So far 2020 has almost exclusively been about COVID-19.Whether it has been about working from home more than you ever thought you would, understanding the personal impact of being furloughed, or coming to terms with the uncertainty of being made redundant; the coronavirus has dominated our lives for the last 6 months. Now that we are starting to see a way through this global pandemic we should consider whether the reward we offer is working as hard as we need it to.
What do people want and really value, what do companies want to be known for, and crucially what can they afford to provide in a post-Covid world?
Everything for everyone
Only very few companies have the necessary resources to provide everything for everyone on a long-term sustainable basis. A few global giants have the resources necessary to provide market leading base pay complimented by great bonuses, a valuable long-term incentive, and a benefits offering, that would genuinely cater for all. In reality, even in such environments what can easily happen is that the more that is provided for people, the more they want and a culture of entitlement can ensue. For most companies, there is a need to be more creative with their resources and they will have to make choices about what the most important aspects of reward are that will enable them to attract, motivate and retain the people they need, to achieve their goals.
A clear purpose for reward
If most companies are making choices about where to position their base pay against the external market, what bonus opportunity is affordable, how many people to include in a long-term incentive plan, and which benefits to offer, they should be able to clearly articulate what the purpose of each element of reward is. Overall, we know it’s about attracting, motivating and retaining people, but what specific role does each element of reward play? Do they all work in harmony, complementing each other, or is there unnecessary overlap, which means value that could be allocated elsewhere is not being maximized?If you reward performance through a competitive short-term bonus plan and have an active promotion process so that people can grow their base pay through progression then linking base pay with short-term performance seems superfluous.
Reward that supports the culture you’re trying to build
If you’re clear on the purpose of each element of reward have you really considered what the reward says about the culture? It seems more common that companies are overly focused on offering the same rewards as the companies they regard as their competitors for talent. This has always seemed somewhat counterintuitive because if reward is homogenised it becomes irrelevant. Instead companies should take the opportunity to use reward to support the culture they are trying to build and in doing so set themselves apart from the competition for talent. Start-ups that talk about being entrepreneurial and wanting people to take risks, but offer generous pension plans and similar insured benefits to established multi-nationals with thousands of employees seem to me to be blurring their proposition. People that are truly entrepreneurial are unlikely to be attracted and motivated by traditional corporate style rewards.
Reward that drives the behaviour you want
At a more granula level, most companies benefit from a healthy level of employee turnover. New people with new ideas, new ways of looking at the same issues can be really beneficial. What the ideal level of employee turnover is, is difficult to determine, but what you should definitely avoid is reward working against the turnover you desire. Generous holiday programmes that get richer with tenure and any kind of defined benefit pension plan are a sure fire way to stifle healthy turnover. More specifically, if you know that the optimum lifecycle in a particular role is 18 months to 2 years, then any incentive plan for people in that role should align to that timeframe. Offering a long-term incentive that does not fully materialise until after 4 years would be counter-productive.
And finally, it really shouldn’t just be about reward
Coming out of covid, is an opportunity to reassess reward. To make sure it’s sustainable, supports the company you want to be, and offers the people you need, what they want and value. However, reward should never be considered in isolation, and more than ever, it is important that reward is aligned to, and compliments, the people strategy and the overall direction of the company. By ensuring this it will mean that you are maximising the investment you’re making in your people and reinforcing the culture you want to create and the company you want to be.
Connect with article author Matt Austin on LinkedIn today
