Why companies must reconsider rewards programmes

Rewards programmes

Companies are eager to recruit younger generations of employees — particularly those who can help them grow their businesses for decades to come.

Corporate leaders are aware that younger employees want creative rewards packages that are personalised according to their unique talents, values, and lifestyles. Unlike older employees, today’s recruits seek more than just health insurance, sick leave, and overtime pay. They want flexibility, recognition, and creative rewards programmes.

But companies are lagging in their efforts to provide them, the latest version of an annual Deloitte report says. Deloitte’s 2018 Global Human Capital Trends survey found that 37% of respondents rated rewards as very important, but only 9% felt “very ready” to deal with the challenge.

“The rewards system has to be directly measured and be tied to wellness, because the workforce today understands that concept more, and it’s more important to them than it was to me 40 years ago,” said Kerry Jothen, president of Vancouver-based Human Capital Strategies.

“The wellbeing of the workforce, defined broadly — not just in their ability to perform, but in a broader holistic way — is really important.”

Going forward, he added, a company’s success will correlate directly to the wellbeing of the workforce, the individual, and the organisation. But today’s employers are struggling to provide the flexible working hours and other nontraditional benefits that younger employees desire.

“[Employers] are behind the curve,” Jothen said. “Some are trying to varying degrees. They’re in different industries, different kinds of companies, different locations. A lot of [the difficulty] is driven by talent. It’s driven by where they find their talent. Different companies and different industries are doing better than others.”

Seeking a custom experience

The Deloitte report found that younger employees are requesting “more personalised, agile, and holistic rewards, including a focus on fair and open pay”.

Highly talented employees want a customised experience instead of rewards that are the same for all staff.

Knowledge-based companies and higher-end software firms are more successful in their hiring than established traditional companies, Jothen said. “Big companies, in general, are struggling, for whatever reason: global trends, market competition, government regulations,” he said. “You can’t point to one company or industry.”

Younger employees expect to have a say in company decisions while seeking work/life balance and flexible work hours, schedules, and locations, Jothen said. Young employees also place more emphasis on doing work that they like and is aligned with their values.

“Because of the demographics and because of the concerns about where you find your talent, younger employees have more leverage — more bargaining power — to walk down the street and go somewhere else,” Jothen said.

Perks plus regular review of pay

Some companies are offering a wide range of unconventional perks, including free cars and pet insurance. Others are going bigger.

Tech company TextNow, for instance, provides top-performing employees with prizes that range from wireless headsets to trips for two around the world, with friends and family members allowed to use the second ticket.

“Where [competitors] are throwing another couch in the lunchroom for people or another ping-pong table or whatever, we’re going to look at things around their development, their recognition, [and] their growth,” said Greg Silva, vice-president of people and culture for TextNow.

The nine-year-old company, which has offices in Canada and San Francisco, reviews compensation of its approximately 100 employees twice per year to keep pace with the rapidly changing market.

However, TextNow does not offer a bonus programme — a decision that stems from the company’s attempt to treat employees more fairly than other firms do. Citing his experiences with other companies, Silva said a bonus programme can result in “a lot of bureaucracy” and prompt employees to think in “the silo” rather than as a team.

“We’d rather just pay people — and pay people correctly,” Silva said.

TextNow has also made its review process more transparent, and it has separated performance evaluations from pay assessments. TextNow also goes out of its way to recognise employees internally for accomplishments, provides executive coaches for all leaders, and assists employees with career and personal-development goals.

In turn, TextNow is retaining employees longer than the industry average of 18 to 24 months, Silva said.

A high salary is not the biggest differentiator when a prospect is weighing multiple job offers, he added.

“[Prospects] want to know that they’re going to be working with other top talent, that they’re going to be challenged in a role that they’re acquainted with, and it’s going to be something that’s a large opportunity for them,” Silva said. “So they’re thinking about it in a personal level rather than [asking], … ‘Do we have sushi on Fridays?’ ”

The role of trust

When it comes down to intangibles that make a difference, trust is a big factor. Research from the Great Place to Work Institute shows that companies trusted by workers outperform their rivals. “High trust” publicly traded companies achieved a 935% gain on their investment between 1998–2018, according to research conducted for the institute by Russell Investment Group. Meanwhile, the top quartile of companies on the organisation’s latest US list grew their revenues 23.5% year-over-year.

“People can see that they can trust their managers, and they believe [in] their managers and what they are doing,” said José Tolovi Neto, managing partner of Great Place to Work Institute Canada.

Rather than a high pay level, employees look for a certain level of satisfaction.

“Our research shows that, once you receive a minimum level of compensation that is satisfied, other results become much more important than that,” said Tolovi Neto, whose organisation publishes annual great-place-to-work lists for 55 countries, basing the lists on surveys of employees in 7,000 organisations worldwide.

Paul Maher, founder and CEO of London-based tech firm Positive Marketing, said a company that delivers rewards optimised for team-oriented employees’ satisfaction will be more agile and successful — and companies that do not will suffer the consequences.

He cited the example of a client, a UK-based woman who usually worked four days per week from her new “dream home” and could not do a long commute every day. In a move that caught the woman unaware, her IT security firm lumped her into a group of employees required to work exclusively in the office.

“She moved to a smaller, faster-growing competitor where she is thriving within a role which suits her new lifestyle and means,” Maher said. “Her new employer has a very well-qualified and now completely motivated employee. She took all of her industry knowledge, trusted suppliers, and work ethic with her.”

As for compensation, he added, most organisations are not set up to offer a range of rewards.

“It requires changing processes which work with previous cohorts of workers,” Maher said. “Given the reality that today’s workforce can expect more job-role changes, this may be the first generation which solve the problem of [building] customised careers which also align with corporate goals.”

Education, technology as retention tools

Companies that focus on building “a culture of learning” will benefit as they are challenged to create new career models and build skills across the workforce, the Deloitte report says. The report cites 2017 Deloitte research, which found that companies with an educational culture are three times more profitable and have up to four times more worker retention.

The report does not discuss the idea of including workplace technology within the framework of employee rewards. But Maher said employers must offer technology-aided work processes if they want to compete for top talent.

“Most traditional — that is to say, nontech — companies are saddled with old tech,” he said. So even if they wanted to allow work-from-home opportunities and other flexible work arrangements, they would struggle.

“[Technology availability] is way more of an issue than many of them recognise today,” Maher said.

He paints a realistic scenario: Employees commute to work watching YouTube videos, and FaceTime their loved ones, then they arrive to decade-old IT at their workplace.

“It is no exaggeration to say that, for a given level of pay, employees will consider changing jobs for a better tech,” he said.

Monte Stewart is a freelance writer based in Canada. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at