Enabling, Engaging, and Rewarding Employees

1. Enabling, Engaging, and Rewarding Employees for Dow Scott, Ph.D. Professor of Human Resources Loyola University Chicago 1038 W. Loyola Avenue #1 Chicago, IL 60626-5206 312.915.6597 www.pdii.net Performance Development International, LLC.

2. What does it mean for employees to be engaged? • How engaged are your employees? • Very engaged • Engaged • Neither engaged nor disengaged • Disengaged • Very Disengaged If so, why? In not, why not? Why or why not?

3. “Employee engagement” • The commitment employees feel toward their organization and work team. • Employees’ discretionary effort…their willingness to go the extra mile for the organization

4. Engagement is important Increasing importance of engagement is a function of: • Knowledge-based economy • Focus on lean operations and ROI • Fast-changing environments • Employee emphasis on personal fulfillment

5. Work environments must transform motivation into productivity

6. Employee performance Employee retention Customer satisfaction Financial success The business case for engaging and enabling employees Increase in employees above performance expectations Reduction in turnover rates Customer satisfaction rates Revenue growth High engagement only 10% -40% 71% x2.5 High engagement & high enablement 50% -54% 89% x4.5

7. Peer Group Most Admired Value of engagement I believe our efforts to engage employees have: % Strongly agree / agree Created a competitive advantage Reduced complaints about pay fairness and equity Reduced turnover Reduced employee performance problems Strengthened customer relationships

8. “MAC” engage employees Peer Group Most Admired Our company has developed an explicit employer brand Our company has a specific definition of employee engagement HR staff across our company have a good understanding of what employee engagement is Line managers own engagement initiatives % Favorable

9. W@W on rewards and engagement

10. Research Methodology

11. Research objectives • Identify reward practices impacting employee engagement • Identify what works and what can be improved in the reward space in engaging employees • Identify reward and engagement attributes and activities that enhance organization performance

12. Survey overview • Over 650 WorldatWork members participated • Methods of analysis: • Descriptive analysis (e.g., means and frequencies) • Content analysis, factor analysis, and reliability analysis to create meaningful variables • Correlation analysis to identify relationships

13. Research Findings

14. ROI on engagement efforts Efforts to engage employees through reward programs have: Created a competitive advantage Resulted in better relationships with customers Increased organization’s financial performance Increased organization innovation

15. ROI on engagement efforts Efforts to engage employees through reward programs have: Reduced complaints on pay fairness Reduced turnover Reduced absenteeism Reduced employee performance problems Created a more positive work culture Resulted in better collaboration and relationships

16. Retention as a key priority I am very confident in my organization’s ability to retain key talent as the economic outlook improves

17. Defining engagement and ensuring accountability Employee engagement performance metrics are built into variable pay programs Our organization has a specific definition of ‘employee engagement’ Employee engagement is explicitly included in our organization strategy

18. Measurement and monitoring • Most organizations conduct surveys every one to two years (59 percent); Only 20 percent indicate that they do not use surveys • Most view surveys as effective in generating action and change (60%) • Conducting surveys was related to perceived effectiveness in fostering engagement (r = .22), but taking action is more important (r = .54)

19. Reward professionals believe: • Intangible rewards and leadership have more impact on engagement than base-pay, benefits, and incentives • Short term incentives are the tangible rewards that have the most impact on engagement • Quality of work, work environment, career development, and senior leadership are the intangible rewards that have the most impact

20. Impact of rewards on engagement Base salary level Base salary increase Benefits and perquisites programs Short-term or bonus programs Long-term or bonus programs Financial recognition programs

21. Impact of intangible rewards on engagement The nature of the job or quality of the work Work environment or organizational climate Career development opportunities Work-life balance Non-financial recognition

22. Impact of leadership on engagement Manager’s assessment of employee performance Coaching from managers or supervisors Organizational objectives Quality of senior leadership

23. Employee involvement in reward programs Design Implementation Evaluation

24. Manager involvement in reward programs Design Implementation Evaluation

25. Involvement in reward design on engagement • Conventional thinking and research suggests that participation in program design builds ownership and commitment. • This study found reward program involvement is linked to more positive views of effectiveness of reward strategies in engaging employees (r ≥ .35) • We found very low levels of employee and manager involvement in reward program design, implementation, and evaluation.

26. Some more questions Why is employee and management involvement in reward decisions so low? What role does your reward function play in employee engagement in your organization? What should the reward function do to enhance employee engagement? Why or why not?

27. Recommendations

28. Engagement and Rewards • Base-Pay • Benefits • Incentives (i.e., financial and non-financial) • Development and career advancement opportunities • Work environment

29. High performance work environment requires • Employee have: • Opportunity to participate • Information to participate intelligently • Good reason to participate “The average worker knows his job better than anyone else.” – Joe Scanlon Performance Development International, Inc.

30. Our top ten list Organizational Priorities Make a business case for engaging employees Measure and monitor engagement Take action on survey results Make everyone responsible for engagement Connect people with the future Reward Priorities • Go beyond comp & benefits to a total rewards mindset • Include employees & managers in reward design and launch • Tailor total rewards to workforce segmentation • Use engagement metrics in performance criteria • Communicate the value of what you have

31. 1. Make a business case for engaging employees Identify connections between engagement and business outcomes Use internal business & engagement measures if you have them Otherwise, begin a dialogue with your leaders around external norms and internal opportunity Involve managers in initiatives to promote employee engagement

32. 2. Measure and monitor engagement Employee opinion surveys are important tools for monitoring and managing employee engagement Surveys are two-way communication tools What is measured sends important signals to employees about values and priorities. Sharing results and a plan for action demonstrates respect for employee input

33. 3. Take action on survey results The best companies make more frequent use of surveys than their peers and they use the input more effectively They indicate employee surveys are more effective in generating action and change They report doing more to link employee survey results to performance outcomes, such as customer satisfaction They say their best managers are more likely to take action

34. 4. Make everyone responsible for employee engagement

35. 5. Connect people with the future To maintain high levels of engagement requires connecting people with jobs and organizations and helping them to see a positive future for themselves and their organizations. Focus areas should include: Confidence in leadership Clear and promising direction Development opportunities Strategic rewards

36. 6. Go beyond compensation and benefits to a total reward mindset • Help leaders and managers understand that rewards go far beyond compensation and benefits • Build the core organization messages (employment value proposition) around what is meant by total rewards • Develop tools for managers so they can effectively reward employees beyond the confines of compensation and benefits • Develop and reinforce communications around total rewards

37. 7. Include employees and managers in reward design and launch “We do employee surveys every two years and make action plans based upon the survey results. One key finding is that we need to do a better job at communicating the total value of reward to our employees.” Guaranteed cash Intangible reward Annual variable Heineken Long term incentives Benefits “The real power is when you actually start talking with your employees. We design our reward programs, invest in new programs, and beef up current programs based upon the feedback we receive from our employees.” McDonalds

38. 8. Tailor total rewards to workforce segmentation • Identify the most meaningful and valued ‘rewards’ in the organization: Do reward values vary across the organization and work units? • Recognize that different employees value different rewards: What do your boomers, generation X and Ys value? • Build the manager’s reward tool kit based on how can they use • career development • organization and job design • non-financial recognition programs • organizational work climate … to reward employees?

39. 9. Use engagement metrics in performance criteria • The Most Admired Companies have more balance performance scorecards • Balances timeframes, measurement level and measurement types • MACs using human capital measures are double their peer groups • Recognition that financial performance is driven by engagement • Establish baseline measures so you can monitor trends

40. 10. Communicate the value of what you offer • ‘Best’ practices and sophisticated designs fail if they are not properly rolled out. • Clarify and focus on a few direct messages and tools • Use total reward statements • Help line managers understand and use their tool kit to communicate reward value

41. Employee are engaged because . . . • They believe the organization is doing something important and they are making a meaningful contribution • They believe they are doing something important and will be recognized for the contribution • Management believes that employees are assets to be developed and not a cost to be reduced • Management treats employees fairly for the contribution they make. Performance Development International, Inc.

42. Questions - Comments

43. Dow Scott, Ph.D. Dow Scott, Ph.D. is a Professor of Human Resources in the School of Business Administration at Loyola University Chicago and President of Performance Development International, LLC, a human resource consulting firm. Dr. Scott’s practical approaches to teaching, research, and consulting focus on helping business leaders create more productive and satisfying work environments. He has over 100 publications which includes his recent book Incentive Pay: Creating a Competitive Advantage. He consults with diverse organizations on pay and other human resources issues including AT&T, Groendyke Transport, Landstar Systems, Sara Lee Corporation, HNI Risk, Marsh, Inc., Xaloy, Hay Group, and USG. He often is called upon by organizations to evaluate compensation programs and other human resources programs. 312.915.6597 or dscott@luc.edu