Your Total Rewards Investment is a Waste, Unless... By Derek Irvine

Do you have a Total Rewards strategy?

Do you communicate your Total Rewards strategy to all employees in a way that gives them a true sense of your organization's total investment in them?

If you answered "no" to the second question, then by default the real answer to the first question is also "no."

No matter how well-defined or constructed your Total Rewards program is, if your employees don't know about it in terms that matter to them, then your Total Rewards strategy doesn't really exist.

In research introduced in May 2012, the Chartered Institute of Personnel and Development (CIPD) revealed:

"The CIPD/Benefex Reward Management Survey 2012 found that more than a third of companies plan to increase their spend on employee benefits this year, but few (17.8 percent) provide 'total reward statements' and 8 in 10 offer no financial education to help employees understand the value of their pensions and other financial benefits. What's more, the survey revealed that the majority of organizations have not adopted a transparent approach to communicating information about pay scales, the provision of benefits and allowances, grading systems, job evaluation, performance-related pay schemes and how pay decisions are made for different individuals or groups of employees."

Let's be honest. Rewards or benefits packages can be as half as much or more than an employee's base salary. Why, then, do we so often leave employees in the dark about the full extent of their entitlements?

Too often, the term "reward" is linked to an employee's performance against corporate goals. In reality, "rewards" encompass so much more, including everything from healthcare benefits to retirement plan contributions, to recognition and incentives received.

But if the total value of these rewards isn't communicated effectively to employees, then its intended benefit will not be felt. Moreover, if reward is to be both truly meaningful to the recipient and provide valuable insight to the HR department on the key performers across the organization, it absolutely must be closely linked to recognition. This is a sentiment echoed in a recent Gartner report (Gartner 2012 Strategic Road Map for Employee Performance Management - March 2012, membership required) recommending organizations test a social recognition policy alongside their existing pay-for-performance programs to improve the success of its reward program. Charles Cotton, rewards adviser at the CIPD, commented on this research:

"If rewards are used to motivate employees, or to encourage higher performance, then being reticent about reward communication does not make sense. Employers shouldn't take it for granted that potential candidates and existing staff appreciate or understand the value of the pension scheme or perks such as subsidized meals, life assurance and critical illness insurance. Many employees will not look beyond their base salary and how far they can make it stretch from month to month. As we embark upon the biggest shake up to pensions since the state pension was created, employers will have a duty to communicate with employees about these changes and how they could benefit from saving for their retirement. What's more, if employers apply that duty of care to their entire reward strategy, by improving employee understanding and awareness around the value of the entire breadth of benefits they offer, employers are likely to reap the benefits in terms of recruitment, retention, engagement and productivity."

To ensure the success of a total reward strategy--incorporating strategic employee recognition--communication is vital, particularly in light of changes to employee entitlements through mounting economic difficulties. Once the strategy is communicated appropriately and fully understood, it will be embraced by employees and the program will grow--ultimately delivering improved performance across the board and a more satisfied and engaged workforce.

How well is your Total Rewards investment understood by your employees?

As Globoforce's Head of Strategic Consulting, Derek Irvine is an internationally-minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. Follow Derek on Twitter at @DerekIrvine. This article was originally published on the Compensation Cafe blog at: http://www.compensationcafe.com/2012/05/your-total-rewards-investment-is-a-waste-unless.html.