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Module 4: Designing and Implementing a TotalRewards Program

Topics

Topic 1: Core Steps of Designing a Total Rewards Philosophy

Topic 2: Segmentation of the Workforce

Topic 3: Implementing the Total Rewards Philosophy

Topic 4: Communicating/Marketing Total Rewards

Topic 5: Conclusions

Topic 1: Core Steps of Designing a Total Rewards Philosophy

Nine core steps in the strategic marketing approach of designing a total rewards program and

implementing it are summarized in table 4.1 below. In this first topic, the focus is on steps 1-5 (the

designing steps) and each is described in sequence. The remaining steps (6-9) are addressed in

topic 3. The steps are presented in a sequential manner, but the organization may perform some

of the steps concurrently. The steps may also vary if the organization is a start-up organization,

one that is long established, or if a total rewards strategy is already in place.

Table 4.1 Core Steps in Designing and Implementing Total Rewards

Designing:

Step 1: Understand the organization

Step 2: Define the requisite KSAs required for success

Step 3: Identify current and potential employees' "drivers"

Step 4: Design a total rewards philosophy statement

Step 5: Assess financial costs and plans with key leadership

Implementing:

Step 6: Pilot the total rewards assumptions

Step 7: Develop timeline, obtain vendors, assign duties

Step 8: Implement plan

Step 9: Communicate and market

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Step 1: Understand the Organization

Providing rewards for the purpose of attracting, retaining, and motivating employees with the

requisite KSAs in order to enable the organization's success is the ultimate goal of the total

rewards approach. Therefore, an understanding of the organization's business objectives, mission,

vision, values, and business model is essential in the process of designing and implementing a total

rewards program. Achieving this understanding begins with how the business creates marketable

products, services, or expertise, and markets, sells, and delivers them, along with a review of the

organization's mission, vision, values, and culture (Kaplan, 2005). Also important is being familiar

with the business model, revenue generation strategy, the business life cycle, business design, the

current brand impact, and geographic requirements. Organizations achieve their success in various

ways; some take a centralized approach while others take a decentralized one. Some organizations

have socially conscious values they hold important, while others do not. Some organizations are in

the infancy stage of their growth, others are stagnant, and still others are experiencing huge

growth. Many organizations are structured as not-for-profit, some are for-profit, some are publicly

traded, and others are privately held; and then there are government agencies and the military.

There are tremendous differences among these organizations, and their differences and

uniqueness must be examined.

Some of the questions helpful in understanding the organization and leading to an effective design

of the total rewards strategy are listed in table 4.2 below. Although more questions may need to

be asked to reach a good understanding of the organization, these are a good start:

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Table 4.2 Questions for Understanding the Organization

1. What are the vision, mission, and objectives of the organization? Will any of them

change in the next three years?

2. What are the values of the organization? What social values have been demonstrated

outside the organization? On what does the organization want to have an impact? Are

there written values and, if so, are they demonstrated?

3. What is the culture of the organization?

4. How does the organization generate revenues today? Will that change over the next

three years?

5. What business cycle is the organization in (stagnant, growth, decline)? Are any

mergers, acquisitions, downsizing, or global expansion planned?

6. What business design supports the organization's ability to make money? (For example,

is the design a cost-savings or a market-leader approach?)

7. Does the organization have an existing employment brand?

8. If so, what is the value of the organization's employment brand today in attracting and

retaining employees?

9. Where does the organization want to be geographically?

10. Does the organization have a clear marketing brand and, if so, what is it and how is it

viewed by the public?

The questions presented in table 4.2 are best asked in person and directly to senior management.

Asking the questions in person will allow for follow-up questions and clarification. In addition,

existing documents describing the items mentioned, such as the vision, mission, business

objectives, and values, are likely available and should be gathered. The purpose of this step is to

understand as much about the organization as possible because the success of the organization is

the end result being sought.

Step 2: Define the Essential KSAs Required for Success

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This step makes explicit what knowledge, skills, and abilities (KSAs) are required to accomplish the

business objectives, not only for today but also in the future. It aligns the total rewards strategy

with the business strategy. The specific KSAs (and the people who possess them) are the target for

recruitment, retention, and motivation. The organization may already have the KSAs identified by

level of employee (i.e. leadership, management, general employee population) and by business

function (i.e. marketing, finance, accounting, operations, human resources, customer service,

research and development). If so, they will need to be validated, keeping the current and future

business objectives and business model in mind. If the KSAs are not already identified, the steps of

job analysis, job description, job specification, and job evaluation (discussed in module 2) are used

to identify them. The KSAs are grouped by KSA set, which is a type of segmentation by KSAs

needed by job function (such as sales, accounting, service, research) and by level within the

organization. The segmentation by KSA set is important because employees or potential

employees of each KSA set may have different drivers for wanting to work for and remain with the

organization (Kaplan, 2005). Of course, other segmentation may occur as well. In table 4.3,

questions about the KSAs are posed that need to be answered.

Table 4.3 Questions About Knowledge, Skills, and Abilities (KSAs)

1. What KSAs are required by level and by function to generate revenues (at each stage)?

This question should be asked of major KSA sets within the organization by level and

function.

2. Will the KSAs needed by level and function change in the near future? How about in

three years?

3. Are there gaps in the existing KSAs that need to be addressed?

4. What has been the turnover by KSA level and function?

5. For each KSA set (by level and function), where are they located geographically? Are

there any cultural differences by KSA set?

The KSA questions can be answered through personal or electronic interviews or surveys. After

the study is done it needs to be verified by the key leadership of each function and each level of

the organization.

Step 3: Identify Current and Potential Employees' "Drivers"

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The research in this step leads to the identification of the "drivers," which are the composite

wants, needs, and preferences of current and potential employees. As in consumer product

marketing, in which the product is designed based on the consumer's drivers, the reward program

will be designed based on the employee's drivers. This step requires internal and external research

and an evaluation of the two. Internally, what is working (or not) in attracting, retaining, and

motivating employees is explored. Externally, what is attractive to the larger population is studied,

including other organizations, geographic locations in which the organization may be expanding,

and demographic groups that may not be in the workforce currently but will be in the near future.

A. Internal Research

It is important to include in the research the current demographic and psychographic composition

of the current population of employees and potential employees, again by level and job function.

Table 4.4 provides some of the questions to be answered internal to the organization.

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Table 4.4 Questions for Internal Research

1. What challenges for recruitment are foreseen in the labor market?

2. What challenges of retention are foreseen within the organization?

3. What is the composition demographically of the current employees? What is the

current geographic disbursement of employees?

4. What is the retention rate overall, and what is the rate by specific KSA set (by level and

function), by department, by division, by geographic location, by demographic?

5. What is the time to hire a specific KSA set (by level and function), by department, by

division, by geographic location, by demographic?

6. What is the level of satisfaction, in general, of the employees? What is the level of

satisfaction of the employees with each of their rewards?

7. If given a list of rewards (monetary, non-monetary, and work experience), what is the

most important to the current employees in order to retain and motivate them? There

may be items that are relatively inexpensive, or even cost neutral, that are important to

attraction, engagement, and retention. Having the employees rank their preference for

rewards is an effective way to gain this information, in addition to determining price

points if the employee is asked to pay for a benefit (insurance, for example).

8. Have current employees been tempted to leave in the past six months? If so, what

caused them to think about leaving? What would entice them to leave today?

The data may be gathered though a variety of means: telephone surveys, electronic surveys,

individual interviews, focus groups, or paper-and-pencil surveys. After the information is gathered,

the organization can use statistical modeling techniques that allow analysis of other existing

employee data to better understand employee preferences. This statistical modeling will help to

identify trends by the various categories (level, functional job groups, and demographics). It will

also point out inconsistencies in the answers. For example, what employees really care about, as

measured by things such as making a decision to leave the company, are sometimes different than

what they say they care about. The statistical modeling provides human resources professionals

with more robust information on which to design their total rewards program. If statistical

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modeling is unavailable the team working on the total rewards program design can read through all

the data, synthesize the key findings, and validate it with focus groups of employees at all levels of

the organization.

B. Research External Data

Reliable normative data, such as Mercer's What's Working data on country- and region-specific

employee perceptions and attitudes about work, help to determine how the information you have

gathered internally compares to external data. Information may also be gained from the Bureau of

Labor Statistics; WorldatWork; through local, state, and national Society for Human Resource

Management Societies; and through partnering with other organizations to benchmark data and

practices. Ideally, the same information about reward preferences of potential employees and

what would cause them to leave their current jobs to work for another organization would be

obtained. This information can be gained through a variety of methods, such as published reports,

focus groups, written or electronic surveys, telephone interviews, etc. Some organizations that

conduct employee satisfaction surveys for large firms share a composite of the results. Telephone

interviews or focus groups allow the facilitator to ask probing or follow-up questions easier than

can be done in a written survey. Table 4.5 poses some of the questions that need to be answered

external to the organization.

Table 4.5 Questions External to the Organization

1. What are outside experts' reports about challenges for recruitment by job function and

geographic location?

2. What demographic trends are reported (increases, decreases by segments)?

3. What are psychographic trends for reward preferences by demographic segment?

4. What is the economic forecast domestically and globally?

5. What rewards are your competitors offering? What is the competitors' experience with

attracting, retaining, and motivating employees? The competitive market survey for

rewards was described in an earlier module. Most organizations conduct this survey on

an annual basis, so it may already be current and available.

C. Compare Internal and External Research

After the internal and external data is gathered, the two sets are compared for consistencies and

inconsistencies. As with the other two steps, statistical modeling programs are available to help

synthesize the data and identify trends, consistencies, or inconsistencies. The computer programs

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are also helpful in identifying existing challenges versus future ones, based on such things as

population changes, growth of the current organization, expansion into new markets, introduction

of new products and services, downturn in the economy, and changes in the business model.

Table 4.6 Comparative Questions

1. Is the internal data consistent with the external data?

2. What, if anything, differs?

3. What issues are there with recruitment, retention, and motivation internal to the

organization that may be influenced by the external population?

4. Given the internal and external research, what challenges must we address through the

rewards programs in order for the organization to be successful?

Step 4: Design a Total Rewards Philosophy Statement

The design of the total rewards philosophy statement is what Kaplan (2005) calls a total rewards

road map. A total rewards philosophy is a statement of the total offerings of rewards, what some

refer to as the employment brand of the organization. This is a formulation of the total rewards

strategy from a big picture perspective, one that determines the general areas of focus by segment

of the population. The resulting portfolio of rewards is designed to align the rewards strategy and

the business strategy, to reach the goal of attracting, retaining, and motivating employees with the

requisite KSAs to achieve the business objectives.

Given what was learned through the internal and external research, the organization is now ready

to propose what rewards would attract, retain, and motivate the employees most needed for the

company to be successful. They will need to determine the mix of the monetary, non-monetary,

and work experience elements to attract, retain, and motivate respective employees by level and

by job function or other segments they have identified as important. These are decided with the

culture and values of the organization in mind. Other decisions will be made regarding items such

as what rewards will be designed for each segment, eligibility, how the rewards will be earned and

awarded (performance versus entitlement, individual versus team, fixed versus flexible, offered to

all, part time or full time), competitive positioning of compensation and benefits, and if the

rewards will be administered internally or externally (through outsourcing), and the timing of the

introduction of the rewards. The organization will also need to ensure that pertinent laws and

regulations affecting rewards and their administration are followed. First, however, a draft total

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rewards philosophy statement is prepared so that the financial costs and commitment can be

measured. This step also begins the process of setting baseline measurements for the key

objectives of the rewards philosophy. Table 4.7 below, from the Constellation Energy Web site

(2008), shares excerpts of a sample total rewards philosophy statement.

Table 4.7 Total Rewards Philosophy Statement: Constellation Energy

We believe our employees are the brightest stars in our constellation. That's why we invest

almost $1 billion annually in total rewards. At Constellation, total rewards is more than just

pay. It is the combination of pay, benefits, learning and development, and the work

environment. Together, these elements help make Constellation a great place to work. By

integrating our total rewards offering, Constellation delivers to employees a work experience

that rewards their contributions, supports their work and life needs, and provides the

opportunity to learn and to grow.

Pay: Our total compensation philosophy is to pay employees competitively and to vary

rewards based on individual and company performance.

Benefits and Time Off: We offer competitive benefits to our employees on a partnership

basis, including health care choices, a retirement plan, insurance coverage choices, and

flexible spending accounts.

Development: Professional advancement is important to everyone at Constellation.

Employees who continuously update their skills are more satisfied with their work and

contribute more to our collective success.

Work Environment and Community: A positive work environment, opportunities to give

back to the communities where we live and work, and the ability to balance work and life

demands are important to all of us.

Diversity: We're equally proud of the success of our programs that promote minorities and

women, and we continually reaffirm our commitment to equal employment opportunities.

Source: Constellation Total Rewards Statement. (2008). Retrieved May 4, 2008, from

http://www.constellation.com/portal/site/constellation/menuitem.37364b5370ec64875fb6

0610025166a0/

Step 5: Assess Financial Costs and Discuss Costs/Objectives/General Plan with Key Leadership

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Rewards can be a very large percentage of an organization's operating expenses. In fact, for many

it is the largest single expense. The step of assessing the financial implications puts the expense

into perspective and helps to gain concurrence and buy-in of the top leadership and management

of the organization. Although costly, offering the right rewards can maximize the reward dollars

spent. Offering the right rewards, while at the same time eliminating those ones that employees

may not value, ensures that time and money is not wasted. Key leadership must be involved in the

total rewards initiative throughout the process of designing and implementing them, but at specific

times the commitment must be checked. Prior to the final decisions being made, as with the

implementation of any large and important initiative, it is crucial that the decisions are officially

agreed upon. It is advisable to keep a written record of the decisions made in case reference is

needed later.

Topic 2: Segmentation of the Workforce

Before the final steps of implementing the total rewards plan are addressed, the use of

segmentation will be described to ensure an understanding, because it is a key activity and

perhaps one that is new to some human resource professionals. Segmentation is a term used in

marketing (as well as other disciplines) to refer to how the population divides according to

differentiating factors. In human resources, the segments can be psychographics (individual

personality preferences) such as career goals, desired schedules, and the need or preference for

certain benefits or work experience. Segmentation can also be made by demographics, level of the

organization, or job function. Segmentation by demographic group can include, for example, men,

women, age groups, ethnicity, marital status, or education.

Organizations use segmentation of the population to target their marketing efforts to groups of

consumers who may purchase products or services. The organization offers unique features in its

products or services that the targeted population prefers (for example, minivans for families,

pickup trucks for farmers, or alternative fuel vehicles for the cost conscious or environmentally

conservative). They also design their marketing efforts to reach the targeted audience by creating

advertisements that appeal to the particular segment they are targeting. To communicate the

unique features of the product or service, key messages and the medium for the communication

are chosen to reach and appeal to the targeted population. In the same way, an organization can

segment the internal and external workforce population, determine the unique features (monetary,

non-monetary, and work experience) desired by each, and design a total rewards program

customized for the individual segments of the organization or the individuals they are seeking to

hire.

There are many ways in which segmentation of the workforce can be achieved. Three examples

follow. The first is suggested by Mercer (2007), the second by Erickson and Gratton (2007) in a

Harvard Business Review article. The third is an example from a fast food company dealing with a

problem of very high turnover of employees. Keep in mind that how employee groups are

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segmented will likely be unique to each organization. Specific job families, geographies, or skill

sets do not consistently map to specific workforce segments across organizations. Rather,

segments that appear in an organization will depend entirely on the role of different employee

groups of the organization, its geographic disbursement, its individual values, culture, or business

model. The way segments are identified may also vary outside the organization.

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Table 4.8 Segmentation by Value Created

In a study by Mercer (2007), they found the following segments to be beneficial as they

attempted to segment the employees. They found the employees could be grouped into

categories that were either performance drivers, performance enablers, or legacy drivers.

Segmentation by Value Created

Performance Drivers

Performance drivers are employees who directly create

value for the organization. This segment could include

employee groups or functions such as marketing in

consumer products companies, research scientists in

pharmaceutical organizations, chefs in restaurants, or

athletes in the National Football League (NFL).

Performance Enablers

Performance enablers are employees who support

value creation by facilitating the efficiency of

performance drivers, including human resources or

finance staff at many organizations. Other examples

could include the coaches and trainers in the NFL and

time and motion experts in restaurants.

Legacy Drivers

Legacy drivers created value for the organization

historically but no longer drive competitive advantage.

For example, production and circulation functions in a

media organization may become legacy drivers as

content is increasingly delivered online. In the

restaurant business this could be a former celebrity

owner, or in the NFL it could be a coach that once led

the team to the Super Bowl but is no longer in tune

with the latest play strategies.

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The identification of the segments is only the first step in the research process. The individual

employees will also need to be interviewed or surveyed to determine if there are common rewards

in each segment the organization could offer in order to fulfill their needs and desires.

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Table 4.9 Segmentation by Drivers for Engagement

Segmentation: by Drivers for Engagement. Another set of segments comes from authors

Erickson and Gratton (2007), who were able to see segments differentiated by roles the

employees wanted the organization to play for them. Their studies suggested that work

played six general roles, which correspond to six types of employees, and were based on

psychographic characteristics. Each worker segment, they found, cares deeply about several

aspects of the employee-employer relationship and little about the others.

Segmentation by Drivers for Engagement

Expressive Legacy

Expressive legacy.These employees care about creating

something with lasting value. What appears to engage

them are autonomy, entrepreneurial opportunities,

creative opportunities, and stimulating tasks that

enable continual learning and growth.

Secure Progress

Secure progress. For these employees, work is about

improving one's lot in life and finding a predictable

path. They are engaged by fair and predictable rewards,

stability, structure, routine, and career training.

Individual Expertise and Team Success

Individual Expertise and Team Success. This group of

employees value that work is about being a valuable

part of a winning team. They prefer collaboration, fun,

stability and structure, opportunity to gain competence,

and the opportunity to leverage their personal

strengths.

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In this example, as in the first, segments have been identified, but in this case some of the drivers

have been used to separate the groups. The organization would need to conduct further study to

see if the segments fall into certain demographics, geographics, KSA sets, functional job

categories, or levels in the organization. It may be discovered that, for example, certain age groups

fall into a specific category or possibly that individuals in specific job categories such as

accountants, human resource professionals, sales staff, customer service representatives, or

information technology specialists fall into identifiable categories. If so, this information would be

very helpful in planning the rewards philosophy.

Risk and Reward

Risk and reward. For this segment, work is one of

multiple opportunities to live a life filled with change

and excitement. They are motivated by the opportunity

to improve personal finances, flexibility, the

opportunity to choose tasks and positions from a long

menu of options, and open-ended tasks and approaches

to getting work done.

Flexible Support

Flexible support. These employees see work as a

source of livelihood but not yet (or not currently) a

priority. They want flexibility, well-defined vacation and

family benefits, and well-defined work routines. They

also like the ability to plug in and out of tasks and

assignments with ease, and virtual, asynchronous tasks

and assignments. They want to have fun.

Low Obligation and Easy Income

Low obligation and easy income. This final segment

sees work as a source of immediate economic gain.

They are engaged with jobs that are relatively easy to

come by and that have well-defined work routines,

lucrative compensation, and benefit packages. They

also desire stability, security, and recognition.

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Table 4.10 Segmentation by Specific Desires

Segmentation: by Specific Desires. A third example of segmentation of employees is similar

to the others and continues to demonstrate that there are various groups that can be

identified through segmentation. A study was conducted in a fast food company to discover

how they could improve their recruitment, hiring, and retention of employees. The

organization was facing a very large turnover problem, which was not only creating

recruitment and training costs to soar, but also hindered the ability to serve customers due

to a constant shortage of employees. The following segments of employees were identified

through a series of focus groups with existing employees. This last example of segmentation

is more of the unique set that organizations may see surface when they perform their own

research. The segments fell into groups of employees who were stay-at-home mothers,

those who were fast food junkies, and those who wanted an entry point for a broader

hospitality career.

Segmentation by Specific Desires

Stay-at-home Moms

Stay-at-home Moms. One segment of the existing

employee population was mothers with children who

were away at school during the day. These employees

wanted only part-time hours, on weekdays, between

the hours of mid-morning to mid-afternoon. They were

dependable employees as long as they were not asked

to come in early or to stay late. Most were interested

not so much in benefits but in earning extra money, as

long as it didn't interfere with the family schedule.

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In this example, total rewards were designed to target each of the three core segments. The

organization was able to design work experiences that satisfied the stay-at-home moms, the entry

point career employees, and the fast food junkies. The turnover was dramatically reduced and the

cost savings were substantial. One of the interesting points of this real-life example is that it was

done in the 1980s, before the total rewards model was prevalent. The organization merely applied

the strategic marketing approach they knew so well to the issue of attracting and retaining

employees.

Topic 3: Implementing the Total Rewards Philosophy

Step 6: Pilot the Total Rewards Philosophy Assumptions, Internally and Externally

Entry Point for Broader Hospitality Career

Entry Point for Broader Hospitality Career. This

segment consisted of employees who wanted an entry

into the larger parent organization through the fast

food division of the hospitality corporation. They were

not planning to stay in the fast food division, but would

do so in order to gain the training and service to qualify

for a transfer to another division. These employees

were excellent workers and dependable, but were not

expected to stay beyond five years, at which point they

would either leave the company or be transferred.

Fast Food Junkies

Fast Food Junkies. This segment was one that had no

desire to transfer to one of the other divisions of the

corporation, but did want to expand their careers up

the ladder within the fast food organization. What was

of interest to them was learning about new products

and seeing new stores, taking the training that was

offered, and being considered for promotions. These

were the managers who would stay with the

organization as long as they thought they were learning

and being considered for promotion or actually being

promoted.

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The first five steps addressed the design stage of the process. Steps 6 through 9 will focus on

implementation. After preliminary decisions have been made for the total rewards philosophy, a

pilot of the rewards strategy is done in order to help validate if the decisions will yield the

intended results. The pilot can be done through focus groups of employees, as well as with

potential employees. At this time the key objectives, baselines for the evaluation metrics, and

commitment for implementation are double checked. The objectives and the metrics will be used

not only to measure the success of the programs, but will also be used as a form of communication

and decision making should revisions be required. Examples of metrics can include quantitative

and qualitative measures such as reducing turnover, reducing time to hire, increased production or

services, more satisfied employees, more satisfied customers, or ability to expand or introduce

new products (or other key objectives of the business plan).

Step 7: Develop Timeline, Obtain Vendors, Assign Duties for Implementation

For every initiative, whether it is a new total rewards program or changes to an existing one, a plan

will need to be established to indicate the projected timeline, as well as listing all the major tasks

to be completed, who in the organization will be accountable for each task, and the due date the

task is to be completed. A sample timeline is presented in table 4.11, which indicates many of the

tasks that will be taken in the implementation stage.

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Table 4.11 Sample Timeline of Activities for Implementation

Activity Due Date Person Accountable Comments

Pilot Total Rewards Philosophy Statement

Revise Philosophy

Statement if Needed

Select Team for Implementation

Assign Due Dates, Accountability

Decide on Eligibility and Waiting Periods

Establish Baselines for Measurement

Ensure Computer Systems are Ready

Develop Admin Guideline

Secure Final Approval

Select Vendors or Outsourced Providers

Begin Communication

Provide Training to Key Employees

Begin Enrollment of New Benefits

Evaluate, Report Metrics

Topic 4: Communicating/Marketing Total Rewards

With the change in the way organizations look at their rewards, there is also the need to change

the way the rewards are communicated. Communication now takes a broader focus on educating

the workforce about the true value of its total rewards package and to foster a greater

appreciation for these programs. Ultimately, the goal of the communication is increased employee

satisfaction, reduced turnover, increased acceptance rates, and fulfillment of the organizations'

business goals (Black, 2007).

Charlton Consulting Group, Inc., a benefits communications consultancy, found that only 5 percent

of 128 companies surveyed said that their employees fully understand and appreciate the value of

their total compensation packages. More than a third of the companies said that their employees

do not understand the value of their total compensation at all, according to a 2006 research report

from the firm titled "How to Ensure Your Employees Value Their Benefits Packages" (Black, 2007).

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In order to be effective, communication and marketing to employees needs to use a variety of

communication channels. Organizations cannot reap the full benefits of a well-designed total

rewards strategy if employees are unaware of all the elements offered and the value of the

rewards in monetary terms. Communicating and marketing of the rewards package may be more

obvious in the recruitment efforts, because that is when potential employees are thinking about

what is important to them and at that time they have the best opportunity to compare various

organizations' rewards. According to Mercer's survey (2007), HR leaders in both North America

and South America report that they are using at least three vehicles to communicate with

employees, particularly if they have changed their total rewards strategies within the past three

years. The most popular methods include individual meetings, hard-copy personalized statements,

and presentations to employees made by leadership. Many organizations, however, are using

electronic means through the Internet and intranet. Different means apply when recruiting, rather

than educating the current employees, is the goal, but in each situation more than one means will

help to ensure that all are reached with the messages effectively.

Whether it is via electronic or hard copy, one of the effective means is the total rewards

philosophy statement (Smolkin, 2007). This document, which was referenced earlier in step 4, is

the document that is shared with top leadership in order to gain concurrence on the plan for

implementation. The total rewards philosophy statement expresses the organization's values and

beliefs about the rewards offered. The purposes of the statement are: to communicate

commitment and expectations to employees, to serve as a reference point to evaluate the

effectiveness of the total rewards program, to reinforce the values and culture of the organization,

and to communicate and reinforce the organization's business objectives (WorldatWork, 2007).

In developing a communications plan, it is important to consider specific employee audiences

already identified through the segmentation steps, key messages to convey, how those messages

will be disseminated, how much money is available, a timeline for implementation, and how to

gather employee feedback to the communication. The communication must be customized to the

specific internal and external audiences. For example, the communication to the executive team

may include more of the results of the rewards program and the relevance to the business

objectives. Management or supervisor communications may include specific information about the

departments or areas they manage or supervise. The widespread employee population will have

information specific to them, including new offerings, updates, and information about the rewards

for their households. Communication is designed for the recruitment audiences, the newly hired

audience, the audience when enrolling in programs, and the total audience of current employees

for ongoing reminders and information (WorldatWork, 2007). In some cases there are other

audiences, such as the board of directors, union representatives, and retired employees.

A few reminders about good communication plans are listed in table 4.12 below.

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Table 4.12 Communication tips

Know the audience and seek to frame the message and the medium for those you

most need to attract. For example, an organization will frame its message differently

and will use different mediums for the communication if it is an executive they are

seeking to attract versus a computer specialist.

Key messages: have a clear vision of what you want to accomplish.

Communicate the employment value proposition; state what is in it for them.

Keep messages simple, consistent, and timely.

Begin as soon as all reward elements have been designed and approved.

Communicate continuously.

Focus on each of the main elements of the total rewards: monetary, non-monetary, and

work experiences.

Select credible and respected spokespeople to deliver key messages.

Quality of presentation counts; take the time needed to ensure error-free and effective

communication products.

The widespread use of the Internet has resulted in the portal becoming the hub of benefits

understanding. Timeliness and interactivity are the chief advantages of online total rewards

statements. The Internet also provides the opportunity for greater personalization and the

capability to link to additional resources, thereby expanding the scope of communication.

However, many means of communication are available today. Some of the most popular ones are

listed below in table 4.13.

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Table 4.13 Examples of Communication Methods

Audiovisual: video, audio, teleconferences

Print: brochures, booklets, letters, bulletin boards, paycheck stuffer, question-and-

answer columns

In person: small and large meetings, one-on-one counseling, manager/employee

sessions

Electronic: interactive computer programs, e-mail, telephone response systems,

personalized total rewards statements online, Internet, and intranet

Many organizations use a personal benefits statement to annually communicate to all their

employees the rewards they are offered, which ones they participate in, and the value of the

rewards. The statement can be delivered electronically, in print, or on a web site. It is an excellent

document that the employee can share with members of the family and is also an excellent

reminder of the total value of the rewards for the individual employee. In addition, it is a way to

communicate the costs of the rewards to the employer and is a method for employees to verify

their enrollment in benefits and to have a permanent record of their holdings in their retirement

plans, deferred compensation, and stock programs, if eligible for them. Our next Company

Spotlight, on Avaya, describes how they use the total rewards statement to increase the

appreciation of the value of their programs.

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Company Spotlight: Avaya

Avaya is a leader in communications software services. It pioneered voice mail, interactive

voice response, skills-based call routing, audio conferences, and the virtual LAN. Avaya

serves one million customers, including 90 percent of the Fortune 500 companies. It

employs 20,000 people in 50 countries and has 2,500 business partners. Thus, an online

total rewards approach was a natural. It proved the solution to getting employees to

appreciate the value of their benefit programs.

Avaya's online total rewards approach was implemented after a survey showed that most of

its employees were largely unaware of the value of their benefits and didn't know where to

look for information about their benefits. To remedy the situation, Avaya created an online

benefits web site, My Total Rewards, which is integrated into the existing employee service

center portal. The site contains personalized, comprehensive statements that give

employees information not only about their pay and benefits, but also what the company

pays to provide the benefits that add up to the total rewards package. Avaya recently added

a benefits summary page and a retirement income replacement tool to its site. Employees

gave the company site high marks for helping them understand their benefits, and the site

won an award from the Profit Sharing/401(k) Council of America.

Of course, employers need to go beyond total rewards statements since the concept of Total

Rewards goes beyond the traditional view of rewards as the monetary and non-monetary

rewards, but also the value that results from the employment relationship, or work

experience. Communication ideally would include not only compensation and benefits, as is

the case of Avaya, but also other key items such as recognition, balance of work/life, culture,

career/professional development, advancement opportunities, and work environment (Black,

Nov. 2007).

Topic 5: Conclusions

A total rewards approach to compensation management is strategically planning a targeted reward

package to successfully attract, retain, and motivate segmented populations of employees who

possess the right KSAs needed for accomplishing the organization's business objectives. This

module described the steps for designing and implementing a total rewards program. The steps

were divided between those of designing, which include: 1. understanding the organization, 2.

defining the requisite KSAs required for success, 3. identifying current and potential employees'

"drivers," 4. designing a total rewards philosophy statement, and, 5. assessing financial costs and

plans with key leadership. The steps for implementing the plans include: 6. piloting the total

rewards assumptions, 7. developing a timeline, obtaining vendors, and assigning duties, 8.

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implementing the plan's programs, and, 9. communicating and marketing. Segmentation of the

population is a vital part of the process for designing a total rewards program. Because of its

importance and because it may be a skill new to many human resource professionals, a description

of it was provided along with three examples.

After the planning and implementation come the remaining important aspects of a total rewards

approach. The remaining activities include designing and tracking metrics, evaluating the results of

the total rewards programs against the metrics established, and making any necessary revisions.

These activities are all described in the remaining module of this course, module 5. Also included

in our final module are pitfalls to consider when implementing and communicating total rewards

programs, and global considerations for reward design.

References

Black, Ann. "Total Rewards." Benefits & Compensation Digest. Vol. 44, Issue 11, pp. 32-36. Excerpt

from the book Communicating Employee Benefits, Changing Methods and Changing Minds and

Effective Benefits Communication. Nov., 2007.

Christofferson, J.; and King, B. (2006). "The 'IT' factor: A new total rewards model leads the way."

Workspan, http://www.worldatwork.org

Constellation Total Rewards Statement. Retrieved May 4, 2008, from

http://www.constellation.com/

Erickson, T.J.; and Gratton, L. (March, 2007). "What it means to work here." Harvard Business

Review.

Kaplan, S. (2005). "Total rewards in action: Developing a total rewards strategy." Benefits &

Communication Digest. Vol. 42, Issue 8, p 32-2.

Manas, T.; and Graham, M. (2003). Creating a total rewards strategy: Toolkit for designing

business-based plans. New York: American Management Association, AMACOM.

Maslow, A. H. (1954). Motivation and personality. New York: Harper.

Mercer. (2007). "Compensation trends of the future: Designing a sustainable global total rewards

strategy." White paper. Retrieved MArch 1, 2008, from http://www.mercer.com

Salopek, J. (2008). "Retention buzz." Training and Development. Alexandria: Jan. Vol 21, Issue 1,

pp. 23-25.

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Smolkin, S. (2007). "Total reward statements promote attraction, retention." Employee benefit

news. Canada: Vol 4, Number 4, pp. 27-28, Jul-Aug.

WorldatWork. (2007). The WorldatWork handbook of compensation, benefits & total rewards: A

comprehensive guide for HR professionals. New Jersey: John Wiley and Sons.

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