Aligning Total Rewards With Your
Business Strategy
13th Annual Illinois HR Conference & Exposition
August 7, 2012
Presented by
Karen Vujtech, SPHR, GPHR
Bob Fulton, SPHR, CCA, CEBS
The Walker Alliance www.walkeralliance.com
Defining Total Rewards
 Beyond just the financials to include all aspects of the work
environment
 Intrinsic part of the organization's strategic direction
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Compensation (direct, cash)
Development Opportunities
Benefits (indirect)
Personal Growth
Location
Work Variety
Flexibility
Work Importance
Social Interaction
Authority/Control/Autonomy
Status/Recognition
Work Load
Advancement
Work Conditions
August 7, 2012
Today’s Agenda
 Building a Strategically Aligned Total Rewards Strategy
 Assess: business strategy and current programs and
policies
 Develop: Total Rewards philosophy; design or
redesign programs/polices
 Execute: implementation and communication
 Evaluate: measure outcomes;
interpret findings
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August 7, 2012
Assess: Business Strategy
 Vision –what we seek to become
 Mission – why we exist
 Values - what is important to the organization in terms of
behavior and culture
 Philosophy – guiding principles
 Strategy – the long-term ways through which we will
achieve our mission/vision
 Operational plans – the way we bring the
strategies alive for the organization
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August 7, 2012
Assess: Tools and Process
 Know/understand your business’s strategic plan
 Conduct a SWOT Analysis of current Total Rewards
offerings vs. business strategy, long and short-term goals
and objectives
 Identify gaps between business strategy and total
rewards practices, programs and policies (gap analysis)
 Use Framework of Foundation and Performance awards
to assist analyses
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August 7, 2012
Assess: Framework of Foundation and
Performance Awards
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August 7, 2012
Assess: Key Questions
 Which of the practices/programs are currently used?
 Which ones are most important to the overall
organization in achieving business strategy and remaining
competitive?
 Which are the most/least effective in supporting the
mission, strategy and culture?
 Which programs/practices are important to specific
employee groups, i.e., executives, sales, technical
professionals, service, operational, etc.; new hires; high
potentials?
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August 7, 2012
Assess: Key Questions (continued)
 Where does the company spend the most money?
 Where does the company spend most time and effort?
 Does the application of some programs overlap or
interfere with others?
 Are there any common themes that should exist across
all programs?
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August 7, 2012
Using a Balanced Scorecard as
Planning/Evaluation Tool
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August 7, 2012
Total Rewards Strategy Alignment:
The Business Case
 Summarize all of the information/data received
 Include statistics on usage, cost, perceived
value ( management and employees)
 Identify how/if/where existing programs and
practices add value and support business
strategy
 Propose the new Total Rewards Strategy
alignment
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August 7, 2012
Total Rewards Strategy Alignment:
The Business Case
 Analyze and define gaps between existing programs and proposed
new TR strategy
 Make recommendation(s) for:
 Next steps (design, redesign, elimination)
 Prioritization
 Timing
 Cost
 Propose new Total Rewards Philosophy Statement
 Obtain approval to move forward
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August 7, 2012
Develop: Total Rewards Philosophy
Statement
 Create a statement of your guiding principles for
determining and delivering total rewards in your
organization:
 A reward strategy should articulate in simple but powerful
terms how the company will invest its resources, reinforce
its core principles and values, and create a competitive
advantage.
 Provides a framework for aligning rewards with business
objectives
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August 7, 2012
Sample Total Rewards Philosophy
Statement
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To achieve our company's mission and vision, we must
attract, motivate and develop highly qualified and
dedicated employees. Our Company provides
competitive rewards to its employees with flexibility to
address diverse and changing business and employment
environments. This philosophy
 Applies to all employees
 Includes cash and non-cash rewards, benefits,
recognition and development
 Is market competitive
 Stresses open communication and education
August 7, 2012
Design/Redesign: Project Team
Process
 Review all TR practices/programs for fit and impact on business strategy
 Identify which programs should:
 Be retained
 Be retained with changes
 Be recommended for elimination
 Based on feedback from Top Management, set Priorities Develop business case
for the recommendations; Consider how changes will affect:
 Employee growth/development
 Ability to attract and retain employees
 Cost structure/preliminary ROI for recommended changes
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August 7, 2012
Design/Redesign: Project Team
Process
 Establish Team of Key Stakeholders for Oversight Team:
 Owners and Champions
 Responsible for managing the Big Picture
 Create Project teams to address TR component areas:
 Compensation
 Benefits
 Growth and Development
 Recognition and Work Environment
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August 7, 2012
Design/Redesign: TR Area Project
Teams
 Proposed design/design changes
 Assure alignment with overall TR strategy
 Test with focus groups, include HR
 Propose evaluation measures and metrics
 Create a business case and ROI for all
recommendations
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August 7, 2012
Execution: Implementing Strategy
 Determine necessary resources and
timelines for implementation
 Assess and address implementation and plan
rollout considerations
 Recalibrate with management, and with
impacted groups
 Create a defined communication plan
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August 7, 2012
Execution: Determine Resources
 What is required to implement and support each
program area:
 Financial, personnel, systems
 Consider financial constraints and business
limitations
 Will you use the same design team or a separate
team of implementers?
 How can we build on prior successful
implementations?
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August 7, 2012
Execution: Implementation Issues
 Critical questions for implementation:
 Which SBUs, groups, functions, or departments are affected?
 What systems modifications or installations are required to
move forward?
 What specific data tracking and reporting needs will each
program area require?
 What type of ongoing administrative support is necessary?
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August 7, 2012
Execution: Feasibility Analysis
 Some rewards components may require a more
in-depth evaluation and/or trial period before
full implementation
 What is the business ready for?
 What needs to be tested and tried?
 How can implementation be best achieved without
significant disruptions?
 Think about this in the same way as many IT
implementations – parallel systems, staging
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August 7, 2012
Feasibility Analysis: Example
 Example: large food manufacturing company was
considering implementing gainsharing as part of
overall rewards strategy
 Met with senior leadership to explain the
foundational aspects of this type of program
 Prepared a feasibility analysis examining relevant
company issues
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August 7, 2012
Feasibility Analysis: Example
 Before making the decision, we helped them to examine a number
of critical factors, including:
 Culture: Cost/quality/safety/service philosophy is firmly
rooted in the company’s method of work
 Demographic: Minimal issues with employee complaints, and
with current pay levels
 Performance: Effective systems in place to measure
performance
 Communication: Willing to share business information
(operational, financial) with employees
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August 7, 2012
Execution: Communication Plan
 Questions to consider in communicating strategy:
 What are the critical messages?
 What are the typical channels of communication?
 Which formats are employees used to?
 Who do employees trust to convey these messages?
 How can you create support and buy-in with key business
leaders, natural champions, and skeptics?
 How do you drive active rather than passive communications?
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August 7, 2012
Evaluation: Business Value
 Defining & measuring outcomes, metrics
and ROI
 Strategic HR considerations: how does the
TR strategy address
 Employee engagement or satisfaction?
 Recruitment & retention?
 Performance effectiveness?
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August 7, 2012
Evaluation: Metrics
 Metrics can be developed to measure the
effectiveness of your TR strategy by linking
expected outcomes with actual results
 Every component of the TR strategy should have
some sort of measured ROI
 This is normally addressed in the Execution
phase
 Work with your CFO and with HR staff to
define
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August 7, 2012
Using a Balanced Scorecard as
Planning/Evaluation Tool
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August 7, 2012
Evaluation: Metrics
 Total Rewards strategy metrics can include:
 Number of employees who have access to
career/TR/work online administration site
 Decreased turnover or increased candidate acceptance
of offers
 Significant difference in pay relative to performance
 Increased participation is specific work/life or
retirement programs
 Lower benefit costs from selective usage by those who
need a particular benefit program
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August 7, 2012
Example: Pay for Performance
 If your company has a pay for performance
philosophy, this can be the place to start the
evaluation process
 For most companies, pay for performance is a
throw-away phrase that keeps leadership thinking
that the TR program working effectively
 How is it working for your company?
 How do you know?
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August 7, 2012
Final Thoughts
 Aligning all Total Rewards components with business strategy can
improve business results and customer satisfaction while
improving employee engagement and satisfaction.
 Total Rewards is more than just compensation and benefits
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Compensation (direct, cash)
Development Opportunities
Benefits (indirect)
Personal Growth
Location
Work Variety
Flexibility
Work Importance
Social Interaction
Authority/Control/Autonomy
Status/Recognition
Work Load
Advancement
Work Conditions
August 7, 2012
Final Thoughts
 Follow all the Steps:
 Assess: business strategy and current programs
and policies
 Develop: Total Rewards philosophy; design or
redesign programs/polices
 Execute: implementation and communication
 Evaluate: measure outcomes; interpret findings
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August 7, 2012
Final Thoughts
 You’re not finished!
 Periodically review TR components for
alignment
 Every 3 years to make sure still aligned with
business strategy
 After merger, acquisition, restructuring
 Due to regulatory or legal changes
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August 7, 2012
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August 7, 2012
Karen Vujtech, SPHR, GPHR
Total Rewards Consulting, Inc.
kvujtech@totalrewardsconsulting.com
Robert Fulton, SPHR, CCP, CEBS
The Pathfinders Group, Inc.
rfulton@pathfindersgroupinc.com
www.walkeralliance.com
August 7, 2012
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