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

Deborah Voyt, Ph.D.Presented at D-SHRM Total Rewards

October 2013

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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

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New Total Rewards Model

• Compensation• Benefits• Performance and

recognition• Development and

career opportunity• Work life

WorldatWork Total Rewards Model

Total rewards model is flexible and tailored to meet the needs of the business, employees, and aligned with organizational culture

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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

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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

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What is culture?

• It’s simple “the way we do things around here”

• A set of shared, subconscious assumptions and tacit beliefs

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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)

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Challenges to Culture and Change

• New competitors• Demanding customers• Complaining staff• Decreasing profit and

sales• Merger or

reorganization• Going global

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Culture has an impact

Research has shownthe powerful impact on performance and long-term effectiveness of organizations

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Culture makes the difference

The effects on employee morale and retention, commitment, productivity and innovation are well documented

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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

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Competing Values FrameworkCameron and Quinn, 2006

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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)

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Company ProfilesOrganization Type Distribution Organization

Size Number of employees

Distribution

For profit, privately held/partnership/consultancy 38% > 5000 54%

For profit, publicly traded

42%

1000 - 5000

31%

Governmental

12%

50 - 250

8%

Nonprofit

8%

500 - 1000

8%

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Culture Type Distribution Number of Companies

Clan

31%

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Adhocracy 4% 1

Hierarchy 27% 7

Market 38% 10

Organizational Culture Type Survey Results

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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

Organizational Culture Type Survey Results

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How Total Rewards Success is Measured

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Total Retention/Turnover

30%

Employee engagement/commitment surveys

17%

Not formally measured

11%

Company Financial Performance

9%

Ability to Recruit

9%

Cost

7%

Pay Program Attributes

4%

Program Utilization

4%

Responses Left Blank/Unknown

4%

Customer Feedback

2%

Leader Effectiveness

2%

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Clan Culture

• People-oriented, friendly• Leader: facilitator, mentor,

team builder• Value: commitment,

communicate, develop• Effectiveness: development

and participation

Cameron and Quinn, 2006

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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

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How success is measuredClan Culture

• Retention• Employee engagement scores• Attraction• Total rewards utilization

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Clan CultureTotal Rewards Considerations

Rewards Emphasis • Respect the organization’s traditions • Focus on interpersonal and

employee needs Base Pay • Competitive or above (caring family) • Pay reductions rather than layoffs Bonus • Team-based Benefits • Inclusive and competitive; flexible

Performance and Recognition • 360 degree feedback • Competencies and values rather

than numeric ratings • Group recognition Development and Career Opportunity • Individual and team important Work-Life • Important to take care of family

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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

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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%)

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How is Success MeasuredMarket Culture

• Retention – 40%• Exit interviews – 20%• Cost – 20%• Not measured – 20%

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Market CultureTotal Rewards Considerations

Rewards Emphasis • External market focus • Emphasis on individual performance • Earn rewards based on achieving

agreed-upon goals Base Pay • Competitive with market • Differentiate based on performance

rather than seniority Bonus • Individual/company performance Benefits • Employees take greater

responsibility

Performance and Recognition • High performance standards that

differentiate individual performance • Goals and expectations • Spot awards and individual

recognition important Development and Career Opportunity • Individual development • Use of “stretch” assignments Work-Life • Important for recruiting • Employee resolves with manager

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Hierarchy Culture

• Controlled, structured• Leader: coordinator,

monitor, organizer• Value: efficiency,

consistency, timeliness, uniformity

• Control and efficiency and capable processes

Cameron and Quinn, 2006

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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

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Hierarchy CultureTotal Rewards Considerations

Rewards Emphasis • The reward systems respect the

hierarchy and the need for a predictable and secure environment

Base Pay • Competitive • Well-defined procedures important Bonus • Individual/company performance • Targets support hierarchy Benefits • Traditional with focus on long-term

job security to maintain a smooth-running organization

Performance and Recognition • Highly structure performance

management systems • Formal recognition plans with well-

defined criteria • Service awards Development and Career Opportunity • Important for advancement within

the structure Work-Life • Not highly valued – slow to adopt

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How is Success MeasuredHierarchy culture

• Retention (5%)• Employee engagement scores (1%)• Ability to recruit (1%)• Cost (1%)• Customer feedback (1%)

Cameron and Quinn, 2006

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Adhocracy Culture• Dynamic, entrepreneurial• Leader: innovator, visionary,

entrepreneur• Value: innovation, agility,

transformation• Innovativeness, vision and

new resources

Cameron and Quinn, 2006

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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

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How is Success MeasuredAdhocracy culture

• Company performance – 50%• Cost – 50%

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Adhocracy CultureTotal Rewards Considerations

Rewards Emphasis • Attract creative individuals who can

take innovation to next level Base Pay • Above market based on individual

talent • Skill-based pay a consideration Bonus • Individual/company performance • Patents/innovation Benefits • Flexible and latest innovations

Performance and Recognition • Support innovation • System encourages mistakes • Punishes inactivity • Recognize and celebrate success Development and Career Opportunity • Symposiums and forums • Tools, technology, and systems to

support individual important Work-Life • Flexibility is important

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Questions