While it’s important not to make stark assumptions, our research finds there are meaningful differences in the types of rewards employees value that often do fall along generational lines, and, relatedly, where employees are in their career trajectory.
Millennials — commonly defined as individuals born between 1981 and 1996 — will soon comprise a significant portion of the workforce. By 2020, half of the workforce will be millennials, and by 2025, it will jump to three quarters, according to the Aon Hewitt 2015 Health Care Survey. That’s why it’s more important than ever to devise creative and effective compensation strategies to attract and retain this generation of talent.
Millennials have a different take when it comes to rewards. Before doubling down on certain types of rewards, it’s first important to understand what millennials value most, which can differ from older generations in the workplace. Companies shouldn’t make assumptions that their traditional rewards opportunities will resonate with all employees — particularly new entrants to the workplace. Figure 1 reflects our research on what different generations tend to value most when it comes to compensation, benefits, performance management and workplace culture
Planning Rewards for This Generation
As seen in Figure 1, millennials want to do meaningful work — so much so that they tend to prioritize it over other more traditional forms of motivation such as money or job title. Collaborative by nature, they seek regular feedback and want a more creative blend of benefits.
That’s why it’s important to consider these key areas when planning rewards for this generation:
Offer flexible career progression: Cross-training, collaboration between teams and flexibility in terms of assessing talent are a few ways to help millennials explore different areas. Identify and create interesting work opportunities for this generation by reducing the bureaucracy that makes it difficult for someone to move around the organization, or taking special care to place millennials with managers from whom they can learn. Appropriate rewards structures are needed to accommodate this kind of job movement and career flexibility.
Reward relative performance: Millennials are competitive, so it’s important to structure rewards that reflect this. That means driving top performance by reinforcing it with rewards. Millennials measure themselves — including their performance at work — against their peers and expect to be recognized for superior performance. This makes a variable pay mix ideal for millennials. The base salary provides a foundation to access opportunity and variable pay provides a way to recognize those who make the most of the opportunity. In fact, differentiating rewards has been shown to be effective with millennials.
Provide connection and transparency: Millennials often share information that other generations have considered extremely personal. For example, they are more likely to let others know what they earn as well as how much they receive in any pay increase. As information about pay spreads, employees will create perceptions about whether the company pays fairly. Companies need to get in front of the pay transparency movement and make sure their pay-for-performance story is communicated throughout the organization.
Recognize Millennials Regularly
Millennials want to feel that their work is making a difference. As such, they appreciate special recognition, especially when it’s simple, personalized and immediate. To appeal to them, you’ll want to go beyond traditional recognition programs, which have often been fairly generic in how they’re designed.
Figure 2 shows the changing preferences for different types of recognition awards from 1996 to 2016. Over the past 10 years as more millennials joined the workforce, we can see cash remains highly valued but still not as popular as it was in 1996. Overall, employees appear more diversified in the different recognition rewards they value today.
Remember, it’s not just a paycheck to millennials, it’s a purpose. It’s not just job satisfaction, it’s development. It’s not just having good managers, it’s getting coached. And it’s not just having annual reviews, it’s having ongoing conversations.
Understanding these nuances and catering to millennials’ expectations for talent and rewards programs is critical to attract and retain a generation of workers that will soon comprise the majority of the workforce.
To learn more about how our surveys and consulting experts can help your organization take a strategic approach to designing rewards, please contact us.