How total reward strategies can help

The cornerstone of our total rewards strategy is the Employee Value Exchange (EVE), which examines the balance between the rewards that employers offer and the expectations they set in exchange for those rewards. In our Rewards of Work model, we identify five types of rewards:

• Compensation: The money employees receive for their work and performance
  
• Benefits: Indirect compensation including health, retirement and time off
  
• Work content: The satisfaction employees receive from their work
  
• Career: The long-term opportunities employees have for development and advancement
  
• Affiliation: The feeling of belonging employees have toward the organization

We use proprietary research conducted through years of study to help clients understand how to best craft their own value exchange, the preferences of their staff and the causes of any gaps between employee and/or organization aspirations and the actual exchange presented.

One example of a total rewards strategy

Below you'll find just one example of how our performance and rewards practice approaches total rewards redesign, providing the client with significant compensation cost savings over the long term. 

The issue

A mid-range diesel engine manufacturer needed to redesign its total rewards system for hourly manufacturing associates. This company is state-of-the-art, with a work culture heavily influenced by a team-based work system.

The company’s future vision includes a facility expansion, new production lines, new products and increased volumes, concurrent with improvements in quality and efficiency and an overall reduction in cost per engine.

The pressures resulting from a high-performance work environment and an aggressive vision for the future underscored the need to improve the effectiveness, perceived fairness and competitiveness of the company’s reward systems.

Our solution

After conducting an in-depth needs assessment of its total reward system, the company decided to use a high-involvement process in redesigning its plant goal-sharing system for its exempt and hourly employees and its performance management and base-pay systems for its hourly employees.

A steering committee comprised of senior managers was formed to develop a total rewards philosophy and to guide the redesign process. Planning teams of hourly and salaried employees were chartered to plan employee conferences where more than 150 employees developed ideas for redesigning the company’s reward system. In the end, close to half of the company’s 700 employees were involved directly in the change.

The steering committee and the company’s corporate parent finalized and approved the following changes:

• Redesign the group incentive program to increase target payout, introduce paying for sustained performance, provide a partial award to temporary employees, simplify quality and cost measures, replace the inventory measure with an efficiency measure and improve the ongoing communication of the program’s performance
• Replace the time-based, step-rate pay progression for hourly employees with a pay-for-contribution system that offers base wage increases according to contribution, as measured by feedback from peers and supervisors
• Introduce contribution cash or lump-sum awards for employees at the top of their range
• Establish a new process and new criteria for conducting the annual pay competitiveness survey

The result

The company achieved the following results with its reward system changes:

• Significant compensation cost savings over the long term to ensure competitive structure on a global basis while keeping total cash compensation levels above local labor market levels
  
• A shift from an entitlement culture to a performance-based culture
• Shift in emphasis from base pay to variable pay
• Simplification of measurement systems to ensure that employees focus on the right things