Total Rewards Implementation and Integration. research. A report by WorldatWork and Mercer July 2010

Transcription

1 Total Rewards Implementation and Integration research A report by WorldatWork and Mercer July 2010

2 Contact: WorldatWork Customer Relations N. Northsight Blvd. Scottsdale, Arizona USA Toll free: Fax:

3 1 Total Rewards Implementation and Integration Total rewards is a term that has now been used by HR professionals for more than 10 years to describe the concept that several employment factors (such as compensation, benefits and worklife amenities) can be strategically applied, in unison, to deliver desired employee attraction, motivation and retention. Although the concept has been adopted in companies across a wide variety of industries and countries around the world, many organizations have chosen to define and implement it in their own way. In early 2010, WorldatWork and Mercer conducted a survey of WorldatWork members with the specific intent of examining how organizations are both adopting and adapting total rewards today more than 10 years into the life of the concept. The survey was electronically sent in January 2010 to a random representative sample of approximately 5,000 WorldatWork members; 741 responses were received. The results are presented below. Demographics The 741 survey respondents represented a diversity of organizations and industries, mostly multinational. The vast majority of organizations were located in the United States with 10% of respondents based in Canada and another 8% from other geographic areas. A breakdown of respondents organizations by annual revenue is presented below. What is the annual revenue for your organization? (n=497) $20b USD and over 11% $10b $19.9b USD 8% $1b $9.9b USD 34% $500m $999m USD 18% less than $500m USD 29% 0% 10% 20% 30% 40%

4 2 Where is your organization s headquarters located? (n=443) United States of America 81% New Zealand 1% 7% Canada 10% Executive Summary Total rewards is a common concept, but definitions vary The 2010 survey reveals that the vast majority of the survey s 741 respondents say that their organization employs a holistic employee rewards concept like total rewards. More specifically, 73% use the precise term total rewards to describe an integrated strategy to attract, motivate and retain. Among those who do not have a unifying concept, more than half say they intend to incorporate such a strategy in the future. The survey revealed some differences among organizations in terms of total rewards definitions between those who use the terminology: The vast majority (94%) include at least compensation (base salary, incentives and guaranteed payments) and benefits (retirement and medical) in their definition of total rewards. A subset (still a majority of 59%) include compensation, benefits and work-life programs (e.g. flexible working times, options to take extra vacation) in their definition of total rewards. In aggregate, the survey supports a strong showing for both the words and concept of total rewards. However, when respondents were asked to grade how well their holistic strategy is applied, only one-quarter said they could either agree or strongly agree that their organization has a truly integrated total rewards approach, despite the fact that the integrated nature of the model is one of its essential elements.

5 3 Total rewards is primarily about retaining employees and financial performance Why do organizations implement a total rewards program? Survey participants cited the following business objectives most often: 1. Retain high performers 2. Enhance the organization s financial performance 3. Attract key talent These objectives generally correlate with what many organizations have described as key attributes for digging out of the recent economic downturn and successfully competing in a future business environment. When participants were further asked about the objectives for their total rewards program in the next two years, these three objectives remained unchanged at the top of the list. Most organizations have a senior executive responsible for total rewards In order to achieve these key objectives, how do organizations make decisions about their total rewards programs, and who makes the decisions? The majority of respondents reported that their organization has a senior executive responsible for total rewards. Further, in more than half of responding organizations, the executive responsible for total rewards reports directly to the top HR professional, while 27% report directly to the organization s chief executive or CEO. The top total rewards person is more likely to report to the CEO in smaller (less than $500 million in revenue) organizations and to the top HR executive in larger (greater than $10 billion in revenue) organizations. Most respondents indicated that they draw on both internal analyses and reports and external practices to make informed decisions about changes to their organizations total rewards mix. Organizations primarily use cost and affordability measures (especially as more senior leadership is involved), as well as business strategy documents to make these decisions. In smaller organizations, the top total rewards person is more likely to also be involved in business strategy development. Total rewards concept has stayed constant in the face of economic turmoil Despite 43% of respondents reporting a decline in organizational revenue during the past 12 months, investments in total rewards have stayed the same overall: 15% reported their organization increased its total rewards investment, while 21% reported a decrease. Even with investments in total rewards programs staying mostly neutral, organizations changed the levers they were pulling and mixed up the allocations of their total rewards spend. For example, 38% of organizations reduced their annual bonus pool funding, and 67% reduced merit budgets. Forty percent reported enhancing or adding wellness programs.

6 4 The top three factors influencing changes to total rewards programs over the past 12 months were: 1. Cost/affordability 2. Business performance/economy 3. Attraction and retention of key talent There is a relationship between total rewards integration and organizational resilience To test the extent of total rewards thinking throughout the responding organizations, the survey presented eight statements, the results of which were formulated into a total rewards integration index. The eight statements that created the index were: We use rewards statements and other communications that encourage employees to think about the total rewards deal in an integrated way. Employees recognize the brand of our total rewards function. The top total rewards person in our organization is involved in business strategy. Leadership generally views spending on total rewards as an investment rather than a cost. We train managers to communicate to their employees the value of total rewards. People responsible for total rewards work together (e.g. annual planning meeting, regular communications, clear decision making process, etc.). We make changes in total rewards investments using quantitative tools (such as the value that employees ascribe to different rewards aspects compared to costs). The CEO is a vocal supporter of the idea of total rewards. Participants rated these statements on a five-point scale from strongly disagree to strongly agree. A rating of strongly agree received five points, while a rating of strongly disagree received one point. The highest score possible for an organization is 40. Organizations were then divided into two groups: Low-to-mid total rewards integration (1 24 points acquired) Mid-to-high total rewards integration (25 40 points acquired)

7 5 Total Rewards Integration Scoring Index (n=610) Low-to-mid scoring (1-24) Mid-to-high Scoring (25-40) 56% 44% The results based on self-reported responses to the eight statements indicated that an organization s total rewards integration correlated with how it faired during the economic downturn of Organizations with a lower integration score were more likely to experience a decrease in both revenue and spending on total rewards relative to revenue. Mid- to high-level total rewards integrated organizations were statistically less likely to enact layoffs, overtime restrictions, involuntary time off or a reduction in hours. In addition, organizations with higher integration scores were more likely to take a broader view of the total rewards concept, and include work-life, careers, job specific training and recognition in their definition of the concept. 1 In looking further at these correlations, the data revealed that if an organization had decreased its total rewards investment, it was more likely to have seen a decline in revenue during the prior 12 months than an organization that increased or maintained its total rewards investment. While a majority of respondents agreed that the recent poor economic conditions had enhanced the importance of total rewards, those that reported a decline in their organization s revenue were also more likely to say that economic conditions had reduced the importance of total rewards in their organization. 1 Please note that these are correlations, not statements of causality. In other words, we are not suggesting that some organizations experienced a decrease in revenue specifically because they do not have a highly integrated total rewards program.

8 6 The direction of organizational revenue during the prior 12 months had a major impact on the types of changes made to the various components of total rewards. Specifically, organizations that indicated a decline in revenue during the prior year were much more likely to: Eliminate or reduce annual bonus pool funding, merit budget and spot bonuses Provide non-monetary recognition Reduce health insurance Reduce retirement funding/matching Reduce training budgets. Conversely, organizations that reported an increase in revenue during the prior 12 months were more likely to enhance annual bonus pool funding, merit budgets, health insurance and training. Those employers that experienced a decline in revenue during the prior 12 months were more likely to indicate that their employees do not recognize the brand of their total rewards program and generally feel that leadership views spending for total rewards as an organizational cost, rather than an investment. An organization s size (employee count) also seemed to impact total rewards strategy. More large organizations indicated that the economic turmoil had enhanced the importance of total rewards in their organizations. However, larger employers were also more likely than smaller employers to report they had implemented layoffs. Smaller organizations, on the other hand, were more likely to reduce or eliminate annual bonus pool funding, encourage voluntary unpaid time off and implement a reduction in hours paid. To measure the success of these total rewards actions taken during the downturn, participants reported that they will first examine the impact on costs, and secondarily examine employee survey data. Larger employers were more likely to use feedback from executives to measure the impact of these changes. Organizations that saw no change or an increase in revenue over the past 12 months were more likely to measure the success of change in total rewards investments using quantitative tools. What does the future hold for total rewards? This question might be answered by seeing where the concept has come during the past 10 years. When compared to results of a Mercer snapshot survey conducted in , it seems evident that organizations have taken their application of and views on total rewards to another level. Specifically, in 2005 the focus of a majority of respondents seemed to be on aligning an organization s business strategy and its compensation, whereas in 2010 the emphasis seems to be on linking performance management and rewards not just to the business strategy, but to business results. 2 Mercer Human Resource Consulting, Measuring the Return on Total Rewards: 2005 Update.

9 7 With regard to communicating total rewards with employees, the emphasis in 2005 was to ensure employees understood the various elements of the rewards programs and the associated costs. Today, the goal is to motivate employees through personalization of communications in relation to the total rewards programs. In summary, the overarching objectives of total rewards programs today and in the future will likely continue to be: to retain high performers, to attract key talent and to enhance the financial performance of organizations. In the view of 2010 survey respondents, organizations that can successfully achieve one or more of these goals via their total rewards program will need to: Better integrate their total rewards components Seek out quantitative decision making and program design tools More effectively communicate program attributes to participants Better engage front-line managers Secure the buy-in of organizational leadership. As the research shows, the pay-offs are many, including being positioned to reap a better return on the total rewards investment and weather economic fluctuations.

10 8 Survey Results Strategy and Components Is total rewards a term that you use in your organization?(n=741) Yes, it is one of the terms we use 44% Yes, it is the primary term we use 29% No, we do not use this term 27% 0% 10% 20% 30% 40% 50% What term(s) do you use in your organization to refer to the concept we refer to here as total rewards? (Check all that apply)(n=741) Compensation and benefits package 57% Total compensation 57% Employee value proposition 13% Human resources 9% We only use the term total rewards and no other term 6% Human capital 3% The deal 2% 7% No particular term used frequently, but the concept is present Our organization does not have a unified concept like total rewards in place 6% 10% 0% 20% 40% 60% 80%

11 9 Do you expect any movement toward adopting a unified total rewards concept in your organization in the next few years? (n=37) No 43% Yes 57% Only participants who answered "no unified total rewards concept" in previous question received this question. What is considered part of the definition of total rewards in your organization? (Check all that apply) (n=699) Compensation (e.g., base salary, incentives, guaranteed payments) Benefits (e.g. retirement, medical, etc.) 95% 94% Work-life programs (e.g. flexible working times, options to take extra vacation, sabbaticals, etc) Recognition 59% 57% Career development 44% Job specific training Intrinsic work factors (e.g., culture, leadership, work content, etc.) 30% 34% 10% 3% 1% 0% 20% 40% 60% 80% 100%

12 10 Total Rewards Integration Statements n=609 Strongly disagree or disagree Neither agree or disagree Strongly agree or agree The top total rewards person in our organization is involved in business strategy 19% 18% 63% Current economic conditions have enhanced the importance of total rewards in our organization [note this and following item 14% 24% 62% We use rewards statements and other communications that encourage employees to think about the total rewards deal 31% 14% 55% People responsible for total rewards work together (e.g. annual planning meeting, regular communications, clear decision 27% 21% 52% The CEO is a vocal supporter of the idea of total rewards 17% 39% 44% Leadership generally views spending on total rewards as an investment rather than a cost 24% 32% 44% We train managers to communicate to their employees the value of total rewards 43% 20% 37% We make changes in total rewards investments using quantitative tools (such as the value that employees ascribe 36% 32% 32% Employees recognize the brand of our total rewards function 44% 33% 23% Current economic conditions have reduced the importance of total rewards in our organization 70% 17% 13% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

13 11 Please indicate your level of agreement with the following statements: (By annual revenue) Annual Revenue Less than $500m Greater than $500m and less than $10b Greater than $10b We use rewards statements and other communications that encourage employees to think about the total rewards deal in an integrated way Employees recognize the brand of our total rewards function The top total rewards person in our organization is involved in business strategy Leadership generally views spending on total rewards as an investment rather than a cost We train managers to communicate to their employees the value of total rewards People responsible for total rewards work together (e.g., annual planning meeting, regular communications, clear decision making process, etc.) We make changes in total rewards investments using quantitative tools (such as the value that employees ascribe to different rewards aspects compared to costs) The CEO is a vocal supporter of the idea of total rewards Current economic conditions have enhanced the importance of total rewards in our organization Current economic conditions have reduced the importance of total rewards in our organization Strongly disagree/ disagree Neither Strongly agree/ agree Strongly disagree/ disagree Neither Strongly agree/ agree Strongly disagree/ disagree Neither Strongly agree/ agree 31% 17% 52% 34% 13% 54% 26% 17% 58% 40% 32% 27% 51% 31% 18% 35% 37% 28% 20% 12% 68% 22% 21% 58% 17% 22% 61% 26% 24% 50% 27% 36% 37% 21% 33% 46% 39% 22% 40% 49% 18% 33% 32% 22% 46% 27% 16% 58% 31% 20% 50% 22% 21% 57% 38% 36% 26% 43% 27% 30% 28% 29% 42% 16% 28% 56% 20% 42% 28% 12% 40% 48% 17% 28% 55% 15% 22% 63% 8% 18% 74% 60% 22% 18% 70% 16% 14% 83% 7% 10%

14 12 My organization has a truly integrated / holistic total rewards approach. (n=609) Neither agree nor disagree 31% Strongly disagree or disagree 43% Agree or strongly agree 26% Objective of Total Rewards Please allocate 100 points to identify the key objectives and relative emphasis in your total rewards program currently. (n=526) Zero allocated 1-25 points allocated points allocated points allocated points allocated Retain high performers 19% 58% 21% Attract key talent 26% 59% 16% Enhance employee engagement 40% 53% 7% Enhance financial performance of organization 43% 32% 20% Help to differentiate across performance levels 52% 42% 5% Better return on all HR-related investments 67% 29% 3% Enhance employment brand 67% 32% 1% Improve customer satisfaction 67% 30% 2% Improve oversight or governance of all HR-related programs 81% 19% 1% 98% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

15 13 Please allocate 100 points to identify the key objectives and relative emphasis in your total rewards program currently. (n=526) (Point averages) Retain high performers 20 Enhance financial performance of organization Attract key talent Enhance employee engagement 11 Help to differentiate across performance levels 8 Improve customer satisfaction Better return on all HR-related investments 5 5 Enhance employment brand 4 Improve oversight or governance of all HRrelated programs How do you anticipate this allocation will change (if at all) in the next 2 years? (n=526) Zero allocated 1-25 points allocated points allocated points allocated points allocated Retain high performers 24% 56% 20% Attract key talent 30% 58% 12% Enhance financial performance of organization 43% 32% 20% Enhance employee engagement 45% 48% 6% Help to differentiate across performance levels 54% 41% 5% Enhance employment brand 66% 32% 3% Better return on all HR-related investments 67% 30% 2% Improve customer satisfaction 71% 27% 2% Improve oversight or governance of all HR-related programs 80% 19% 1% 97% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

16 14 Decision Making To whom does the top total rewards person in your organization report? (n=592) Top HR Executive 55% CEO / President 27% CFO or Top Finance/ Accounting Executive 4% Top Administration/ Shared Services 5% COO/Chief Operating Officer 2% Executive 6% To whom does the top total rewards person in your organization report? (By annual revenue) Annual Revenue Less than $500m Greater than $500m and less than $10b Greater than $10b CEO / President 50% 20% 13% Top HR Executive 25% 67% 75% CFO or top Finance / Accounting Executive 10% 3% 1% Top Administration / Shared Services Executive 6% 5% 8% 7% 4% 2% COO/Chief Operating Officer 2% 1% 0%

17 15 Business Context 30% How has revenue changed for your organization in the past 12 months? (n=599) 25% 22% 24% 20% 15% 14% 14% 14% 10% 7% 5% 3% 1% 0% Decreased 30% or more Decreased 15-29% Decreased 5-14% Relatively flat Increased 5-14% Increased 15-29% Increased 30% or more Don t know How has your organization s investment in total rewards programs changed as a share of revenue in the past 12 months? (n=626) Increased as a share of revenue 15% Flat as a share of revenue 64% Decreased as a share of revenue 21% 0% 10% 20% 30% 40% 50% 60% 70%

18 16 Please select the option that best describes your organization s business strategy. (n=525) Operational Excellence: This strategy includes a combination of price, quality, dependability and ease of purchase that competitors cannot match. 35% Product/Service Leadership: This strategy offers products and services that expand performance boundaries (the best products), leapfrog/replace technologies/products, create more/better ideas and commercialize them faster than competitors. 30% Customer Intimacy: This strategy focuses on creating results for carefully selected customers (making them successful). Firms that use this strategy build bonds with targeted customers. 29% 0% 10% 20% 30% 40% Changes to Total Rewards What type of change did your organization make in regards to these items in the past 12 months? (n=604) Eliminated or Reduced No change Enhanced or Added Wellness programs 6% 54% 40% Hiring freeze 12% 54% 34% Flexible work arrangements 3% 75% 21% Non-monetary recognition (saying thank you / recognizing employees) 8% 71% 21% General training 26% 57% 17% Job specific training 17% 69% 14% Spot bonuses 21% 69% 10% Annual bonus pool funding 38% 53% 9% Merit budget 67% 25% 9% Retirement funding / matching 20% 74% 6% Health insurance 19% 70% 11% 0% 20% 40% 60% 80% 100%

19 17 Please choose one item from the list of things in which you indicated a change occurred in the past 12 months that you are very familiar with (i.e., the process that went into the decision to make the change). Merit budget 53% Annual bonus pool funding 15% Wellness programs Health insurance 7% 9% Retirement funding / matching Hiring freeze Flexible work arrangements Spot bonuses Non-monetary recognition (saying General training Job specific training 4% 4% 3% 2% 2% 2% 1% 0% 10% 20% 30% 40% 50% 60% The following three graphs summarize the decision-making process and evaluation used when making the changes listed in the graph above. What internal analysis did your organization complete in making this decision? (Check all that apply.)(n=495) Cost affordability 75% Business strategy documents 32% Cost projections over a 3 year + period Feedback from executive interviews Results from broad-based employee surveys Statistical cost modeling and analysis of internal workforce patterns Special cuts of broad-based employee data (such as top performers, critical skill jobs, etc.) Executive surveys Employee focus groups Conjoint analysis of employee preferences None 24% 21% 20% 19% 11% 9% 7% 4% 10% 4% 0% 20% 40% 60% 80%

20 18 70% 60% What external analysis did your organization complete in making this decision? (Check all that apply.)(n=495) 62% 50% 40% 46% 32% Many participants mentioned market and salary surveys were used in external analysis under '' as well as market trends and other economic indicators. 30% 20% 14% 10% 8% 0% Common rewards practices among other organizations (benchmarking) External benchmarking of specific peer group Market leading and innovative rewards practices (best practices) (describe) None How do you plan to measure the impact of thischange? (n=487) Cost affordability 41% Employee surveys 31% Cost projections over a 3 year + period Statistical cost modeling and analysis of internal workforce patterns Business strategy documents Employee focus groups Feedback from executive interviews 11% 10% 10% 21% 20% Executive surveys Conjoint analysis of employee preferences 5% 4% 9% None 23% 0% 10% 20% 30% 40% 50%

21 19 Please indicate whether or not your organization has taken the following actions in the past 12 months: (n=612) Took this action Did not take this action Layoffs 60% 40% Overtime restrictions 48% 52% Involuntary time off (furloughs / office closures) implemented 17% 83% Increase in voluntary time off unpaid (sabbaticals / unpaid vacations) encouraged 15% 85% Reduction in hours paid (such as move to a 35-hour workweek) 14% 86% 0% 20% 40% 60% 80% 100% Please choose one item from the list below where you are familiar with the decision process behind the change (n=300) Layoffs 56% Overtime restrictions 22% Involuntary time off (furloughs / office closures) implemented 11% Increase in voluntary time off unpaid (sabbaticals / unpaid vacations) encouraged Reduction in hours paid (such as move to a 35-hour workweek) 6% 5% 0% 20% 40% 60%

22 20 The following three graphs summarize the decision-making process and evaluation used when making the changes listed in the graph above. What internal analysis did your organization complete in making this decision? (Check all that apply.)(n=295) Cost affordability 74% Business strategy documents 41% Cost projections over a 3 year + period Statistical cost modeling and analysis of internal workforce patterns 27% 32% Feedback from executive interviews Special cuts of broad-based employee data (such as top performers, critical skill jobs, etc.) 13% 18% Conjoint analysis of employee preferences Executive surveys Employee focus groups Results from broad-based employee surveys None 3% 2% 1% 1% 5% 10% 0% 20% 40% 60% 80%

23 21 What external analysis did your organization complete in making this decision? (Check all that apply.)(n=279) None 56% Common rewards practices among other organizations (benchmarking) 20% External benchmarking of specific peer group 18% Market leading and innovative rewards practices (best practices) 9% 10% 0% 10% 20% 30% 40% 50% 60% How do you plan to measure the impact of this change? (Check all that apply.) (n=295) Cost affordability 51% Cost projections over a 3 year + period Statistical cost modeling and analysis of internal workforce patterns Business strategy documents Employee surveys 16% 15% 22% 27% Feedback from executive interviews 9% Employee focus groups Conjoint analysis of employee preferences Executive surveys 3% 2% 5% None 19% 7% 0% 10% 20% 30% 40% 50% 60%

24 22 Impact of Economic Crisis How has your organization s investment in total rewards programs changed as a share of revenue in the past 12 months? Revenue Change Revenue has Revenue has Revenue has Investment in total rewards programs has: decreased remained flat increased Decreased as a share of revenue 31% 12% 16% Remained flat as a share of revenue 53% 80% 59% Increased as a share of revenue 17% 8% 25%

25 23 Level of agreement with the following total rewards statements based on change in revenue changes in the past 12 months. Revenue Change We use rewards statements and other communications that encourage employees to think about the total rewards deal in an integrated way Employees recognize the brand of our total rewards function The top total rewards person in our organization is involved in business strategy Leadership generally views spending on total rewards as an investment rather than a cost We train managers to communicate to their employees the value of total rewards People responsible for total rewards work together (e.g., annual planning meeting, regular communications, clear decision-making process, etc.) We make changes in total rewards investments using quantitative tools (such as the value that employees ascribe to different rewards aspects compared to costs) The CEO is a vocal supporter of the idea of total rewards Current economic conditions have enhanced the importance of total rewards in our organization Current economic conditions have reduced the importance of total rewards in our organization Eliminated or reduced this item Revenue has decreased No change Enhanced or added this item Eliminated or reduced this item Revenue has remained flat No change Enhanced or added this item Eliminated or reduced this item Revenue has increased No change Enhanced or added this item 33% 12% 55% 33% 17% 50% 30% 16% 55% 51% 28% 21% 42% 40% 18% 44% 34% 22% 22% 17% 61% 18% 21% 61% 21% 18% 61% 31% 27% 42% 22% 34% 44% 21% 34% 46% 42% 21% 37% 42% 22% 36% 47% 17% 36% 29% 20% 51% 26% 23% 51% 26% 19% 55% 41% 32% 27% 34% 31% 35% 36% 28% 36% 21% 37% 42% 14% 43% 43% 19% 35% 45% 19% 21% 60% 11% 23% 66% 13% 31% 56% 65% 17% 19% 71% 20% 9% 76% 16% 8%

26 What type of change did your organization make in regards to these items in the past 12 months? Revenue size <500m >500m and <10b >10b Eliminated or reduced this item No change Enhanced or added this item Eliminated or reduced this item No change Enhanced or added this item Eliminated or reduced this item No change 24 Enhanced or added this item 1&2 3 4&5 1&2 3 4&5 1&2 3 4&5 Annual bonus pool funding 49% 39% 12% 38% 53% 9% 31% 56% 13% Merit budget 63% 29% 9% 72% 20% 9% 66% 28% 7% Spot bonuses 20% 65% 15% 24% 69% 7% 14% 81% 5% Nonmonetary recognition (saying thank you / recognizing employees in meetings) 7% 67% 26% 8% 72% 19% 9% 74% 17% Health insurance 19% 70% 11% 17% 70% 13% 22% 73% 6% Retirement funding / matching 21% 74% 6% 20% 75% 5% 19% 74% 8% Job specific training 17% 65% 18% 18% 70% 12% 21% 67% 13% General training 27% 55% 18% 28% 55% 18% 28% 62% 10% Hiring freeze 12% 58% 30% 11% 50% 39% 13% 56% 31% Flexible work arrangements 3% 73% 24% 3% 75% 22% 2% 76% 22% Wellness programs 7% 55% 38% 6% 56% 38% 2% 51% 47%

27 25 Total Rewards Integration Analysis Low- to mid-scoring organizations vs. mid- to high-scoring organizations A total rewards integration index was calculated using the following integration statements: We use rewards statements and other communications that encourage employees to think about the total rewards deal in an integrated way Employees recognize the brand of our total rewards function The top total rewards person in our organization is involved in business strategy Leadership generally views spending on total rewards as an investment rather than a cost We train managers to communicate to their employees the value of total rewards People responsible for total rewards work together (e.g., annual planning meeting, regular communications, clear decision-making process, etc.) We make changes in total rewards investments using quantitative tools (such as the value that employees ascribe to different rewards aspects compared to costs) The CEO is a vocal supporter of the idea of total rewards. Participants rated statements on a 5-point scale from strongly disagree to strongly agree. A rating of strongly agree received 5 points while a rating of strongly disagree received 1 point. The highest score possible for an organization is 40. Organizations were then divided into two groups, Low- to mid-total rewards integration (1-24 points acquired) Mid- to high-total rewards integration (25-40 points acquired). The following analysis examines how low- to mid-integration and mid- to highintegration organizations differ on the total rewards related issues examined in this survey.

28 26 Is total rewards a term that you use in your organization? Low-to mid- integration scoring (1-24) Mid-to high- integration scoring (25-40) No, we do not use this term 17% 33% Yes, it is one of the terms we use 42% 52% Yes, it is the primary term we use 15% 41% 0% 10% 20% 30% 40% 50% 60% 3 What term(s) do you use in your organization to refer to the concept we refer to here as total rewards? (Check all that apply.) Low- to mid- integration scoring (1-24) Mid- to high- integration scoring (25-40) Compensation & Benefits Package Total Compensation No particular term used frequently, but the concept is present Employee Value Proposition Human Resources We only use the term total rewards and no other term Human Capital The Deal 15% 6% 13% 15% 10% 9% 3% 9% 3% 4% 2% 2% 6% 6% 69% 60% 63% 63% 0% 10% 20% 30% 40% 50% 60% 70% 80% 3 Mid- to high-scoring organizations were statistically more likely to report that the term total rewards was the primary term used in their organization (41%).

29 27 What is considered part of the definition of total rewards in your organization? (Check all that apply.) Low- to mid- integration scoring (1-24) Mid- to high- integration scoring (25-40) Compensation (e.g., base salary, incentives, guaranteed payments) Benefits (e.g. retirement, medical, etc.) Recognition Work-life programs (e.g. flexible working times, options to take extra vacation, sabbaticals, etc) Career development Job specific training Intrinsic work factors (e.g., culture, leadership, work content, etc.) 53% 65% 50% 70% 38% 53% 27% 42% 26% 37% 9% 13% 3% 4% 99% 100% 98% 99% 0% 20% 40% 60% 80% 100% 120% 4 4 Mid- to high-scoring organizations are statistically more likely to include recognition, work-life programs, career development and job specific training in their total rewards definition.

30 28 How has your organizations investment in total rewards programs changed / relative to revenue in the organization? Low- to mid- integration scoring (1-24) Mid- to high- integration scoring (25-40) 70% 67% 61% 60% 50% 40% 30% 26% 20% 17% 14% 16% 10% 0% Decreased relative to revenue Flat relative to revenue Increased relative to revenue How has revenue changed for your organization in the past 12 months Low- to mid- integration scoring (1-24) Mid- to high- integration scoring (25-40) 60% 54% 50% 47% 40% 30% 20% 25% 30% 21% 24% 10% 0% Decreased No change Increased

31 29 Please indicate whether or not your organization has taken the following actions in the past 12 months: Mid- to high- integration scoring (25-40) Low- to mid- integration scoring (1-24) Layoffs 52% 66% Overtime restrictions 43% 54% Involuntary time off 13% 22% Increase in voluntary time off unpaid (sabbaticals/unpaid vactions encouraged) 13% 18% Reduction in hours paid (such as move to a 35-hour workweek) 10% 18% 0% 10% 20% 30% 40% 50% 60% 70% 5 What is the annual revenue for your organization? Low- to mid- integration scoring (1-24) Mid- to high- integration scoring (25-40) 40% 37% 35% 30% 34% 32% 25% 20% 25% 22% 15% 10% 15% 7% 9% 9% 11% 5% 0% Less than $500m USD $500m $999m USD $1b $9.9b USD $10b $19.9b USD $20b USD and over 5 Mid- to high-scoring organizations were statistically less likely over the past 12 months to enact layoffs, overtime restrictions, involuntary time off or a reduction in hours compared to organizations than were low- to mid-level scoring organizations.