We’re living through a period of change that is happening at breath-taking speed. Some have called this the Fourth Industrial Revolution, spurred by technological breakthroughs and leading to widespread disruption of the economy.
The world of work is changing just as rapidly and has recently undergone massive upheaval accelerated by the pandemic. Overnight, employees abandoned their office desks and took up working remotely in agile teams. People embraced the idea of flexibility, of making choices that allowed them to weave work into their lifestyle, not the other way around.
As people reassessed their priorities in huge numbers, the Great Resignation took off. Microsoft research suggests that 52% of Gen Z and millennials will consider changing employers this year. Skilled individuals, meanwhile, now have more employment choices as the labour market swings in their favour.
Against this challenging backdrop, companies need to drastically rethink how they are attracting and retaining their top talent. In one survey, 43% of employees cited lack of good benefits for quitting their jobs in 2021. Yet how we look at reward and compensation is still stuck somewhere in the last century (at least) – and it is past time for serious change. What Reward needs is disruption – not only in its design but in the way it’s communicated.
Confusing incentive plans
Working in a company that specialises in Reward communication and engagement across all industries, many organisations tell me the same thing: people don’t understand their Reward package and it’s inflexible. Executives, moreover, find long-term incentive plans confusing and too complex. Instead of promoting a growth mindset and innovation, Reward is failing to energise employees and it comes with consequences – business performance suffers.
Picture the opposite: a workplace where everyone feels valued, engaged and recognised, where Reward is tailored and communicated effectively to individuals in a way that inspires. Imagine a borderless, open-talent future where people are rewarded for their skills and contributions. The result? A meaningful and motivating workplace culture which is proven to drive business performance.
Personalisation and choice are the way forward and they’re increasingly in demand. One comprehensive workplace study found that 70% of employees felt that recognition is most meaningful when it’s personalised. Not only that, but it drives productivity. If you feel what you do matters, you are more likely to put in the effort.
This insight, however, is not consistently carried through into many workplaces. Instead, a blanket and complex remuneration approach tends to be common. When employees don’t understand how their salary is calculated or how benefits and incentive plans are tailored to them, the value is lost.
Fluid, simple and personal
What we need now is a structure that is fluid, simple and intensely personal. We can control and flex nearly everything we want these days – changing the day a package arrives, for instance, to selecting what to watch on TV at any given moment. Reward needs to respond to this expectation and provide a new way of engaging people.
We’ve reached a tipping point. HR and Reward teams should be asking themselves how they can capitalise on available technology and leave inflexible and linear pay structures behind. Instead of cloaking compensation in mystery, it should become transparent, simpler and driven by real-time market data and analytics. Everyone should understand how decisions around pay and reward are taken and the impact on them as individuals.
So, let’s be brave and embrace a future that is personalised; a future where people are empowered. Employees are expecting more control over how they work and what that looks like – and Reward should be no different.
An engaged workforce is more profitable
Get it right and you’ll be enabling performance and driving better results, because people will feel not only consulted but in control. Research suggests that companies with a highly engaged workforce are 21% more profitable.
Moving away from legacy systems, manual spreadsheets and rigid frameworks will have a cost, but it’s one that companies can’t afford to ignore. Moreover, isn’t it time we thought of people as a company’s biggest investment, not its largest cost?
There’s a prize to be had for changing the record on Reward. It’s estimated that employers are losing £22.75bn through employee turnover and absence because they fail to communicate their Reward and benefit offerings effectively. The companies that see this as an opportunity to use Reward to enable performance and create a sense of belonging will, quite literally, reap the biggest rewards.