EMPLOYEE BENEFITS
Market researching benefits packages
Businesses invest colossal amounts of money each year in employee benefits that are all too often an expensive extravagance when it comes to recruiting, retaining and motivating staff. So how can you ensure that you obtain the maximum value from your spend? One emerging tool is the use of market research techniques, according to a case study published in the September 2000 edition of the US compensation magazine workspan.
Ohio-based NCR decided to team up with management consultants International Planning and Research (IPR) to find ways to restructure the computer maker compensation and benefits so that they added real value. The company wanted to improve its understanding of employee preferences and increase the value of its benefits package without raising costs.
Collecting data on employee preferences
The traditional approach to managing and administering remuneration is to benchmark best practice compensation and benefits programmes. But keeping up with the competition is often not enough. As the authors of the workspan article observe: While necessary, these studies alone are insufficient. Companies that rely solely upon them are merely ‘ following’ rather than ‘ leading’ .
Only by viewing employees as customers and doing the necessary market research to understand their preferences can a company design the kind of compensation and benefits package that will enable it to gain a competitive advantage in attracting and retaining talent in today’ s highly-competitive labour market.
There are now, it seems, a host of well-established market research techniques that can be used to measure employees’ benefit preferences. But it’ s no easy matter to identify the optimal trade-off in your compensation and benefits offering. It can be daunting process.
Employee-preference surveys
NCR opted for an approach that requires employees to choose simultaneously between various benefit options within the context of his or her total compensation spend. An employee-preference survey was used to determine the value each individual places on various new and existing benefits.
In essence the survey is similar to a flex selection process. Each employee is asked to build the benefit package that best meets his or her needs and is consistent with his or her compensation budget.
NCR employees made their choices under three different cost scenarios to provide information on their willingness to pay for an option. This approach allowed NCR to test market new benefits to a small group of employees to determine interest and buy rates.
Identifying win-win opportunities
The key to achieving what NCR characterised as win-win was to identify enhancements to the package that were worth more to employees than it costed NCR to provide. Put simply, win-win situations result when the perceived value of the benefit outweighs the cost to the company
A final word . . .
A compensation and benefits offering that creates unique value for employees — one that is difficult for competitors to replicate or involves significant switching costs to employees — will provide a sustainable competitive strategic advantage to the employers.
Want to know more?
Title: The employee as customer: using market research to manage compensation and benefits , workspan, September 2000, WorldatWork.
About the authors: Lynn Gaughan is director of global pension and benefits at NCR Corp. Jorg Kasparek is NCR’ s vice-president of compensation and benefits. John Hagens and Jeff Young are consultants with International Planning and Research.
Availability: contact workspan in the USA, tel: 001 480 951 9191, or email: workspan@worldatwork
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