Enabling, Engaging, & Rewarding Employees · PDF fileEnabling, Engaging, & Rewarding Employees...

Enabling, Engaging, & Rewarding EmployeesA Study of Most Admired Companies

Mexico City (April 6, 2011)

Tom McMullen

Fortune survey of World’s Most Admired Companies

What is it?

� Fortune has combined the America's Most Admired Company (AMAC) survey and the World's Most Admired Company (WMAC) survey to generate one global ranking

� Candidate companies: Fortune 1,000 companies; non-US Global 500

2© 2010 Hay Group. All rights reserved

Candidate companies: Fortune 1,000 companies; non-US Global 500 companies of $10 billion+ and top foreign companies operating in the US

� Companies rated both overall and relative their industry peers by executives, directors and analysts

� A total of 667 companies from 33 countries were surveyed

� Industry rankings generated for 55 industries

‘All stars’ for 2010

1 Apple

2 Google

3 Berkshire Hathaway

4 Johnson & Johnson

11 Microsoft

12 Southwest Airlines

13 FedEx

14 McDonald's


4

5 Amazon.com

6 Procter & Gamble

7 Toyota Motor

8 Goldman Sachs Group

9 Wal-Mart Stores

10 Coca-Cola

14

15 IBM

16 General Electric

17 3M

18 JP Morgan Chase

19 Walt Disney

20 Cisco Systems

The value of reputation

WMACs outperform industry peers and the market as a whole

Total shareholder returns

WMAC S&P 500


One year 42.3% 26.5%

Three year 0.1% (5.6)%

Five year 5.5% 0.4%

Ten year 4.0% (0.9)%

This year’s research

Our focus

� This year, our research focused on employee engagement issues

� Explore organization approaches to retain and motivate employees in a tough economic environment – and how they can reengage and reenergize their workforces as they prepare for recovery-related growth


workforces as they prepare for recovery-related growth

02The business case for engaging and enabling employees

02

Engaging and enabling employees to drive performance

Work environments have to turn motivation into productivity

Engagement


Str

ate

gic

inte

nt

Busin

ess r

esults

Enablement

Engagement

Employee effectiveness

The business case for engaging andenabling employees

Increase in employees above performance expectations

Reduction in turnover rates

Customer satisfaction rates

Revenue growth

Employee retention

Employee performance

Customer satisfaction

Financial success


expectations

10% -40% 71% x2.5High engagement only

50% -54% 89% x4.5High engagement +high enablement

Based on linkage case studies using Hay Group’s global normative database

03Lessons Learned from WMACs

03

Lessons learned from WMACs

Key themes

� Linking employee engagement to organizational objectives

� Employee engagement in a downturn

� Employee surveys and other approaches to measuring and monitoring employee engagement


employee engagement

� Ensuring line manager involvement in and attention to engagement initiatives

� ROI on engagement efforts

� Communicating employee engagement levels externally

Weaving employee engagement into organizational fabric

81

94

Most Admired Peer group

Our company has a specific definition of employee engagement


% Favorable

67

79

88

88

0 20 40 60 80 100

Our company has developed an explicit employer brand

HR staff across our company have a good understanding of what

employee engagement is

WMACs made less extensive use of …

WMACs were able to take less severe actions amid the downturn

Hiring freezes30

14



Compensation freezes

% Very great extent / great extent

Layoffs23

36

10

19

0 10 20 30 40 50

WMACs are emerging from the recession with more engaged and enabled people

Rate now as compared with two years ago...

Employees’ loyaltyto the organization

49

69



Ease of recruiting talentto fill key positions

Frustration among employeesover work conditions

not conducive to their success

% Greatly improved / improved

31

57

44

73

0 20 40 60 80 100

Ongoing measurement and monitoring

How would you rate the effectiveness of your employee

survey program in generating action

87



survey program in generating action and change?

% Favorable

58

69

71

0 20 40 60 80 100

How successful has your company been in linking employee engagement to customer

satisfaction?

WMACs ensure line manager involvement

76

75

86


Line managers own engagement initiatives

Engagement levels fostered by line


% Favorable

82

66

77

90

65

75

0 20 40 60 80 100

Engagement levels fostered by line managers are a factor in performance

evaluations

Employee engagement metrics are incorporated into variable pay programs

Employee engagement is incorporated into leadership or

management development programs

WMACs are realizing a greater ROI on engagement efforts

I believe our efforts to engage employee have:

69

82

83

94


Created a competitive advantage

Reduced complaints about pay fairness and equity


% Strongly agree / agree

72

72

67

69

84

85

94

0 20 40 60 80 100

Reduced turnover

about pay fairness and equity

Strengthened customer relationships

Reduced employee performance problems

WMACs do more to communicate engagement levels to outside stakeholders

How frequently do you share information on employee engagement levels with...

33

45


Investors


% Very frequently / frequently

30

56

51

65

0 20 40 60 80 100

Prospective hires

Current/prospective customers

04Perspectives from Reward Professionals

04

Research objectives

� Survey of over 650 WorldatWork members to:

− Identify reward practices impacting employee engagement

− Identify what works and what can


− Identify what works and what can be improved in the reward space in engaging employees

− Identify reward and engagement attributes and activities that enhance organization performance

Reward professionals believe:

� Intangible rewards and leadership have more impact on engagement than base pay, benefits, and incentives

� Short term incentives are the tangible rewards that have the most impact on engagement


impact on engagement

� Quality of work, work environment, career development, and senior leadership are the intangible rewards that have the most impact

Impact of financial rewards on engagement

Base salary level

Base salary increase

Benefits and perquisites programs

42%

41%

39%

44%

20%

15%


Short-term incentives or bonus

programs

Benefits and perquisites programs

32%

32%

54%

48%

50%

44%

30%

37%

18%

24%

16%

14%

0% 20% 40% 60% 80% 100%

% High % Neither % Low

Long-term incentives or bonus

programs

Financial recognition programs

Impact of intangible rewards on engagement

Work environment or

organizational climate

The nature of the job or quality

of the work

61%

69%

28%

26%

10%

5%


Career development

opportunities

organizational climate

Work-life balance

37%

55%

59%

47%

31%

29%

16%

14%

11%

0% 20% 40% 60% 80% 100%


Non-financial recognition

programs

Impact of leadership on engagement

Manager’s assessment of

employee performance

Coaching from managers or

supervisors55%

65%

36%

25%

9%

9%


Organizational objectives

supervisors

Quality of senior leadership 49%

53%

55%

37%

34%

36%

14%

13%

9%

0% 20% 40% 60% 80% 100%


Why people leave organizations

From our employee opinion research database (4MM records), the factors that drive employees out of organizations include (in rank order)

1. Career development opportunities


2. Compensation

3. Work climate

4. Manager/supervisory conflict

5. Lack of challenging work

6. Direction of organization

7. Lack of recognition

Impact of employee and manager involvement in reward design on engagement

� Conventional thinking and the research suggests that participation in program design builds ownership and commitment.

� And in this study we found reward program involvement is linked to more positive views of effectiveness of reward strategies in engaging


more positive views of effectiveness of reward strategies in engaging employees (r ≥ .35)

� However, we found very low levels of employee and manager involvement in reward program design, implementation, and evaluation.

4%

4%

17%

16%

42%

40%

37%

40%

Employee involvement in reward programs

Design

Implementation


3%

18%

17%

39%

42%

40%

37%

0% 20% 40% 60% 80% 100%

% Always % Often % Seldom % Never

Implementation

Evaluation

12%

8%

31%

29%

35%

40%

22%

23%

Manager involvement in reward programs

Design

Implementation


6%

12%

27%

31%

37%

35%

39%

22%

0% 20% 40% 60% 80% 100%

% Always % Often % Seldom % Never

Implementation

Evaluation

Why is employee and management and management involvement so low?

05Recommendations

05

Our top ten list

Organizational Priorities

1. Make a business case for engaging employees

2. Measure and monitor engagement

Reward Priorities6. Go beyond comp & benefits to a

total rewards mindset

7. Include employees & managers in reward design and launch


engagement

3. Take action on survey results

4. Make everyone responsible for engagement

5. Connect people with the future

8. Tailor total rewards to workforce segmentation

9. Use engagement metrics in performance criteria

10.Communicate the value of what you have

1. Make a business case for engaging employees

� Employee engagement should not be confused with employee satisfaction.

� Organizations that manage employee engagement most successfully clearly articulate how high levels of employee motivation support core priorities (e.g., enhancing productivity and innovation, fostering and sustaining strong customer relationships, and retaining top talent)


2. Measure and monitor engagement

� Employee opinion surveys are important tools for monitoring and managing employee engagement

� Surveys are two-way communication tools

− What is measured sends important signals to employees about values and priorities.


employees about values and priorities.

− Sharing results and a plan for action demonstrates respect for employee input

3. Take action on survey results

� The best companies make more frequent use of surveys than their peers and they use the input more effectively

− They indicate employee surveys are more effective in generating action and change

− They report doing more to link employee survey results to performance


− They report doing more to link employee survey results to performance outcomes, such as customer satisfaction

− They say their best managers are more likely to take action

4. Make everyone responsible for employee engagement

� Engagement should be a priority for managers and employees at all levels

Senior Leaders

• Share engagement index scores across functions

• Communicate expectations about engagement to

management team

• Model engaging leadership behaviors

Human Resources

• Align employer branding to key engagement drivers

• Measure engagement levels and consult on key

actions

• Coach and support people managers in engaging


Model engaging leadership behaviors

• Hold engagement conversations with top talent

• Incorporate engagement into performance

evaluations

People Managers

• Understand and align with functional leaders’

expectations

• Examine personal engagement

• Build skill in management behaviors that impact

employee engagement

• Hold engagement conversations with top talent

Coach and support people managers in engaging

their teams

Employees

• Discuss individual engagement factors with manager

• Participate in the employee survey and other

feedback opportunities

• Provide feedback to managers about the

effectiveness of engagement efforts

5. Connect people with the future

� Maintaining high levels of engagement requires connecting people with jobs and organizations and helping them to see a positive future

for themselves and their


for themselves and their organizations.

� Focus areas should include:

− Confidence in leadership

− Clear and promising direction

− Development opportunities

6. Go beyond compensation and benefits to a total reward mindset

� Help leaders and managers understand that rewards

go far beyond compensation and benefits

� Build the core organization messages (employment

value proposition) around what is meant by total

rewards


rewards

� Develop tools for managers so they can effectively

reward employees beyond the confines of

compensation and benefits

� Develop and reinforce communications

around total rewards

7. Include employees and managers in reward design and launch

Intangible reward

Annual variable

Guaranteed cash

“We do employee surveys every

two years and make action plans

based upon the survey results.

One key finding is that we need to

do a better job at communicating

the total value of reward to our


Benefits Long term incentives

reward variable

employees.”

Heineken

“The real power is when you actually start

talking with your employees. We design our

reward programs, invest in new programs,

and beef up current programs based upon

the feedback we receive from our

employees.”

McDonalds

8. Tailor total rewards to workforce segmentation

� Identify the most meaningful and valued ‘rewards’ in the organization: Do reward values vary across the organization and work units?

� Recognize that different employees value different rewards: What do your boomers, generation X and Ys value?

Build the manager’s reward tool kit based on this understanding


� Build the manager’s reward tool kit based on this understanding

− How can they use

− career development

− organization and job design

− non-financial recognition programs

− organizational work climate

… to reward employees?

9. Use engagement metrics in performance criteria

� The Most Admired Companies have more balance performance scorecards

− Balances timeframes, measurement level and measurement types

− MACs using human capital measures are double their peer groups

� Recognition that financial performance is driven by engagement


� Recognition that financial performance is driven by engagement

� Establish baseline measures so you can monitor trends Financial

Non-financial

Corporate

Individual

Short term

Long term

Financial

Non-financial

Corporate

Individual

Short term

Long termNon-financialNon-financial

FinancialFinancialCorporateCorporate

IndividualIndividual

Short term Short term

Long termLong term

CustomerHuman Capital

OperationalSocial

Responsibility

10. Communicate the value of what you offer

� ‘Best’ practices and sophisticated designs fail if they are not properly rolled out.

� Clarify and focus on a few direct messages and tools

� Use total reward statements


� Use total reward statements

� Help line managers understand and use their tool kit to communicate reward value

What else is on your list?


What else is on your list?

Contact us

Tom McMullen

Hay Group (Chicago)

[email protected]

312.228.1848


Enabling, Engaging, & Rewarding Employees · PDF fileEnabling, Engaging, & Rewarding Employees...

Documents

Transcript of Enabling, Engaging, & Rewarding Employees · PDF fileEnabling, Engaging, & Rewarding Employees...