USING A TOTAL REWARDS STRATEGY TO ENGAGE A MULTIGENERATIONAL WORKFORCE

Transcription

1 USING A TOTAL REWARDS STRATEGY TO ENGAGE A MULTIGENERATIONAL WORKFORCE

2 From Traditionalists to GenZ, today s organizations employ a broad range of generations. Each employee age group has their own set of values and priorities. These differences can provide a rich blend of unique perspectives to create a thriving workforce where Total Rewards becomes important for all. In spite of having the most robust blend of generations in the workforce than ever before, employers are facing staffing challenges, too. Skill shortages and low engagement levels are affecting virtually every industry. As a result, organizations are seeking creative ways to attract in-demand talent, keep workers engaged, and retain their top performers. Enter, the Total Rewards Strategy. By recognizing the diversity within your workforce generations, you can create a rewards strategy with components designed to appeal to each age group. In this guide, you ll discover tactics for creating a total rewards program aimed to engage your multigenerational workforce. Throughout the coming pages, we ll discuss: the purpose of a total rewards strategy, what it takes to attract and retain talent, the most important factors driving employee engagement, the main differences among generational groups, the building blocks of total rewards, the total rewards design process, and effective communication strategies for each generation. If you re ready to find out what you can do to make your total rewards strategy more appealing to the various generations of employees, let s begin! Page 2

3 What s the Purpose of a Total Rewards Strategy? According to an HRsoft poll, only 32% of employers have a formalized total rewards strategy in place. If your organization is among the other 68%, it may be a good idea to consider developing one. Developing a strategy for your total rewards plan serves a number of purposes. It helps you stay focused with your goals as you design your plan and can prevent you from going off track when you need to make decisions about what to include. Having a total rewards strategy in place can also achieve the following objectives: Reinforces the mission and vision of your organization Your total rewards strategy should also tie into your overall HR strategy and align with your organization s mission statement. Defines which core elements will create an appropriate competitive advantage What are some of the most sought-after elements you can use to give your company a competitive advantage? Whether it s flex time, PPO, or a specific benefit, taking the time to develop a strategy will help you define these core components. Provides clarity for your talent management group Don t forget about your recruiters. They, too, can use your total rewards plan to attract new talent. Creates guidelines necessary for designing a rewards program consistent with your organization s mission and vision Having guidelines will help HR and managers to maintain consistency and not steer off course. Remember to review it annually so you can stay agile as your business needs change while also keeping your program aligned with your company mission. Page 3

4 What It Takes to Attract & Retain Talent Lockton has performed extensive research to identify what it takes to attract and retain employees, along with the key factors that would compel them to leave an organization. We can use these findings to craft a total rewards program that may better appeal to employees. Lockton found that the three most important elements an employee needs to stay with a company are: challenging work, encouragement to develop, and positive interactions (with both managers and peer groups). On the other hand, the three top drivers causing employees to leave are: lack of recognition, no motivation, and lack of growth opportunities (especially for Millennials). Now that we know what it takes to retain employees (as well as what would drive them away), let s take a look at some factors that can keep employees engaged in their work. Page 4

5 The Top 5 Reasons Employees Are Engaged As you know, engaged employees are typically also more likely to be retained employees, so keeping your top talent engaged is one of the best ways to encourage them to stay. Moreover, employee engagement has a direct impact on countless business outcomes, including productivity. By identifying what keeps your teams engaged, you can leverage these factors to make your total rewards strategy more powerful. The top five factors impacting employee engagement include: Connectivity to Manager The top driver of engagement for employees is the connection they have with their managers. Moving forward, we ll find out how managers can communicate with their teams of all generations to develop and maintain strong connections. Growth & Development Opportunities For Millennial employees in particular, this is the single most important driver for engagement. It s also the leading factor they seek out in employment opportunities. While it s important to appeal to Millennial employees with development opportunities during the recruitment stage, it s equally as critical to continue offering outlets for ongoing growth as part of your total rewards strategy to support retention and engagement initiatives. Work Experience Employees seek a positive work experience, which you may be able to support through initiatives like paid volunteer hours and outlets for teams to interact with one another in less-formal, fun ways. Some companies even host bring your dog to work days. We ll learn about some additional tactics to improve the work experience shortly. Personal Time Striking a healthy work/life balance is important to employees. This is especially true for those who are juggling responsibilities like family life, continuing education, volunteer hours, and similar obligations. Challenging Work Having challenging work isn t just necessary for employees to stay with a company, it s also essential for keeping them engaged. Page 5

6 As you can see, there s some overlap among the list of engagement drivers and things employees need to stay with a company. These elements challenging work, development opportunities, and positive interactions with managers should be considered paramount when structuring a rewards program meant to engage and retain your employees. Interestingly enough, you can also see that compensation and benefits are not included on these lists. Of course, that doesn t mean they don t matter to employees it simply shows that there are other factors employees consider most important in their working lives to stay engaged. These findings can help you put a total rewards strategy in place which addresses more than compensation and benefits alone, focusing on the components that matter most to your people. As you re building your total rewards strategy, you ll need to think about what it takes for people to stay as well as why they d leave. There may be different reasons for your company depending on the nature of your business, the distribution of generations within your workforce, and other differentiating factors, but the majority of organizations are experiencing the trends discussed above. Let s move on and take a brief look at some of the key differences between the multiple generations in your workforce. Page 6

7 Main Differences Among the Generations of Employees Understanding the mindsets each generation brings to work, as well as the aspects of their work life they consider to be most important, will help you develop a total rewards program that can appeal to everyone. Here are the generations of employees you may have working for you: Traditionalists You may not have many Traditionalists still working for you, if any, as most of these employees have already retired. They were born between 1922 and 1945 and view employment as a reward. Traditionalists are also known to be very loyal to their employers. Baby Boomers Born between 1946 and 1964, these employees usually have an optimistic approach about work. In general, they tend to be excited about the prospect of work and the opportunities it can provide. Baby Boomers want to excel at what they do. They re often willing to learn and want to focus on skill practice to build a strong career. One of the benefits they consider most important is job security, and their primary wealth need is retirement planning. Generation X The next generation is made up of individuals born from 1965 to Gen Xers are known to be highly motivated and independent (which also means that they tend to dislike close supervision). They may ask Is there an app for that? because while they are not as technologically adept as Gen Yers, they are still somewhat tech-savvy. Unlike Baby Boomers, Generation X employees work priority is to have a fun and flexible career. Because this generation tends to be sandwiched by caring for elderly parents and their children, an important priority is striking a healthy work/life balance. Their primary financial concern is simply to build wealth. Page 7

8 Generation Y Commonly referred to as Millennials, employees born from 1981 to 2000 make up Generation Y. They tend to have a can-do attitude and seek out mentors to guide them in their career development. They are technologically superior to the other groups: whereas Gen Xers ask whether there s an app for that, Gen Y employees simply assume that one exists. Education is of significant importance to Millennials, and their main objective is to accrue as much knowledge and experience from their jobs as possible. When it comes to work/life balance, their aim is to achieve a meaningful relationship with the community. Volunteerism is important to many members of this generation. Gen Z This group was born between 1996 and 2010 and represent the next wave of employees that companies must understand in order to harness their talents and attract their interest. They have never known a world without smartphones and social media, so it s even more ingrained for them. Unlike the Millennials, Gen Z is less interested in sharing their lives for the public record. They were raised by the Gen X parents who lived through a recession so their sense of money is much stronger than their Millenial counterpart. Now that we ve identified the key characteristics of the generations in your workforce, let s see how we can fit these findings into your total rewards plan by looking at its building blocks. Page 8

9 The Building Blocks of Total Rewards Your total rewards program may look a bit different than the next company s, as each has their own set of priorities, mission statement, and workforce. However, there are three main building blocks of total rewards that all companies have: compensation, benefits, and workplace experience. Compensation can include base salary, variable pay (annual incentives, profit sharing, etc.), long-term incentives, pay-for-performance, and so forth. Benefits include healthcare (medical, prescription, dental, and/or vision), disability, retirement, paid time off, longterm care, and wellness, to name a few. Workplace experience, however, is the building block that affords you the most creativity. You may find that some of the elements listed below could be relevant to your company. Growth & development Talent management Succession planning Communication Connectivity to supervisor and leadership Work/life benefits Corporate leadership Recognition While the possibilities are virtually endless here, you must make sure that the elements you re focusing on are both sought after by your employees and aligned with your corporate mission and values. We ll go over some tips for fulfilling those two priorities in an upcoming section. In the meantime, let s look at two examples of how real companies chose to compile their total rewards strategy. Page 9

10 Sample Strategy #1 One company assessed how their employee needs aligned with business needs. (This is an essential step for every company to follow, as it s extremely valuable for securing executive buy-in.) They chose to do an employee survey to identify what was most important to their teams. Called an employee climate survey, this assessment asked employees to rank a list of benefits from most to least important. Separately, the company held a total rewards strategy session with business leaders. At the time, they were in a growth period and going through acquisitions. By merging the priorities of employees and senior leadership, the company s HR team was able to develop a total rewards program encompassing: Variable Pay Fixed Pay Performance Management Health and Welfare Savings/Retirement Time Off Learning & Development Work-Life Page 10

11 Sample Strategy #2 In another example, a second company chose to focus on five core elements. While these elements included benefits and compensation, the three others all fell under the realm of work experience. Here s how they designed their total rewards package to engage their workforce: Benefits: Medical, dental, vision, retirement, death and disability, long- and short-term disability Compensation: Base pay and variable pay Rewards & Recognition: Performance management, discount programs, onsite celebrations Career Development: Training opportunities, tuition reimbursement, collaboration, encouragement of expression Work Life: Unlimited PTO, diverse work environment, support of community and environment, paternity/ maternity leave, employee assistance program, bring your dog to work opportunities Your organization s total rewards package will look a little different from the samples above, but these examples may inspire you to think outside the box in terms of what you can offer to engage all of your generations. Mentorship opportunities, for instance, have become increasingly popular ways to offer a richer work experience for employees. At the same time, gaining an understanding about where your company is headed from your executive leadership team is also essential for developing a future-focused total rewards plan. Collecting insights about potential mergers or acquisitions, for example, is necessary for developing strategies to keep new and existing employees of all generations engaged. Page 11

12 The Total Rewards Design Process There are four main steps for designing your total rewards program: understanding, assessing, strategizing, and recommending. You ll see below that the brunt of the work takes place within the first two steps; this is because you must first identify your needs and current state before you can determine where you need to go. Understand To understand where you are currently, you ll need to consider business goals, program costs, and employee expectations. To help you gauge the state of your organization, below are a few things you may want to ask your leadership team: Are we in growth or stability mode? Are there any market pressures we re facing? Are we focused on a specific market segment? Is there a particular philosophy you d like to see the organization take when developing a total rewards strategy? What is the organization s value proposition, vision, and mission? Do our existing reward programs support our both our long- and short-term goals? Which rewards programs are most (and least) effective for supporting our mission and culture? Which programs are most important to the organization? Do you think employees are currently engaged, and if so, is it a result of the rewards we offer? How do we attract and retain top talent? Who is our peer group, and should we tailor our philosophy to match their current strategy? Where should we anchor pay and benefits: 50 th percentile, below, or above? How does variable compensation play a role in total compensation, and what should the mix of pay be? Do we have a pay for performance culture? Are there any rewards that appear to be missing from the package? Page 12

13 Assess The assessment phase has a few different steps. For one, you ll want to survey the market to compare benchmarks against your own total rewards program. For another, you and your fellow HR colleagues can review the current plan design to identify business implications. One option for identifying the strengths and weaknesses of your existing reward plan is to perform a SWOT analysis. You may already use SWOT analyses in your organization. (If not, here s a brief refresher: SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.) To carry out the analysis, ask yourself the following questions: Strengths Which reward programs currently work well for us? Which should we keep and/or emulate? Weaknesses Which plans are not working well? What, and how, much needs to change? What are the market conditions, and are we competitive? Opportunities How can we meet the demands of key stakeholders? Could we be more competitive? What are employees perceptions of total rewards? Threats Which conditions are threatening the success of our business? How are our existing plans failing to respond to external conditions? How are our existing plans failing to respond to internal conditions? Finally, you may wish to perform an employee climate survey to gather responses to total rewards questions. Please keep in mind that you can ask these questions initially; or, you may also choose to skip directly to performing a total rewards value analysis to give you an idea as to how your company compares to your specific peer group. After you ve collected all of the data you need from your current plan, the market, and input from both leadership and employees, you can perform a gap analysis to identify where you are now versus where you need to be before moving onto the strategy portion of the design process. Page 13

14 Strategize To strategize, begin by recalibrating HR s approach to total rewards based on the findings you collected in the previous steps. You can then design your total rewards program in a way that supports your strategy, and assess its financial implications to be presented to your leadership team. Recommend Finally, you can present the total rewards strategy developed by HR to your executive team. Make sure that you clearly identify the link between the total rewards program and your organization s strategy. Of course, you ll also be asked about the financial impacts of the program, so have answers prepared for potential questions executives may have. Once the above processes have been completed, you ll need to communicate your total rewards program to employees, bearing in mind the needs of each generation of your workforce. Let s take a look at the preferred communication methods of each generation next. Page 14

15 Total Rewards Communication Strategies for a Multigenerational Workforce Each group in your multigenerational workforce has its own communication preferences. Although it may be challenging at first to meet the needs of everyone, bear in mind that diversity is a good thing. Not everyone fits one mold, and the better you re able to communicate with each generation, the better you ll be able to motivate your teams. In fact, multigenerational communications can actually drive collaboration. Consider how Baby Boomers could learn from Millennials, and vice versa. Most importantly, you ll need to train your managers communicating in a multigenerational workforce, because as we mentioned earlier, the number-one driver of engagement is how well employees connect with their managers. Below, we explore each generation s preferred communication channels. Page 15

16 Communication Channels for Each Generation While traditionalists may have preferred personal notes and individual interactions, over the years, the increasingly fast-paced nature of the changing business landscape led to a need for more rapid communications. For instance, on the other end of the spectrum you have Millennials, who prefer to communicate via texts and instant messages. Fortunately, you don t have to choose just one communication channel. Here are some ways you can appeal to each generation: Traditionalists & Baby Boomers typically prefer face-to-face, personal interactions. They also like phone calls and informal conversations. Encourage managers to hold casual conversations over lunch or coffee, and have them inquire about mutual interests. Make exchanges participative, and link the message to team or individual results. Gen Xers prefer more direct interactions than Baby Boomers. Train managers on getting straight to the point and limiting corporate jargon when communicating with Gen Xers. is preferred among this generations. Millennials expect instant communications, so any form of digital or instant messaging are ideal for communicating with this age group. Give managers tips on how to avoid condescending tones, as Generation Y can find this off-putting. Managers can also focus specifically on communicating with Millennials about personal and professional development opportunities. Some communication channels you may wish to experiment with could include total rewards statements, placards, manager meetings, town hall meetings, FAQs or summary statements on your intranet, Webex presentations, or even a salary management app. Page 16

17 Summary As we ve seen, total rewards plans cannot be fashioned using a one-size-fits all approach. That said, you can take a strategic approach to designing a more powerful total rewards program by assessing the wants and needs of your multigenerational workforce, as well as those of your senior leadership. For an even more powerful program, you can assess the market to see where your total rewards program stands in comparison to your competitors. From there, you can develop a plan that addresses each of these components, and then use the appropriate communication tactics to appeal to the widest possible audience. To leave you with some actionable takeaways, here s a brief review of the main ideas from this guide: The purpose of a total rewards strategy is to reinforce your company mission and vision, while also helping you achieve a competitive advantage. An effective total rewards program can support your retention strategies by leveraging the key drivers of employee engagement, including connectivity to manager, growth and development opportunities, and work experience. Each generation has their own set of expectations for their work life. Identifying the priorities each group considers most important will help you design a total rewards program built to suit everyone s respective needs. The building blocks of total rewards include benefits, compensation, and workplace experience. The last category is the one which you might have the greatest ability to customize, and therefore leverage, to keep each generation engaged at work. The total rewards design process includes four phases: understanding, assessing, strategizing, and recommending. In order to design an improved program to appeal to your multiple generations, you must first have a complete understanding of your current state. You can survey both your leadership team and your employees to see where you stand, as well as where you need to go. Each generation has its own preferred communication channel, so it s important to train managers on some different approaches for communicating total rewards. Making these changes to your total rewards program and its corresponding communication strategy is a powerful way of showing your employees that you value each generation equally. It also demonstrates your willingness as an employer to create a positive work environment for everyone. By adapting your total rewards program to the needs of each generation, you can support your overall workforce strategy of creating a more engaged, committed, and motivated workforce. Page 17

18 Resources HRsoft is the industry leader for compensation planning and total rewards software. Our cloud based SaaS solutions combine best of breed features with an intuitive, easy-to-use interface that simplifies and automates the entire compensation process helping companies save time and their best employees. Phone: Web: hrsoft.com About the Contributors Mary Mosqueda Compensation Practice Leader, Lockton Companies Mary Mosqueda has more than two decades of experience in compensation, human resources, and work/life programs. She is an in-demand national speaker on total rewards and compensation and has been a key contributor in the strategic development of public and private sector executive compensation and total rewards programs that attract and retain top talent. Mary assists clients with strategy, design, funding, administration, and communication of total rewards programs and incentive compensation plans. Page 18