employee value proposition and total rewards: … · § 2,004 employer respondents ... modernizing...

Employee Value Proposition and Total Rewards: Modernize or Risk Irrelevance

September 29, 2016

© 2017 Willis Towers Watson. All rights reserved.

Findings from the 2016 Global Talent Management & Rewards and Global Workforce Studies

About the 2016 studies

Fielded April – June, 2016§ 29 markets globally§ 2,004 employer

respondents representing >21 million employees

§ 21st annual survey

Key topics covered:§ Attraction and retention

drivers§ Talent mobility and challenges§ EVP and total rewards§ Leader and manager

effectiveness§ Career management§ Performance management § Pay for performance

35%

21%

18%

26%

2016 Global TM&R Study

Asia Pacific EMEALatin America North America

Key topics covered:§ Attraction and retention

drivers§ Drivers of sustainable

engagement§ Leader and manager

effectiveness§ Career management§ Performance management§ Health, stress, wellness§ Communication

Fielded April – May, 2016§ 29 markets globally§ >31,000 employee

respondents

Global Talent Management & Rewards Study (TM&R)

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only. 2

Global Workforce Study (GWS)

Number of participants (Financial Services):GWS: 4,816TM&R: 350

Modernizing your Employee Value Proposition and Total RewardsDiscussion outline

Setting the Stage§ What’s driving a modernization agenda§ Talent market context§ What it all means§ The Modernization Agenda § The ROI on Getting it Right

Understanding the Drivers of Attraction, Retention and Sustainable Engagement Modernizing your EVP§ Effective Leaders § Work, Stress and Wellness § Performance Management§ Total Rewards

Anticipating the Future of Work

Conclusion

Additional Information


Conclusion

© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 4

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda


Modernization, relevance and what’s at stakeCreates increased pressure and stress on the workforce and a whole new definition of what it means to be a leader

Market trend/reality

Expectations of transparency and individualization

Fast-changing technology

Demographic shift – It’s really happening


Fast-changing market

Challenges attracting employees in key workforce segments remain high overallEven more so for organizations operating in emerging economies

Mature Markets Emerging Markets

6

28%

45%

55% 54% 56%

44%

57%

66%

77% 76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

All employees Diverseemployee

populations

Critical-skillemployees

High-potentialemployees

Top-performingemployees


populations




Attraction Challenges

Nearly half (48%)of employers report

hiring activity increased

GLOBAL

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.

Retaining key employee groups remains difficult, especially in emerging markets

Mature Markets Emerging Markets

7

Close to three quarters of employers have trouble retaining high potentials

20%

28%

37%

47%44% 41%

47%

59%

70%65%

0%

10%

20%

30%

40%

50%

60%

70%

80%


populations





populations




Retention Challenges

One-third (35%) of employers report

turnover activity increased

GLOBAL


The cost of turnover puts significant value at risk

Job LevelFinancial cost of turnover

(% of annual compensation)*% of ee’s at highrisk of turnover**

Financial costat risk***

Senior Manager/Executive 74% 31% 23%

Professional 59% 25% 15%Sales & Customer/ClientManagement 59% 27% 16%

Business Support 48% 27% 13%

Lost productivity

Hiring

Training

Job vacancy

Probability of turnover

Financial cost at risk

Financial cost of

turnover

8

*FCOT measured in our proprietary benchmark database**% at risk of turnover from 2016 Global Workforce Study ***Financial cost at risk=FCOT*% at risk of turnover

GLOBAL


Needed: A modernization agenda to address the challenges of today’s workplace and remain relevant

The Modernization Agenda – companies need to:

Be agile and nimbly respond to changes in business strategy and talent markets

Introduce flexibility into talent and reward plan design and delivery

Improve transparency in reward programs

Tailor programs to key segments of their workforce

Leverage technology to digitally engage employees

Transition from job security to relevance (career security)

Address work place stress

9© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.

Modernizing also means getting the EVP right

Have formally articulated their EVP that is clearly aligned with what they stand for in the marketplace, and differentiates them from other organizations with whom they compete for talent

Understand their employees and potential candidates the same way they would understand their external customers

Customize their EVP for employees with critical skills

Effectively communicate and deliver their EVP, leveraging technology to understand employees and communicate differentiated messages to them

Best practice EVP companies:


Conclusion

11

Setting the Stage









Modernizing your EVP should be accomplished in the context of an overarching human capital framework

Leadership

Measurement, Change Management, Communication and HR Technology

EVPEmployee Value

Proposition

Desired Culture

Human Capital

Strategy

almost 3x as likely to report theiremployees are highly engaged

93% more likely to report significantlyoutperforming their industry peersfinancially

27% fewer regrettable new hires in the first year

More than 10% less likely to reportdifficulty attracting and retaining keyemployees segments

OutcomesHuman capital dimensionsBusiness strategy

17% lower voluntary turnover

Best practice EVP companies achieve better outcomes

12

GLOBAL


Getting it right starts with understanding the top drivers of attraction

RankFinancial Services Global

Employee view Employer view Employee view Employer view

1 Base pay/salary Career advancement opportunities Base pay/salary Career advancement

opportunities

2 Job security Base pay/salary Job security Base pay/salary

3 Career advancement opportunities

Reputation of organization as a great place to work

Career advancement opportunities


4 Challenging work Challenging work Challenging work Challenging work

5 Reputation of organization as a great place to work Job security Opportunities to learn new

skills Job security

6 Opportunities to learn new skills

Organization's mission, vision and values


Organization's mission, vision and values

7 Health care and wellness benefits

Opportunities to learn new skills

Health care and wellness benefits


13

Comparing top drivers of attraction


You also need to understand why employees would choose to leave your organization

RankFinancial Services Global

Employee view Employer view Employee view Employer view

1 Base pay/salary Base pay/salary Base pay/salary Career advancement opportunities

2 Career advancement opportunities

Career advancement opportunities

Career advancement opportunities Base pay/salary

3 Job security Relationship with supervisor/manager Physical work environment Relationship with

supervisor/manager

4 Ability to manage work-related stress

Ability to manage work-related stress Job security Ability to manage work-

related stress

5 Length of commute Short-term incentives (e.g., annual bonus)

Ability to manage work-related stress


6Relationship with

supervisor/managerOpportunities to learn new

skillsRelationship with

supervisor/managerFlexible work arrangements

7 Flexible work arrangements Trust/Confidence in senior leadership

Trust/Confidence in senior leadership

Short-term incentives (e.g., annual bonus)

14

Comparing top drivers of retention


GroupFearful

Stable and steady

Financially concerned

Making a career of it

In a good place

Key characteristic

Don’t want to lose my job

Don’t want my job to change

Don’t want to lose my paycheck

In it for the long haul

I’m happy, for now

Employerscan offer

Career Security through training to remain relevant in the new market

Integrated Performance Management to help employees to adapt to changing workplace needs

Alternative work arrangements to allow employees to do same tasks for more than one employer

Total Reward programs redesigned to help employees with concerns about budgeting and financial planning

Leadership and managers who support an innovative culture

Greater use of pay programs with emphasis on LT payoffs (Career Management, LTI, Pensions)

Pay for performance and skills

Training for high valued skills to remain relevant in marketplace

Job security and the modernization agenda are not irreconcilableJob security is a top driver of attraction and retention, but can mean different things to different people

*Percentages represent those who selected job security as a driver of retention and who fall into this group.

15

26% 24% 22% 10% 19%

GLOBAL


To achieve desired outcomes, companies must address the drivers of sustainable engagement

Sustainable Engagement Drivers

Rank 2016 – Financial Services 2016 - Global 2014 - Global

1 Senior Leadership Senior Leadership Senior Leadership

2 Supervision Clear Goals & Objectives Clear Goals & Objectives

3 Clear Goals & Objectives Supervision Workload & Flexibility

4 Workload & Flexibility Image & Integrity Image & Integrity

5 Image & Integrity Workload & Flexibility Empowerment

16

What is Sustainable Engagement? § Engagement – Rational, emotional and behavioral attachment to the company§ Enablement - A local work environment that supports productivity and performance§ Energy - Individual physical, interpersonal and emotional well-being at work


Sustainable engagement pays dividends...

17

but only one-third of employees are highly engaged

§ Research shows that companies with high levels of sustainable engagement outperform those lacking energy and enablement

37%

17%

21%

25%

Global

Highly Engaged: Those who score high on all three aspects of sustainable engagement

Unsupported: Those who are traditionallyengaged, but lack enablement and/or energy

Detached: Those who feel enabled and/or energized, but lack a sense of traditional engagement

Disengaged: Those who score low on all three aspects of sustainable engagement

-13.3%

1.9%5.2%

-20%

0%

20%

12-month change in gross profit margin vs. sector

Highly engagedDisengaged Unsupported

41%

17%

19%

23%

Financial Services


Conclusion

18

Setting the Stage









In the modernization agenda, we (re)define the term “leader”

19

However, what the leader leads is dependent on the role within the organization

The executive-leader:§ Makes sure the right things are done§ Engages others in building and driving the business§ Leads others while managing outcomes/results§ Fosters a broad culture of success and fulfillment

The manager-leader:§ Makes sure things are done right§ Engages others in getting the work done every day§ Manages the work/outcomes while leading others§ Creates a local environment for success and

fulfillment

Manager Executive

In simplest terms, a leader is someone who leads –

not necessarily a specific role or title (e.g., a manager or executive)


What makes a leader effective? There are key areas of leadership effectiveness that are “universal”

Professional People

Pioneering

Handling a wide range of people issues across teams and functions. Interacting assertively with people to achieve results. Understanding and adapting to the needs of others.

Impact created through:§ Engagement§ Successful Teams§ Communication

Impact created through:§ Managed Risk§ Service & Product Delivery§ Expert Reputation

Applies expertise and deep knowledge. Uses strong analytical and reasoning capability. Investigates and solves problems using specialist expertise.

Driving success, change and growth. Seizing commercial opportunities and outperforming competitors. Generating imaginative solutions and a long-term vision.

Impact created through:§ New Product/Markets§ Organizational Transformation§ Organizational Growth

Based on our research, the requirements of the leader are guided by three performance factors and the impacts needed from the leader


Our research indicates that the emphasis on performance factors changes, depending on leadership level

The emphasis on certain

areas shifts depending

on scope of role in the

organization

Managers tend to focus more on the professional side than other levels of leadership. And the impacts they create are related more to operational activities.

Successful Executives focus more on the pioneering factor – but they don’t lose focus on professional or people; they are still bringing their domain expertise to bear, and industry leadership. Additionally, the people side of their role is still a key area of focus.

21

Manager Executive


Our organization develops leaders who will be able to meetchanging business needs

Strongly Agree/Agree

64%

So what are companies doing around leadership development? Overall there is room for improvement

22

My organization makes effective use of a leadership competency model

Strongly Agree/Agree

61%

Currently have

46%

Which of the following HR technologies does your organization currently have or plan to add in the next year or two?

Leadership developmentPlan to add in next

year or two

35%No plans

20%

In Financial Services:§ 71% of organizations agree or strongly agree that they develop leaders who will be

able to meet changing business needs§ 60% report that they make effective use of a leadership competency model§ 49% currently have and 33% plan to add leadership development technology in the

next year or two, while 18% have no plans


Employees give senior leadership low marks on key aspects of their role

Percent favorable

Item Financial Services Global

How would you rate the job that senior leadership is doing to:

Grow the Business 62% 52%Manage Costs 57% 47%Develop Future Leaders 44% 39%

Senior leadership behaves consistently with the organization's core values 59% 52%

I believe the information I receive from senior leadership 56% 50%

I have trust and confidence in the job being done by the senior leadership of my organization 55% 48%

Senior leadership at my organization has a sincere interest in employees' well-being 49% 44%

Fewer than half (46%) of the next generation of leaders globally thinktheir organization does a good job of developing future leaders


Less than 20% of employers are removing or redeploying blockers, or using software for succession management

24

Employer view

Succession Management process : Financial Services Global

Uses work assignments and talent movement to develop leaders 78% 75%Uses actual succession plans to fill vacancies 62% 60%Links our succession management process with other talent and reward programs (e.g., performance management, compensation)

41% 38%

Uses psychometric tests to assess potential 29% 28%Uses software to enable succession management 20% 18%Removes/Redeploys "blockers" to provide development opportunities to top talent 13% 16%

Succession management is a key enabler of developing future leaders. There’s a significant opportunity for employers to do more.


Employees give their immediate managers better marks than senior leaders

25

Given the importance of managers, there is still room for improvementEmployee view

My immediate supervisor/manager: Financial Services Global

Treats me with respect 76% 72%

Assigns tasks suited to my skills and abilities 70% 66%

Clearly communicates goals and assignments 56% 55%

Encourages new ideas and new ways of doing things 60% 54%

Listens carefully to different points of view before reaching conclusions 58% 54%

Helps remove obstacles to doing my job well 56% 52%

Is effective at differentiating performance between high and low performers 58% 52%

Makes fair decisions about how my performance links to pay decisions. 53% 48%

Has enough time to handle the people aspects of the job 48% 46%

Coaches me to improve my performance 47% 44%


The responsibility-respect mismatch: Less than half of all employees think the role of the manager is respected

26

Yet so much is expected of them, and having the necessary skills is the number one facilitator of performance management

Which of the following are facilitators of your performance management experience at your organization?

The People manager role is highly respected in my organization

45%global

My line manager/supervisor has the necessary skills

42% global

Lack of effective feedback is the

#1 barrierto the performance management experience (#1 globally)

Managers are spending5.5 hours per employee/year on managingperformance (3 to 4 hours globally)

Inadequate time spent in their role as people manager

46%Financial Services



9%11%

26%54%

Both ineffective

The bottom line: Employees with effective senior leaders and managers are much more likely to be highly engaged

Highly EngagedUnsupportedDetachedDisengaged

Source: Willis Towers Watson 2016 Global Workforce Study – Global. Note: Proportions may not sum up to 100% due to rounding.

33%

25%

24%

18%

Effective senior leaders & ineffective

manager

23%

20%32%

26%

Effective manager & ineffective senior

leaders

67%17%

11%5%

Both effective

27

GLOBAL


So what does it take to be an effective leader?

Effective leaders demonstrate these key competencies

Source: Willis Towers Watson 2016 Global Workforce Study – Global.

Rank How effective is your manager at… Favorable Not Favorable

1 Developing Talent (creating developmental opportunities, coaching and mentoring, giving feedback)

56% 20%

2 Leading Change (identifying change needs, driving change, addressing concerns)

54% 20%

3 Engendering Confidence and Trust (demonstrating reliability, being open and honest, being consistent)

53% 20%

4 Building Effective Teams (forming teams, creating shared purpose, identifying talent needs)

54% 19%

5 Displaying Entrepreneurial Spirit (perceiving subtle changes, thinking boldly, pursuing opportunities)

54% 21%

6 Focusing on Customers (identifying needs, developing relationships, developing solutions)

52% 20%

7 Articulating the Vision (communicating the vision, translating the vision, showing commitment)

52% 21%

28

Engagement levels are significantly higher among employees who rate their managers favorably on these competencies

Engagement levels are significantly higher among employees who rate their managers favorably on these competencies

GLOBAL


Conclusion

29

Setting the Stage









Two-thirds of employers globally identify stress as the top workforce health risk issue

30

Source: 2015/2016 Global Staying@Work Survey

Stress (64%)

Lack of physical

activity (53%)

Poor nutrition (31%)

Lack of sleep (30%)

Stress (85%)

Unplanned absences

(45%)

Stress (74%) Stress (72%)

Lack of physical

activity (58%)Stress (44%)Overweight/

Obesity (70%)

Lack of physical

activity (61%)Overweight/

Obesity (45%)

Lack of physical

activity (52%)

Lack of sleep (30%)

Stress (75%)


Lack of physical

activity (46%)

Lack of physical

activity (45%)


Lack of sleep (31%)

Overweight/ Obesity (43%)




Presenteeism (35%)



Presenteeism (23%)

Presenteeism (40%)

Global US Canada EuropeLatin

America Asia PacificRank

1

2

3

4

5

GLOBAL


mailto:Staying@Work

Addressing workplace stress involves rethinking pay, addressing staffing issues, and changing an organization’s culture

31

Source: 2015/2016 Global Staying@Work Survey and 2015/2016 Global Benefits Attitudes SurveyGBAS sample: US and Canada full-time employees with an employer health plan. Rest all employees.

Lack of work/life balance #1 ≠ #5 #1 ≠ #6 #1 ≠ #8 #1 ≠ #6 #1 ≠ #5 #1 ≠ #4

Inadequate staffing #2 = #2 #2 ≠ #1 #3 ≠ #1 #2 ≠ #1 #2 ≠ #3 #2 = #2

Technologies that expand day #3 ≠ #13 #3 ≠ #12 #4 ≠ #12 #3 ≠ #14 #6 ≠ #11 #4 ≠ #11

#1Lack of work/life balance

#1Low pay

(Global, Lat. Am. & APAC)

Inadequate staffing(US, Canada & Europe)

Company culture #10 ≠ #3 #12 ≠ #3 #10 ≠ #3 #9 ≠ #4 #11 ≠ #9 #8 ≠ #3

Low pay #11 ≠ #1 #11 ≠ #2 #12 ≠ #2 #12 ≠ #2 #10 ≠ #1 #10 ≠ #1

Global US Canada Europe Latin America Asia Pacific

Employer view

Employee view

Note: Rankings based on options 3/4/5 on a 5-point Likert scale

Causes of stress: main disconnects between employer and employee views

GLOBAL


mailto:Staying@Work

The employer role: Move from ‘pull’ (encouragement) to ‘push’ (driving change) gradually – build employee permission.

Trust: There is a strong connection between health engagement and the broader employment deal. Address concerns on privacy of personal information.

Social connections: Leverage worksite and support interactions and competitions around health. Important for managers to be effective advocates of employer programs.

New technology: Use technology, peer groups and personal communication to motivate action.

So what does it take to build a culture of health and well-being?

1

2

3

4


Conclusion

33

Setting the Stage









Performance management and “going ratingless” are in the spotlight What are companies actually doing?

Is your organization planning to make any of the following changes to your performance management process?

Already taken action

Planning to take action

Considering taking action

Neither planning nor considering

taking action

Financial Services Global Financial

Services Global Financial Services Global Financial

Services Global

Focus on increasing frequency and improving quality of performance conversations/dialogue between manager and employee

35% 33% 23% 23% 26% 24% 16% 19%

Using performance management to evaluate/measure future potential 32% 28% 22% 20% 24% 25% 22% 27%

Implementing new enabling technology (e.g., to support crowdsourcing or enable mobile platforms)

13% 15% 15% 16% 23% 21% 49% 48%

Eliminating performance ratings/scores entirely 4% 8% 4% 3% 14% 15% 77% 74%

Eliminating performance ratings/scores for performance management but keeping for compensation purposes

3% 5% 6% 4% 14% 14% 78% 77%

§ Very few employers have gone or are considering going ratingless§ Most are focusing on having more and better performance

management conversations


Employees continue to say that performance management –as they experience it – is not very helpful

Employee View

The extent to which you agree with the following statement: Financial Services Global

People are held accountable for their performance at my organization 60% 56%

The people who evaluate me have clear visibility of my performance on the job 63% 56%

My performance was accurately evaluated in my most recent performance review 60% 52%

My organization does a good job explaining our performance management process 57% 50%

My performance reviews have helped me improve my performance 51% 48%

High-performing employees in my organization are rewarded for their performance 57% 46%

There is a clear link between my job performance and my pay 54% 45%

35

This represents a lost opportunity to address a top driver of sustainable engagement: clear goals and objectives


While more favorable, employers are not enthusiastic about their performance management process

Employer View

The performance management process at your organization is effective at: Financial Services Global

Aligning individual performance objectives with strategic business priorities 82% 76%

Identifying high, average and low performers 82% 74%

Reinforcing key organization-wide values and desired behaviors 75% 73%

Providing a mechanism for differentiating rewards 79% 70%

Driving high performance across the workforce 70% 67%

Informing development needs and plans 69% 64%

Providing a mechanism for determining talent program eligibility 65% 60%

Encouraging employees to set stretch goals 61% 60%

Creating a positive employee experience 53% 51%

Clarifying accountability of specific roles 51% 47%

36

Just 51% of employers indicate that their performance management process is effective at clarifying accountability for specific roles


Employers’ views on managers’ effectiveness at performance management are not very favorable

37

Managers are effective in the following aspects of performance management:

Financial Services Global

Differentiating performance between high and low performers 58% 53%

Fairly reflecting overall performance in the employee’s final performance rating 53% 50%

Working with employees to set appropriate performance goals for individual performance 47% 49%

Fairly reflecting performance in pay decisions 54% 49%

Identifying development opportunities 41% 39%

Giving employees regular coaching and feedback on their performance 40% 35%

Conducting career development discussion 33% 30%

Driving the right degree of risk taking to enable innovation 23% 22%


Over 75% of managers spend less than six hours per employee per year on performance management

% of managers


2 hours or less per employee 21% 27%

3 or 4 hours per employee 27% 26%




More than 10 hours per employee 18% 10%

In the typical year, how much time per employee do you spend on performance management, including any time spent on the ratings calibrations process? The Math:

On this critical process, the typical manager globally devotes time to performance management equal to 0.2% of the hours a typical fulltime employee works in a year.

What falls through the cracks?


Managers also say they spend too much time filling in forms…

The amount of time I spend on the performance management process:

Too little About right Too muchFinancial Services Global Financial

Services Global Financial Services Global

Collecting feedback from colleagues is... 22% 24% 68% 63% 10% 14%

Ongoing conversations with employees about their individual performance is... 22% 19% 64% 64% 13% 16%

Helping employees set performance goals or objectives is... 18% 19% 68% 66% 14% 14%

Understanding and using performance management technology is... 16% 18% 69% 67% 15% 15%

Year-end performance feedback sessions is... 12% 18% 74% 66% 15% 16%

Participating in calibration sessions is... 16% 16% 69% 64% 15% 21%

The process overall is... 12% 15% 72% 68% 15% 17%

Completing forms is... 6% 7% 68% 69% 26% 24%

39

And not enough time on setting goals, collecting feedback and discussing individual performance


There appears to be a sweet spot in terms of time invested in performance management activities and desired outcomes

2 hours or less per

employee

3 or 4 hours per employee



9 or more hours per employee

It is easy to get the information I need to update my direct reports on key organizational changes 45% 60% 60% 67% 58%

Our annual base salary increases are effective at drivinghigher levels of performance among my direct reports 37% 52% 52% 53% 49%

Our annual base salary increases are effective at differentiating pay based on performance among my direct reports

36% 52% 54% 61% 49%

Our annual incentives or bonuses are effective at driving higher levels of performance among my direct reports 38% 57% 57% 61% 56%

Our annual incentives or bonuses are effective at differentiating pay based on performance among my direct reports

39% 55% 60% 59% 51%

Our formal performance ratings are effective at driving higher levels of performance among my direct reports 39% 52% 56% 57% 50%

Our performance management system is effective at differentiating performance among my direct reports 38% 58% 60% 66% 55%

40

Outcomes reported by managers vary based on how muchtime they spend per employee per year on performance management

GLOBAL


Conclusion

41

Setting the Stage









Modernizing Total Rewards means challenging conventional thinking

Traditional approach New reality

42

Employees never discuss pay and benefit details with each other

“Living out loud” on Glass Door; emerging legislative agendas that prescribe pay transparency

Provide guaranteed jobs Enable career security through career development

Pay for performance = merit increase and incentive pay based on last year’scompany performance + individual “performance rating”

Changing business models and nature of work means challenging the individual performance definition and the role of base pay

“One size fits all” Segmentation and customization


37%43%

48%

59%62%

37%44%

47%54%

62%

0%

10%

20%

30%

40%

50%

60%

70%

How my totalcompensation compares

to the CEO at myorganization

How my totalcompensation comparesto the typical employee atother organizations like

mine

How my totalcompensation comparesto the typical employee in

my organization

How my bonus isdetermined

How my base pay/salaryis determined

Percentage of employees who agree they understand…


Employees claim to understand how pay is determined, but not its value relative to other groups


Employee perceptions of internal equity and market competitiveness are mixed

44

18%

33%

23%

16%

26%

17%

43%

36%

38%

42%

36%

37%

39%

31%

39%

42%

38%

46%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Base Pay

Bonus

Total Rewards

Base Pay

Bonus

Total Rewards

Below Average Average Above Average

Overall, how do you think the value of each of the following compares to that offered for similar positions in other organizations?

Pay fairness Globally, half think they are paid fairly, but 1 in 5 disagree Paid fairly compared to

others in other companiesPaid fairly compared to

others in my organization

Financial Services

Global

Global Financial Services Global Financial Services50% 54% 51% 55%


Employers promise pay for performance differentiation, but fail to deliver

Employer view Manager view


Services Global

Our base salary increases are effective at driving higher individual performance 47% 40% 45% 48%

Our base salary increases are effective at differentiating pay based on individual performance 58% 55% 49% 49%

Our short-term incentive programs are effective at driving higher individual performance 58% 50% 49% 52%

Our short-term incentive programs are effective at differentiating pay based on individual performance 66% 52% 49% 52%

Our formal performance ratings are effective at driving higher levels of performance among my direct reports n/a n/a 50% 50%

Our performance management system is effective at differentiating performance among my direct reports n/a n/a 53% 53%

45

40% globally

47% Financial ServicesOf employers think that base salaryincreases drive performance

Only

50% globally 58% think that short term incentives do

Perceptions of differentiation effectiveness are mixed

Financial Services


The organization has defined job levels that reflect a common definition of internal job contribution across the organization

Our career planning and growth program includes emphasis on dual career paths for people managers and comparable-level individual contributors

My organization has a formal process to ensure there is no bias or inconsistency in performance reviews

No Yes No Yes

39% 59% 52% 62%

My organization has a formal process to ensure there is no bias or inconsistency in compensation distribution

39% 66% 57% 68%

The need for consistency in performance reviews and compensation decisions raises the importance of job leveling and career frameworks

46

The transparency agenda demands it

52% of organizations globally report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)52% of organizations globally report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)

GLOBAL


Merit increase

Employees who did not meet expectations 0%

Employees who partially met expectations 1%

Employees who met expectations 3%

Employees who exceeded expectations 4%

Employees who far exceeded expectations (e.g., top 10%) 6%

Overall merit increase 3%

Incentive plan funding and differentiation resultsSuggest that “pay for performance” programs are not delivering the overall performance lift or the differentiation levels intended in design

Short-term incentive/bonus amounts Target differentiation*

Actual differentiation*

Employees who did not meet expectations 21% 18%

Employees who partially met expectations 52% 50%

Employees who met expectations 88% 86%

Employees who exceeded expectations 101% 99%

Employees who far exceeded expectations (e.g., top 10%) 118% 113%

47

At the same time 90 percent of organizations have, are planning, or considering changing some aspect of their performance management program

*Values represent averages

GLOBAL


How do we put “pay for performance” back on track?Get crisp on what performance needs to be rewarded and adapt programs accordingly

Define performance Drive the right performance

Reward for performance

Cultivate a high performance culture

§ Define all key performance dimensions (e.g., results, potential, behaviors, culture, collective, individual) and how and where they may differ by employee segment

§ Ensure objectives (e.g., results-based, behavioral, cultural) are aligned to deliver on the defined performance dimensions

§ Improve the performance experience through efficiency and effectiveness

§ Determine the performance dimensions to be “rewarded” by talent segment and choose the “right” combination of reward vehicles

§ This may include broadening performance pay to include other rewards (e.g., PTO, career management)

§ Genuinely commit to a change strategy to build and embed the desired performance culture

§ Ensure all leaders and managers are communicating and engaging in an ongoing dialogue with employees on performance

Adopt Enabling HR Software

You may need to take a step backwards to move forward


On merit increase decisions, HR puts most emphasis on final rating and achievement of goals; managers take a more holistic view

HR’s view Manager’s viewFactor should

effectManager gives more weight than intended

Factor does effect their decision


Services Global Financial Services Global

Final rating in most current year-end performance review 78% 72% 55% 52% 66% 63%

Achievement of individual goals 61% 65% 45% 47% 66% 65%Demonstration of knowledge and skills required in current role 53% 55% 43% 41% 70% 68%

Penetration in pay range for current role 58% 54% 31% 30% 55% 57%

Achievement of team goals 51% 49% 38% 29% 68% 66%

Concerns over market competitiveness 52% 48% 42% 37% 50% 55%Possession of skills critical to the success of the future business model 51% 46% 43% 40% 61% 63%

Criticality of the role 57% 48% 60% 54% 58% 62%

Concerns over internal equity 44% 42% 47% 44% 50% 52%

Perceived potential 45% 41% 40% 41% 56% 59%

Demonstration of company values 33% 35% 20% 19% 52% 57%


Performance Rating

Salary Range PositionBelow

MinimumLower Third

Middle Third

Upper Third

Unsatisfactory performance

0.0% – 2.0% 0.0% – 2.0% 0.0% 0.0%

Performance needs improvement

2.0% – 4.0% 1.0% – 3.0% 0.0% – 2.0% 0.0% – 1.5%

Good performance 4.0% – 7.0% 3.5% – 6.0% 2.5% – 4.5% 1.0% – 3.0%

Excellent performance

7.0% – 11.0% 5.0% – 8.0% 3.5% – 6.0% 2.5% – 4.5%

Base pay, the number 1 driver of attraction and retention globally, gets mixed reviews while the world will get more complicated

50

Suggesting that old tools and approach tothe annual merit cycle may needto change. As the number onedriver of attraction and engagement, weneed to get base pay right in themodern context

Half of employersglobally expect to pay more

for certain skill sets

in the next 3 years , in comparison

to an expected 46% of Financial

Services employers

Our managers execute our base pay program well

51% global

59% Financial Services


After base pay, career management continues to be a top driver of attraction, retention and sustainable engagementBut effective career management remains elusive


All employees

All employees

Top performers

High potential

My company does a good job explaining how I can advance in my career 43% 42% 48% 59%

My immediate supervisor/manager helps me with career planning and decisions 37% 38% 47% 54%

My organization provides career planning tools and resources that are helpful to me (coaching, self-assessment, career paths, job rotation, competencies)

51% 44% 51% 60%

I have to leave my organization and join another organization in order to advance to a job at a higher level 43% 44% 42% 45%

51

Most employers provide traditional career paths, on-the-job training and internal job boards

Only a third of employersglobally provide lateral or dual career paths, beyond-the-job training, employee self-service tools and integration within technology (e.g. HRIS)

44% of employees globally feel they need to leave to advance their career.This doesn’t change for top performers (42%) or high potentials (45%)


Employees with alternative and flexible work arrangements are more engaged and a lower retention risk

Flexible work schedule

Compressed work week

Work from home

Work from other remote

locationHot desking/

hotelingNone

of these

By Engagement Group

Highly engaged 48% 46% 43% 49% 49% 29%

Unsupported 15% 17% 19% 19% 17% 16%

Detached 19% 19% 19% 17% 19% 23%

Disengaged 18% 18% 19% 15% 16% 32%

By Retention Risk

Stayers 45% 38% 47% 47% 45% 39%

Soft Stays 29% 30% 27% 28% 29% 35%

At Risk 10% 17% 10% 10% 9% 5%

Leavers 15% 15% 16% 15% 17% 21%

52

GLOBAL


3 Changing nature of work demands modern approach to pay for performance

In summary, the new Total Rewards reality suggests…

1 Transparency is a core principle

5 Recognize that the “total” in total rewards includes flexibility and a move away from “one size fits all”

2 Career security is the new job security

4 Base pay needs an identity check, it’s purpose may be lost


Conclusion

54

Setting the Stage









The Reality: The employment relationship is changingThe plurality of work options is here…

55

Artificial IntelligenceRobotics

Talent platforms

AlliancesOther types of workers

OutsourcingTraditional employees

Volunteers


Resulting in fundamental shifts in how work and organizations are organized

Our organization is a place containing employees doing work.

Our organization organizes work and talent.

Our organization is a fixed set of functions that work together to create value.

Supply chain ManufacturingRetail stores Marketing

IT R&D

Our organization is a malleable set of functions and deciding which ones get done inside the organization is a big part of strategy.

Supply chain Manufacturing

Retail stores MarketingIT R&D

R&DRetail stores


The use of non-employee talent is increasing and having an impact on businesses

Growth in share of non-employee talent expected over next three years

25% globally

24%globally

46%globally

54%globally

Of all managers say they manage at least one contingent worker on their team

Of all managers say they manage at least one contractor

Of companies report changing their workforce activities enabling them to use more non-employee talent due to technology now or in in the next three years

57

28% Financial Services





Considering the future, employers feel it’s more likely they will need to redesign jobs to be done by employees with lower or higher skills

Which of the following areas of your workforce and work activities are changing today or will change in the next three years due to technology?

Today but not

in 3 years

Today and in 3

years

In 3 years Neither

Paying more for employees with certain skill sets 29% 15% 35% 22%

Increasing work flexibility (e.g., scheduled hours to get work done) 30% 13% 31% 26%

Changing the way we design jobs so they can be done by employees with lower skills 14% 4% 29% 53%

Enabling work to be deployed to other locations 27% 11% 27% 36%

Changing the way we design jobs so they can only be done by employees with more skills 16% 4% 26% 54%

Requiring/Enabling us to use more nonemployee talent* 18% 6% 23% 52%

Improving collaboration and information sharing 45% 22% 18% 16%

58

GLOBAL


Identify the tipping pointsWhile jobs filled by employees will continue to be the dominant means for getting work done, companies are experiencing challenges in two key areas

High Value/Limited Supply: “Premier”

§ Highly skilled work with challenges attracting & retaining and market supply (e.g., software development talent)

§ By deconstructing jobs companies can change the talent curve creating supply for select activities and tasks

High Supply/Eroded Value:“Democratized”

§ Technology is fragmenting traditional skilled work into tasks that can increasingly be performed by less skilled talent (e.g., accounting, manufacturing assembly)

§ There are significant cost opportunities to be realized by thinking beyond employment

59

Val

ue

Supply


Conclusion

60

Setting the Stage









Supervision – Make room for managers to have the time needed to provide effective people management

Transparency – Heighten transparency

Performance Management and Pay for Performance–Re-define performance management and differentiate

Flexibility – Create flexible career paths, embrace flexible work arrangements

Technology Enablement – Leverage digital media to drive engagement

Leadership – Instill trust and confidence/build trust-based relationships; role model the EVP, develop the next generation of leaders

Modernization will create a more equal value exchangeThe employee-employer relationship in the new world of work

61

Key Leverage Points for Employers to Improve


Conclusion

62

Setting the Stage









63

Thank you


employee value proposition and total rewards: … · § 2,004 employer respondents ... modernizing...

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