REWARD STRATEGY
Most admired companies get a better return from reward investments
New research by the Hay Group has found that employers on the best company lists have not stumbled on a silver bullet for making employee reward programmes work more effectively.
They are simply able to execute more successfully on a number of basic HR best practices, and tend to have a cultural understanding and recognition of the value brought to their organisations. In essence, it’s implementation and communication practices that make a difference, says Hay Group.
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Background
Each year, Hay Group, a global management consulting firm, and Fortune magazine release their annual rankings on “The World’s Most Admired Companies” and “America’s Most Admired Companies” lists.
Hay Group also conducts additional research to identify business practices that distinguish companies on the lists from all others. This year’s analysis focused on how these companies manage their employee reward programmes, and found that they “do a much better job of leveraging their reward investments than their peers”.
The research covered more than 160 organisations in total. It compared companies that ranked in the top three within their industries against “peer group” companies, which scored lower in the rankings. Respondents included HR executives, as well as senior leaders in other line and staff management roles.
Most admired companies pay less
Previous Hay research has shown that companies on these lists actually manage to pay lower salaries for talent than their peers – about 5% less.
“They tend to have less of a need to hire expensive outside talent for jobs, because they are better at grooming people internally and retaining employees. The lower costs of recruiting and training new people have a ripple effect across an organisation,” said Hay Group Vice President Mel Stark. “In addition, these companies do a better job of rewarding top performers - delivering the best pay increases to those who are truly deserving and holding the line on pay for marginal performers. Over time, this results in a compounded effect of top performers earning appreciably more than others.”
Stark added: “These companies also do a much better job of engaging and leveraging their managers to reinforce with employees the total value of what the organisation provides, encompassing both the tangible and the intangible nature of rewards.”
Key results
Other notable gaps between companies on the two most admired lists and their peers include:
79% regularly provide employees with total reward statements, versus 53% of peer group respondents
82% regularly reinforce the company’s reward philosophy in communications with employees, while only 64% of peer companies do the same
74% state that their employees understand and appreciate that rewards consist of both tangible and intangible components, compared with 61% of their peers
41% say that line managers in their organisation create a positive work climate, whereas only 21% of peer companies respond similarly
28% state that line managers utilise financial and non-financial recognition programmes, compared with 16% of peer companies
41% believe that their reward programme is internally fair, while only 27% of their peers believe the same
48% report that their reward programmes support efforts to retain their best talent, versus 28% of their peers
45% say that their reward programme allows them to attract the talent they need, compared with 25% of their peers
A final word
“Implementation is really the primary differentiator between employee reward programmes at companies on America’s Most Admired Companies list and their peers – communication, aligning reward programmes with business priorities and operationalising the pay for performance relationship.” - Mark Royal, Hay Group Insight senior consultant.
Want to know more?
Hay Group is a global consulting firm that “works with leaders to transform strategy into reality”. It has 88 offices in 47 countries. To find our more visit www.haygroup.com.
Hay Group has collaborated with Fortune magazine annually since 1997 to identify, select and rank companies on “The World’s Most Admired Companies” and “America’s Most Admired Companies” lists and uncover the business practices that make these companies both highly regarded and successful. The lists can be found at www.fortune.com.