Tuesday, 13 November 2007

Playing to Win in a Global Economy

Watson Wyatt's Global Strategic Rewards Report (2007/08) notes the difficulty organisations around the world are experiencing in attracting and retaining their employees, particularly those with critical skills and those rated as the highest performers.


The report also notes that we need to better understand the wants and needs of employees.

Employers think the key drivers for people to join their organisation are, in order: career development opportunities (47%); base pay (46%); employer reputation (44%); company culture (34%); nature of work (26%). Employees themselves believe these drivers are nature of work (44%); base pay (31%); job security (30%); employer reputation (23%) and length of commute (23%).

Similarly, employers' views on drivers for retention are: base pay (52%); career development opportunities (47%); promotion opportunity (45%); relationship with supervisor / manager (35%); work/life balance (24%). Employees say the true drivers are stress levels (37%); base pay (33%); promotion opportunity (25%); career development opportunities (23%) and work/life balance (22%).
SHRM recently found a similar lack of understanding of drivers for employee satisfaction. HR professionals noted that these are relationship with immediate supervisor; compensation; management recognition of job performance; benefits and communication between employees and senior management. Employees said the factors were compensation; benefits; job security; work / life balance; and communication between employees and senior management.
As well as employers' lack of understanding of their employees' needs, both reports note that HR tends to think people and longer-term issues are more important than they are.

SHRM: "It remains a challenge for HR professionals to balance the relational aspects of job satisfaction with tangible rewards, such as benefits, compensation, job security and flexibility."

And commenting on Watson Wyatt's report, Richard Donkin in the FT notes:

"Employers, for example, failed to grasp the importance attached by employees to the nature of their work. This intrinsic satisfaction to be found in a job was overlooked by managers, who believed that opportunities for career development would be of prime concern. The distinction is important because the latter assumption relates to future possibilities while it seems the immediate concern of employees is for the here and now of their work."

The reports also reinforce Towers' finding that a range of organisational factors have more impact than employee's relationship with their line manager (although it could be argued that an employee's experiences of these factors is felt through their line manager):

SHRM: "HR professionals viewed employees' relationships with their immediate supervisers aer the most important aspect of employee job satisfaction, while employees placed it eighth on their list."

I think there are some potential flaws in these surveys. The first relates to how well employees understand the basis for the decisions they take. Secondly, in my experience, drivers for joining, satisfaction and retention vary from organisation to organisation. This means that employers' / HR's views of their own employees' needs could be closer than these reports suggest, the actual situation being disguised by the process of averaging. Nevertheless, I think the findings do ring broadly true.
Watson Wyatt point to two further pitfalls linked to this lack of understanding:

  • "Misguided investments - Companies and employees have divergent perceptions of the reasons for attraction and retention, so the changes that companies make may not align with employee priorities.

  • Poor execution / implementation - Employees may not understand the changes that employers are making."


The last point is a clear concern given that only half of employers say that they communicate reward plan designs.

I would add one further pitfall to this list, from Towers Perrin's recent report on performance management and reward, that there is too much 'timid tinkering' in the design of reward systems where what s really needed in much more fundamental and innovative change.

However, Watson Wyatt's report did identify good news too: organisations are already stepping up their actions, and particularly those focused on the critical employee groups identified in the report:

"To reduce turnover, companies are increasing both their efforts to survey employees (40%) and their responsiveness to the survey findings (37%). Organisations have also implemented off-cycle increases (32%), improved work-life balance (29%) and increased the use of recognition programmes (29%).

Companies are approaching turnover among top-performing employees differently, most often with accelerated career development opportunities (50%), off-cycle pay increases (49%) and rotational assignments (37%)."