10 5 Reward Categories Direct financial rewards Indirect financial rewards Work content Development and advancement Affiliation 10
11 A Simple Truism When trying to attract the best people, you need to pay better than most. Recent research from Watson Wyatt Worldwide in the Human Capital Edge recommends that to attract the best employees, you need to pay more than your average paying counterparts in the market place. 11
12 After all, when you pay peanuts, you are likely to get monkeys Glenn Boyle
13 Let s Talk About Some Specifics 13
14 Once Upon a Time Pay within the range said something about proficiency Performance got you a big raise No one was allowed to talk compensation 14
15 Times have Changed Raises (if any) are small and don t reward well based on performance Pay has been stagnant Organizations are unsure about everything 15
16 So compensation plans and strategies must change! 16
17 What s Now and What s Next Variable Pay Lower fixed costs Share the success Target specific goals Change the entitlement mentality Move away from bonus to true Incentives - know $ and work in advance Focus on Differentiation, not copycat 17
18 What s Now and What s Next (cont.) Idiosyncratic Deals Denise Rousseau, Ph.D. Employees do not always value the same things Reconciling fairness with flexibility Designing own pay brings greater buy-in and loyalty Not shady deals which are a result of favoritism, but options for everyone 18
19 What s Now and What s Next (cont.) Consider chopping off the top of the range (25% +/-) and providing Performance Awards instead of base pay increases Structure specific learning objectives for new hires and move up their pay as they learn 19
20 What s Now and What s Next (cont.) The value of time Increased vacation Mini-sabbaticals Remote arrangements Community service ROWE Training as compensation 20
21 Some Fun Ideas Arrange vendor discounts for employees Hold raffles for targeted groups of employees Pay departments to serve as guinea pigs for new plans Give Certificates for crossing time or learning thresholds 21
22 To achieve success, however, more than just fun ideas are necessary. 22
23 Effective Incentive Plans 23
24 Possible Metrics for Variable Pay Plans 24
25 Success of Any New Pay Plan Depends On: The development of clear, understandable plans that are continually communicated. The use of realistic performance measures. Keeping plans current and linked to organizational objectives. Strong links among performance results and payouts that truly recognize performance differences. Clear identification of separation of incentives from base pay. 25
26 And one other critical thing that is needed - communication, communication, communication!!! 26
27 Communication Options Applicants Orientation Compensation Philosophy Handbook Balanced Scorecards Annual Reports CEO Forums Charts and Graphs 27
28 Hope you are having a great day and that this was informative for you! Judy Clark, SPHR HR Answers, Inc. 28
29 Thank you! Human Resources We re Only A Phone Call Away Compensation Employee Relations Policy & Procedure Affirmative Action Plans Human Resource Practices Audit Compliance Labor Relations Investigations Employee Opinion Surveys Employee Training and Development Resource Library Monthly Workshops and Programs HR e-newsletter HR Extras Recruitment Assistance Reference Checks/Background Screens HR Professionals for: - Interim - Temp-to-Hire - Direct Hire Placement of: - Generalist, HR Managers, HR Directors, VP s of HR, Recruiters HR Answers, Inc. 29
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