REWARD STRATEGY
Reward strategy can deliver superior performance
New pan-European research by consultancy Watson Wyatt suggests that high-performing businesses are much more likely to link reward strategy to business goals and are significantly more likely to report programmes as being flexible.
Watson Wyatt's survey draws on information received from 170 major employers across nine European countries, as well as data from 2,000 high-performing employees in a sample of these businesses. For the purposes of the survey, high-performing companies are defined as those in the top third of surveyed companies using a five-year measure of total shareholder return. Low performers are those in the bottom third.
The results were remarkable and conclusive:
A half of high-performing firms link reward strategy to business strategy, whereas less than a third of low-performing companies do so.
Seven in ten high-performing firms report that reward plans are flexible to meet changing business conditions, compared with only 56% of low-performing companies.
Employee involvement in reward design boosts shareholder value
Tony Gilbert, a partner at Watson Wyatt, reckons that linking reward strategy to business strategy in itself is not sufficient to drive continued high performance. Says Gilbert: "Employers must understand the profile of their employees and also their needs and expectations. When possible employee input should be reflected in final plan designs of both financial and non-financial rewards."
But the sad reality is that neither group of organisations in the survey involve employees to any great extent, although high-performing companies do tend to involve employee more.
Rewarding top performers boosts shareholder value
From the raft of data, the researchers found that companies that focus on rewarding top performers more than other staff produce returns to shareholders 17% higher than companies which do not. Companies which customised rewards for top performers returned 74% to shareholders over a five-year period, whereas shareholder received only 57% by investing in those companies which do not adopt this approach.
| Key findings of Watson Wyatt research |
| Reward strategy linked to business strategy delivers higher total shareholder return. |
| Employee involvement in reward design results in higher total shareholder return. |
| High performing companies use rewards to improve and motivate performance. |
| Differentiation of rewards results in superior performance. |
| Rewards can increase profitability. |
| Communications is the essential element for delivering rewards effectively. |
Want to know more?
Title: Strategic Rewards: European survey results 2002, Watson Wyatt.
Methodology: Participants completed a detailed questionnaire. The survey is based on two sources of information:
questionnaire returns received from 170 major employers in nine countries in Europe. More than a fifth of respondents (21%) are in financial services, while 18% are in the high-tech sector
responses from 2,000 top-performing employees - selected by their employers on the basis of performance and representing all levels across a variety of industries.
Availability: The report is available from Joanne Campbell, tel: 01737 273387, or email: joanne.campbell@eu.watsonwyatt.com.
To read the press release online, visit . . .
www.watsonwyatt.com/news/press.asp?ID=10128
To download a copy of the report in PDF format, visit . . .
www.watsonwyatt.com/europe/research/surveys/resrender.asp?id=2000810&page=1
Watson Wyatt is a global consulting firm focusing on human capital and financial management. It specialises in four areas: employee benefits, human capital strategies, eHR, and insurance and financial services. Watson Wyatt has more than 6,200 associates in 87 offices around the world. Find out more www.watsonwyatt.com