![]() The annual bonus and ratings-based performance management processes that most organizations use today took hold in the 1980s. And through the decades, inducements have been introduced to encourage behavior change and drive results, especially as the global war for talent escalated. The 1940s saw the introduction of longer-term incentives to deliver sustained performance. Traditional incentive-based pay started with the dawn of industrial manufacturing in the 1920s, when workers were given one-time cash bonuses to meet quotas. We suggest a four-step approach to designing reward packages that are fit for today’s changing world: start with the data, customize, communicate, and, continually monitor. Our data suggests that in many cases, as with the insurance and bank examples above, this will cost companies less than their current blanket reward packages while yielding measurable improvements in engagement, satisfaction, retention, and performance. Companies need a new approach to understanding the big picture of reward that will allow employees to tailor their options. Old-fashioned engagement surveys provide little or no meaningful insight into reward strategies because they focus on a point-in-time sentiment rather than a gauge of employee preferences. But HR departments, overly concerned with what other companies are doing or what benefits are most cost-effective, are not keeping up. Work–life balance options and training and career development have tripled in importance (see chart). The importance of other types of benefits-medical, dental, vision, and life insurance wellness and supplemental health benefits and child care-has doubled. Our proprietary analysis, which uses data collected via TrueChoice Solutions, a preference analytics company headquartered in New York, shows that the relative importance of financial compensation has declined by 11% over the past decade. Rather than offering a plethora of alternatives for people to choose from, the list of options should reflect an understanding of the potential impact on every single employee, not just employees in aggregate. Employers need to understand preference at the individual level-in other words, from the bottom up, not from the top down. ![]() That means that standardized approaches will rarely lead to an optimal result. Today’s workforce is more diverse, attitudes toward work are evolving, and employee preferences are changing.Ī key trend we see in the preference data is that employee populations have become more heterogeneous. If companies were to ask their employees if the rewards they offer make a difference, they’d get a shock. What we’ve found makes it clear that it’s time to rethink the approach to rewards. We know this because for ten years we’ve been collecting data-more than 50 million data points from more than ten million surveys undertaken with global companies-on the trends in employee preferences for financial and nonfinancial benefits, and how much value employees place on them. And the speed of that change is only accelerating in the post-COVID-19 world. Today’s workforce is more diverse than it used to be, attitudes toward work are evolving, and employee preferences are changing. If companies were to ask whether the rewards they offer make a difference, they’d get a shock. ![]() Year after year, most employers offer the same menu of choices-health benefits, pension contributions, gym memberships, cash incentives-without bothering to ask employees which ones they prefer and which ones they value most highly. Over the past decade, what people value in terms of employee benefits packages has changed, even though the fundamentals of corporate rewards have not. These are good examples of why it’s important to regularly rethink old practices. The bank made a number of changes to its offerings, created a platform for individuals to mix and match different corporate benefits, and ended up saving as much as US$2,800 per employee per year while maintaining (and often increasing) retention and employee satisfaction. They valued choice-especially the flexibility to control certain aspects of the employee experience, including training, working patterns, and even their home office setup. Similarly, a global bank was able to redesign a costly reward package that was failing to retain key talent when it realized that what employees wanted was more than money and shares. ![]() By Nele Van Buggenhout, Soraya Murat, and Tom de Sousa
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