Retention and
attraction
This
is what can actually be said about the impact of TRSs on engagement and motivation
if we consider statements in isolation.
Inasmuch
as retaining valuable individuals is a difficult feat to achieve for employers
in whatever circumstances, in the current economic climate, broadly characterised
by belt tightening, attaining this objective clearly becomes even harder. Paying
particular care on effectively and properly communicating to each member of
staff the value of the overall reward package he/she receives appears, then, to
be particularly crucial (KPMG, 2002). Since pay increases could be unlikely or,
at best, not as generous as they had been during the previous years, the importance
of effectively communicating staff the worthiness of their current reward package
could help organisations to improve staff’s morale or, if anything, to soften
the negative impact that belt tightening periods can generate over staff (NorthgateArinso,
2009).
Ensuring
that individuals truly understand and properly value each component of reward
can turn to be particularly useful and effective in order to “developing or
reinforcing a branding for reward and benefits within an organisation” (Hay
Group, 2008). Additionally, this awareness can effectively contribute to deter
employees from leaving their current employer just for a meagre basic salary
increase, as well as make them understand that the organisation really care
about them. By comprehensively representing the real value of the overall
reward package, rather than only that of the core salary, offered by an
employer, TRSs can act as an affective and “valuable retention tool”
(NorthgateArinso, 2009). Recruitment is widely recognised as being a quite
expensive exercise; additionally, replacement cost is conservatively estimated
to reach 150% of the leaving employee’s annual compensation amount (IDC, 2011).
Statements, offering a real and complete picture of the worth of the package an
individual receives, will certainly make individuals thinking over about the
possibility of leaving their current employer.
Enabling
organisations to show individuals that they are adequately and competitively
rewarded for their capabilities and performance will turn to be particularly
important not only in order to retain individuals but also in order to attract
new talents (KPMG, 2002).
Statements,
helping organisations to provide candidates with a thorough and comprehensive
knowledge of the worthiness of the total reward package they receive “above and
beyond the core salary”, can effectively help organisations to attract valuable
individuals (NorthgateArinso, 2009). Giving potential recruits the possibility
to gain a good understating of the package’s value on offer will, also,
definitely enable organisations to manage more effectively and consistently the
recruitment process whilst developing the organisation’s brand of employer of
choice (NorthgateArinso, 2009).
Motivation and Engagement
Taking
as axiomatic that total reward statements, providing staff with a detailed knowledge
and understanding of their packages, can actually help businesses to retain
current and attract new staff, it could also be worth investigating if this
tool can actually also enable organisations to achieve better staff engagement
levels.
Considering
engagement more strictly associated with the job carried out by each
individual, rather than with his/her organisation, it cannot be excluded that
statements could actually act as drivers to produce better engagement levels.
Since they also contain details of all of the developmental opportunities
offered to them by their employers, on reading statements employees should
immediately found out that if they perform at certain levels it is also and mainly
because their employers have provided them with these developmental
opportunities, training and a job enabling them to carry out their activities
with that enthusiasm, stimulation and positive behaviour to which refer Murlis
and Watson (2001).
Statements
should also help firms to attain better results from the motivational point of
view. Individuals, in fact, by means of TRSs will have the opportunity to have,
at a glance, a complete view of all of the benefits they receive from their
employer. An individual not seeing in a statement anything motivating, neither
from the tangible nor from the intangible point of view, will clearly be an
individual totally unsatisfied, with his job and with his overall working
situation. Since organisations who have decided to introduce statements are
clearly not organisations offering their staff only basic salary, this
circumstance should be in practice the most unlikely to occur.
In
actual fact, nonetheless, statements do neither represent an isolated tool nor provide
a distinctive, additional value to employees on themselves, but they are
important to stress and highlight the value of what employers already do for
their staff. The real value employers provide to their staff is, in fact,
incorporated in all of the tangible and intangible, financial and
non-financial, elements included in their total reward programmes. To put it
another way, statements do not provide value, rather enable individuals to
value what their employers do for them, so that they basically support total
reward programmes meaning and effectiveness. Once again, we are looking at the
bundle effect, where the combined power of more forces, by means of synergy, enable
businesses to attain a better result compared to that which they would have
achieved by means of each single force used in isolation.
Implementation
critical factors
Communication
approach and strategy
Total reward statements are basically concerned
with total reward communication and, as such, they are considered as a crucial
element of total reward programmes implementation. Though TRSs represent an
important means by which employers aim to stress and emphasise the value of
their total reward programmes, in order to be effective total reward statements
need to be supported by a specific and effective communication programme themselves.
In
order to properly put the message across, employers should, first of all,
identify the most suitable communication strategy and approach.
Clearly,
on designing and deciding the communication approach employers should consider
that this has to be in line with the usual approach used within the
organisation.
Indeed,
total reward statements need to be consistent and coherent not only with the
communication style used within an organisation but also with its employer’s
brand (Hay Group, 2008).
Having
recourse to a pre release communication strategy has revealed to be a very
effective approach, enabling employers to attaining an average 75/80% employee
utilisation compared to the more common 25/40% average (Hay Group, 2008). Ads,
pop-ups and specific messages posted in the corporate intranet, poster,
newsletters, leaflets, memos, mails, you name it we have it can effectively
contribute to generate staff’s interest and draw their attention towards this
initiative.
When
it comes to total reward statements communication acquires a remarkable role
not only to support their introduction but also as for what concerns their
content. So that, in order to provide individuals with the necessary
information they need in order to take informed decision for their future
choices and avoid any possible form of mix-up, businesses need to keep communication
clear and simple, totally avoiding, in particular, any recourse to jargon
(Pearce, 2009).
As
suggested by Silverman and Reilly (2003) employees need to be knowledgeable
about, if anything, the essential mechanism of the benefits scheme in place and
TRSs can be the most suitable means to explain them how benefits plans are
operated. Ultimately, employers can also decide to provide access to external
financial advisor or a dedicated helpline in order to offer staff more specific
advice, clearly this would be a superb initiative, but it will obviously have a
considerable impact in terms of cost.
Benefits valuation
There
is broad consent on the critical importance the correct valuation of benefits
showed in TRSs has for their successful implementation. All of the data and
information provided to each member of staff, in fact, need to be accurate and
absolutely reliable. Differently, the statements exercise will turn to be a
massive waste of time and resources, not to mention the counterproductive
effects it is very likely to produce on staff morale.
Although,
by and large, the TRSs exercise seems to be rather straightforward, benefits
evaluation actually represents one of the trickiest decisions businesses need
to take.
More
specifically, employers have to decide if they intend to show in the statement
the value each perk is likely to provide to the individual concerned, the cost
faced by the firm to provide each of them or both. If, for instance, an
employee would need to spend £500,00 for a seasonal ticket enabling him to travel
from home to work, it is likely that the employer could offer the same ticket actually
paying it, for instance, £450,00 (depending on the number of seasonal tickets
bought and the agreement cut with the rail company).
According
to Silverman and Reilly (2003) organisations usually decide to state in the
document the value of each perk in terms of the advantage they offer to
employees (in the example £500,00), in that it is clearly associated with a
higher value compared to the cost actually faced by the employer (in the
example £450,00), who can, in fact, benefit of favourable prices on account of
buying a relevant quantity of each item or service. But the Authors also
highlight the circumstance that considering this perks’ valuation method could
give raise to dispute with employees and/or their representatives. In some
circumstances and depending on the different kinds of perks, in fact, the value
each employee will associate with each perk can be differently perceived
according to the different circumstances. Clearly individuals near their
retirement will perceive as higher the value associated with complimentary
pension schemes and health insurance, whilst younger people could perceive as less
worth the value of these kinds of benefits. Those perks which can be enjoyed by
employers with their family members would possibly be perceived as having even more
value than they objectively have.
Employers
should be careful on considering the impact of these different perceptions on
the acceptance of data reliability, the risk being of jeopardising the
legitimacy of the overall reward package on offer. That is why businesses very
often do prefer showing for each item both the value for the employee and the
cost faced by the organisation to offer it.
Other Key factors
In
addition to data accuracy, content personalisation, clear and simple
communication and a consistent data valuation method, there are other relevant
factors which need to be duly taken into consideration by employers when
designing statements.
One
of the things employers need to completely avoid, for instance, is to oversell
benefits (Hay Group, 2008). Employers should then be careful on not including
in statements more than is actually available and on offer, avoiding as well attributing
to benefits, independently of the used method, more than their actual value.
Another
pitfall business should avoid to fall into is to overfill statements with
figures (Hay Group, 2008). Despite numbers and charts can help employers to
provide a synthetic view of statements’ content, their usage has to be
appropriate and a descriptive section explaining and clarifying the meaning of
the different charts and figures has invariably to be included.
Some
issues, albeit apparently of secondary importance, which employers should be
ready to address during the phase of statements implementation, concern the
determination of the number of pages the overall document needs to contain and
the different lengths statements can reach according to the different
individuals to whom they are addressed (Hay Group, 2008). Depending on the
support chosen, i.e. paper or online, in fact, the different length and number
of pages, if not considered since the very beginning, can, in fact, give raise
to problems which could reveal to be not as simple and easy to overcome. Once
decided the standard layout, employers could decide, for instance, to leave some
spaces blank in the first instance in order not to change the overall scheme
and number of pages. In this case, nonetheless, decisions need to be taken in
order to determine the best way to fill these spaces before issuing the final
version of the statements.
Designing and
Implementation approach
In
order to design and implement total reward statements, employers have to use a
clear, structured approach. The method suggested by Watson Wyatt (2006) is
formed by 6 different stages. During the first stage businesses have to
complete the checklist of the benefits offered by the organisation to staff.
The second phase will be, instead, dedicated to take the decisions concerning
the statements’ structure. The third stage represents a quite delicate phase in
that is it concerned with the definition of the valuation method, which will be
used in order to determine data to be showed into statements. During the fourth
stage businesses will develop statements content and layout, whilst the fifth
stage will be concerned with data collection, which represents one of the most
sensitive phases of the overall process. At this point everything is ready for
the sixth stage, i.e. total reward statements launch.
Clearly,
before carrying out the statements designing and implementation processes a
previous analysis aiming to clearly highlight the business’ strategy and
objectives and determine how statements can actually support organisations to
achieve these has to be considered mandatory. This analysis is also of
paramount importance in order to determine where statements “sit in the broader
reward context” (BDO, 2010).
Since
statements are directly linked to the total reward programme in place within an
organisation and, as such, to the flexible and voluntary benefits schemes
eventually offered, TRSs after having been launched also need to be reviewed
according to the eventual changes applied to these schemes.
However,
design, development, launch and maintenance are not the only activities
associated with issuing TRSs. After having launched statements, in fact,
employers should carry out an employee survey aiming to investigate employees’
perception of this tool (Hay Group, 2008) and whether the intended objectives
have actually been attained. Clearly, employers will review statements
according to the feedback received by their staff, triggering a “refine and
refresh” stage which will, very likely, lead to a re-issuing phase (Hay Group,
2008).
This
process, aiming to modify and eventually adapt statements according to employee
feedback, has actually to be considered part of the maintenance process itself,
meaning by that that it has to be fully considered part of the overall process
and, as such, be carried out as a matter of course.
TRSs and the public
sector
Issuing
total reward statements could appear to be a practice typical of private sector
organisations, but this is not actually always the case. In the UK, in fact,
three big local authorities, namely the Buckinghamshire, Cambridgeshire and
Hertfordshire councils decided, during the summer of 2008, to join forces in
order to pilot a project aiming to design and implement total reward statements
to be issued for 60,000 staff (Berry, 2008).
After
all, this should not really be that surprising in that, although on the one
hand local governments’ reward packages have always been undervalued and
underestimated by staff, on the other hand it cannot be denied that public
sector employees usually enjoy benefits such as pension, holiday and flexible
working whose value very often overcomes those offered by private sector
employers (Berry, 2008).
And
that is actually why in 2008 the Cabinet Office in the UK recommended to public
bodies to have recourse to TRSs, the aim and objective are clearly exactly the
same as those pursued by private sector organisations.
TRSs
exercise is of paramount importance especially in a period when salary
increases granted to public sector staff are below the inflation rate; fostering
the value of the overall package offered to staff becomes, then, of paramount
importance (Hibberd, 2008).
What next
Summarising
the statements introduction process it can be said that by means of TRSs
introduction employers can clearly communicate to their staff the total
reward concept to which the organisation reward programme is inspired.
Employees can then have a clear view and understanding of what benefits their
employer offers to them and of the cost and value of the perks they receive.
Ultimately, by means of this tool employers can also clearly establish
within the business the principle of associating or integrating reward and benefits (Watson Wyatt, 2006).
That
done, employers, will need to gather employees’ feedback in order to eventually
change the tool accordingly and verify that the intended objectives have been
achieved. But this is not all, after having introduced total reward statements,
businesses will also need to analyse statements data in order to identify
possible opportunities in terms of financial savings, make changes in the
benefits packages and, eventually, in the cafeteria benefits schemes offered
(or deciding to introduce this latter scheme if not yet introduced within their
organisations) (Watson Wyatt, 2006).
Longo, R., (2011), Total reward statements’ influence on retention, attraction and
engagement. Implementation critical factors, HR Professionals, Milan [online].
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