Total Rewards Philosophy and Strategy from Wilson Group

Total Rewards Philosophy and Strategy

Every organization wants to attract, retain and motivate employees. Many think that these are the primary objectives of compensation and reward programs. Then, they define their compensation strategy as being at “X Percentile” in their industry. For example, a company may target base salaries at the median (50th percentile) of the market and total cash compensation at the 75th percentile. While this strategy is clear and simple, it does not provide a sustainable differentiation for the company in the marketplace, nor does it provide any guidelines for making decisions. In short, this is a strategy that provides little value.

The purpose of a total rewards strategy is to define the critical requirements of all your company’s compensation and reward programs so they enable the company to effectively manage the people resources. A meaningful strategy provides guidelines for how various reward programs should be designed and managed. The programs can include salaries, variable cash compensation plans, long-term or equity based plans, employee benefits and services, recognition programs and other programs, and practices that influence the actions of your people. A reward strategy should articulate in simple but powerful terms how the company will invest its resources, reinforce its core principles and values, and create a competitive advantage.

We have found that while the words may appear similar from one organization to another, the real value is the meaning these words have to leaders and those working for the organization. The words become reality when they are effectively translated into action through programs, systems and practices utilized everyday. The result is simple — more effective allocation of resources and higher performance.

Determining the Right Strategy for Your Organization:

When we work with a company to develop their total reward strategy, we first seek to understand its business model, vision and strategy, as well as, its critical success factors. We learn the leadership philosophy and desired culture. We understand how the organization operates, the accountabilities of key roles and the principles reflected in the design of the organization. Further, we work to identify their true marketplace for talent — external labor and talent markets and internal movements through promotions and career paths. We then summarize this background information and translate it into the key requirements for each program that constitute their compensation and rewards.

As stated above, rewards include those programs, services and experiences that impact the commitment and actions of people. Some are available to virtually everyone because they are employed by the organization (or for a specific level or group within the organization) — these are “foundation” type programs. In addition, there are programs and rewards individuals receive because of their “performance” or the performance of the group to which they belong. In these type of reward programs not everyone receives them, and the amount depends on many factors related to the performance of the individual or group.

Finally, there are programs that are clearly compensation based (e.g., salaries, variable cash compensation, equity based plans, etc.), and there are those that are non-compensation and are part of the opportunities within the workplace (e.g., employee benefits, services, recognition award programs, promotions, career opportunities, training and development). The combination of reward programs and practices define the nature of the relationship between the individual and the company.

This framework can help the company organize and examine the programs it uses and determine where changes should be made. This framework is depicted in the figure below:

rewardsChart

Our clients often find this simple framework as extremely helpful in identifying the similarities and differences between their reward programs. We have found that the real value of this framework lies in answering several important questions:

Which of these programs (or categories) does the organization currently use? Which ones are most important to the overall organization and why?
Which of these programs are the most important to specific groups of employees and why? These groups can include executives, managers, sales, technical professionals, and service, operational and administrative employees, as well as new hires, organizational veterans and/or high-potentials or “A Players.”
Where (among the types of programs or services) does the organization spend the most money? Where does it spend the most time and effort?
Which of these programs are the most and least effective in supporting the mission, strategy and culture of the organization? Where does the application of one program compliment, conflict, or off-set the inherent weaknesses of another reward program?
What are the common themes that should exist across all these programs? What are the purpose and objectives of specific programs for the organization?

What the Wilson Group Offers:

We believe that a total reward strategy is most useful when it creates focus, commitment and action. When we assist our clients in developing their reward strategy, we view our role as a partner to this process by:

Facilitating critical discussions and developing a consensus with key leaders on the most important areas for investment and change.
Providing information and expert interpretation on the “best practices” of other organizations and how these may apply to the situation.
Summarizing the key messages in each program of compensation and rewards so they can be effectively assessed for their impact on the organization.
Developing the action plans necessary to design or implement desired changes.

In short, a strategy statement works because it enables the organization to focus actions and allocate resources to those areas that create a sustained competitive advantage.

You will see from this approach that we believe “How” programs work are often more important than “How much” (in terms of dollars) they provide to employees. Understanding the marketplace and your competitive position is critical to a sound reward strategy. How the programs are designed and utilized by the organization creates true value. By engaging in a serious assessment of current practices and making targeted improvements, the company will be able to assure it makes its return on investments.

By working with members of the Wilson Group, you will not only have additional insights and understanding of your current total compensation and reward programs, you will know what needs to be improved and managed effectively. Then, the time and dollars invested through these programs will have a positive, direct and meaningful impact on the success of the company.