Posted by Peter DeBellis on January 18, 2018.
How likely are employees to recommend your company to a friend based on its rewards package?
This type of question is probably familiar to you, as it’s the basis for calculating net promoter scores (NPS), a metric widely adopted by many organizations and used to measure loyalty between a customer and a company. But the focus of the question—how well your company’s rewards package supports employee loyalty—is new. And what we discovered in Bersin’s first High-Impact Rewards survey1 is troubling: The NPS of employee rewards, which we calculated from more than 1,100 survey responses, was negative 15 (−15).
NPS can range from a high of 100 (everyone is a promoter) to a low of −100 (everyone is a detractor). In the consumer realm, a negative score is considered disastrous for a brand. In the employee realm, an NPS of −15 drawn from a data set of this size suggests that rewards packages across industries and geographies actually detract from employee loyalty and everything that follows from it.
This is a serious consideration for HR leaders and their companies for two reasons:
- Rewards offerings are an essential part of the employer value proposition. They are among the most fundamental and effective levers that employers can pull to secure and enhance employee performance, engagement, advocacy, and other positive behaviors.
- Rewards offerings are a major factor in talent acquisition and retention. With a shrinking labor pool and talented candidates increasingly commanding rewards premiums, employers simply can’t afford a rewards package that relegates them to a disadvantaged position in the labor market.
HR leaders need to raise the NPS on their employee rewards packages
In the coming year, our research will focus on supporting members as they address this challenge. While this post offers a brief outline of possible responses, our upcoming research will offer leading practices, more analyses, and more in-depth research findings. But we already see several key themes in our research forming the outline of a viable solution:
- Align rewards with strategy. To start, HR leaders must ensure that the rewards strategy flows from and supports the strategy of the business. This sounds obvious, but it is not uncommon to find companies in which strategic goals have changed in fundamental ways but employee rewards offerings have not kept pace.Once strategic alignment has been addressed, HR leaders can turn their attention to supporting the rewards strategy through rewards communication and employment branding. Thoughtful alignment between rewards strategy and employment branding helps ensure that everything the company is telling current and prospective employees is consistent with the actual rewards package itself. This also helps the company reap maximum benefit from its rewards investments.
- Adopt a more holistic view of rewards. Confining the definition of rewards to only compensation and benefits limits the perceived value that rewards packages offer employees and, in turn, the return these rewards investments can provide to employers. Rather, a more expansive and inclusive view of rewards should encompass all of the elements of the employer-employee relationship to which employees ascribe value. We call this view “total rewards.” Total rewards include employee compensation, benefits, well-being, and experience and actualization programs and opportunities. Many companies already consider and include employee well-being in their definition of rewards packages—but some don’t—and far fewer include experience and actualization. The inclusion of experience and actualization in this definition broadens the lens through which we view rewards to include the following:
- Learning and development opportunities
- Career paths
- Diversity and inclusivity of the workplace culture
- The physical environment and working conditions
All of these elements have the potential to enhance the perceived value of the rewards package a company offers to current and prospective employees—if the employer seizes the opportunity.
- Take a customer-centric approach to designing and administering rewards. Like beauty, value is in the eye of the beholder, and in the case of rewards, the beholder is the employee. That’s why creating a rewards package that employees love requires a customer-centric mindset.Historically, employers unilaterally decided how to reward employees and simply broadcast the specifics. But today, how companies design, deliver, and communicate rewards is as important as the rewards themselves. By involving employees in the design and development of rewards offerings, employers can demonstrate respect, care, and concern for their employees and help ensure that the offerings will actually have value in the eye of the beholder.
- Build flexibility into rewards packages. Companies are striving to respond to fast-changing markets and disruptive technologies. They are asking their people to join together in ad hoc teams, deliver results, and then disband and reform into new teams as conditions demand. Yet, their rewards packages are often semipermanent fixtures, which change at a relatively glacial pace. Rewards packages must become as agile and flexible as the work itself if they are to truly support the business and deliver value to employees. To do this effectively, the reward-setting process must be streamlined. Employers need to be nimbler with respect to base pay—reviewing and adjusting it more frequently and as needed. They also need to adopt and adjust variable pay plans that drive performance, and accommodate and recognize the increasingly important role that teams play in the new world of work. As structures change and people shift within them, rewards packages have to shift, too.
The purpose of rewards is the same as ever—to attract and retain talented people and to incent and enable employee contributions, all in the name of organizational performance. But everything else about the rewards discipline is changing. To raise the NPS on rewards, employers should reconsider their reward strategies, develop and define holistic total rewards packages, and deliver and adapt the elements in those packages in ways that employees love.
Every day from January 16 through January 26, Bersin will be sharing perspectives on the most timely, relevant, and interesting developments for HR professionals to watch in 2018. Check back every day, or visit bersin.com on January 29 for a consolidated report with all of the predictions.
Pete leads total rewards research for Bersin, Deloitte Consulting LLP. Pete has a deep understanding of the various tools organizations use to attract, motivate, develop, and retain talent—from compensation and benefits to worker wellbeing programs to experience and actualization opportunities, among others. His experience, gained as in-house rewards professional for public companies and as a consultant, helps him understand the critical linkages between total rewards, HR strategy, and overarching business objectives. Pete holds a bachelor of science degree in industrial and labor relations from Cornell University.
1 Bersin, Deloitte Consulting LLP, High-Impact Rewards survey, 2017.