How Total Rewards Can Drive Performance Management Success

Forward-thinking employers are treating their rewards strategies as integral to their staffing and performance management efforts—and viewing their rewards as an investment in workers' productivity and engagement—especially as organizations face greater competition for talent.

At WorldatWork's 2018 Total Rewards Conference, held recently near Dallas, many speakers encouraged using total rewards—compensation, benefits, work-life quality and career development—to enhance business success.

"Productivity increases have slowed to a crawl since the 2008 recession and engagement has barely moved up," said Josh Bersin, founder and principal of Bersin by Deloitte, a unit of Deloitte Consulting, during a keynote address. "But a set of companies have figured out how to engage people in this environment," he noted. These organizations have adopted "a culture of taking care of people," assessing the needs of their workforce based on factors such as age, education, demographics and job level, and then offering segmented benefits to meet these needs.

For those struggling with making ends meet, for instance, financial wellness education comes into play, while Millennial women, in particular, seek generous maternity leave benefits.

A "new generation of rewards" emphasizes well-being by offering benefits that address financial wellness, fitness, stress relief, mindfulness and work-life flexibility, Bersin said. Highly valued rewards can become competitive differentiators that make an employer stand out, and these can be highlighted as the employer's "rewards brand."

Since organizations have different aims and goals, these, too, should be reflected in the rewards strategy. If retaining experienced employees is a priority, consider letting older employees work fewer hours, perhaps with lower pay, and become "champions" who are a resource for younger employees, Bersin advised. Growing organizations that need to bring in new talent may prioritize student-debt repayment assistance.

Compensation and Business Strategy

Keith Reynolds, vice president of global compensation at Pepsico, encouraged thinking of total rewards as it relates to business and talent strategies by asking, "How do we create a compensation and benefits programs that can help us to attract the right talent, retain that talent, and help to engage that talent now and in the future?"

As an example, measuring the effectiveness of compensation designs "is paramount to the work that we do, especially in our variable compensation plans," Reynolds said. "Our job is to create and design compensation programs that support business strategy. If we don't take the time to pause, look back and measure how well our overall earnings achievement is correlated with business achievement, we'll never understand if our compensation design is effective and where we should make modifications."

[SHRM members-only toolkit: Developing Employee Career Paths and Ladders]

Career Development as a Benefit

A vital component of rewards strategy, Bersin said, is adopting "a new way of thinking about careers" by helping employees shift roles within a company, even if this doesn't involve a promotion, to keep them engaged. "Thriving companies are social enterprises that believe in employees' growth and development," he said.

He gave the example of Unilever, a company that encourages employees to create "purpose statements" envisioning what they want from the company, and then helps them plan a path to achieve these aims.

Picking up on Bersin's theme, "redirecting, re-engaging and differentially rewarding employees can drive up business results," said Kim Scott, a senior professional services consultant at pay consultancy Salary.com. "Retention can't be a passive activity. Make transfers between departments part of your career-development program" by encouraging managers to redirect employees into new roles, even if those roles are outside their department. 

Managers are often unenthused about talent moving away from their team, even if these workers would be re-energized by the change and the organization would benefit. HR, with the support of senior management, can counter this reluctance through training and discussions, with recognition and rewards given to managers that help their team members shift to a new role.

Reynolds said that when managers at Pepsico have conversations with employees about their future, the focus usually isn't on pay. "It's about learning and development, career progression, and whether you can explain to employees what their career will look like the next one, two and three steps out."

Twice a year, Pepsico conducts a pulse survey that asks employees to rate their confidence in their ability to achieve career objectives and asks what is impeding their ability to advance, "which shows where more opportunities for training and development should be directed," Reynolds said.

Recently, Pepsico split many salary-range broadbands at the director level and above into separate bands so employees could more easily advance to a higher-level position, Reynolds noted. In broadbanding, organizations have fewer but wider bands to allow employees' pay to rise significantly without a promotion, but employees value promotions even without pay increases, Pepsico and other employers have found.

Present the Full Picture

"Reinforce your story about market competitiveness through total rewards statements," recommended Tom McMullen, senior client partner at pay consultancy Korn Ferry Hay Group. He noted a trend toward using personalized total rewards statements "not just for your current employees but also for candidates." In addition to the offer letter, for instance, a total rewards statement "highlights the full value of rewards within the organization."

Along with pay and traditional benefits, the statements should list programs such as learning and development and career-advancement opportunities, he advised.

While in the past it may have been challenging for small companies to produce individualized total rewards statements, "the technology barriers have largely gone way," McMullen said.

Added Reynolds, "If you're not doing this, you're missing a huge opportunity to foster employee engagement."