Total Rewards
Finding the Sweet Spot
Presented by Scott Thomson
Spring Rock HR Consulting LLC
Total
Rewards
Solutions
Performance
How important are pay and benefits to employees?
For most desirable employees once you hit the normative range of fair pay (40th to 60th
percentile) for their roles, then it becomes more about the work, the company, and the team.
• Make sure that they have challenging, engaging work
• Make sure that the company fosters, rewards, and recognizes strong performers
• Make sure that your managers are well trained and provide great leadership
Remember this – you can have great pay with great benefits but if you have lousy work and a bad
company culture, this will only appeal to mercenaries. Very few companies have achieved greatness
with a team full of mercenaries…
When you hit the sweet spot for compensation, benefits, and performance then you can really
focus on the work, the company, and the team. So what is the sweet spot and how do you get there?
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A visual representation of the Sweet Spot
When compensation,
benefits, and performance
are all in a good place…
Compensation
Benefits
then you can focus on
the work, the company,
and the team
Performance
Spring Rock HR Consulting LLC
So Total Rewards means what exactly?
In today’s ultra-competitive employment market it means the whole package of compensation,
benefits, and performance that helps to attract, engage, and retain your most valuable
employees. It typically includes:
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Base salary or hourly rate
Short Term Incentive aka variable pay in the form of bonus, commissions, spot bonus, etc.
Long Term Incentive aka equity (stock options, restricted stock, phantom shares, etc)
Deferred compensation vehicles
Medical insurance plans
Dental insurance plans
Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts
Life Insurance, LTD, STD, AD&D, etc.
Retirement plan (401k, 403b, pension, etc.)
Paid time off (holidays, vacation days, personal days, family days, volunteer days, etc.)
Wellness initiatives, onsite fitness centers, cafeteria with healthy foods, walking trails, etc.
Onsite daycare or facilitated arrangements in close proximity
An inclusive culture that values the individual, the team, and commitment to the company
Recognition programs that reward both tenure and performance
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COMPENSATION
Generally stated:
• Base salary or hourly rate pays the employee for “what” they do on the job.
• Short Term Incentive (STI ) aka Bonus or Performance Pay rewards them for “how well”
they do their job, the discretionary effort above and beyond.
• Long Term Incentive (LTI) aka stock options, restricted stock, phantom shares, profit
sharing arrangements, etc. encourage the employee to have a long view on their contributions
to the company.
• Deferred Compensation is an arrangement that allows the employee to defer the receipt
of compensation to a later date for tax efficiency. There are a variety of vehicles that can be
used for deferred compensation.
Spring Rock HR Consulting LLC
Are you paying your employees competitively?
IF your talent bar is set high, can you:
• Find the talented employees that you need to fill your mission critical roles?
• Keep them happy and engaged?
• Prevent them from being poached from your company?
IF your talent bar is set low, is there a compelling need to improve it?
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Changing a company culture with low standards is very hard to do
Creating a performance oriented company culture can be even harder
It has to start at the top with your executive team
It means moving out the low performers which can be painful
It will take years, not months – chip away at it and keep evaluating your progress
Spring Rock HR Consulting LLC
How do you validate your pay levels to the market?
Your HR team needs to gather your job descriptions along with your roster containing base pay
along with STI and LTI targets and actual payouts. Then you:
• Subscribe to a survey (or two or more) that has good data for your industry with many job
matches aligned with your company. Companies like Hay, Mercer, Radford, McLagan,
PayScale, and ERI have been doing surveys for a long time.
• Submit your data using your job descriptions, job titles, and pay data to the survey provider
• They will then make their data available to you so that you can build benchmarks by function
to see how your pay stacks up against the market by percentile (25th, 50th, 75th, etc.)
• You can use these benchmarks to work with your line managers when looking at base pay
increases, STI and LTI determinations
• Key questions – how is the employee paid to market, paid to their peers, and performing
in their role? This should influence salary increases and variable pay awards
• Data integrity is crucial so make sure you have good matches both for submission and for
your benchmarking analysis
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BENEFITS
Includes: Insurances, Programs, and Differentiators
• Medical insurance plans
• Dental insurance plans
• Life Insurance, LTD, STD, AD&D, etc.
• Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts
• Retirement plan (401k, 403b, pension, etc.)
• Paid time off (holidays, vacation days, personal days, family days, volunteer days, etc.)
• Wellness initiatives, onsite fitness centers, cafeteria with healthy foods, walking trails, etc.
• Onsite daycare or facilitated arrangements in close proximity
• Tuition reimbursement, sabbaticals, dry cleaning services, movie tickets, etc.
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Essential Insurances
Includes:
• Medical insurance plans
• Dental insurance plans
• Life Insurance, LTD, STD, AD&D, etc.
Considerations:
• Are you competitive on your plan offerings, cost shares, and coverages?
• Does your provider supply you with good claims data for analysis?
• Do you have your arms around your annual insurance costs and drivers?
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Essential Programs
Includes:
• Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts
• Retirement plan (401k, 403b, pension, etc.)
• Paid time off (holidays, vacation days, personal days, family days, volunteer days, etc.)
Considerations:
• Are you providing your employees with helpful, cost effective programs?
• Are you helping your employees to save for retirement?
• Are you providing time off affording your employees some semblance of work life balance?
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Competitive Differentiators
Includes:
• Wellness initiatives, onsite fitness centers, cafeteria with healthy foods, walking trails, etc.
• Onsite daycare or facilitated arrangements in close proximity
• Tuition reimbursement, sabbaticals, dry cleaning services, movie tickets, etc.
Considerations:
• Are you competing for employees and will these amenities up the ante for your company?
• Can you track data showing some degree of Return On Investment (ROI) for these efforts?
• These differentiators also contribute significantly to company culture!
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PERFORMANCE
Includes:
• Recognition programs that reward both tenure and performance
• A performance oriented culture where employees can expect that everybody on the team is
pulling on the rope in the same direction
• An environment where the executive team, management, and employees treat one another
with respect and honesty
• Pride in the company that encourages the discretionary effort to help the company transcend
from good to great
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Performance Considerations
Measurements:
• Great Place to Work Survey
• 100 Best Places to Work (national)
• Boston Globe Best Places to Work
• Campbell Survey and other climate surveys
Reality Checks:
• Are you filling a lot of your jobs on employee referrals?
• If your talent bar is high, is your turnover low?
• Do you do a good job of weeding out low performers?
• Are your employees dragging themselves in the front door or do they arrive cheerfully?
• Are your employees heading for the door right at 5 PM or do they stay to get the job done?
• Do you have a great leadership team that lives the company values?
• Do you have company values? If you don’t communicate the expectations, who knows?
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Performance Conclusions
Observations:
• A performance oriented culture forms when the company is young and small, often reflects
the founders values and work ethics
• As companies scale care needs to be paid to preserving the culture if it is good
• If culture is left untended, it can go bad in a hurry and it is hard to reverse a bad culture
Reasons for Hope:
• Most employees want to work for a great company with a great performance oriented culture
• Building a great culture or fixing a bad culture takes conscious effort from the leadership
team and the employees
• Being part of a company that moves from good to great can be immensely rewarding
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So what is holding your Company back?
What can you do to help it move forward?
Spring Rock HR Consulting LLC