First Published on LinkedIn
At the beginning of the year, the world’s CEOs ranked attracting and retaining talent as their top concern for 2020, according to a report by the Conference Board. While the COVID-19 pandemic has become a top risk management concern that none of us could have foreseen months ago, the underlying talent concerns remain. Talent supply and demand constraints, particularly for hot jobs, are encouraging companies to redefine their rewards and recognition programs to better attract and retain high-value employees. In fact, given the current environment with many employees’ equity falling underwater, talent retention is in many cases a more prominent issue.
In the past, compensation strategies have been based primarily on setting benchmarks for pay against comparable jobs among a custom peer group. Recruiters have often used predetermined pay ranges, combined with the candidate’s experience and ability to negotiate, to determine starting pay.
And once someone starts at the company, rewards are typically based on merit increases or performance reviews that yield a modest pay increase (it has stayed around 3% in the United States for decades). Promotions, one of the few avenues to a significant bump in pay or higher overall salary package, are typically only awarded to a few individuals.
While it may be hard to completely break away from this compensation framework, the fact is that this approach is outdated for the desires of today’s workforce. Employers need to augment this model with other tools that enable their company to excel during the current talent supply crunch and build the 21st century workforce they need.
As our skill and competency frameworks change, so must the way behaviors and accomplishments are rewarded. Here are three ways to rethink your company’s approach to rewards.
Focus on Learning & Skills-Based Rewards
Skills-based reviews are usually not part of the rewards and compensation conversation. Outside of the traditional manufacturing environment, acquiring new skills through additional education, training or certification is not typically compensated in the annual review process and generally has a small impact on an individual’s career advancement, unless it’s a university degree or major certification that is required after multiple years of study.
However, skills-based rewards have begun to emerge on the forefront of the compensation arena. As scarcity drives demand for certain roles like machine learning or data science through the roof, companies struggle to compete. That’s because their compensation frameworks often create a constraint once the key individual is identified as the best hire for the role. Companies therefore might look to implement a skill-based rewards system to enable them to attract and retain talent for these hot jobs. To learn more about how this works, see our recent article, Why More Companies are Turning to Skill-Based Compensation Programs.
We’ve found that in a rapidly evolving workplace, investing in training and reskilling is the only way to deliver continued success — for your organization and for your employees.
Make Recognition Meaningful
The days of just flipping a gift card inside an envelope are over. Companies are rethinking their approach to rewards and moving toward a broader definition of the term "recognition." Increasingly, they’re strategically using non-monetary rewards and practices to recognize employee talent and emphasizing flexibility, which helps to build teams that can adapt to future workplace needs.
It is important not to look at recognition programs in a vacuum, but rather as a supporting player with your rewards program and the company culture. For instance, can the program be structured in a way that highlights or recognizes the corporate or team values? For example, if your culture supports entrepreneurship, make sure managers are recognizing employees that take initiate and go above and beyond in suggesting a new idea and seeing it through. Employers should examine their overall rewards, performance management and talent programs to ensure they are providing a cohesive, meaningful experience for employees.
In addition, organizations are realizing the value of focusing their manager-employee conversations on outcomes and goals, not just ticking off boxes on a list or trying to hit a certain number on an ever-evolving rating system. This change will need to be fostered and supported by the company through developing new guidelines and talking points for managers or providing additional manager training. In addition, employers should look at whether their current job architecture and career paths allow for the flexibility needed for career development (i.e., allow employees to move across functions and get exposure to new experiences rather than only moving up the ladder within their job function). New types of tools, such an experience map, can enable this goal.\
Embrace a New Approach to Rewards at All Levels
Restructuring your rewards program doesn’t just rely on employee buy-in; leadership must also back the initiative. Championing a growth mindset isn’t just for the rank and file: it requires support and implementation at all levels. Leadership should be the first to exhibit the new behaviors, while also delivering the time and resources employees need to focus on reskilling and professional development. Employees should be encouraged to engage in learning, retraining and reskilling, and key performance indicators should be adjusted to account for and reward engagement in these initiatives.
A shift toward educational and development initiatives means that training and development should become integrated as part of the regular workday and rewarded consistently with ownership, experiences and recognition. Success in adopting a new approach to rewards relies on a shift in how we think about success at work. Putting a premium on rewarding internal talent development represents a disruption in the traditional rewards approach, but embracing this change is critical to the success of your organization’s future workforce.
About the AuthorMore Content by Hannah Kenney