WorldatWork released its "Survey on Workforce Flexibility" report earlier this year.  Over 500 WorldatWork members from HR,compensation and benefits roles participated in the research. 

The research looked at a variety of workforce flexibility programs and found that on average, employers offered six different types of program concurrently.  The types of programs emphasized varied somewhat by different types of organizations: compressed workweeks are more prevalent in the public sector (68%); part-time schedules are more common among non-profit organizations (90%); and ad-hoc telework is more frequently offered by public companies (89%).  Surprisingly, the study found no correlation between the number of programs offered and turnover rates.

Organizations tend to tailor flexibility programs to fit the needs of their workforces as well as their own priorities. The most prevalent programs are "flex-time" (flexible start/stop times), part-time schedules, and teleworking (aka, telecommuting) on an ad- hoc basis. Each of these programs are offered to some or all employees in more than 80% of surveyed companies; when offered they are also the most commonly used by employees, with flex-time being the highest ranked in popularity.  

The study also found that a culture of flexibility was more important than how the various programs were administered. "When it comes to workplace flexibility programs, culture trumps policy," said Rose Stanley, a practice leader for WorldatWork. "It's not about the quantity or formality of programs offered; it's about how well supported and implemented the programs are across the organization."

Organizations that have a stronger culture of flexibility were shown to have lower voluntary turnover rates.  In addition, a majority of employers report a positive impact on employee satisfaction, motivation and engagement.

The study revealed several obstacles to the adoption of flexibility programs, which included: lack of training and top management resistance.  The study also found a lack of employee interest in some programs, such as phased return from leave, phased retirement and career on/off ramps.

In today's world of small merit budgets and weak global economy, workplace flexibility can be a key differentiator maintaining and retaining an engaged workforce.

Join us for our annual rewards trends and salary planning workshop on September 28th in Seattle!  See here for more information.

Medical costs rose sharply during the recession and are continuing to rise at several times the rate of inflation, despite a poor economy, weak demand for medical services and generally low inflation.  Despite what you may have learned in economics 101 in college, the law supply and demand has seemingly little impact on medical cost inflation.

Two recently published studies show or predict costs rising at an approximately 8% annualized rate, even while demand for medical services is not growing much and inflation remains at very low levels (other than gas prices, of course!).

The PricewaterhouseCoopers (PwC) Health Research Institute recently predicted that employer health care costs will rise by about 8.5% in 2012, after rising by about 9% a year in both 2010 and 2011.  Even with modest cost-sharing and other plan changes, most employers can expect about a 7% increase on health plan costs over the next year.

The recently published 2011 Milliman Medical Cost Index (MMI) reports that in 2010 costs increased at a 7.3% rate to an average of over $19,300 a year for a family of four on a PPO plan, more than double the $9,235 cost in 2002.  The employee portion of these costs have also more than doubled, from about $3,600 in 2002 to just over $8,000 in 2011.

As costs have soared over the years, the employee's share of the total costs have also been increasing.  The MMI report states that the employee share of total health care cost have increased to nearly 40% (39.7%) of total costs, up from 36.8% in 2005 when they started tracking this metric.

Neither report offers much hope for a reduction in cost growth (the roughly 8% current medical cost inflation rate is down from annual increases in excess of 10% for most of the last decade).  The likely ongoing trend will be further cost-shifting to employees, even with employers absorbing much of the increased costs.

We believe that the ongoing high medical cost inflation rate also has the indirect effect of keeping a lid on merit and pay increase budgets (even in better times), as employers have to incur ever-increasing fixed benefits costs, even in times of economic stress and low inflation (and low pricing flexibility for their own products and services).

The PwC report states that 84% of employers are planning to make changes to their health plans to try and offset some of the expected cost increases.  A similar percentage (86%) state they are likely to re-evaluate their overall benefits strategy, while one-half are considering reducing or eliminating subsidies on dependent medical coverage.

Applied HR Strategies has announced its 2011 series of StrategicPay^® training workshops for HR and rewards professionals.

These half-day workshops are packed with knowledge, skills, tools and templates that attendees can use and apply back at their workplaces immediately.

Taught by leading experts in their respective fields, the workshops are also excellent for certified HR and compensation professionals..  The first two programs have already each been approved for 3.5 HRCI re-certification credits, and we anticipate that all will eventually be approved, once applied for. 

2011 Training Workshops

• Total Rewards & Employee Engagement - Wed, April 6th (Seattle Harbor Club)
• Developing a Performance Management Program - Wed, May 11th (Bellevue Harbor Club)
• Conducting a Competitive Pay Analysis - Tues, June thth (Seattle Harbor Club)
• Compensation Trends & Salary Planning - Wed, Sept 28th (Seattle Harbor Club)
• Designing a Variable Pay Program - Wed, Nov 9th (Bellevue Harbor Club)

All workshops run from 8:00am to 12:00 and include a continental breakfast, program materials and templates, recertification credit documentation, and a 20% discount code on StrategicPay^® Series Toolkits, if desired.

Enhance your skills - register now to reserve your seat!

2010 is now in the rear-view mirror, so let's take a look at where we believe we're going in 2011 and beyond, and how these changes will impact HR and compensation/rewards professionals. 

2010 was supposed to be a year of solid economic recovery from the biggest recession in a generation or more, but it turned out to be a year of glacial growth on the economic front. Yes, the economy was technically in recovery, but the growth was so slow that it felt like an on-going recession for many. Fortunately, 2011 looks a bit better than 2010, but only time will tell...

As we get back to work for the new year, here are our 2011 predictions for HR and reward professionals:

1. The economy will improve modestly (or better) in 2011.  The tax package that President Obama signed shortly before year-end 2010 will increase the pace of the economic recovery, which was already starting to show a bit more spunk before 2010 closed out.  Due to the tax package and other recent improvements, the predicted slow growth in 2011 (most pre-December projections were for 2.0% to 3.0% GDP growth in 2011) will likely accelerate somewhat and range from 2.5% to 4.0% for the full year.  That's good news for businesses, employees, the labor market, and just about everyone else.
2. Healthcare reform keeps employers busy, while employees continue to experience increased out-of-pocket costs in the form of increased premium-sharing, increased co-pays, deductibles and co-insurance. Healthcare reform was the big news in 2010, but less talked about is that employee out-of-pocket healthcare costs have more than doubled since early in the decade, and this trend will continue. I know, this isn't exactly a "surprise" prediction, but one that all reward professionals need to keep in mind as they plan, since increased healthcare cost are impacting nearly everyone, and this trend will continue for the foreseeable future.
3. Salary budgets will for 2011 will end up around 2.8% to 3.0% for the year.  These increases are significantly above 2009 (at about 1.5%), and modestly above 2010 (about 2.5%), but still at very low levels historically.  We will also see some significant industry variation, as the recovery will continue to be uneven.
4. The labor market will finally start to show some life, and 2011 will be a year of job growth improvement.  Persons filing for first time unemployment benefits have been in a slow but steady decline for some time, but until recently there hasn't been much to indicate hiring is about to perk up.  A recent report by the Wall Street Journal shows that online job postings have increased significantly in the past year, possibly portending the first major upswing in hiring since the recession officially ended in mid-2009.  The Conference Board's Employment Trends Index (ETI) also just reported its third straight monthly improvement for December. Still, job growth will be too slow to generate a dramatic reduction in unemployment rates, which will still likely be above 8.5% by year-end 2011.  An increase of about 150,000 jobs a month are needed just to keep up with persons entering the labor market, so it will take more growth than that to generate any meaningful drop in the unemployment rate.
5. Longer-term reward trends toward modest pay increase budgets, but increased variable pay budgets will continue.  As the economy improves, pay increase budgets will expand, but only very modestly.  The days of 4% t0 5% merit budgets are over, barring an explosion of economic activity or inflation. Some top performers will receive these types of base pay increases, but it will likely be many years before we see 4%+ merit budgets again in most industries.  At the same time, employers will continue to fund healthy and modestly increasing variable pay budgets, at least in performance-driven companies. 
6. Forward-thinking leaders will increasingly realize that employee engagement is the "new" retention, and a significant contributor towards improved employee performance.  We will be spending more time on this important trend in upcoming posts, and on our training calendar in 2011. 
7. "Qualitative" rewards will increase in importance, as wage growth remains quite low. Qualitative rewards are non-dollar oriented rewards focused on enhancing the developmental, psychological and cultural aspects of employment.  Employers focused on building and maintaining morale, engagement and retention will increasingly look towards reward elements that are not oriented toward "buying" loyalty in the form of spendable compensation, as budgets for additional payroll dollars will remain tight. Examples of qualitative rewards include enhanced recognition and employee appreciation programs, career and educational development opportunities, offering work-life balance/fit and flexibility options, etc.
8. Industry and job family wage growth will be uneven, so you'll need to stay on top of pay trends and your competitive position in the market. While general pay trends are widely researched and published, wage growth in certain industries and job families can and will vary significantly from the general trends. Currently we are seeing better than average strength in several industries, including technology and biotechnology, energy, consulting and healthcare.  Many job families are showing above average wage growth, such as IT and technology professionals and engineers, life science researchers and professionals, petroleum engineers, and several types of healthcare professionals, etc.  If you haven't formally checked your market competitiveness in more than a year, it's time to dust off your spreadsheets and take another look.
9. Social networking/media isn't going away, so deal with it. Many employers have already figured out their stance with regard to corporate and employee use of social media, but many have not.  If not, it's time to stop ignoring the elephant in the room. One of the more interesting and useful social media approaches/policies are IBM's Social Computing Guidelines.  Employer approaches range widely, from tight censorship/control to to total lassie-fare (i.e., Zappos), so there is no "best" practice.
10. As trends and practices change, you'll need to expand your own skills toolkit. Keeping in mind some of the trends discussed above, are you prepared to use and engage in new and/or creative approaches to address some of the many challenges faced by HR and rewards professionals today?  It's time to continue your own development, so you can be as effective as possible in helping your organization move forward in a positive manner.  To your ongoing growth and development!
11. You will have a happy new year.  We're off and running in the new year, fresh with new challenges and opportunities, so we are predicting and wishing for a happy one for you!

Doug Sayed is the founder of Applied HR Strategies, and the StrategicPay Series. He can be reached at doug@appliedHRstrategies.com.

The Changing Landscape of Rewards
Doug Sayed, SPHR, CCP, Applied HR Strategies, Inc.

The past two years has seen the quickest and most dramatic shifts in compensation (aka "rewards") practices ever.  In the past two years, we've witnessed "the sky is falling" near-collapse of 2008 to the "big one" recession of 2008 - 2009, and the end to entitlement compensation as we knew it (in 2009, when well over 50% of companies reduced and/or eliminated their salary increase budgets for the year).

Now that we're in allegedly in recovery mode, it is back to normal for compensation and  rewards professionals or something else (perhaps a "new" normal)?  I believe the answer is decidedly "something else."

Let's look at what's happening in some major areas of compensation and rewards, and you tell me if you think we're getting close to back to normal.

The Labor Market
Wow - what a mess!  Over eight million jobs were lost during the recession, and chances are that it will take at least three years or more just to get back to employment levels last seen in 2007.  The recent jobs recovery has been tepid at best, and when you take out government and temporary hiring there has been barely any job creation in the private sector.  Even though the official unemployment rate topped out at 9.9%, we've only dropped to 9.6% and without people dropping out of the labor market in frustration; I would wonder if unemployment has really dropped much at all.

Base Pay
Salary increase and "merit" budgets plummeted in 2009, and will remain at historically low levels (but higher than 2009).  If you were lucky enough to stay employed and get a pay increase, it was likely quite small by historical standards.  Overall, wages rose about 1.5% in 2009 according to government statistics.  If you include people who had to take pay cuts to land another job and/or take part-time or temporary work, the overall increase is likely close to zero.

With labor market weak and supply far out-stripping demand, wage growth will almost certainly be slow for years.  And with healthcare cost inflation continuing unabated; these increased costs will likely chew up most of employers' payroll increase budgets.

A few high demand areas will continue to do reasonably well.  Healthcare should remain firm, and many highly-skilled technology and biotechnology jobs are in good demand, relative to supply.  Overall though, there just isn't sufficient job demand to provide the impetus of anything but very slow wage growth in the near term.

Merit budgets will stay at historically low levels and employers are going to have to find other ways to "compensate" for the dearth of extra base pay dollars.

Employee Benefits
One of the biggest factors impacting employers' unwillingness to take their foot off brakes on trying to contain fixed costs are the unabated increases in the cost of providing healthcare coverage for their workforces.  While healthcare cost inflation has dropped a bit in the past year or two, it's still running at several times the rate of inflation, as it has been for most of the past two decades. 

Don't expect so-called healthcare reform to save the day (which was in reality, mostly healthcare insurance reform).  Employers will struggle to manage high healthcare cost inflation with competing compensation dollars for the foreseeable future.

Short-Term Incentives
One area that should show a nice rebound is in funding for (and payouts of) short-term cash incentives (often referred to as "bonus" programs).  The trend towards greater spending on short-term variable pay programs continues, despite a significant hiccup in 2009.

Budgets for variable pay have more than doubled as a percentage of payrolls since the early 90s and have continued to move slowly upwards over the years.  Hewitt predicts 2011 variable pay budgets will be between 11% and 12% of payroll, and forecasts 16% in 2020.  Of course, no one has a crystal ball, but I'm certain we are moving in that general direction.

Increased variable pay for results, rather than a return to more normal levels of merit pay for the masses are the general direction I see cash rewards going in the private, for-profit sector of the economy.

Long-Term Incentives
Long-terms incentives, typically provided in the form of stock/equity grants have been trending downward for non-executives for a few years now, starting well before the recession hit.  During the bear market for stocks everyone who received equity grants took a hit, but while stock-based compensation for executives may well rebound fully, they won't below the executive level, for a variety of reasons. 

In the post Internet bubble, post stock expensing world, the broad-based use of stock options has been declining for the past several years. According to one study by Equilar, the use of options in large public companies has dropped from 92.5% in 2004 to 77% in 2009. And while some other equity vehicles such as restricted stock had been on the rise during the same time period, their increase won't make up for the overall decline in equity granting levels that peaked early in the new millennium.

In addition to the reasons mentioned above, shareholders groups are generally unhappy with high burn rates (shares granted each year as a percentage of shares outstanding), high overhang (potential stock dilution from employee stock grants), and in some case the huge dollars that are spent re-purchasing stock to counter dilution from employee stock grants (in public companies).

Other Rewards
The 2010s may well become the era of non-dollar denominated rewards, or "qualitative" rewards, as companies strive for ways to retain and engage their workers.  With relatively few new fixed compensation dollars to going into workers pockets, these more qualitatively oriented rewards focused more on employee development, worker psychology, corporate culture and the like are going to be the next wave of rewards, in my opinion.

After many years of increasing demands on workers, many in workforce today are fed up with the "doing more with less" trend.  Multiple workforce studies conducted in the past few years have shown declining morale, commitment and engagement with work, and north of 50% of employees that claim to want to change job for the proverbial "greener pastures."

With the general decline in morale and worker commitment, efforts to enhance and improve the work experience are where the action is at for more forward-thinking organizations.

We would love to hear your thoughts on where you see rewards heading.

(For a more detailed version of this post, including graphics, please contact the author directly at doug@appliedHRstrategies.com).

Doug Sayed is principal at Applied HR Strategies, Inc., a Seattle-area compensation consultancy.  Applied HR Strategies is also partnering with the Washington Technology Industry Association (WTIA) on the development of the new WTIA Salary Survey, due to be launched in the late fall of 2010.

Get your 2011 compensation planning off to a good start by joining us for our half-day workshop "Rewards Trends and Salary Planning," 8am to noon on Wednesday October 6th.

This program has been approved for 3.5 HRCI certification credits.

This program will provide an overview of long-term reward trends and ideas for planning for the future.  For current planning purposes, we will provide the latest data on current market trends, including merit increase budgets, salary structure movement, etc., as well as instruction on salary planning, budgeting and merit plan design. 

Participants will walk away with a good picture of the current market conditions and several ideas for merit plan design, as well as the tools and templates to develop, model and implement inside their companies.
 
The cost includes a continental breakfast and parking validation, as well as a 20% discount on the purchase of the Base Pay Toolkit, if interested.

Workshop instructors are Doug Sayed & Jill Odegard of Applied HR Strategies and the StrategicPay Series.

For more information and/or to register, visit our training page.  We hope to see you there!

As I start to write, I'm humming the Beatles tune of a similar title in my head. Their lyrics were  poetic and prophetic, even when it comes to matters of the heart at work, because money can't buy workplace love.

That's not to say that many a manager and employer haven't tried to use money to counter other deficiencies in treating/managing/leading/recognizing/rewarding their workforces, but it rarely works as intended. In today's world of commonplace mass layoffs, "doing more with less" and "working smarter, not harder" a few extra bucks isn't going to buy a Whole Lotta Love (I'm starting to hear another classic coming on..., but I digress).

Don't get me wrong; people work for money, and so market competitiveness, especially for base pay, is critical to the ubiquitous "attract, motivate and retain" objective we often hear mentioned. (Base pay is mostly for the "attract" part, and to a slightly lesser degree the "retain" element; not so much for the "motivate" part, but that's a post for another day). Because cash compensation is so important, it's critical to make sure the cash elements of your rewards programs are competitive with the relevant external labor markets in which you compete for talent.

But if you think you can buy workplace love, engagement, loyalty, or commitment, you're mostly dead wrong. Some people can be bought psychologically, but not that many (excluding politicians, of course!).

Substantial research confirms the disconnect between money and commitment or engagement at work. For instance, a recent study conducted by WorldatWork (membership may be required to view study results), in collaboration with the  Hay Group and others, confirms that indeed, non-pay elements of the total work experience are the key drivers of employee commitment and engagement.

The study, a survey of hundreds of compensation/rewards professionals, reports that organizations realized better outcomes in their efforts to "engage" employees if non-HR employees were also involved in the development of reward and engagement efforts.  Regarding key reward elements, "non-financial rewards, as opposed to financial rewards, are viewed as having more impact on employee engagement," says Tom McMullen of the Hay Group.  He goes onto say that "quality of work, career development, organizational climate, and work-life balance have a greater perceived impact on employee engagement than financial rewards." 

The perceived quality of managers and top leaders are also more important than financial rewards on impacting engagement.  "Quality of leadership has a profound impact on employee engagement and motivation" says Paul Rowson of WorldatWork, who also says that "organizations must think it terms of total rewards and not just financial rewards if they are to enhance employee involvement, commitment, job satisfaction - and performance."

Assuming your compensation levels are already competitive, the next time a weak manager seeks approval to use increased pay to enhance retention or morale, maybe we should be thinking about fixing the manager, rather than throwing money down the drain of worker discontent, especially with their management and/or leadership.

You may have heard the phrase that employees join companies, but they leave their managers - this is so true (just think about the last really bad manager you worked for).  Of course, some will leave for more money or opportunity elsewhere, for sure, but when people are poorly treated and/or managed, virtually all of them want to leave!

Once your workforce is paid fully competitively, additional reward dollars would be better spent on programs and actions that enhance culture, employee commitment and engagement, and ones that strengthen your management and leadership.

Don't try to buy employee love and loyalty; earn it instead.  It's cheaper, and more effective.

Doug Sayed is principal and founder of Applied HR Strategies, Inc., a Seattle-based compensation consultancy, and developer of the StrategicPay Series, a series of hands on, "do it yourself" guides for developing your own strategic compensation programs.

This guest post was written by Shannon Swift of Swift HR Solutions.  Thank you for your contribution Shannon!

You are the CEO, COO,CFO  or VP of Finance, or VP of Operations. You have a full plate, but you are also responsible for Human Resources.  Am I right?

As a VP of Operations you have projects to implement and an office to run.  As the CFO or VP of Finance you have a top line to watch and a bottom line to manage.  As the COO you have everything already mentioned and more than likely a sales organization to oversee.  And as the CEO you have it all and much, much more, as the buck stops with you.  So who has time for Human Resources?  Who has time for all that touchy, feely stuff?  Heck, who even has time to think about any of it today as we are all trying to do more with less?
 
You do, and you have to.  Why? Because, as the VP of Operations, you need strong, competent people to implement and manage those projects.  As the CFO or VP of Finance, you need a critical eye to examine ways to cut costs related to things like benefits and insurance without damaging morale, and someone to keep you compliant to avoid costly litigation and fines.  If you are the COO, you need everything already mentioned along with a solid strategic partner to help you with organizational design to put  the right people in the right places to ensure all are successful and, in turn, the Company.   And if you are the CEO, you need an experienced confidant and candid partner to help you through everything from layoffs to acquisitions and board meetings to executive coaching.  You need to know that every issue related to the success of your company that involves your people (which is nearly every one) is covered.

So, has your view of the value and need for Human Resources changed?  Been updated?  Been confirmed?  What do you need to know to put the right Human Resource program in place for your company?  Well, let's start with the stage of your company and go from there.

Top 5 things you need to know about Human Resources if your company is between 2 and 20 employees:

1.       Implementing best practices and philosophies early is the key to growing your company the right way.  What we mean here are things like foundational areas such as hiring practices, compensation and benefits philosophies, culture and values, etc.

2.       Ensure your benefits are in place and fit your company culture and budget.  A good Human Resource professional can help you do everything from implementing your first benefit package to evaluating an existing one to ensure you are getting the best value for the benefits you are providing and offering.

3.       Compensation is key to attracting and retaining the right people. Having a strategically thought out plan that fits your company's stage of growth, funding, and product stage, and is also competitive with the market, is key to keeping the team happy, as well as your investors.

4.       You never get a second chance to make a first impression.  Be sure that you have an orientation program that helps people quickly come up to speed on all the things they need to know to get started successfully.

5.       Have solid tools in place and an experienced resource to reach out to when you are in need of Human Resource support.  Attorneys are expensive, and don't necessarily fit your culture.  Accountants are not normally well versed in Human Resource requirements, so you need someone on your team who is focused on Human Resources and has the best tools to support you.  Utilizing a product like SwiftHR®-in-a-box affords the appropriate level of HR tools and resources needed in a cost-effective way for even the earliest stage employer

The Top 5 things you will want to consider if your company has more than 20 employees:

1.       If you currently have someone internally managing Human Resource ask yourself if they are tactical, strategic, or both.  If you have an Office Manager, for example, focused simply on tactical execution of the HR function, you likely are missing out on a number of important issues around such areas as compensation (including equity), benefits design, organizational design, leadership and executive coaching.  You may find that adding senior level Human Resource expertise leads to HR practices that more fully support business objectives and facilitate effective organizational growth.  This is a position ripe for outsourcing if you're not ready to absorb the cost of a full time professional.

2.       Make sure all of your executives and management are on the same page.  A good way to test this is to ask each what the mission of the Company is, along with the foundational values that drive the Company's behavior.  Will the answers be the same?  Ask them what the key business initiatives today are and what their role is in ensuring they are met.  Will they know?  Strategic Human Resources can help to ensure that these are clearly articulated and that all parts of the organization are aligning in the same direction.  Having everyone on the same page will allow the company to move toward success much faster and easier, and with fewer hiccups.

3.       Evaluate your compensation and benefits practices to make sure you have a defensible structure with strong evidence of internal equity.  Ensure that your capitalization table is up-to-date and that your underlying compensation philosophies are resulting in consistent hiring and merit procedures and outcomes.  Compensation is an emotionally charged area and one ripe for compliance and litigation problems.

4.       Review your Organizational Chart.  Look for areas that no longer make sense, or may indicate potential problems are looming.  Common problems include too many direct reports (i.e. > 5-7), a strong individual contributor who has somehow managed to build a large base of direct reports but has no leadership or management skills, functional sub-groups under the wrong group, "holes" in a department, or "equal partners" with no clearly defined authority points.  Keeping an eye on the organizational chart of a rapidly growing business and making corrections before they're needed is essential to effective execution.

5.       Know what your people care about. When you started out, the team was all young, single, and didn't care about things like health benefits or EAPs or even having a 401(k) plan.  Does the group still look the same now, 2 or 3 or 4 years down the road?  As demographics of the team change, the package offered should reflect the members you're trying to keep on board, and also those you're trying to recruit.

So where do you start in regards to getting your Human Resource initiatives on track or in place?  The best place to start, if you are an established company, is with a complete Human Resource Assessment.  This process and resulting document will help you determine and address areas of non-compliance, both state and federal, and will also identify areas of deficiency in best practices and gaps in your HR program.  Another consideration in your evaluation of how you're doing as an employer is to invest in a culture assessment.  What aspects of the Company and their job are important to your employees?  What do they say outside the company walls about the company? What would they do differently if they were in charge?  The answers to these questions are all things that help you as an executive anticipate and proactively avoid issues that could slow your company's progress down, or in the worst case scenario, bring it to a halt.
 
Tell us what you are doing to ensure Human Resources is a priority in your company.  What are you doing creatively that you can share with other executives?  What questions do you have that we might be able to answer?

Shannon Swift is the Founder and CEO of Swift HR Solutions, an HR Consulting firm that supports early and mid-stage companies in the Northwest through its talented Human Resource consultants and its SwiftHR® in-a-box product and surrounding services.  For more information contact Shannon at Shannon@swifthrsolutions.com or via phone at 888-768-5920  X701.

Is it crucial to maintain a competitive pay posture to attract and retain high quality talent?  We think so (that why we spent over a year writing a book about how to do it!), and most HR and rewards professionals believe that as well.  But does paying competitively make your people happy, engaged and/or driven to perform?  Generally not, unless you're using a well-designed incentive program to drive certain behaviors (but that only addressees the behavior component).

Competitive base pay is absolutely critical to attract talent, and to maintain a basic level of satisfaction with the compensation that employees receive for voluntarily sharing their skills with your organization.  Beyond base pay though, what really drives motivation, worker engagement and the desire to stay with an organization are how you manage and treat them.

See the table below and tell me what you think of the difference is between an employee who is willing to stay with your organization because they are basically satisfied (but not terribly engaged) vs. an employee who really wants to stay with your organization and believes in it (i.e. is engaged).

Source: Employee Hold'em, 2009

The data above is from a large study done every two years or so by by an organization that focuses on employee engagement, and the results are clear: it's not just about the money!  In fact, we would argue that how you manage and treat your employees is more important than the money, assuming the money is about where it should be (you're paying at least close to or better than competitively).

With dollars scare these days (over 50% of employers gave 0% - or less - pay increases last year, and 2010 pay increase budgets are south of 3% for now), how you treat your employees is even more critical.  Hence, there is a growing movement towards more qualitative rewards (feedback/communication, appreciation, training, etc.) , as opposed to just quantitative ones (mostly pay and benefits)

We'll continue to bring you more information and data on this large topic of worker psychology, qualitative rewards and employee engagement in the coming months.

Don't miss an opportunity to sign up and participate in these upcoming events:

Compensation, Rewards & Employee Engagement Trends - 2010 and Beyond (approved for 3.5 HRCI Credits)
Date: May 13th, 2010 8:00 AM to noon
Location: Bellevue Harbor Club
Cost: $295.00
Register for this Event

Organizations are struggling to keep up with changes in salary and compensation trends. As the economy recovers, what is the future of pay and employment? What can employers do to retain and re-engage talented employees? In this half-day session, participants will explore 1) the latest compensation trends and future rewards thinking and 2) the elements of a successful employee engagement and recognition strategy. Participants will take away low-cost tools, ideas and resources to build a culture of appreciation within their teams and organizations. Workshop instructors include StrategicPay Series creator, Doug Sayed and Chief Motivation Officer, Theresa Chambers of Recognition Works. The program will be held at the Harbor Club in Bellevue from 8am to noon. The program includes a continental breakfast, parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone, if interested.

 
Utilizing Market Data & Conducting a Competitive Pay Analysis (approved for 3.5 HRCI Credits)
Date: June 10th, 2010 8:00 AM to noon
Location: Bellevue Harbor Club
Cost: $295.00
Register for this Event

This half-day program will focus on how to conduct a market-based pay analysis, including selecting and using pay data sources, grading jobs into a salary structure and evaluating how the company measures up.  This is an advanced, in-depth course.  Participants will walk away with a working knowledge of the subject matter, as well as the tools and templates to execute in their company.  The cost includes a continental breakfast and parking validation, as well as a discount coupon to purchase the Base Pay Toolkit worth one-half the tuition cost alone.

There have been so many fundamental shifts in the workplace and the employee-employer relationship in the past two decades that it's not only time for workers to reconsider how they manage themselves and their careers, but also time for us, as HR and rewards professionals, to relook at how we face today's workplace realities, which include:

• The death of job security as we (and especially our parents) once knew it.
• Fundamental shifts in loyalties, and in some case of trust, in the employee-employer relationship.
• The realization that all employees are responsible for their own career and are in effect, the CEOs of  "Me, Inc." (In other words, employees are responsible for managing their own career and professional development, not their employer).
• The job description for CEO of Me, Inc., includes a line that job security is primarily the CEO's responsibility, not their employer's (see Ann Bares' recent post "A Fundamental Shift in Talent Management: Will 'Active Job Security' Replace 'Passive Job Security'?").
• That employers now, more than ever, are responsible for creating an environment where their Me, Inc. employees will choose to keep their skill sets and performance focus.

Since Me, Inc. employees are primarily concerned about "Me" (that's you, not me!), most Me incumbents want to know details on the fundamental question of "What's in it for Me?" in their employment relationship. (I call it the "WIFM question").

In the "old days," employees worked for employers, and employers controlled virtually all aspects of the employment relationship.  In return, employees showed up to work nearly every day, did their jobs and generally enjoyed high levels of jobs security. That was the implicit contract: I take care of you, and you take care of me...

Today, employees must take care of themselves (and hopefully most labor force participants have figured this out by now), which means that most insightful workers are now working for Me, Inc., even if they are doing so at an employer's place of business.  Today, it's far more important than in the "old days" for employers to provide the favorable set of conditions for Me, Inc. incumbents, and to do so in a way that is productive and fruitful for both sides of the employment relationship.  With most of the implicit loyalty out the window, the dynamics of the employment relationship have changed significantly. Employers need to provide a reason (and hopefully several of them) for high-performing Me, Inc. employees to stay with them.

Translating these shifts into newer ways of doing business as HR and rewards professionals means, among other things, that your mode of communications must be enhanced to address the WIFM questions and the win-win relationship between employers and Me, Inc. workers. For instance:

• Instead of just informing employees about your compensation and rewards philosophy,  communicate it from a partnership perspective and explain why and/or how your philosophy benefits them too (back to the WIFM question).
• Rather than just expecting performance, clearly define what performance means for each individual, and how it is important and beneficial for the business and the employee to perform well.  Create a "win-win" strategy.
• Explain the performance-benefit linkage (the performance WIFM) between how high levels of performance benefit the employee as well as the organization.
• Continue to communicate the employer-employee value proposition, addressing the WIFM questions and how the employment "deal" is a beneficial one for both employers and their Me, Inc. employees.

As we're discussed recently on the StrategicPay Blog, there are not going to be a lot of extra fixed payroll dollars to throw around in the next few years, and so it will be especially important to focus more on the psychological and qualitative benefits of working for your organization.  These include developing and supporting a culture of appreciation and accountability; having a well trained, high quality, appreciation and performance-oriented management team, and providing learning and growth opportunities for your Me, Inc. employees in residence. Training and coaching managers to utilize the right skills and mind-set for this type of management style (communicative, supportive, collaborative, and yet accountability-driven) will be critical to successfully managing in the era of Me, Inc.

Another way employers can help create a positive partnership is to recognize and value the inherent stresses impacting workers these days. In today's hectic world, with working parents and crammed schedules, workplace flexibility is an especially valuable workplace benefit that costs little to offer. Those employers that can provide a trusting but accountable environment and that can manage to job expectations, rather than managing to specific times on a clock, will likely see benefits in lower turnover and greater loyalty and engagement among their professional and managerial staff.   (Yes, you'll still have to manage to the clock for your non-exempt employees).

Of course, offering a competitive compensation and benefits package is still very important in the "attract, retain and motivate" equation.  More important than the minimal extra dollars that most employers will be adding to their payroll budgets in the next few years, however, is the way your employees are treated and managed. The days of the "we own you" approach to management are numbered. The days of "we work together for mutual benefit" is where the world of work is heading for high-performing organizations.

Doug Sayed is principal for Applied HR Strategies, Inc. and developer of the StrategicPay Series, a series of "do it yourself" toolkits designed to assist HR and compensation professionals to develop strategic compensation programs on their own.