omniture

Rewards and Their Influence in the Workplace

2010-02-09 01:31 9995

"There are two things people want more than sex and money...recognition and praise." (1)

SHANGHAI, Feb. 9 /PRNewswire-Asia/ -- One of the reasons why reward programs often seem to misfire is that they are too mechanical. Compensation & benefits managers talk about benchmarking, comp ratios, and market levels when discussing reward strategy. For many companies, reward management has become a purely technical tool and has drifted away from its original purpose -- to align an organization's reward strategy with its mission, vision and values and to use reward management tools to support achievement of business goals.

Unfortunately, the current approach to rewards often seems similar to selling a car or a washing machine simply on technical product specifications. Rewards have lost their marketing appeal and the branding messages that can accompany them.

A rethinking of reward strategy and management is the order of the day. Creative and innovative thinking about rewards needs to replace the technical and statistical approach that has come to characterize reward management in many companies. The accelerated pace of change combined with long-term economic, cultural and demographic trends makes this a necessity.

The times, they are changing

The speed of change in Asia has accelerated exponentially in the past decade. Consistently high economic growth for long periods characterized East Asia's economies for decades up until the mid-1990s. Since then, economic growth has faltered and then gathered speed in an up and down spiral. Reduced capital intensity among the most profitable new industries, such as software and biotechnology, is allowing them to morph and consolidate faster than industries of the past. The continued acceleration of information, technology and innovation as well as shorter product life cycle has further exacerbated the pace of change.

These changes have implications for reward managers in three areas

1. The information that people have available to them;

2. The additional ways in which people seek gratification and recognition;

and

3. The methods that companies use to manage increasingly networked

organizations.

Information flows at warp speed. The speed of change can be largely attributed to the fact that information moves more rapidly and flows through more informal channels and networks. Just look at these recent statistics:

1.7 billion people use the internet of which 43% are in Asia (2);

-- Three billion people have cell phones of which nearly 600 million are

in China alone (3);

-- 580 million people visited a social networking site in June 2008

[Indonesia has the fastest growing usage of Facebook worldwide with 6.5

million people registered in July 2009, up from only 209,000 in July

2008(4)]; and

-- A Harris / eHarmony survey estimates that 19% of American newlyweds met

online in 2006 and 2007 (and some SMS divorces too...) (5).

What this means is that more people have access to more information much faster than ever before. Compensation managers used to be the only ones with credible reward information at hand. Now, it can generally be said that employees know well what their counterparts in other companies are being paid. Water-cooler conversations are much more evidence based.

The implications for reward management are that it is no longer enough to say, "We are benchmarking against the market." The facts flow faster and the facts do not necessarily reside only with certain individuals in the organization.

How people find gratification is changing. People's lifestyles, interests and concerns are changing with similar speed and, along with it, the way people seek gratification has changed. For instance, in parallel life online, people are paying real money to buy virtual land or do virtual farming. A survey of Chinese youths aged 16 to 25 conducted in 2007 found that 61% of Chinese respondents said they have a parallel life online. Plus, 86% of the Chinese respondents agreed with the statement that, "I live some of my life online." (6)

Clearly, these youths are finding gratification in different ways from the generations before them. Recognition now encompasses different things and how people seek satisfaction or gratification is at a different level. People don't feel obligated or loyal to an organization simply because the organization is paying them well or giving them a bonus.

Networked organizations need new perspectives on HR. Over the past several decades, companies have moved away from hierarchical "command and control" structures toward networked formations. The dynamics of a networked organization are quite unlike the traditional hierarchical organization.

Examples abound. Singapore Telecom is a case in point. SingTel owns its business in Singapore, but outside of Singapore they operate as part of a network. Their largest business outside Singapore is in India where they own 30% of Bharti Airtel, a cellular provider with a 25% market share. They have similar minority shares in cellular companies throughout Southeast and South Asia. Even where SingTel owns and controls the company (e.g. Optus of Australia), they still work as network influencers. They don't say this is the corporate policy and everyone will follow it. They must work by influence and not so much by control.

Similarly, Reward Managers must be more consultative and less technical. They must look closely at what suits the business and what will suit different levels and groups within the business. Furthermore, if the organization depends on outsourcing, contractors, vendors or direct salespeople (which is increasingly common as organizations become more networked), then the Reward Managers also have to be aware of how their indirect workforce is being rewarded as well.

The lack of involvement or interest in reward management beyond direct employees can have dire consequences. This is what led to Lehman Bros mini bonds failing in Singapore. The sales network was not under the control of DBS or Lehman and how the salespeople were compensated was not a primary concern of their Reward Managers. The rewards that were given to the point-of-sale people were completely misaligned with the risk of the investments that they were promoting. The focus of the reward program was very short-term even though the risk and payback was medium to long-term.

What can we do?

A technical approach to compensation does not equip the Reward Managers with the tools necessary to confront the problems created by the trends outlined above. Aligning rewards strategy to business goals in the new environment requires a different perspective on rewards.

First of all, let's be clear about the "The War on Talent." It is over and talent has won. Organizations need to look at rewards from the perspective of the employee.

The classic approach to reward management is based on the assumption that that money is the primary motivator for employees. Performance incentives usually are primarily, if not entirely, cash-based. In fact, paying an employee fair and equitable compensation for a job well done is just a given. Repeated research over the past 60 years clearly shows that people are looking for interesting work and work in which they are appreciated (7). Recent surveys have confirmed this and found that Gen Yers (those born between 1980 and 1994) and Boomers (those born between 1945 and 1960) in the US, are seeking a new set of rewards that go far beyond the size of their pay package (8). What they found was that Gen Yers have more in common with the boomers than with the Gen Xers in between them!

Types of rewards that are at least as important as compensation (9)

Gen Y

-- High-quality colleagues

-- Flexible work arrangements

-- Prospects for advancement

-- Recognition from one's company or boss

-- A steady rate of advancement and promotion

-- Access to new experiences and challenges

Boomers

-- High-quality colleagues

-- An intellectually stimulating workplace

-- Autonomy regarding work tasks

-- Flexible work arrangements

-- Access to new experiences and challenges

-- Giving back to the world through work

-- Recognition from one's company or boss

How can we leverage this knowledge of generational differences into the structure of a reward program? By structuring programs around fulfilling employees' intrinsic desires and what they are looking for from life. Generational differences as well as individual differences within a generation create diverse needs and motivation levers. We need to shape our reward proposition accordingly.

To do so, we need to look "outside the box." Keeping track of what competitors within our own industry are doing is unlikely to surface many creative and innovative ideas that we have not tried before. Start looking at other industries and other geography - not just within your own industry or your own country. Then try to analyze how their experience might apply to your own circumstances.

For example, why do restaurants create such an aura around the chef? It is because the chef can attract a huge following of fans, which helps build the business. But when the chef moves, so do the fans. Aspiring cooks will do anything to train with a star chef even though he may be demanding and tough. They are not thinking about short-term rewards but rather about development and long-term recognition.

In your own environment, how many instances can you think of where a leader leaves, the best talent goes with that person? Isn't it better to creatively leverage the draw of charismatic, high-performing individuals rather than ignoring or resisting the attraction that such a person has for others in the workforce? Let's focus on keeping the high performer motivated and engaged. In so doing, the company not only retains that star but also all of the "fans" (both customers and employees) that the star inspires.

How can we fit into people's larger scheme of life?

Thinking "outside the box" means also looking at what motivates employees beyond the basic desire for fair compensation. The oldest way of looking at human needs and desires is Maslow. Using a model based on Maslow's Hierarchy of Needs helps us analyze whether we are using all of the levers of rewards and recognition that are available to us.

http://tinyurl.com/yh372ay

An employer must satisfy an employee's compensation needs -- that is a given. In addition, the organization should explore what it takes to satisfy an employee's desire to belong, to be recognized, and to achieve his or her sense of purpose and life goals. To do so, Reward Managers need to consider an employee's performance and the employee's employability. Increased skills, knowledge, experience, and public recognition all help make a person a more attractive candidate and thus contribute to higher employability. Increased employability leads to greater self-actualization since increased employability enables a person to achieve his or her aspirations.

Many firms are wary of giving public recognition to their high performers (and thus increasing their employability) for fear that competitors will selectively poach their best people. Ironically, it is a paradox that the more an organization helps improve an employee's employability, the more likely that employee is to stay with the organization. Assuming that the organization has satisfied an individual's basic compensation needs, if a manager can help actualize a subordinate's potential and they organization supports the person's development, then the more likely that person will stay with the organization. If a high performer does not feel she is realizing her potential or fulfilling life goals, the chances increase that she will look elsewhere for self-actualization.

Conclusion

As Mary Kay so aptly said, "There are two things people want more than sex and money...recognition and praise." Fulfilling ourselves as individuals is more than securing high pay and job promotions. It also encompasses recognition, access to new experiences and challenges, an intellectually stimulating workplace, autonomy in one's work, new experiences and challenges and the opportunity to give back to the world through work.

An employer can have an important role in supporting employees' self-actualization and by so doing retain high performers and simultaneously increase organizational performance. Managers can be trained to support a person's pursuit of life goals. Good leaders are good coaches. Good coaches are constantly trying to enable people live up to their own potential rather than demanding adherence to exacting performance standards or getting subordinates to meet pre-set criteria.

The payback in retention and performance would be huge if Reward Managers look beyond the technical aspects of compensation and address the full range of employee aspirations. In so doing, they will fulfill the original purpose of a rewards strategy.

1 Mary Kay Ash, Founder of Mary Kay Cosmetics

2 Miniwatts Marketing Group, "Internet Usage in Asia," Internet World Stats: Usage and Population Statistics,

3 Family Education Network "Cell Phone Usage Worldwide, by Country," Infoplease.com,

4 Nick Burchar, "Facebook usage statistics - Top 20 fastest growing countries by users",

5 Carl Bialik, "How Many Marriages Started Online?" The Wall Street Journal Blogs, July 28, 2009,

6 IAC and JWT, "China Leads the US in Digital Self-Expression:IAC and JWT study reveals new means of expression for China's Tech-Savvy Youth,"

7 Surveys of managers and employees perception of what employees want were first conducted in 1946 in Foreman Fact, from the Labor Relations Institute of NY. Lawrence Lindahl produced the survey again in Personnel magazine in 1949. The study subsequently was replicated with similar results in 1980, 1988, 1991 and 1997-2001. For further information see How Managers Can Help Retain Their Best Employees by Susan Cullen

8 Sylvia Ann Hewlett, Laura Sherbin, and Karen Sumberg. How Gen Y & Boomers Will Reshape Your Agenda (Harvard Business Review, July-August 2009).

9 Ibid.

Source: Aon Consulting
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