Pay vs Intangibles

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Pay vs. Intangibles: Which Rew ards Best Motivate,Engage?Employees not involved in the design of reward programs

7/ 20/2010 By Stephen Miller

In light of the 2008-09 recession and sluggish recovery, employers have become concernedabout keeping employees motivated after wage freezes, lost bonuses, increased work

demands and downsizing. This has led to a corporate battle cry for employee engagement,

typically described as high levels of employee involvement, commitment to the organization

and job satisfact ion.

But most compensation professionals say that their organizations do not necessarily consider

how reward programs affect employee engagement, according to a survey report by

WorldatWork, Loyola University Chicago and Hay Group, Im pact o f Rewards Program s on

Em p loyee Engagem ent .

The survey of WorldatWork membersprimarily reward professionalswas fielded from Dec. 15,

2009 through Jan. 12, 2010. Among the findings, only 11 percent of respondents indicatedthat their organization frequently ("often" or "always") involved employees in the design of

reward programsalthough encouraging employee input and involvement in programs that

affect them is a method organizational development specialists suggest to enhance employee

engagement and commitment.

Through our research we have learned that organizations that involve employees in the

design, implementation and assessment of reward programs are assoc iated with reward

strategies that effectively foster high levels of employee engagement, said Dow Scott, Ph.D.,

professor of HR and industrial relations at Loyola University Chicago. Involving employees in

programs that affect them offers a direct way for reward professionals to enhance employee

engagement.

Work-life Balance, Work Quality and Career Opportunities

Data from the 736 survey respondents also shows that base pay and benefits had a weaker

relationship with the organizations ability to foster high levels of employee engagement and

motivation compared to nonfinancial incentives, intangible rewards and quality of leadership.

Quality of work, career development, organization climate and work-life balance all have a

greater perceived impact on employee engagement than financial rewards such as base

salaries, benefits and monetary incentives, said Tom McMullen, North American practice

leader for Hay Group, a consulting firm.

Quality of leadership has a profound impact on employee engagement and motivation, added

Paul Rowson, managing director of WorldatWork's Washington, D.C., office and conferencecenter. Organizations must think in terms of total rewards and not just financial rewards if

they are to enhance employee involvement, commitment, job satisfactionand performance.

Another View:

Pay Has Strongest Impac t on Employee Retention, Engagement

As the job market picks up and concerns about engagement and retention remain at theforefront, cost pressures still loom. According to Mercers 2010 Attraction and RetentionSurvey, slightly more than two-thirds (67 percent) of North American organizations will be

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influenced equally by external competitiveness and internal affordability when making paydecisions. However, about one-quarter (24 percent) report that affordability will have agreater impact on pay decisions.Conducted in April 2010, Mercers survey assesses the tactics employers are using topromote employee attraction, retention and engagement. It includes responses from morethan 320 employers across all industries throughout the U.S. and Canada.The survey found that over the previous 18 months, amid limited pay budgets,organizations increased their use of non-cash rewards as a means to enhance employee

retention and engagement. Rewards offered more during this time period included:

Communicating the value of total rewards to employees (27 percent ofrespondents).

Work-life programs (22 percent).

Formalized career paths (21 percent).

Special project opportunities (20 percent).

Despite past emphasis on non-cash rewards, for 2010 and beyond organizations plan tofocus on money as well as career development to retain and engage the right talent,

Mercer found. Leading reward elements perceived to have the strongest impact onemployee retention and engagement for 2010 were:

Base salary increases (41 percent of respondents).

Short- and long-term variable pay (36 percent).

Training and career development (35 percent).

Interestingly, approximately one-quarter of organizations report that programs such aswork-life initiatives, employee communication campaigns and t ime-off planselements ofimportance during the previous year and a halfwould have less impact on employeeretention and engagement going forward.

Non-cash programs like career-pathing, increased communication to employees and work-life initiatives are important in fostering employee retention and engagement regardless ofthe economic environment, said Loree Griffith, a principal with Mercers rewardsconsulting business. However, as recovery occurs, employers want to revisit pay as ameans to staying competitive and retaining top-performing employees.

Stephen Milleris an online editor/manager for SHRM.

Related Article:

U.S. Rank-and-File Workers Feel Undervalued by Managers, HR News, July 2010

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SHRM Compensation Data Center

SHRM Metro Economic Outlook reports

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Pay vs Intangibles

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