Making the reward structure flexible
The first thing to realise when talking about reward is that we are not just referring to monetary compensation. Both employers and employees today see reward as much more than plain old-fashioned cash in the bank. But again, we also have to stress that it is those who can be most flexible and treat employees as individual cases requiring tailored compensation in different ways and at different times in their lives that will truly create the engagement culture we would all like.
As with the changing needs of an employee's overall lifestyle and its relationship to workstyle, so compensation will need to be restructured on a regular basis to reflect emerging needs. Compensation consultants Towers Perrin explain that ˜over the past decade , more and more companies have begun viewing their reward programmes as an aggregated investment pool that they can mix and remix in different ways, depending on the workforce needs and issues and financial pressures. They can identify employee preferences among reward options and create programmes that let employees trade current for deferred pay, salary for bonuses, bonuses for benefits, benefits for cash and so on.' Towers Perrin add, ˜Down the road lies perhaps the ultimate goal. A totally customised, flexible approach that puts all the risk and responsibility in employees' hands by giving them a total sum of money - commensurate with their skills, experience, function and level - to allocate in whatever way best suits their needs across an array of employer-provided, or sponsored, programmes.'
By being a great deal more flexible in how and when they reward people at different stages in their life, companies will be able better to meet employee needs, once again allowing the employee to fulfil the lifestyle option they have chosen at that particular time. For example, a young, single professional may want more cash incentives as well as increased blocks of time off (back to trading salary for time). When that professional settles down with a partner, they may want a cheap loan for a house, or some guarantee to cover school fees for children. Later pension or other after-work provisions may well take precedence. As people's needs change and their lifestyle options develop as they move through life, so companies can change the mix.
Of course, not everyone has signed up to the concept of flexible reward. A study by Aon Consulting [6] highlighted what they called, ˜the sorry state of compensation planning.' According to their study, 40 per cent of businesses developed their compensation policies more than five years ago, and almost 50 per cent more than four years ago. Worse still, although aligning compensation programmes with corporate goals frequently shows up on HR and Finance's ˜wish-lists,' 61 per cent of the respondents felt that gaps still existed: 40 per cent to a great extent. Aon commented, ˜these numbers suggest the need for a fresh and focused look at compensation planning.'
Not just money
Cash may be king, but it isn't the only reward item in today's world. Other factors - the flexible approach to time, the where and when employees do the job - form part, in their minds at least, of the reward structure. Certainly, in making job choices, employees today compare offers based not just on the monetary input but the convenience of working for a particular employer. Furthermore, access to the very best training and development (of which more in Chapter 5), is regarded as reward by many. So too is coaching or access to a mentoring programme. All of these ˜add-ons' have a strong intrinsic value, but again their value varies depending on the expectations of the individual involved. However, there is no doubt that companies who place strong emphasis on helping their people be the best are going to be viewed as better places to work than those who don't.
Please keep it flexible
Some managers argue that in a complex world, simplicity is the Holy Grail. Not so. Luckily, technology comes to the rescue. We can and must be able to treat people as individuals. Difficult if you have 10,000 employees, but not impossible . Just think about it. 10,000 people, 10,000 individuals all with their own lifestyle defining who they are and who they are at work. Since people do not leave their lifestyle behind when they get to work, they bring it with them. We need to find the ways to encourage that, not eradicate it. We need to celebrate it and - why ever not - use it for the good of the individual and the company.
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Cargill Incorporated is an international processor, marketer and distributor of agricultural , food, financial and industrial products and services, with 97,000 employees in 59 countries . A privately held company, it comprises more than 100 business units.
Recently, Cargill began a corporate transformation, centred on changing from a commodity products-oriented company to an integrated food products and food services company - from a supplier of ingredients to a provider of solutions. To do that they needed to create an environment where innovation fostered customer solutions. In support of this Cargill made changes in their organisational structure, compensation programmes and people processes. In addition, Cargill took a serious look at organisational behaviour, benchmarking a group of companies that threw up compelling evidence that to succeed as a customer solution provider they would have to excel at employee engagement.
Convinced of the correlation between employee engagement and business results, Cargill made ˜engaged employees' one of four corporate-wide performance measures, along with satisfied customers, enriched communities and profitable growth.
Cargill partnered with Hewitt Associates to pilot an employee engagement study in four separate business units, totalling 7,500 employees. Following the successful pilot, Cargill then worked with Hewitt to conduct an engagement study of 25,000 salaried and some hourly employees around the world. The survey - translated into 27 languages - was administered partly on paper and partly over the Internet to meet the needs of Cargill's diverse employee population.
Gathering data from so many employees in so many places was a challenge for Cargill. Although the company originally intended to survey only a sampling of employees, management later decided to make the survey available to all 97,000. They wanted all employees to know that their opinion and their engagement matters.
Once the results were processed , managers could review the data, communicate it to employees and create an action plan within four weeks. Each business unit leader was held accountable for employees' perceptions of whether engagement results were shared and whether actions were taken based on those results. Hewitt and Cargill also built an on-line reporting system that allowed managers to view and model the data for their employees on-line anytime .
The engagement survey data has prompted some Cargill business units to redesign their compensation programmes and establish individual recognition systems. Others have made leadership changes or enhanced their career development programmes and several have improved communication between senior management and employees. Although the engagement survey is a tool provided at the corporate level, action plans must be developed and implemented at the business unit level, or even for each location, to be effective. With a diverse range of employees, raging from future traders in Geneva to plantation workers in Indonesia and meat packers in Kansas, different things engage employees in different cultures in different parts of the world.
The employee engagement concept enjoys tremendous support from Cargill's senior management. This support encourages co-operation from HR managers around the world, so that employee engagement is viewed as a business strategy not an HR programme. Although Cargill is still determining how their employee engagement efforts will impact the business overall, they believe that this work will allow them to achieve sustained business results, lower turnover and increased retention of the right people. Cargill believe that it will help them maintain a ready pool of qualified people to promote as the company grows as well as helping employees under- stand that what they do as individuals impacts the company's business results.
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During 2003 I paid a site visit to one of the most amazing companies I have ever come across. Herman Miller make office furniture. Not only that, they make it in a place called Zeeland Michigan, the heart- land of the furniture industry established by Dutch settlers two centuries ago. Until two years ago the firm was in hearty health. Then recession hit. Large numbers of employees were made redundant. A difficult thing to do when your main site is one of the region's major employers and you are employing three generations of a family in some cases.
But Herman Miller came through those travails incredibly well. First by treating those that had to depart with respect, understanding and a great job-seeking package. But they also managed - despite the toughest economic times the company had ever seen - to keep the employees engaged.
Now, I have to be fair in this. They are not in the middle of a major metropolis. They are, as our American cousins say, ˜deep in the boon- docks'. But maybe they should take credit for that too. Because in wild, remote, unsophisticated Zeeland, Michigan (where Harry Potter books got banned in school for their ˜black magic' content) they have not only engaged with their employees, they have taken that extra step and put ˜who they [the employees] are' into the workplace contract.
Their corporate brochure opens with the words, ˜Cathedrals celebrate the idea of the heavens. Courthouses celebrate the concept of justice . We believe workplaces can celebrate the process of work.' But then they go on to say, ˜The days we spend . The stories we tell. The beliefs we share. The insights we seek. The blurred line between our work 'in here' and our lives 'out there'.'
You see, Herman Miller get it. They realise that everyone has their own lifestyle and they bring it to work with them every day. And, being in the middle of nowhere, the employees of Herman Miller are the modern day equivalent of the American pioneer. They are hunters, fishers, hikers, canoeists, campers and part-time ecologists. When they came to work at Herman Miller, they brought their lifestyle with them - it's still there!
Here's how they tell it.
In 1981 when Herman Miller built its Energy Center at the request of a group of employees, we only wanted to save money on electricity bills and stop sending so much scrap wood to the landfill. In 1989 another group of employees decided we needed to co-ordinate all the environmental work at Herman Miller. They formed the Environmental Quality Action Team and insisted that senior management get behind it. And senior management did.
Today, employees all over the company look for - and put into practice - new ways of becoming more environmentally aware. It's not a programme. It's part of corporate life.
There is only one thing wrong with this last statement. The programme is not part of corporate life. Corporate life at Herman Miller is a part of their employees' lifestyle(s).
In 1989, different groups of employees at Herman Miller discovered that their work on reducing waste, preventing harmful emissions, exploring safe materials and so on, had become a de facto environmental effort company-wide. They formed an Environmental Quality Action Team (EQAT), presented it to senior management, and included educating both customers and employees in their mission. EQAT continues its grassroots work today, represented by over 300 people on nine different sub- teams .
The deep-seated engagement of its employees has kept Herman Miller on track through the bad times. Not only has it won many awards for its environmental stance, it has actively kept on pushing the envelope of what is possible. They now have moved to their own vision of the future - sustainable capitalism - using materials at a rate slower than the natural environment can provide them for future generations.
But it is all delivered through the people who come to work each day. People who have a rich natural heritage and an appreciation of the environment around them. In one of their pieces of literature they say that employees come together each day ˜in the spirit of a small city, where the important industries are new ideas, customer communication and employee collaboration.'
But most of all, they embrace the respect of the employee lifestyle, when they say, ˜a place where work and people co-exist peacefully and constructively.'
Can you do what Herman Miller does in a different environment? After all their factory is surrounded by 37 acres of natural grasses, 6 acres of permanent wetlands and 5 acres of buffalo grasses and they adhere firmly to a policy of no lawn-mowing, no pesticides and no irrigation.
Yes you can. You just have to look for those ˜keys' to what people bring with them every day. Maybe they are not all Davy Crockett's ancestors who know how to tree a squirrel, but people join companies because they feel affinity, and because they join others with similar views. So, in many cases, there are common ideals, causes and views that your employees share. If you want to engage them, find out what they are. For example many companies existing in the urban jungle have developed a tremendous level of staff engagement through volunteer programmes in local communities or charities. Others have used sports- related activity to light a spark.
The people who come to your firm come for a reason. After a week or so, they know - even if they need the job only until a better offer comes up - if they can ˜be themselves here.' Can they bring themselves to your office everyday without checking in their lifestyle and personality at the front gate? If you engage them, fine. If you can - like Herman Miller - let them lead you to a better world, why would you try and make it difficult for them to do it?
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With annual sales of around & pound ;9 billion and 85,000 employees, Safeway is one of the UK's top grocery retailers. Recently, it has been the target of a heated take-over battle in the supermarket sector. This is a time when you really find out how well engaged your people are. Safeway not only came through, they probably increased rather then lessened the engagement quotient in the business. A large part of that was achieved through letting people be themselves, and do the things they did best. Let them bring ˜themselves'.
On 9 January 2003, it was announced that Safeway had received a take-over bid from Morrisons, a Bradford-based supermarket group. Most employees experienced the typical change responses of shock , denial and blame. However, within days other supermarkets began expressing an interest in Safeway and it soon became clear that it could be a very protracted process, particularly when the government called for a full investigation by the Competition Commission. Safeway quickly realised that they needed a strategy to retain people and maintain motivation and morale in the long term .
The firm introduced financial incentives to encourage people to stay but also recognised that most staff at Safeway have a relational psychological contract, in that they are long serving and not motivated simply by money. The average length of service is 15 years for management and 9 years for the organisation as a whole. Safeway knew that it would have to appeal to people in different ways.
The approach the company developed therefore had two main aspects - transactional and relational. The latter element contained strategies for dealing with training and development, leadership, communication and morale and motivation. Rather than turning off training and development, because of uncertainty about the future, the firm invested far more into helping people prepare for the future, cope with the uncertainty and develop their skills. This has been a real ˜wow' for employees and many have since reported that it had the single biggest impact upon their decision to stay. Safeway also revised their model of leadership behaviour, to help leaders manage the more relational aspects of their role more effectively in times of extreme uncertainty. The model, based around providing direction, gaining commitment and driving results was refocused to put it in the context of their current situation. This was supported by the introduction of a development programme to communicate and embed the required behaviours across the company's leadership teams.
Clear and frequent communication was vital . Safeway set up an area on its intranet called ˜Our Future', to keep people informed of new developments. They had a ˜Meeting For Everyone', at least every four weeks at their Hayes head office where board members present the current situation and open the floor to questions. This was video linked to distribution depots and regional offices, and phone linked to all store managers so people nationwide could gain access and ask questions. Safeway also established ˜Colleague Councils' ahead of legislation, where staff representatives met senior people for two way dialogue, the outcomes being cascaded throughout the organisation. They also had a strong emphasis on encouraging social events and fun activities in order to create a sense of team camaraderie.
Considering the uncertainty, Safeway has reported that it maintained a very creditable business performance and experienced no significant change in labour turnover, with it even falling in some parts of the business. This has amazed onlookers, especially in the media, who were speculating that they would haemorrhage staff.
Another measure is the customer service programme Friendliest Store in Town. This is a monthly measure of the service customers receive in Safeway stores and is independently validated by an external organisation using mystery shoppers. Since January 2003, it shows that the company consistently improved its performance every month.
Removing fear of an uncertain future was great management, but using the inherent commitment of employees and feeding that through improved training, development and social events, under- scores that Safeway understand that employees are themselves at work, not what we compel them to be.
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The hotel industry is notorious for labour turnover. In fact the industry average in Europe and the US hovers between 70 and 80 per cent annually. Traditionally, this has been blamed on poor pay and conditions and the fact that the hotel and catering industries are often the first foot on the ladder for many employees just beginning their working lives.
Sara Edwards, now Group Director of HR at the Savoy Group (that includes such prestigious London luxury spots as Claridge's, The Connaught, Simpson's-in-the-Strand and The Savoy itself), was convinced that sky-high turnover didn't have to happen. ˜Just managing employee churn isn't good for the business or for our customers, many of whom are regulars and want to see continuity of service,' she says, ˜so we set out to change that.'
What Sara Edwards and her team did - first at Claridge's and later throughout the group, was to treat people differently, engage them and give them pride in the contribution they were making. ˜Yes, we do pay well for our industry,' admits Edwards, ˜but that is not what our staff stay for. In our surveys the top score is for 'recognition and value' which last time rated out at 99.2 per cent. People stay with us because they feel valued.'
Does it work, in retaining staff? Enthuses Edwards ˜When we began our programme, turnover at Claridge's was 73 per cent. Last year it was 27 per cent and so far this year (2004) to end May it was 10.4 per cent.'
Much of what the Savoy Group have done is simply to make people feel wanted. There is a free chiropody clinic (hotel staff are on their feet a lot); a full-time occupational therapist; health adviser and an osteopath, which staff can attend in work time. Each hotel has a separate staff restaurant with its own chefs. ˜This is important so that people get proper, cooked meals, not what a busy chef, whose priority is the paying customer, has the time to do,' explains Edwards, ˜and it is free to everyone.' Now the group is looking at introducing yoga lessons for staff.
Edwards stresses that the other factor in helping to reduce dramatically the turnover rates is open, honest communication. ˜When 9/11 happened we knew we would have problems - there were hundreds of cancellations within hours - so we gathered all the staff together in the ballroom and told them what we were going to do.' Edwards continues, ˜Then we met again the next day and weekly thereafter. We knew it would be a difficult time but we used it to retrain lots of staff into new jobs and there was a great team spirit.'
Edwards and her team also asked staff to tell them what were their hobbies and interests or other skills so that they could identify other work opportunities for people.
But the one thing that gives Edwards most satisfaction is probably her introduction of what they call the ˜Going for Gold' programme. ˜We have the usual employee of the month programme,' says Edwards, ˜but what we wanted was something that was instant. Something that could reward immediately, was low cost to operate , but had high value for the employee (managers were also included in the programme).'
The ˜Going for Gold' initiative is based on seven key service values, and managers award instant gold cards to employees who demonstrate them. It may be excellent service to a customer, or a great idea. Whatever it is, the reward is instant. The employee gets the card and then goes to the HR department where there is a pot of ˜gold' ( mainly gold covered chocolate money!). In the pot are 32 envelopes (renewed monthly). In each enveloped is a prize. These range from a limousine to take you home after your shift to an extra day off, a liein or a dinner out with your partner. Top prize - each month - is a night's stay, dinner and breakfast in one of the penthouses ( 3,850 a night rooms) with your partner. Only rule, the prize must be taken within four weeks.
˜The great thing, ˜ smiles Edwards, ˜is that everyone knows about it. And because it is open to everyone it is really an exciting programme that does get all of us involved.'
Edwards believes that every firm in every industry can do the same sort of thing. ˜Often people say to me, 'well that's easy for you in your industry,' but I don't agree. If anyone bothers to think for a while, this type of engagement programme can be applied anywhere .'
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[6] (September 2003) Aon Consulting Global Forum.
[7] Getting engaged: the Cargill story is based on material extracted from Hewitt Magazine , the corporate publication of Hewitt Associates, (2003) Vol 6, Issue 2.
[8 ] Getting engaged: times of change at Safeway is adapted from the report (2003) Managing on the Edge, Psychological Contracts in Transition . Roffey Park Management Centre .
EAN: 2147483647
Pages: 131