While companies see the value of and invest significantly in total rewards programs, a new survey announced today by Aon Hewitt, the global human resource solutions business of Aon plc, found that few are seeing successful results due to a lack of execution.
Aon Hewitt’s 2012 Total Rewards Survey of nearly 750 organizations shows that more than half (58 percent) use total rewards programs to drive employee engagement, while 48 percent want these programs to improve their ability to retain talent as well as attract talent (44 percent). However, 60 percent of companies surveyed described their engagement levels as low, and two-thirds indicated that the trend in engagement is holding steady or trending downward.
“Companies invest millions of dollars each year to recruit and incentivize talented people to be engaged and motivated to perform at their highest levels,” said Jane Kwon, associate partner of Aon Hewitt. “When rewards programs are properly aligned, designed and delivered, the positive impact on individual engagement and organizational performance can be significant. However, we find most organizations are not taking the necessary steps to achieve these desired outcomes.”
To uncover why employees were falling short on meeting their objectives, Aon Hewitt analyzed the total rewards programs of 150 high-performing companies—those organizations that reported the highest levels of innovation, employee engagement and revenue—and compared them with the remainder of the surveyed companies. Aon Hewitt found the differentiating factor between high-performing companies and the rest was not about the programs they focus on, but how the programs are executed.
According to Aon Hewitt’s analysis, high-performing companies do several things differently with respect to executing total rewards programs:
• They articulate clear strategies and goals – High-performing companies are almost two times more likely to have declared total rewards an area of focus and have a clear stated strategy compared to the rest of surveyed companies. They are also more focused on leadership development, culture and learning.
• They use data and input to drive decision-making – Three-quarters of high-performing companies gather market data to assess the competitiveness of their programs, compared with just 61 percent of all other companies. Additionally, high-performing companies are more likely to gather cost data (57 percent vs. 39 percent) and input from employees (40 percent vs. 26 percent)
• They connect their total rewards program to the business and employees – High-performing companies are more likely to align total rewards programs, such as those that focus on culture, challenging work and pay benefits, with top business objectives. Therefore, they communicate better and use targeted communications to meet the diverse needs of the workforce.
• They define the effectiveness of their total rewards programs differently -- Aon Hewitt’s analysis shows that the primary way high-performing companies define the effectiveness of their total rewards programs is by measuring employee engagement, while the rest of companies define effectiveness as cost versus budget.
As a result of these differences, 51 percent of high-performing companies say their employees understand the value of their total rewards programs compared to one-third of all other companies, according to the Aon Hewitt survey. Fifty-one percent also report increases in employee engagement over the past 18 months, compared with just 30 percent of the rest of the firms surveyed. Equally important, high-performing companies report they are more effective in achieving key business objectives such as operational effectiveness (96 percent vs. 75 percent), customer service (85 percent vs. 48 percent) and quality (63 percent vs. 28 percent).
“High aspirations and mediocre execution are producing a lot of pressure for change. This is a time for breakthrough thinking that may require bold new ideas, including new ways of looking at the issues,” said Kwon.