Total Rewards and Motivation:
Mistakes, Myths
and What’s Working
Laura Wolfe
April 27, 2012 - LA SHRM
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Objectives
• Present new information about total rewards
and motivation
• Cover body of knowledge required for CE
credit
• Provoke you to think in new ways and about
new ideas
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Big Picture
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Total Rewards
• monetary & nonmonetary rewards
companies use to attract, motivate and
retain employees
• more than comp & benefits
• a philosophy
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Foundational Stuff
• Behaviorism
• Law of Effect
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Equity
Inputs/Outcomes
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Equity
• External
– Labor markets
– Market conditions
• Internal
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Org Justice
• Distributive
• Procedural
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Discussion
• Best thing a company has ever done to
motivate you?
• Is your company using incentive pay plans?
– How are they working?
• Effective recognition programs?
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Is money the best and
ultimate motivator?
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Research
• Teresa Amabile and Steven Kramer
• Book: The Progress Principle
• Support workers’ everyday progress
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Research
• Carol Dweck
• Book: Mindset
• Fixed or growth?
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Research
• Dan Pink
• Book: Drive
• Autonomy, Mastery, Purpose
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www.idonethis.com
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Empowerment
• Empowered employees:
– Felt worthy, competent, capable
– Performed better, more innovative, more job
satisfaction, greater commitment, more OCB
• Related:
– flexible work hours
– vacation policies (Netflix)
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Happiness
• Frequency, not intensity, of happy
experiences more important to creating
happiness
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Incentives
• Economy a factor
• Shifts
• Technology
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Incentives
& On-time Behavior
• Timeliness improved through rewards and
recognition program
• Computer system to track arrival and departure
times and calculate compensation for arriving early
• Most workers arrived early when additionally
compensated
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Sales Compensation
• Proportion of incentive to base
• Engage others in design process
• Communication
• Technology
• Planning
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10 Sales Incentive
Design Mistakes
1.
2.
3.
4.
Trying to Keep Everybody Happy
Failing to Separate Novices from Veterans
Negative Reward on High Productivity
Targeting Prizes Toward Entire Sales
Force
5. Planning a Contest with No Sales Force
Input
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10 Sales Incentive
Design Mistakes
6. Leaving Top Management Out of the Plan
7. Being a Do-Gooder
8. Being Inflexible
9. Hoping for X While Rewarding Z
10. Forgetting that Good Salespeople Always
Work for Their Own Good First
– From HR Daily Advisor
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Executive Compensation
• CEO pay and performance
– Significant yet modest relationship
– Executive boards dynamically adjust current pay
according to historical performance
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Executive Compensation
• Top Mgt Team turnover impacted by pay
dispersion
– > the pay differences > likelihood of turnover
– Market pay levels and “cut” of total TMT also
influence turnover decisions
• NBA example ?
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Merit Pay
• Advantages
– reward key talent
– once or recurring
– nudges poor performers
• Disadvantages
–
–
–
–
difficult to measure performance
good systems take resources
divisive
communication
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Before PFP Ask:
•
•
•
•
What is our philosophy?
Where do we want to be?
How does it align?
Do we have:
– high performers?
– a performance culture
– managers able to:
• identify high performers
• Communicate
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Reward Behaviors,
Not Just Results
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Point-based Rewards
• Medical center example
• Points earned by using shift-scheduling
software and for working shifts
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Recognition
“Attention
is a powerful nutrient.
It amplifies and accelerates the
situations on which it is focused.”
--Martha Beck
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Workplace Recognition Study
•
•
•
•
38% tangible rewards
21% opportunities to learn and grow
19% verbal or written praise
20% nothing
• 65% of ees b/t 18-34 more likely to leave if they
don’t feel like they are recognized
– Office Team Survey
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Recognition Blunders
•
•
•
•
•
Acknowledging incorrect facts
Offering token gestures
Being vague
Going overboard
Overlooking contributors
– Office Team Survey
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Praise
• For effort or for ability?
• When not to use it.
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Best practices
FORTUNE
100 Best Companies to Work For
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Best Practices
Zappos
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Best Practices
• Discovery Communications
• Sprint
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Moving toward
Total Rewards
• Meeting with Leaders
• Permission to align rewards with strategy
• Ask for any resources needed to get the
project going
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Good Data
• Data based planning
• Metrics and benchmarking
• The big ?
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Benchmark & Metric Data
•
•
•
•
SHRM
Saratoga Institute
WorldatWork
Consulting firms
– Mercer, Hewitt, Hay, Towers Perrin, Watson Wyatt
Worldwide
• Professional associations
• In-house pay surveys
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HR Metrics for Compensation
HR Performance Area
Method of Calculation
Pay and benefits as
percentage of operating
expense
Total pay and benefits expenditures/Total
operating expenses
Human value added
Revenue – Operating expense – Pay and
benefits = Adjusted profit/Full-timeequivalent employees (FTEs)
Return on human capital
invested
Revenue – Operating expense – Pay and
benefits = Adjusted profit/pay and benefits
Employee cost factor
Total compensation and benefits/FTEs
adapted from Mathis and Jackson, Human Resource Management, 12th edition,
Thompson-Southwest
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Metric Options
for Variable Pay
• Production performance
– Actual change vs. planned change
– Revenue growth
– Return on investment
– Average employee productivity change
adapted from Mathis and Jackson, Human Resource Management, 12th edition, Thompson-Southwest
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Metric Options
for Variable Pay
• Sales Programs
– Increase in market share
– Customer acquisition rate
– Growth of existing customer sales
– Customer satisfaction
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Metric Options
for Variable Pay
• HR Related Program Measures
– Employee satisfaction
– Turnover costs
– Absenteeism cost
– Workers’ comp claims
– Accident rates
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Cost and ROI of
•
•
•
•
•
•
•
Health and wellness benefits
Wellness programs
Recognition programs
EAPs
Retirement plans
Time-off programs
Stock purchase
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Alignment
Strategic Goals & Objectives
• Compensation is not an HR program
– Org owns compensation
• Appropriate mix of total reward elements
• Profit sharing – Nucor Steel
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Alignment
Values
• Employee Value Proposition
• Rewarding what is valued
– Values=culture=strategy
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Keys
• Communication
• Personalize
– Win over family when possible
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Questions
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Resources
Dan Pink
• RSA Animate - Drive: The surprising truth
about what motivates us
– http://www.youtube.com/watch?v=u6XAPnuFjJc
• Drive: The Surprising Truth About What Motivates
Us, Riverhead Books, 2009, by Dan Pink
• Twitter: @DanPink
• http://www.danpink.com/
• https://idonethis.com/
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Resources
websites & blogs
•
•
•
•
•
•
•
http://www.zappos.com/index0.zml
http://www.ioatwork.com/
http://www.shrm.org
http://hrdailyadvisor.blr.com/
http://danariely.com/
http://www.inc.com/
http://blogs.hbr.org/
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Resources
webinar
• SHRM e-learning webinar
– Aligning Your Compensation Strategy with
Business Priorities by Stacey R. Carroll,
SPHR, Director of Customer Service &
Education, PayScale, Seattle, Wash.
– 1.5 strategic CE credit
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Resources
The Startup Daily
• Play to Your Strengths
– http://thestartupdaily.com/2012/02/play-to-your-strengths/
• Why Do You Do What You Do?
– http://thestartupdaily.com/2012/02/why-do-you-do-what-you-do/
• The Magic of the Mundane
– http://thestartupdaily.com/2012/02/the-magic-of-the-mundane/
• The Cost of Focusing on Results
– http://thestartupdaily.com/2011/09/the-cost-of-focusing-on-results/
• Benefit from the Success of Others
– http://thestartupdaily.com/2012/02/benefit-from-the-success-ofothers/
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Resources
online articles
• The Secret Document That Transformed China
– http://www.npr.org/blogs/money/2012/01/20/145360447/the-secretdocument-that-transformed-china
• Best Ways to Recognize Employees
– http://www.toiletpaperentrepreneur.com/the-right-actions/ways-giveemployee-recognition/
• The Folly of Stretch Goals
– http://blogs.hbr.org/cs/2012/04/the_folly_of_stretch_goals.html
• How to Set Your Employees Free: Reed Hastings
– http://www.businessweek.com/articles/2012-04-12/how-to-set-youremployees-free-reed-hastings
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Resources
Inc. Magazine online
• Why Flexible Hours Inspire Performance
– http://www.inc.com/margaret-heffernan/why-flexiblehours-inspire-achievement.html
• Now’s a Good Time to Reward Employees
– http://www.inc.com/michael-alter/nows-a-good-time-toreward-employees.html
• How to Keep a Superstar Employee Happy
– http://www.inc.com/jeff-haden/how-to-keep-a-superstarwhen-you-have-little-to-offer.html
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Resources
HR Daily Adviser
• 10 Incentive Design Mistakes
– http://compensationdailyadvisor.blr.com/?p=200
1?source=CDA&effort=11
– http://compensationdailyadvisor.blr.com/2012/01
/10-dogooder-acts-that-drive-good-salespeopleto-the-competition/#
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Resources
100 Best
• FORTUNE (magazine) 100 Best Companies
to Work For
– The 100 Best issue comes out every year late
January/early February and includes select data
on each company and an in depth story on the
#1 company and at least one other that made
the list
• http://money.cnn.com/magazines/fortune/be
st-companies/
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Resources
HR Magazine
•
•
•
•
•
•
•
•
•
•
Fill Those Unpopular Shifts, 4/2009
Money Matters in the Hiring Process, 9/2009
Salaries Looking Up, 10/2009
Treating Employee Like Customers, 10/2009
At Work in 2020, 1/2010
No Good Deed Goes Unrewarded, 1/2010
May the Sales Force Be with You, 9/2010
All For Incentives, Incentives For All, 1/2011
Benefits Choices: Educating the Consumer, 3/2011
Make a ‘Deal’,1/2012
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Resources
Books
• Mindset: The New Psychology of Success, Ballantine
Books, 2006, by Carol Dweck
• The Progress Principle: Using Small Wins to Ignite Joy,
Engagement and Creativity at Work, Harvard Business
Review Press, 2011, by Teresa Amabile
• The 5 Languages of Appreciation in the Workplace:
Empowering Organizations by Encouraging People, by
Gary Chapman & Paul White, Northfield Publishing, 2011
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Resources
Books
• 1001 Ways to Reward Employees, Workman Pub.,
2005, by Bob Nelson
• Instant Influence, How to Get Anyone to Do
Anything – FAST, Little Brown, 2011, by Michael
Pantalon
• Investing in What Matters: Linking Employees to
Business Outcomes, SHRM, 2009, by Scott
Mondore and Shane Douthitt
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