Reward your employees! April 2011

Reward your employees! by Toronto Training and HR April 2011

Contents 3-4 Introduction to Toronto Training and HR 5-6 In the beginning 7-8 Main benefits issues 9-10 Main rewards issues 11-12 Challenges in respect of reward 13-14 Doing things the right way 15-16 Drill A 17-20 Improving reward-related risk management 21-22 Reward risk groups 23-28 Case studies A-C 29-31 Setting up incentive programs 32-33 How incentives improve performance 34-35 Financial education 36-37 Drill B 38-39 Praise 40-42 Recognition 43-47 Low cost and no-cost rewards 48-50 Well, instead of a pay rise… 51-59 Linking engagement with reward 60-61 Drill C 62-63 A successful reward strategy 64-65 Reward in a time of economic uncertainty 66-68 Total rewards 69-72 Types of reward problems 73-75 Desired reward outcomes 76-79 Where will employers be investing in the future? 80-83 Case studies D-E 84-85 Conclusion and questions

Introduction to Toronto Training and HR Toronto Training and HRis a specialist training and human resources consultancy headed by Timothy Holden 10 years in banking 10 years in training and human resources Freelance practitioner since 2006 The core services provided by Toronto Training and HR are: ,[object Object]

Training course delivery- Reducing costs ,[object Object]

Improving employee engagement & morale

Services for job seekers,[object Object]

In the beginning… Extrinsic and intrinsic rewards Objectives Direct v indirect reward

Main benefits issues Lack of employee understanding around benefits Lack of joined-up thinking with overall package Employees demanding more benefits Employees demanding more flexibility Final salary pension costs Long-term sickness provision costs Uncompetitive benefits package Company cars Private medical insurance costs Greater focus on green issues Appropriateness of non-final salary pension schemes

Main reward issues Base salary competitiveness Flexibility of reward to meet the needs of the business Harmonisation and removing inconsistencies Total reward competitiveness Flexibility to meet the needs of employers Effectiveness/competitiveness of performance related pay Managing bonus expectation Return on investment Administration Legislation and tax law Overseas strategy

Challenges in respect of reward

Challenges in respect of reward Attracting/retaining the right talent Supporting organization change (e.g. reorganization, transformation, M&A) Communicating the value of rewards programs to staff Gathering relevant market compensation data Keeping rewards programs affordable and sustainable Managing base pay budgets Increasing the effectiveness of incentive plans Ensuring pay-for-performance Developing/implementing a rewards strategy aligned to business direction Differentiating high performers

Doing things the right way

Doing things the right way Get your house in order Ask employees Ensure management buy-in Set attainable goals Make managers accountable Be specific, meaningful and timely

Improving reward-related risk management

Improving reward-related risk management 1 of 3 Set up effective intelligence gathering systems for reward risk. Use a range of sources to identify the risk that could damage your reward strategy by working with colleagues in finance, legal, compliance and audit functions to gain different perspectives. Regularly review your reward strategy and systems for risk. It’s not a one-off process-ongoing vigilance is required. Don’t reinvent the wheel-use established risk management tools to assess and manage identified reward risks.

Improving reward-related risk management 2 of 3 Know your reward risk threshold and manage risk consistent with this. Engage your senior management in this discussion. Build your risk management resilience and develop a permanent risk management culture.

Improving reward-related risk management 3 of 3 Risk identification. Risk assessment. Risk mitigation.

Reward risk groups SEVEN REWARD RISK GROUPS Strategic Behavioural Financial Operational Implementation and change management Legal and ethical Governance

Setting up incentive programs

Setting up incentive programs 1 of 2 Decide who can participate Choose the right rewards Tailor your communication Fix measurable goals Ensure goals are achievable Track and publish progress

Setting up incentive programs 2 of 2 Target all relevant employees Communicate before the launch and during the incentive for maximum engagement levels Set goals that are in line with company strategy, are clear, measurable, challenging yet achievable Select aspirational rewards to suit the participants Ensure all progress is tracked and published

How incentives improve performance

How incentives improve performance When appropriately designed incentives promote greater effort from individuals When aligned to the correct performance measures, they help to focus individual effort on an organization’s values and priorities Differential incentives will drive performance as they will attract the right kind of people and put off those not motivated by financial return

Financial education Pensions Debt management Insurance Mortgages Investment options including shares

Praise Personal Relevant Appreciated Informed Sincere Expressed

Recognition 1 of 2 Don’t legislate recognition too much. Leave plenty of room for employees to express their true thoughts and emotions. Always include the company value demonstrated or strategic objective contributed to in the recognition message. Write a detailed message of appreciation expressing precisely how the person being recognised contributed and why that contribution was important within the bigger picture. That’s it. Step back and get out of the way.

Recognition 2 of 2 CRITICAL ELEMENTS IN A CULTURE OF RECOGNITION Critical mass Simplicity Training for managers and supervisors

Low-cost and no-cost rewards

Low-cost and no-cost rewards 1 of 4 Post a thank-you note on the employee's or team member’s office door. Have your director call an employee or team member to thank him or her for a job well done, or have the same person visit the employee at his or her workplace. Greet employees and colleagues by name when you pass their desks or pass them in the hall. When discussing an employee's or a group's ideas with other people, peers, or higher management, make sure you give credit.

Low-cost and no-cost rewards 2 of 4 Acknowledge individual achievements by using people’s names when preparing status reports. Ask five people in your department to go up to the person sometime during the day and say "{Your name} asked me to thank you for [the task or achievement]. Good job!“ Have lunch or coffee with an employee or a group of employees you don't normally see. Make a thank you card by hand.

Low-cost and no-cost rewards 3 of 4 Make work Fun! Lunch outings for the entire group as an everyone-pays-his-own-way event. The value is in the going, so encourage but don't force anyone who isn't comfortable going with the group. Share verbal accolades. Don't forget to forward voice mail messages that compliment a team member’s work. Ask a person to teach or share his accomplishment with others as a way of recognizing the person's ability and role.

Low-cost and no-cost rewards 4 of 4 Offer a sincere thank you. Ditch trash and trinkets. Give the gift of time. Foster an environment of inclusiveness.

Well, instead of a pay rise…

Well, instead of a pay rise…1 of 2 Cash bonus for work on a particular project Gift cards A couple of days of extra annual leave Technology gift (e.g. iPod Nano, digital camera) Lunch with family or friends paid for by employer Being ‘fast–tracked’ for promotion Lunch or drinks with colleagues paid for by employer

Well, instead of a pay rise…2 of 2 Access to internal training courses Tickets to leisure or sporting activities for use with family/friends Option to gain experience in a different department within the organization Option to gain experience in a similar department in a different organization A couple of extra days off to do charity/volunteer work A promotion without pay rise

Linking engagement with reward

Linking engagement with reward 1 of 8 A. Organizations that encourage managers to engage employees by making it a performance criteria and rewarding engagement through incentive programs indicate that their organizations more effectively foster employee engagement/motivation then those organizations that do not. As such, if reward professionals wish to encourage employee engagement, they should :

Linking engagement with reward 2 of 8 Develop performance metrics that measure the extent to which supervisors or managers encourage engagement among their subordinates. Reward supervisors and managers for developing employee engagement among their subordinates and peers. Specifically define employee engagement and include it as goal in the strategic plan.

Linking engagement with reward 3 of 8 B. When the impact of different categories of rewards programs on engagement was studied, it was discovered that base pay and benefits had the overall weakest relationship with the organization’s ability to foster high levels of employee engagement and motivation compared to incentives, intangible rewards and quality of leadership on engagement. Quality of leadership had the strongest relationship with effectively engaging and motivating employees. As a result, reward professionals should:

Linking engagement with reward 4 of 8 Use pay packages to attract leaders who have demonstrated their ability to engage employees. Think in terms of total rewards and not just financial rewards. Develop employee engagement resources that are directed toward work environment or organization climate, work-life balance and the nature of the job and quality of the work, and career opportunities.

Linking engagement with reward 5 of 8 C. Opinion surveys are often associated with efforts to enhance employee engagement and because they are a mechanism for obtaining employee feedback on a variety of work-related issues, including total rewards programs. A recent study indicated that employee surveys were used by 80% of the organizations they represented.

Linking engagement with reward 6 of 8 Although more frequent use of employee opinion surveys was associated with effectiveness in fostering high levels of employee engagement and motivation, the relationship was much stronger for organizations where employee opinion survey results generate action and change. As such it is not enough to conduct employee opinion surveys; management must respond to input and suggestions with concrete actions and change. Employees should be involved in those change efforts.

Linking engagement with reward 7 of 8 D. The gold standard in terms of building cooperation and commitment is involvement. A recent study indicated this was true for the design, implementation and assessment of total rewards programs. Although supervisors and managers are involved in the design, implementation and assessment of rewards programs more frequently than employees, their involvement is still relatively infrequent. Thus, involvement in the design, implementation and evaluation of total rewards programs offers a direct way for compensation professionals to enhance employee engagement.

Linking engagement with reward 8 of 8 E. In the past research has shown that reward professionals appreciate the importance of pay communication as a means for aligning pay programs with the business strategy and the interest employees have in understanding how they were paid. Employee understanding of compensation strategy, programs and policies — assuming compensation is based on common notions of fairness — provide a foundation for engaging employees.

A successful reward strategy

A successful reward strategy KEY ELEMENTS To ensure that the demands of each job role are clearly articulated at all times and can be measured. That each individual knows what is expected of them at all times. That each individual knows what they need to do in order to progress to any new role.

Reward in a time of economic uncertainty

Reward in a time of economic uncertainty Communication Careful cost-cutting Top performers Total rewards Solid reward foundation

Total rewards 1 of 2 EXTRINSIC AND INTRINSIC MOTIVATION Compensation Benefits Careers Intrinsic work factors

Total rewards 2 of 2 TANGIBLE TOTAL REWARDS INTANGIBLE TOTAL REWARDS Career development Recognition Coaching Wellbeing and work-life balance Communication

Types of reward problems

Types of reward problems 1 of 2 Failure to produce desired behaviour Production of desired behaviour and undesirable consequences Production of reward dissatisfaction

Types of reward problems 2 of 3 UNDERSTANDING BEHAVIOUR Membership behaviour Task behaviour Organizational citizenship behaviour

Types of reward problems 3 of 3 REWARD DISSATISFACTION Causes of reward dissatisfaction Consequences of reward dissatisfaction

Desired reward outcomes

Desired reward outcomes 1 of 2 Key employee behaviours Key employee attitudes

Desired reward outcomes 2 of 2 BEHAVIOURAL IMPLICATIONS Define the necessary employee behaviour Determine the necessary employee attributes Identify salient employee needs Ensure a positive reward valence Make it clear that performance will lead to rewards Provide conditions for effort to lead to performance

Where will employers be investing in the future?

Where will employers be investing in the future? 1 of 3 Training and career development Non-cash recognition Work-life flexibility Annual cash incentives Long-term stock incentives Healthcare benefits Retirement benefits

Where will employers be investing in the future? 2 of 3 OTHER REWARD TOOLS Signing bonuses More aggressive market adjustments to retain key talent Project milestone bonuses Spot cash awards Referral incentives Alternate work arrangements Workforce segmentation – reward programs to fit the need

Where will employers be investing in the future? 3 of 3 WHAT EMPLOYERS CAN DO Define the right tactics for attracting and retaining the employees that are needed to be successful in 2011 Segment the workforce and creatively build reward strategies for engagement Create a value proposition that helps employees make holistic decisions based upon pay, benefits and careers Go beyond what others are doing - best fit vs. best practices

Reward your employees! April 2011

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