THE CRITICAL LINK: GLOBAL TOTAL REWARDS CULTURE, STRATEGY AND YOUR BOTTOM LINE

1. THE CRITICAL LINK: GLOBAL TOTAL REWARDS CULTURE, STRATEGY AND YOUR BOTTOM LINE Deborah Voyt, Ph.D. Presented at D-SHRM Total Rewards October 2013

2. Global economy and need to manage costs has changed the total rewards model • Traditional view of total rewards - pay and benefits • Limited compensation budgets and benefit reductions • Companies must focus on other key total rewards elements aligned with organizational culture • Maximize the employee value proposition - globally • Attract, retain, and engage knowledge workers • Global framework with local flexibility

3. New Total Rewards Model WorldatWork Total Rewards Model • Compensation • Benefits • Performance and recognition • Development and career opportunity • Work life Total rewards model is flexible and tailored to meet the needs of the business, employees, and aligned with organizational culture

4. Organizational Culture and Total Rewards • Highly successful companies have strong unique cultures • Support employees to achieve strategic objectives and enhance organizational performance • Total rewards systems design and how individuals are rewarded communicate an organization’s beliefs and values • Attract the right employees • Key to understanding organizational culture

5. Total rewards can support or detract • Attract individuals with right values, skills, knowledge, abilities • Motivate to further organizational goals and objectives • Reward systems that do not fit the culture can negatively impact performance and employee engagement • Business culture and local country culture

6. What is culture? • It’s simple “the way we do things around here” • A set of shared, subconscious assumptions and tacit beliefs

7. Total rewards systems reflect and reinforce the cultural norms • Primary signal of organizational values and culture • Business leaders and human resources professionals are placing greater emphasis on culture and the fit with total rewards to attract, retain, and motivate employees to increase individual and firm performance • A survey of 1,200 international business executives show that 90% believe that corporate culture is as important as business strategy for organizational success (Bain & Company, 2007)

8. Challenges to Culture and Change • New competitors • Demanding customers • Complaining staff • Decreasing profit and sales • Merger or reorganization • Going global

9. Culture has an impact Research has shown the powerful impact on performance and long-term effectiveness of organizations

10. Culture makes the difference The effects on employee morale and retention, commitment, productivity and innovation are well documented

11. If you don’t use culture, culture will use you • If you’re not aware, it will shape you • Human beings Copy,Coach, and Correct each other to fit into the group • So make sure Culture works for you, instead of against your necessary change

12. Competing Values FrameworkCameron and Quinn, 2006

13. Survey Questions • The Organizational Culture Assessment Instrument (OCAI)* was used to identify the dominant culture of your organization based on the Competing Values Framework (CVF) • Three open-ended questions were examined, organized, and coded into total rewards categories or broad themes • Question 1: The most important characteristic or attribute that makes my organization's total rewards strategy effective is: • Question 2: The one or two characteristics or attributes that need to be changed to improve the effectiveness of my organization's total rewards systems are: • Question 3: Success of the total rewards system at my organization is measured by: * OCAI developed by Cameron and Quinn (2006)

14. Company Profiles

15. Organizational Culture Type Survey Results

16. Top 3 Themes IdentifiedPay-program attributes, Alignment, and Benefits • Pay-program attributes (22%) • Needs improvement (14%); effective (8%) • Funding, stability, pay differentiation, timing • Alignment (14%) • Needs improvement (6%); effective (8%) • With organizational strategy, objectives, and results • Other total rewards elements and human resources systems • Alignment with organizational culture and employee line of sight • Benefits (13%) • Needs improvement (7%); effective (6%) • Competitive position to the market • Need to improve retirement plans through reinstatement of the company 401k match • Education reimbursement

17. Organizational Culture Type Survey Results

18. How Total Rewards Success is Measured

19. Clan Culture • People-oriented, friendly • Leader: facilitator, mentor, team builder • Value: commitment, communicate, develop • Effectiveness: development and participation Cameron and Quinn, 2006

20. Total Rewards Major Themes Clan Culture • Pay-program attributes – 8% • Stability and funding • Link between pay and performance • Alignment – 5% • Alignment with organizational strategy and other HR systems • Benefits – 3% • Organizational culture • Work environment – 3% • Work-life balance

21. How success is measuredClan Culture • Retention • Employee engagement scores • Attraction • Total rewards utilization

22. Clan CultureTotal Rewards Considerations

23. Market Culture • Results-oriented, competitive • Individuals are competitive and goal-oriented • Leader: hard driver, competitor, producer • Value: market share, goal achievement, profitability • Aggressively competing and customer focus Cameron and Quinn, 2006

24. Total Rewards Major ThemesMarket Culture • Pay-program attributes (6%) • Link pay and performance • Timeliness • Alignment (6%) • Alignment with organizational strategy • Integration with other reward programs • Alignment with organizational culture and other human resources systems • Development and career opportunities (4%)

25. How is Success MeasuredMarket Culture • Retention – 40% • Exit interviews – 20% • Cost – 20% • Not measured – 20%

26. Market CultureTotal Rewards Considerations

27. Hierarchy Culture • Controlled, structured • Leader: coordinator, monitor, organizer • Value: efficiency, consistency, timeliness, uniformity • Control and efficiency and capable processes Cameron and Quinn, 2006

28. Hierarchy Culture • Benefits (4%) • Providing good benefits • Communication (4%) • Providing open communication about total rewards • Value of total rewards • Linkage to business strategy • Development and career opportunities (3%) • Need to improve Cameron and Quinn, 2006

29. Hierarchy CultureTotal Rewards Considerations

30. How is Success MeasuredHierarchy culture • Retention (5%) • Employee engagement scores (1%) • Ability to recruit (1%) • Cost (1%) • Customer feedback (1%) Cameron and Quinn, 2006

31. Adhocracy Culture • Dynamic, entrepreneurial • Leader: innovator, visionary, entrepreneur • Value: innovation, agility, transformation • Innovativeness, vision and new resources Cameron and Quinn, 2006

32. Total Rewards Major ThemesAdhocracy culture • Pay-program attributes • Pay above market levels • Alignment with future business/growth strategy • Benefits • Retirement • Education assistance • Work-life balance • Respect for employees

33. How is Success MeasuredAdhocracy culture • Company performance – 50% • Cost – 50%

34. Adhocracy CultureTotal Rewards Considerations

35. Questions