Employees’ motivation, engagement and commitment, can benefits packages help?

Two similar investigations conducted by the CIPD (CIPD, 2011) over a period of six consecutive months into the reasons for individuals deciding to change their job have produced contrasting results. Whilst the previous quarter investigation had revealed that the main cause for individuals deciding to leave their employer was essentially related with the lack of intangible benefits provided by their job, and hence with job satisfaction, the following study showed that job satisfaction, as the main reason for employees making the decision to leave their employer, had been replaced with the need to receive a higher pay and more generous, valuable benefits (CIPD, 2011). This change in individual predilections apparently marked a shift from individual preference for intangible to tangible rewards.

 

Despite, as claimed by Hemsley (2011), the findings of these investigations suggest that individuals are ready to sacrifice job satisfaction for more generous pay and benefits, this does not necessarily entails that employers can successfully keep their staff “engaged with benefits.” As pointed out by the CIPD (2011), these results rather provide evidence that the key driver and motivator for individuals deciding to leave their current employer is to receive a more significant reward package, rather than to enhance their satisfaction at work, which has at worst nothing and at best little to do with motivation in general.

 

The findings of the CIPD investigation are indeed coherent and consistent with the results produced by a similar survey conducted by the National Training Awards (2010). Something like 76 percent of the respondents to this survey actually admitted that when looking for a new job their major aim is that to receive a more valuable financial reward package. The investigation also revealed that just a relatively meagre 32 percent of the participants maintained to be motivated by money to perform well in their job. This study hence clearly stresses and effectively highlights the difference existing between the two separate aspects: motivation to change a job and motivation in the workplace.

 

In order to consistently and properly investigate the subject it is absolutely important to avert any possible type of mix-up. To this extent a clear definition of and distinction between the terms engagement, motivation and commitment can definitely reveal to be useful.

 

Motivation

As suggested by Armstrong (2009), motivation can be defined as an objective-directed behaviour. A motive basically represents a reason, or rather, the reason for an individual doing something (formulation which at large essentially corresponds with the definition of “motive” provided by both the Oxford and Cambridge dictionaries).

 

 

Individuals can either motivate themselves autonomously, setting their objectives of their own accord and identifying the more suitable way to achieve them; or try and motivate other people setting objectives for others and encouraging these to reach their targets.
 

Either it is the case of self-motivation or of motivating other people, individuals tend to feel genuinely motivated only when what is required from them is likely to enable them to attain an objective and something they value, that is to say a reward at large (Armstrong, 2009). In order to fulfil their purpose, individuals will be invariably ready or motivated to exercise and engage in discretionary behaviour.

 

 

Engagement

The term engagement, with specific reference to the business world and more in particular as regards employee engagement, has actually been defined in many ways over time. All of the formulations provided so far can be nevertheless grouped into two main types of definitions: one which associates engagement with the organization, the other which directly links engagement to the activities performed by an employee.

 

 

The former definition basically associates engagement with the individual sense of belonging. Amongst the advocates of this type of formulation can be mentioned the US Conference Board, which defines engagement as the “heightened connection” which individuals feel for their employer (US Conference Board, 2006) and the British Institute for Employment Studies’ (IES), which describes an engaged individual as someone who believes in and identifies with his/her organization (Robinson et al, 2004).

 

 

 

According to the majority of the definitions hitherto formulated, notwithstanding, the concept of employee engagement is much more concerned with the job and concepts like performance and discretionary behaviour, rather than with the organization. Individuals can be indeed engaged with their job, but not committed to their organization, whereas committed employees are not necessarily engaged (Armstrong, 2009). As claimed by Armstrong (2009), the employees’ sense of belonging and feeling of identification with their organization should be more aptly linked to the term commitment.

 

 

Murlis and Watson (2001) refer to engagement in the self-explanatory sense of “engaged performance”, where organizational success is achieved by means of employee enthusiasm, stimulation and positive behaviour. Towers Watson (2007) suggests that staff engagement emerges and depends on the extent individuals “put discretionary effort in their work, beyond the minimum to get the job done.”

 

 

It can be agreed with Armstrong that, albeit the concept of engagement is incline to be interpreted in several ways, more strictly associating it with the idea of organizational commitment may actually leave room for doubt about its real and widely recognized meaning. The idea nowadays most broadly associated with engagement is typically job-related. Engagement seen from the employer perspective should hence be considered as the bundle of activities and initiatives planned and implemented by this in order to:

- Encourage the individuals’ positive approach to their job;

- Induce employees’ discretionary behaviour and efforts;

- Prepare individuals to go the extra mile.

 

 

Since it is also widely recognised that individual behaviour is of paramount importance for an organization to achieve its intended objectives and ultimately attain competitive edge, the activities which employers co-ordinate to boost employee engagement should also strive, in alignment with the overall business strategy, to foster the behaviour they desire to be exhibited by individuals.

 

 

Commitment

The idea of commitment, which should build up during the development of a HRM philosophy, is most appropriately associated with the meaning of organizational citizenship (Armstrong, 2009). Commitment is what essentially accounts for an individual be proud to work for a particular organization and develop in turn a strong sense of belonging. Porter et al (1974) suggest that commitment relates to the extent of an individual identification with, and involvement in, a particular business.

 

 

 

The notion of commitment outlined so far is generally referred to as “attitudinal commitment”, whereas the type of conduct mostly associated with staying with an organization and continue to contribute to the pursuance of its aim is more commonly referred to as “behavioural commitment” (Torrington et al, 2008).

 

 

 

The concept of commitment is indeed the object of diverging and contrasting opinions; especially as for what concerns the actual existence of a direct link between commitment and performance. Whilst a number of Authors do recognise the existence of this link (Walton, 1985; Iles, Mabey and Robertson, 1990; Guest, 1998; Marchington and Zagelmeyer, 2005) in fact others (Meyer and Allen, 1997) emphasize the lack of evidence in support of this alleged direct cause-effect relationship. Cooper and Hartley (1991) suggest that commitment, reducing flexibility and inhibiting creative problem solving, could indeed jeopardize organizational performance.

 

 

Can benefits and reward help?

Having investigated the meaning of engagement, commitment and motivation, it can be now tried the exercise aiming at exploring whether the benefits included by employers in their value proposition can actually help these to engage, motivate and commit to the business their employees.

 

 

 

Benefits, reward and motivation

The findings of the CIPD and National Training Award investigations mentioned above can actually help to answer the question. Both studies suggest that individuals place great emphasis on financial reward when looking for a new job so that in the event an individual should receive more than one job offer it is very likely that this will opt for the one associated with the most generous reward package. Financial reward would clearly be in this case the “motive” for an individual accepting a particular job offer or the motive for deciding amongst a number of offers which one to accept. But can actually benefits and reward be considered effective motivators in the workplace?

 

 

 

Taking heed of the definition of motivation it clearly emerges that individuals behave and act in a particular way to achieve a result, that is to say an objective. In this instance, discretionary behaviour is not a means in itself but a means to an end, namely a reward. Considered as such tangible rewards and benefits may be regarded as motivators, individuals are likely to make extra efforts and perform better in order to attain the intended result: a bonus, a valued benefit, a pay increase or a cash supplement at large. Financial rewards can thus be considered as effective motivators in the short-term, to wit: for the period of time necessary for an individual to achieve his/her immediate end. Nonetheless, it is unlikely that employers could effectually motivate employees in the mid and long run by just relying on the effects yielded by financial rewards. This being the case, in a bid to pursue their intended objective, these should constantly resort to the carrot and stick approach, which would not be a big issue on its own but for the fact that this method would very shortly reveal to be extremely expensive and, as such, unsustainable over time.

 

 

 

Financial rewards are hence ultimately likely to enable businesses to attain some positive results, but only in the short run. Perhaps, this method could be occasionally used, for instance, in those cases in which employers have to confer particularly sensitive and delicate assignments to their best employees. Some of them could feel motivated by the fact of having been deemed as the most suitable employees for the assignment and by the circumstance that the employer is confident that these will yield the expected results; this is indeed the case of intangible rewards. By contrast, some other individuals may feel mostly motivated by tangible rewards. Under these circumstances, a mix of the two approaches should indeed reveal to be the most effectual method to produce the best results.

 

 

As a general rule, completely underestimating the effect and significance of financial reward would represent a massive blunder; not only during periods characterised by predominantly grim financial and economic conditions. Financial reward never is completely irrelevant; as suggested by the Hertzberg’s two-factor theory (1957), it is not a motivator on its own, but an inadequate and insufficient financial reward package is extremely likely to produce demotivating effects.

 

 

 

Benefits, reward and engagement

Taking into consideration the concept of engagement as defined by the US Conference Board and the British IES, benefits or strategic benefits how referred to by Hemsley (2011), should be regarded as useful to retain employees and to keep these committed to an organization; safe in the knowledge that committed individuals are not necessarily engaged individuals. This approach, notwithstanding, can actually be considered debatable in that whether an individual has decided to leave his/her current employer and has actively started to seek another job, it is hardly believable that such a decision have been actually made by reason of the weakness of the benefits package offered by the current employer, unless the organization is offering overall financial reward packages completely unaligned with the local labour market. In general, such decisions are indeed based on well-different grounds. 

 

Considering the concept of engagement as directly linked to the job, rather than to the organization the most significant reward an individual can obtain from performing his/her day-to-day activities is clearly mainly related to the intangible aspect of reward, the type of reward which is essentially inwardly generated by an individual. Employees find their job and the activities they perform compelling, significant and fulfilling and this accounts for them feeling engaged. Discretionary behaviour does not represent a means to an end, that is to say a financial reward, but the end itself. The reward is represented by the satisfaction individuals obtain from the job these perform and the result these yield by their actions. More than a matter of reward it is hence a matter of self-fulfilment.

 

In order this to occur, nonetheless, managers have to play their role and do whatever they can to enable employees to find fulfilment in their job. Managers can exert engagement on their direct reports by means of job design, job enrichment, employee involvement and employee empowerment initiatives, delegating decision making and in general by means of all of the activities favouring individual personal and professional growth, to wit: offering these learning, training and development opportunities.

 

Whether to perform well individuals need a job giving them a feeling of usefulness, autonomy, involvement and growth it is unlikely that these may exhibit discretionary behaviour by virtue of a more considerable financial reward package; which after a while would be considered as normal and justified irrespective of their performance. 

 

 

 

Benefits, reward and commitment

It could be contended that to some extent benefits and reward may help employers to retain employees. Taking as axiomatic that, when seeking for a new job, individuals only care about financial reward, it would really make no sense leaving the current employer for a new one offering a reward package similar to that which they already receive. Under similar circumstances individuals would possibly opt to better remain with the current employer. Yet, employees know how things go within their current organization (which could sometimes be just the reason why individuals decide to leave), but they surely know little or nothing about how things would go once having eventually joined a new organization; things may potentially go worse. As a general rule, unless the worth of the reward package offered by the new employer is remarkably more considerable than the current one, it is unlikely that an individual might decide to leave an organization for joining a different one exclusively on account of financial-reward-related reasons.

 

The benefits package offered by an employer may hence reveal to be useful to retain its employees, but it sorely depends on the different circumstances so that the effectiveness of benefits packages as a certain means to retain staff remains questionable. In contrast, as confirmed by the CIPD and the National Training Awards investigations, benefits packages can reveal to be useful for businesses which want to attract new talents from the exogenous environment. Claiming that reward packages may reveal to be useful to attract new staff, but can produce limited effects, if any, to retain existing staff may actually sound contradictory. The different role which benefits packages can play depends indeed on the overall reward package offered by an employer. Whether, for instance, an individual should receive in addition to pay only a daily luncheon voucher, the offer of a similar financial reward package enriched by a company car, a housing allowance and a complementary pension scheme could make a world of difference.

 

 

Since committed individuals are not necessarily either engaged or motivated individuals, employers aiming at enhancing employee commitment should pay extra care during the preparation of their budget as regards the sum these are eventually planning to allocate for the attainment of this particular aim. The investment may in fact produce in turn no financial return at all. Since individual commitment is associated with sense of belonging and organizational citizenship, and committed employees are usually proud to work for their organization, employers should try to achieve this objective focusing their efforts on the design and development of employer branding strategies, which will surely be also very effective to attract talented individuals from the exogenous environment. CSR activities, flexible working policies and similar initiatives can at large help employers to achieve the objective. Individuals would be certainly proud to work for an organization which pays attention to the environment, backs charities and endorses eco-friendly activities and initiatives. 
 
 
 
One of the most, arguably the most, important element and characteristic at the basis of employee commitment is invariably represented by consistency and integrity. Individuals are very sensitive to any discrepancy eventually emerging between what employers communicate and foster on paper and what they actually do in practice. Employers have hence to invariably talk the talk and walk the walk.

 

 

Be proud to be part of an organization, rather than of another very much depends on these factors; believing that a person may feel gratified to work for a particular employer only for the financial reward packages this offers would represent a massive blunder.

 

The influence of the exogenous environment

The reason for jobseekers preference having shifted from “increase job satisfaction” to “increase salary/benefits” when looking for a new job, can very likely be explained by the deterioration of employee standard of living at large. The same study suggests that only 7 percent of the respondents reported that their standard of living has actually improved, whilst 56 percent said that it has remained the same and 36 percent reported a worsening situation (CIPD, 2011).

 

The grim financial exogenous context can clearly make a negative impact on the employees’ mood and sometimes, albeit inadvertently, these could bring with them to work their personal problems and feelings. This occurrence may clearly affect their level of performance; the employer’s support can hence definitely help. Since employees are prone to forget in the long-term what an employer has done for them and to keep, by contrast, long-term memory of any even tiny accident, such a help should absolutely be considered within the array of the initiatives producing short-term effects. Yet, during downturn and slowdown periods it is unlikely that employers may afford extra-budget expenses, but this clearly depends on the different circumstances.

 

Still considering the findings of the CIPD study, it must be pointed out that despite “increase salary/benefits” has been indicated, with 54 percent of preferences, as the main motivation for individuals wanting to change their job, “increase job satisfaction”, with 42 percent, “opportunities to learn new things”, with 30 percent and “opportunities for promotion”, with 24 percent, all added together definitely achieved a remarkable score in favour of the intangible and non-financial-related reasons for individuals making the decision to leave their employer (the respondents to the CIPD survey had the latitude to tick more than one option). The change at the top of the table hence does just represent the tip of the iceberg and does not really represent the overall result of the investigation, which still recognises a remarkable and prevailing importance to the intangible side of reward.

 

Motivated, engaged and committed employees would clearly perform much better than individuals who are just motivated or just engaged or just committed. The combination of the three states would actually yield an ideal synergic, multiplicative effect, typical of the bundle approach, which is indeed very tricky to produce in practice.

 

Benefits and salary, as part of a total reward model where the different components of financial and non financial reward play a coordinated role to implement an organization’s reward philosophy and strategy, can clearly reveal to be significant contributors to employee engagement, commitment and motivation. To motivate, engage and commit staff employers should develop a plan of action based on the simultaneous implementation of a series of harmonized initiatives basically aiming at offering employees: learning and development opportunities, an appropriate working environment, a fair and equitable pay scheme and a suitable benefits programme, in other words a consistent and well-developed and well-designed total reward scheme, never neglecting that execution invariably is of paramount importance.  

Longo, R., (2011), Employees’ motivation, engagement and commitment, can benefits packages help?, HR Professionals, [online].


For an extended version of this article and much, much more click here

ABSENCE SURVEY

Levels, causes, costs and patterns

According to the last CIPD “Absence Management” Survey, in 2009, the average employee absence rate has been of 3.3% - 7.4 days per employee a year -, compared to the 3.5% - 8.0 days a year - recorded during the previous 12 months.

This is the lowest absence rate since 2000 and is calculated considering calendar years.

Table 1 shows the trend emerged during the last 10 years.

Sector differences
The investigation revealed that, considering the different sectors, the highest absence score remains pretty high in the public sector, with 9.7 days per employee a year, although recoding a slight decreasing from the previous year’s rate of 9.8 per employee.

Non-profit organisations, the only sector recording an absence ratio increase, reached the second highest ratio with 9.4 days absence a year per employee.

Things have definitely gone better in the “manufacturing and production sector” and in the “private sector services” organisations, where the ratio dropped respectively to in6.5 and 7.2, compared to 7.2 and 6.4 days per employee per year recorded at the end of the previous 12 months.

More in particular, the manufacturing and production sector recorded the highest absence level with 9.1 days per employee per year, with a remarkable increase compared to the 5.1 days figure of the previous year.

On the other hand of it, still remaining in the manufacturing and production sector, the lowest absence level was attained by textiles employees, who recorded an average of 3.7 days of absence per year.

In the private sector services call centres revealed to be the businesses mostly affected by staff absence, with 12.4 days per employee per year, even though it recorded a slight decrease, - 0.4, compared with the previous year.

Better results were achieved by the IT services’ staff who, although recording a 0.4 increase, recorded a 4.8 figure.

In the public sector, somewhat ironically perhaps, the highest absence level was recorded in the health services, where employees had an average absence rate of 11 days per year. Nevertheless, this result represents an improvement compared to the 11.7 days per employee registered in 2008.

Confirming the trend emerged during the previous 12 months, education was, instead, the sector reporting the lowest figure, 7.5 days, registering a further reduction compared to the 7.8 days per employee per year recorded during the previous 12 months.

Amongst non-profit organisations care services employers were the worst performers in terms of absence ratio, attaining the average rate of 10.2 days per employee per year, which represents an increase of 1.3 from the previous year. The best performer emerged to be the “other voluntary” sector organisations, where the absence rate decreased from 6.0 days, from the previous year, to 5.1.

The investigation revealed, not really surprisingly, that between manual and non-manual workers, the former attained the higher absence ratio, with 8.6 days per employee per year, whilst the latter recorded 5.9 days per employee.
For further details see Tables 2 to 5.

  

Increases Vs decreases

Amongst the businesses participating to the survey, 21% reported an absence rate increase, whilst 37% reported a decrease, 27% reported no change at all and 15% did not stated.

The influence of workforce size

As showed in Table 6, the survey findings revealed a direct link between an organisation size and its absence rate. In particular, organisations having a lower number of staff reported lower absence rates and vice versa.

This is possibly due to the circumstance that in smaller organisation working teams are composed by a reduced number of people, so that the absences of each of them have a more sensible impact on the team’s activities and performance and are, additionally, harder to compensate, which very likely account for a staff higher sense of responsibility .

 

Difference between public and private sector

The average absence rate within the public sector continues to be higher than the one recorded in the private sector and this gap is far from being closed; on the contrary, it has rose from 2.6 days per employee per year to 3.3 days.

This trend is putting under increasing pressure policy-makers in the public sector who are currently struggling to cut budgets and improve service levels and productivity.
Although there are no clear explanations about the causes behind the gap between public and private sector absence rates, some considerations could help to explain this occurrence.

It is sometimes argued that this dissimilarity depends on the different workforce size of public and private companies, where public organisations are usually bigger than their private sector counterparts and, as sees above, bigger organisations tend to record higher level of absence rate. But this assumption is actually contrasted by the same findings of the survey which, almost invariably, revealed that public sector staff have higher rates of absence regardless of the organisation’s size, as showed by Tables 7 and 8.

Research carried out by the Health and Safety Executive (HSE) revealed that this dissimilarity could be caused by the different demographics composition of the two kind of workforce, where in the public sector there is a higher component of female and elder workers, who usually register higher than average levels of absence.

Another explanation of the public sector organisations higher absence rate could be found in the kind of job usually carried out within public sector offices, which, more in particular, exposes staff to challenging public-facing roles, such as those involved in teaching, nursing and social care.

In order to explain this gap also the different way absence policies are managed within public and private sector companies could turn to be pretty useful. In fact, despite public sector employers usually put in place best practice approaches to manage absence, such as considering absence rate as a key performance indicator, putting in place system able to tackle unacceptable levels of absence and training line managers in absence-handling, they are, then, less likely to use disciplinary procedures to contrast unacceptable absence levels identified, discipline or dismiss employees for absence-related reasons or restrict pay sick.

Higher absence rate notwithstanding, public sector staff continue to enjoy occupational sick pay for longer periods than that allowed to private sector workforce.

Although it is not definitely an easy task, public sector employers should struggle to find a right balance between supporting staff and taking decisive actions against those who just take advantage of their occupational sick pay schemes.

Length of absence

Nearly 66% of the total days of absence recorded during a single year are represented by spells of up to 7 days, 17% of periods of absence of between 8 days and 4 weeks, whilst nearly 15% is represented by episodes of absence of more than 4 weeks.

Private sectors respondents reported a higher proportion of short term absence periods compared to the public sector respondents.

Absence cost

The average cost of absence per employee per year rose to £692, from £666 of the previous year.

The annual cost per employee per year remains higher in the public sector, at the average of £784, although this represents an improvement compared to the average sum of £906 attained at the end of the previous year.

Manufacturing and production sector registered the second highest absence cost at £754 although, also in this case, a slight improvement compared to the previous year has been achieved (£759).

Although registering a slight increase from the previous year, passing from £663 to £666, the lowest absence cost per employee per year has been recorded by private services organisations.

Table 9 shows the average cost per year per employee recorded in the different sectors.

Although, by and large, employers seem to be very interested on reducing absenteeism and to implement management policies capable to control the phenomenon, the survey revealed that only 41% of organisations actually monitor absence costs.

Considering the cost associated with absence and the potentially relevant savings which organisations could make paying more attention to the phenomenon, more investments to devise and improve people and absence management policies would be definitely worth.

Amongst the different sectors, public services organisations are the most likely to monitor absence cost, nonetheless, less than half do it. The least likely employers to monitor absence costs are the manufacturing and production ones, with just 37% doing so.

Amongst the companies monitoring absence costs, the cost more commonly included are: occupational sick pay, Statutory Sick Pay and cost of replacement labour.
See Table 10 for more details.

Targets and benchmarking

Amongst the surveyed organisations only less than 50% has set a target for reducing absence, with public sector employers the most likely to set a target (63%) and private services sector business less likely to set target (35%).

It also emerged from the survey that few organisations benchmark their absence management performance against other organisations, with public services employers the most likely to do so (64%) and productions organisations, with a measly 28% ratio, the least likely to benchmark.

Within the benchmarking employers 83% claimed to do so against organisation in the same sector, whilst 26% reported to benchmark their absence data against organisations located in the same region.

It also emerged that public services organisations are most likely to benchmark by sector, whilst manufacturing and production employers are most likely to benchmark by region.

Most recurring causes of absence

The survey findings revealed that the most recurring causes of short-term absence are minor episodes of illness such as flu, cold and stomach upsets, with no significant difference between manual and non-manual employees.

The next most relevant causes of short-term absence amongst manual workers are represented by musculoskeletal conditions, followed by back pain and stress.

Also home and family responsibilities were listed by employers as recurring causes of manual staff absence, as well as recurring medical conditions such as asthma and angina.

Stress is, instead, the second cause for absence amongst non-manual workers, followed by musculoskeletal conditions, home and family responsibilities and back pain.

The investigation also revealed that amongst non-manual staff other relevant causes of short-term absence are represented by recurring medical conditions and non-work-related injuries.

Sector differences

One of the most peculiar findings of the survey is represented by the different main causes of short-term absence relating to each of the sectors investigated, apparently, so to speak, each sector has it “preference”.

Both manual and non-manual public organisation staff seem to be most prone to short-term absence because of musculoskeletal injuries and stress-related reasons.

In not- profit organisations, instead, pregnancy-related causes and medical conditions are the most recurring events preventing employees to go work, also in this case invariably for manual and non-manual workers.

In private sectors organisations, once again both for manual and non-manual staff, non-genuine absence and home responsibility are the most recurring causes for employees’ absence.

Manual workers of manufacturing and production organisations are most likely to be absent at work because of work and non-work-related injuries, as well as drug- or drink-related reasons.

Long-term absences

Reasons for long-term absence amongst manual staff, with the exception of rare acute medical conditions, are not that different from the short-term ones. Back pain, musculoskeletal and stress, in fact, are the most recurring causes of staff absence.

Amongst the most recurring causes of absence of manual workers mental ill health and non-work-related injuries and accidents are also cited as significant causes.

The survey also revealed that the main cause of long-term absence amongst non-manual workers is represented by stress, followed by acute medical conditions, mental ill health, such as clinical depression and anxiety, and musculoskeletal conditions.

Other recurring causes for long-term absence amongst non-manual employees are back pain and recurring medical conditions.

Long term absence in the different sectors

The most likely causes of long-term sickness amongst manual workers in the public sector are acute medical conditions, back pain, musculoskeletal conditions and stress.

In manufacturing and production sector manual staff are most likely to no show at work because of work-related injuries and home and family responsibilities.

Non-work-related injuries and pregnancy-related absence are most commonly reported as significant causes of long-term absence for manual employees by private services sector organisations.

Non-profit employers are most likely to cite recurring medical conditions as a main cause of long-term absence for manual workers.

According to the survey’s findings mental ill health, musculoskeletal conditions and back pain are most likely to be cited by public sector organisations as major causes of long-term absence amongst non-manual staff.

Acute medical conditions and stress are, reportedly, the most recurring causes of long-term absence amongst non-manual no-profit employers.

Private services employers are most likely to report non-work-related accidents as a major cause of non-manual employee absence, whilst manufacturing and production organisations most commonly identify minor illnesses as a cause of long-term absence for non-manual employees.

The impact of recession

Almost 40% of respondents said that because of recession their organisation have paid more care to implement cost containment policies and, consequently, monitor and control absence. 16% claimed that recession did not have this effect and 41% reported that recession did not make any difference in the organisation approach to absenteeism. The survey revealed that, in general, the manufacturing and production and private sector services organisations are the more incline to claim that organisations have focused on reducing absence rate as consequence of the recession.

Recession has also had consequences on the attendance level, with 16% of companies believing that staff concern over job security has actually reduced their absence rate, compared to 11% who think the opposite. In all, over 50% do not believe that concern over job security has made any difference on the absence rate, whilst 15% do not know.

Amongst the employers believing that recession has had an impact on increasing attendance, or reducing absenteeism, the most likely to think so are manufacturing and production and private services sectors companies.

The research also revealed that more than 40% of the surveyed organisations consider their staff absence rate as part of the criterion used when selecting for redundancies, whilst 42% declared of not using absence to that end.

Amongst the different sectors manufacturing and production, with 60%, and private services sector, with 44%, are the most likely to use absence rate as a criterion for selecting redundant staff.

Another side effect of the downturn has been the excess of presenteeism of some staff to respond to the pressure caused by concern over job security. In all, 21% of employers, in fact, reported that they have seen increasing the number of people struggling to go work even though sick during the last year. A considerable 67%, instead, claimed of not having noticed any recession effect to that extent.

Not only absenteeism has a cost, but also this kind of presenteeism has. The Sainsbury Centre for Mental Health has estimated that the effect of this presenteeism, due by mental health, amounts to £605 for employee.

Conclusions

The absence figures emerged from this survey are the lowest recorded during the last decade and the achievement of this result could, if anything partially, be explained by the increasing focus and care paid by employers to the absenteeism phenomenon in order to reduce costs.

Another relevant reason for the absenteeism rate reduction could be explained by the change of staff attitude towards absenteeism because of their increased concern over job security, also in this case recession played a fundamental role. The fact that 56% of respondents declared of having made staff redundant over the last 12 months and that 40% of the surveyed organisations declared of considering absence rate to select redundant staff is, to some extent, self-explanatory.

The survey also reveals that the gap between average public and private sector absence levels has increased to 3.3 days from 2.6 days recorded in the previous 12 months. The recorded gap between public and private sector is, very likely, increasing pressure on policy-makers, who are already struggling to make savings on public spending and improve public sector productivity and service levels.

Although trying to find out which are the real causes for the absence gap between public and private sectors is everything but straightforward, it is possible to determine some relevant factors. One of them surely being the difference in demographic profiles between the sectors, with a larger number of female and older workers in the public sector. Additionally, the public sector is more typically characterised by the presence of more stressing and compelling public-facing roles, implying a higher degree of involvement and dealing with more emotionally charged situations, which possibly account for the higher level of absence within the public sector organisations.

This is not all, it is very likely, in fact, that also a substantial difference in culture and absence management practice between the two sectors plays a relevant role. The apparently higher degree of attention showed by public sector organisations on identifying high level of absence and training line managers in managing absence is considerably mitigated by the lack of implementation of consistent measures to effectively oppose the phenomenon. The survey, in fact, also revealed that public organisation employers are less likely than private sector ones to refer to disciplinary procedures in managing absence policies and to dismiss staff for having achieved unacceptable absence levels.

Public employers are also less likely than their private counterparts to restrict sick pay to help manage absence and to use employees’ absence records as part of the criterion when selecting for redundancy.

In order to achieve better results, the implementation of effective absence management practices is key. This implies and requires finding an appropriate balance between providing support to help employees who really have health-related problems stay in and return to work and taking consistent and firm action against employees who try and take advantage of organisations’ occupational sick pay schemes.

According to the survey findings it clearly seems that some public sector employers have still not yet achieved this balance.

Investigation background

The survey involved a panel of 642 respondents, whose average size was of 2,974 staff.

26.4% of the surveyed organisations were from the manufacturing and production sector, 43.2% were from the private services sector, 10.65% from non-profit organisations, whilst 19.7% were from public sector employers.

Reward Risk Management 2010 Survey and Reward Risk Management Process

You might also be interested in Risk and Reward Risk Management


In 2009, the CIPD carried out, for the first time, an investigation on the subject of reward risk management and published in October 2009, the “Managing reward risks: an integrated approach” report, revealing the more likely risks relating to the fascinating subject of “reward risk management” as emerged from the investigation.

The findings of the 2009 report revealed that there were substantial gaps in the way organisations identified, assessed and managed risks relating to their rewarding policies and practices and tried to come up and suggest the most appropriate and effective ways to close the identified gaps.

The survey has been very recently carried out anew, with the aim to identify the risks which reward managing professionals do currently consider more difficult to face and that, consequently, are more likely to cause pitfalls in their activity.

As the CIPD warns, the findings of the survey “are not predictive”, so that what emerged from the survey does not represent the CIPD and the Cranfield School of Management (which carried out the survey with the CIPD) predictions of what it is likely to happen in the incoming future. The report just summarises respondents’ opinions and expresses what respondents believe will be the next challenges they will need to face.

2009 findings and suggestions

Before examining the recent survey’s findings, it could be possibly interesting consider which recommendations emerged from the 2009 survey in order to properly carry out reward risk management.

1 - Establish effective reward risk intelligence-gathering systems.

Effective gathering is necessary to identify possible risks arising both externally and internally to the organisation.

2 - Proactively review your reward strategy and systems for risk.

Reward strategy design, execution and impact, can incur in a whole range of risks. So that, it is strongly recommended to review reward strategy for the following kind of risks: strategic, behavioural, financial, legal and ethical, operational, implementation, change and governance.

3 - Use established risk management tools to assess and manage identified reward risks.

Once risks have been identified, appropriate tools, like impact/probability matrices and risk maps, need to be used to asses and manage them.

4 - Manage risk consistent with your reward risk appetite

Risk management is not about completely eliminating all the identified risks, but it is very much more about managing risks in order to make them acceptable. So that, first of all, it takes to identify, working with the business management, your acceptable level of reward risk, then manage it accordingly.

5 - Build your risk management capability and build a permanent risk management culture.

You cannot think to have the ability to anticipate every reward risk to your company, but every organisation need to build and develop the abilities, skills and competencies to keep this treat under constant control, in order to take action should any problems arise. Reward risk management does not require a frequency or schedule to be carried out; it is something you have to monitor and constantly keep under control.

2010 Survey

The 2010 survey was carried out amongst a panel formed by 191 respondents, 84% of whom were practitioners. Amongst those practitioners 67% were working and biased for large employers (i.e. companies employing more than 1,000 staff). This circumstance should be well kept in mind when interpreting the survey’s findings, in that the presence of this bias towards larger employers may indicate that such organisations are more likely to have the necessary resources to establish reward risk identification and, consequently, be in a better position to answer the survey’s questions than smaller employers.

As suggested by Table 1, reward professionals concerns over the capability of reward to attract and retain talent has sensibly increased between 2009 and 2010. This might possibly be explained by the circumstance that during the downturn, when companies were prompted to face much more serious risks, such as pay freeze and redundancies, benefits and reward related matters have been in general overlooked.

The signs of economic recovery and the consequent likely change of trend have more recently pushed reward professionals to change their strategies in order to fit the new business landscape.

Many reward professionals, nonetheless, do not feel their organisations are competitive in all segments of the business. The major gaps and concerns they identified relate to the lack of tools and means available to them in order to effectively retain key talent within their organisations. In case of failure, the backlash and additional risk being of increasing the turnover ratio, which is, in fact, considered the most challenging risk employers could be called to face.

Reward professionals also expressed their concern over the line managers’ ability to manage reward issues in general and the reward changes which have recently occurred, in particular.

Reward management success relies on organisation’s staff understanding of reward, aspect to which reward professionals attach a crucial importance. This objective can be achieved through the best use of rewards means by line managers, and persuading managers that rewarding is not exclusively a money-related subject.

Cost management, which emerged as a sensitive factor during the 2009 survey, is still perceived as a sensitive issue according to the 2010 survey’s findings. The aftermath of recession have clearly had its negative impact, consequently cost reduction has been an objective all the organisations have tried hard to pursue. So that, although, on the one hand, reward professionals are well aware of the need to change their rewarding strategy in order to retain key skills, on the other hand, they are also aware do not having the required fund to implement the necessary strategies.

Affordability risk, then, emerges as one of the main concern reward experts will need to cope with in the incoming months, raising from the twentieth position it held in 2009 to the eighth position in 2010. Many organisations are still struggling to cope with the uncertain economic context, cutting benefits, changing pension schemes and freezing salaries.

If anything, according to the 2010 survey’s findings, arguably because of the ongoing dialogue between organisations and unions, the reward changes impact on employee relations has fallen from the fifth position in 2009 to the thirteenth position in 2010. It must now be seen how long this dialogue’s effects will last, since 52% of respondents claimed that they feel this risk very likely to rise during the next year, it really sounds something like the lull before the storm.

Another positive note is represented by the fact that reward communication is no longer perceived as such a strong risk as it was last year. This is possibly due to the investment employers have made in communication, so that employees are now more conscious about what their employer needs to be successful and is consequently expected to get from their staff. Similarly, employees are more knowledgeable about what, and how, their employers are willing to reward them. To some extent, this open communication process has definitely helped to redress or, worse comes to worst, to redefine the psychological contracts.

Practitioner Vs Consultants

Table 2 shows the different levels of perceptions expressed by practitioners and consultants on the main risks they envisaged in terms of reward.

Clearly consultants seem to be much more concerned with issues such as the reward strategy alignment to the overall business strategy, the reliability of benchmark data available to organisations and the capability of the companies’ reward team to properly and effectively face reward risks. Whilst practitioners seem mostly concerned with the effectiveness of incentives and retention-related issues.

Although some differences clearly emerge, both practitioners and consultants agree on the fact that attraction and engagement remain crucial factors for the incoming months.

The findings provided by the analysis of risk, as seen from the different industry sectors, shows that, once again, change management risks are at the top of organisations concerns.

In line with the intended cost reduction strategy pursued by the UK Government, affordability and pension issues are raising more concern within the public sector, whilst private sector professionals are more concerned with their ability to attract and retain talent.

Additionally, public sector organisations are more concerned with the risk to their reward strategies and implementation coming from poor industrial relations.

Likely future risks

The survey also tried to identify which risks need more attention, in that more likely to impact rewarding in the near future. The first ten identified risks are showed in Table 3, compared with their 2009 position.

The economic climate still remains one of the most important reasons for concern in the incoming future whilst, on the other hand, respondents seem to be more confident about pension funds future performances.

The reward managers’ concern over the possibility to lose control of their intended strategy, because of the downturn, is expressed by the substantial rise of the importance they attach to the effects of possible changes in taxation and regulation, respectively bouncing to the fourth and sixth position from the twenty-fifth and fifteenth.

In particular, respondents showed concern over possible changes in pensions and income taxation which will make it harder to attract overseas talent for key positions to their organisations.

Public sector employers expressed, instead, concern over the way government wants to address the public deficit, which will make it difficult, and pose serious limit to their ability, to reform pay and reward packages, at least for the next two years.

The way the UK Government intends to manage public sector reward, not only in the banking sector but, more generally, in the public and private sectors, is pretty clear. Now it is up to the businesses trying to take control and manage appropriately this more and more politicised area.

It also appears remarkable the number of changes on the reward risks more likely to increase in the incoming future, compared with the major concerns identified just one year ago. This is clearly showing the high degree of complexity of this field and, at the same time, it could also sound as an incitement to reward professionals to continue to proactively investigating the environment in order to identify likely risks and treats to their organisations and come up with solutions able to effectively help organisations to overcome these risks by the means of reward.

According to a respondent of an Asia-Pacific-based organisation, in China changes in the labour regulation, such as the introduction of a minimum wage and trade unions spreading out throughout the country, will cause some new reward strategies implementation problems.

Public sector respondents highlighted their difficulty on having to face an increasingly difficult to manage issue, with diminishing funding.

Are organisations and their reward professionals ready?

Respondents were also asked to express their opinion on the way they consider themselves prepared to face the identified risks. Compared to 2009 the ratio of reward professionals considering themselves not prepared to manage the identified risks has raised from 9% to 15%.

The reasons behind this increasing unpreparedness trend are, very likely, linked to the speed of changes reward professionals are called to keep pace with and their feeling to have neither the abilities nor the capabilities to effectively cope with the current difficult environment.

Obviously lack of appropriate expertise and of relevant capabilities makes it difficult to address reward-related issues, but clearly, difficulties exponentially increase in the event bonus schemes within an organisation are not aligned with its performance.

Public sector employers in the UK could be prompted to face even more difficulties if, rather than dealing with reward challenges, will have to cope with redundancies and restructuring.

Required skills and competencies

The 2009 survey tried to identify the skills and competencies necessary to properly manage reward risks and help reward professionals to effectively face the challenges and concerns related to their activity.

Although the necessary skills required to pursue a risk-based approach have not yet been officially acknowledged, the research carried out by the CIPD has identified some skills and competencies which can definitely help to implement a risk-based approach. These skills are related to the three different stages identified in the reward risk management process.

Clearly the above listed behaviours are of paramount importance but, in order to properly and effectively approach and implement reward risk management, also technical skills and competencies are required.

Being business knowledgeable, having a strong technical reward understanding and operational management will surely contribute reward professionals the ability to properly and effectively manage and overcome all the kind of risk management issues they will be prompted to face.

Finally, the survey identified that a growing number of risks are likely to affect and hamper the activity carried out by reward professionals on behalf of the organisations they work with. These risks are, in part, due to the changes occurring in the political and economic environment.

Confronting reward risks, pursuing a consistent and coherent process throughout the three phases of the reward risk management process (risk identification, risk assessment and risk mitigation), will surely allow reward professionals to better and confidently face future challenges.

Systematically carrying out reward risk management, to stay on top of the dynamic and complex challenges that organisations’ reward specialists constantly need to face, is key.

Longo, R., (2010), Reward Risk Management 2010 Survey and Reward Risk Management Process, HR Professionals, [online].

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