Optimal employee rewards strategies need to be supported by well-designed surveys that reveal employee stressors – as well as their needs and preferences, writes Peter DeBellis
What is the basis for your company’s rewards offerings? For too many companies, it is purely benchmarks – that is, they make rewards decisions based on the rewards being offered by other companies with whom they believe they compete for talent. The problem: companies that follow this approach are left guessing about the desires and stressors of their actual workforce rather than knowing definitively what they want or need. In fact, based on Deloitte’s 2019 Global Human Capital Trends report, nearly one-quarter (23 percent) of organisations do not feel they know what rewards their employees value.
There’s nothing wrong with benchmarking per se: You should know what rewards your competitors are offering their employees. But that’s only one piece of the rewards puzzle. To optimise a rewards offering, you need to know a lot more about your rewards customers, that is, your company’s employees. Our research at Bersin finds that companies with mature, high-performing rewards functions achieve this by adopting some version of the following 4-step process, which uses the same kinds of surveys that marketers use to understand customers.
Step 1. Evaluate the current rewards context
Before you can optimise a rewards offering, you need to understand its current components, including their costs, the extent to which they appeal to and are utilised by employees, and how they measure up against the offerings of other employers with whom you are competing for talent. This may seem like basic data, but most rewards professionals do not have all of it at their fingertips – nor do most rewards practitioners know how employees perceive the specific rewards they are offered. This data is essential to not only understanding the current rewards context, but also establishing a baseline for modeling other potential rewards scenarios.
Step 2: Understand employee stressors and identify rewards that address them
Before you can identify rewards options that will truly appeal to employees, you must understand their concerns. Think about it: consumer companies would not release an update on their latest product without analysing if their current customers find the features useful. So why do organisations roll out new rewards programs without asking for employee input first? Aside from potentially enabling more optimised rewards offerings, the act of collecting this information can build goodwill with employees – provided that there is honest and transparent communication coming from the employer about why the information is collected and how it will be used. Sensing is another important part of rewards optimisation. Benchmarking provides what’s happening today, but being able to sense the external market for shifts that haven’t happened yet are just as important.
“Employees are not a homogeneous monolith – and your rewards program shouldn’t be either”
Deloitte has developed such a survey based on a set of 19 life stressors – conditions that originate from both inside and outside the workplace and cause anxiety or erode quality of life for employees. When we administered this survey to more than 18,000 employees in the US, it revealed that their top stressors were debt, the ability to retire, and job security. But stressors vary by age, gender, and job status so personalisation by “persona” is key to having your rewards offerings meet the varied needs of your employee population. Employees are not a homogeneous monolith – and your rewards program shouldn’t be either.
Once you know the stressors present in the lives of your employees, you can identify rewards options that could alleviate them. If your research finds that workers are very concerned about their personal debt, for example, you might consider financial wellbeing offerings. If there are pervasive concerns about the quality or reliability of childcare, you might consider backup care programs or on-site care.
Step 3: Determine the reward preferences of employees
This is the heart of a rewards optimisation initiative and, like the previous step, it begins with an employee survey. A rewards preference survey offers employees various combinations of rewards and asks them to choose the ones they prefer. The choices offered in the survey should include the existing rewards offered at the current level, as well as at increased and reduced levels, and new rewards options too, in order to better understand the relative preferences of employees.
A rigorously-designed rewards preferences survey enables rewards professionals to analyse its results, using statistical approaches such as conjoint analysis, and identify which specific offerings are driving employee preferences and to what degree. Bersin’s high-impact rewards research has found that high-performing organisations are six times more likely to use data and analytics to understand employee preferences than their low-performing counterparts.
While preference surveys can be a great tool to help employers sync with their workforce’s preferences at a given point in time, the truth is that alone they are not enough. Organisations should assess the behaviors and mindset of their workforce on an ongoing basis and strive to sense impending changes in sentiment through engagement and pulse surveys, focus groups, solicited and unsolicited feedback, utilisation statistics, vendor outreach, and other methods and channels on an ongoing basis. In order to meet employees’ needs, organisations need to stay connected, knowing how their employees think and feel and paying attention as these preferences invariably shift over time.
“Make sure that your rewards optimisation efforts are employee-focused, evidence-based, thoughtfully and strategically communicated”
Step 4: Allocate your company’s rewards resources based on employee preferences
The final step of the rewards optimisation process is simple: allocate the rewards resources of the company according to the preferences of employees. If no one cares about the pet insurance benefit your company offers, take the money being spent on it and invest it wherever employees care more.
Modeling can help you make more effective allocation decisions. Test different rewards offerings and scenarios and analyse the returns they are likely to generate based on the baseline information you gathered in step one and the preference information you gathered in step three. Then, adjust allocations and offerings to create a win/win rewards offering that best serves both the company and its employees by optimising the return on rewards investments.
Bersin’s High-Impact Rewards research found that only 3 per cent of organisations rate themselves as “very effective” at optimising the return on their total rewards spend/investment and only 20 per cent report being “effective” at same, leaving more than three quarters of organisations globally only slightly effective or worse. Rewards optimisation, informed by employee surveys, holds great promise to improve these statistics by offering employers the opportunity to truly sync their offerings and efforts with the preferences of employees at a point in time. But an employer’s work is not done at this point – monitoring these preferences over time and sensing shifts in sentiment is equally important to help ensure ongoing relevance of rewards offerings.
While some companies undertake rewards optimisation programs to identify cost-savings opportunities, others want more bang for today’s buck; and still others want to increase investments in the most efficient and impactful manner.
No matter what your company’s goal, make sure that your rewards optimisation efforts are employee-focused, evidence-based, thoughtfully and strategically communicated, and supported by well-designed surveys that reveal employee stressors as well as their needs and preferences. There is no better way to enable optimal rewards decisions.