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Employers struggling with total rewards

Companies may be making significant investments in their total rewards programs but, according to a survey by Aon Hewitt, few of them are actually seeing successful results. Why? Due to a lack of execution, says the firm.

Aon Hewitt’s 2012 Total Rewards Survey of nearly 750 organizations found that 58% of respondents use total rewards programs to drive employee engagement, and 48% want these programs to improve their ability to retain talent. However, 60% of the companies surveyed said their employee engagement is low, and two-thirds said that poor 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.”

Aon Hewitt then 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. Their research revealed that the differentiating factor between high-performing companies and the rest is not about the programs they focus on, but how the programs are executed.

Aon Hewitt points to several things that high-performing companies do differently:

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% of all other companies. Additionally, high-performing companies are more likely to gather cost data (57% vs. 39%) and input from employees (40% vs. 26%)

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
High-performing companies define the effectiveness of their total rewards programs by measuring employee engagement, while the rest of companies define effectiveness as cost versus budget.

As a result of these differences, 51% 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 survey. Fifty-one percent also report increases in employee engagement over the past 18 months, compared with just 30% of the rest of the firms.

As well, high-performing companies report they are more effective in achieving key business objectives such as operational effectiveness (96% vs. 75%), customer service (85% vs. 48%) and quality (63% vs. 28%).

This article was originally published in Benefits Canada.

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