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The future of Total Rewards

Applying 2020’s lessons for tomorrow’s success

Future of Work|Talent|Total Rewards|Employee Engagement

By Catherine Hartmann , Jackie Stuedemann and Benjamin Viney | January 20, 2021

It’s critical to review how Total Rewards supports organizational sustainability and the employee experience.

Watershed moments. They are rare, and they have significant implications. 2020 dealt a pandemic, extreme economic challenges, political and social unrest, and a clear demand for new ways of moving forward.

Amid the chaos are important lessons that will shape the path of a markedly different world. Organizations have been forced to review their operating models, redefine ways of working, revisit Total Rewards designs and update their people strategies. Never has it been more important to optimize Total Rewards to manage costs while simultaneously restoring employees’ sense of stability.

The path forward

Given that Total Rewards is one of a company’s largest controllable spends, few organizations can afford not to ensure their programs offer the most value for the investment. As with any monumental moment, lessons learned are key to understanding how to move forward. For example, several coping approaches companies used to manage through the crisis have fundamentally changed the way some organizations approach work:

  • Flexible work options historically and frequently have been met with cultural resistance. However, 2020’s forced flexibility proved these arrangements can be highly productive.
  • Increased use of technology has been necessary to effectively deliver on Total Rewards programs. A focus on how employers connect and communicate with talent will remain an imperative as more employees continue working remotely.
  • Changing nature of work has compelled organizations to clarify which key roles and skillsets are needed to thrive in the future — while at the same time eliminating or evolving many familiar roles.

2020 also reinforced the importance of a renewed commitment to inclusion and diversity. A strong focus on environment, social responsibility and governance (ESG) emerged at the board level, with this focus filtering down to all aspects of Total Rewards:

  • Within compensation, the importance of and need for pay-equity assessments that evaluate program design from a gender, sexual orientation and race perspective became even more evident.
  • Employee benefits as a focal point, recognizing the importance of inclusive and purpose-driven benefits that meet employees where they are; it became clear that “one-size-fits-all” wasn’t personalized enough to deliver engagement.
  • Career enablement moved beyond pure mentorship and gained momentum into a vision of how recruiting, acquisition, retention and development work together to promote diverse leaders.
  • A focus on wellbeing specific to safe workplaces embraced psychological safety, as well as increased emphasis on employees’ emotional, health and financial security in a world of isolation and economic uncertainty.

“In a fluid organization, what binds people together is culture. In other words, culture is the new structure.”

Leena Nair, Chief Human Resources Officer, Unilever, The Future Chief People Officer Study from SHRM’s Executive Network, HR People + Strategy (HRPS) and Willis Towers Watson

As businesses move toward restoring stability and learning to function in a new world, it is critical to review how Total Rewards can support organizational sustainability while also shaping an employee experience that drives success. Several considerations can help prioritize where to fine-tune (or even revamp) Total Rewards programs and practices.

Assess Total Rewards in terms of the organization’s priorities and purpose

Total rewards is a key component of the “give and get” that defines the employment deal. For instance, if an organization’s strategy is to shift beyond a basic need to balance cost containment with investing in growth, the approach to Total Rewards should shift as well.

Companies that perform better focus their priorities across three levels — Essentials, Emphasis and Excellence — keeping in mind that you don’t have to be “Excellent” at everything. Define the Total Rewards experience you want to create:

Total rewards attributes that drive a high-performance employee experience

Figure 1. Define the Total Rewards experience you want to create
Essentials Emphasis Excellence
Ask whether your organizations Total Rewards are: Ask whether your organizations Total Rewards are: Ask whether your organizations Total Rewards are:
Informed: clear and understandable Engaged: compel employees to take action Empowering: inspiring employees to be their best
Competitive: comparable to peers Differentiated: reflect the needs of the workforce Personalized: tailored and customized to meet employees’ unique needs
Accessible: available to employees User friendly: easy to find, access and use Optimized: provide proactive support for the best experience and results
Foundational: include a wide range of separate programs Relevant: working seamlessly together and are valuable to employees Purpose-driven: align with a greater meaning, improving how employees work and live
Compliant: check the box on required standards Creative: expand beyond essential needs Agile: grow with employees as they evolve

When setting strategy, critical questions to ask are, “What do I want employees to say about Total Rewards within my organization?” From a business standpoint, where is it good enough to operate at the Essentials level, and where is it critical to be Excellent? Applying this model to Total Rewards allows you to better prioritize where you place your bets.

Align Total Rewards with how work gets done and talent gaps

Developing an effective Total Rewards strategy and program requires an understanding of the work that was done in the recent past, how work transitioned during the pandemic, and what work will need to be done moving forward. COVID-19 has accelerated this work for many organizations, and as employers think about a post-pandemic world, there is a focus on resiliency and sustainability.

Scenario planning work and Total Rewards for the future can help bridge the gap between restoring stability to effectively managing post-pandemic. Rather than thinking about the “jobs” that need to be done, consider the skills that are needed to support the way work gets done. This will require upskilling, reskilling and, in some cases, outskilling.

“With the use of integrated data platforms, we don’t have to organize around functions anymore: We can actually organize around employee experiences and have multifunctional groups.”

Diane Gherson, Chief Human Resources Officer, IBM, The Future Chief People Officer Study from SHRM’s Executive Network, HR People + Strategy (HRPS) and Willis Towers Watson

Identify how Total Rewards support your employees’ evolving needs

The degree to which employees will value and use Total Rewards changes based on individual life situations well as current events. For example, employees’ sense of financial wellbeing took a serious hit in 2020, continuing to deepen as the year progressed. If organizations prioritize better supporting financial wellbeing, optimization may require more innovative ways of delivering and engaging employees in specific financial tools and resources. Additionally, many employers designed programs for essential workers that were different than those for nonessential workers, presenting a dichotomy in the workplace. If perceptions of inequity are a challenge, optimization may mean continued targeted program design for varied needs — as well as focused communication, including manager enablement and leadership training.

Understanding employee needs — and how they differ across a diverse, multigenerational, geographic and segmented workforce — is critical to getting Total Rewards right. Combining employee insights with financial data helps allocate the Total Rewards investment in the most cost-effective way. For example, employees may be willing to trade time off for help with student loan repayment, or opt for a smaller salary increase to have more money available for retirement.

“It takes a tremendous amount of knowledge about the business and good data to tell you what your real needs are and where you should be focusing your time. HR is in a unique position to draw insights from trusted data to help make smarter decisions.”

Melissa Kremer, Executive Vice President and Chief Human Resources Officer, Target, The Future Chief People Officer Study from SHRM’s Executive Network, HR People + Strategy (HRPS) and Willis Towers Watson

Listening is critical. Employees want to be heard, and especially in times of crisis. Focus groups and employee surveys provide the opportunity to learn about workforce concerns and demonstrate that leadership cares. This is particularly important, as many employees have struggled with various aspects of wellbeing, from the dual-income earners who enter daily battles over limited home-office space to employees who live alone, feel isolated and have their emotional wellbeing shaken.

The ROI of listening pays off in terms of an appropriately allocated Total Rewards investment coupled with a consumer-grade approach, all of which shapes a desirable employee experience. Connecting employee experience to productivity, retention or growth metrics shows the value of these change and communication investments.

Navigate your Total Rewards choices

As we move to a post-pandemic world, adaptive Total Rewards plans are critical to operating successfully. When leaders take a holistic view of Total Rewards and align their approach (and investment) to strategic priorities and workforce needs, organizations enhance the employee experience and drive success. This creates a win-win, and is essential to not just operating but thriving after the crisis — and being able to withstand the next watershed moment.

A version of this article originally appeared in WorldatWork’s November/December 2020 issue of Workspan magazine.


North American Rewards Practice Leader

Director, North America Talent Practice

Senior Director, Talent and Rewards

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