Canadian HR Reporter - Ontario

By Allison Griffi ths E mployees consistently rank base pay as the most important part of the employee value proposition (EVP), so it's little wonder so many companies have adopted a pay-for-performance philosophy. But that doesn't mean employers are good at delivering on that philosophy in a way that supports overall HR strategies. And even the ones that do get it right aren't maximizing the benefi ts of pay-for-per- formance if they ignore other factors that inspire and engage employees, including painting a compelling picture of long-term career paths and opportunities. Be open about pay Almost half (47 per cent) of employees say fair and competitive compensation would have the most impact on their work situa- tion, according to the 2017 Mercer Talent Trends global study of 400 senior executives, 1,700 HR professionals and 5,400 employees from 20 industries and 37 countries. Linked to that is a growing expectation, particularly among younger workers, of greater transparency about how their pay, in- cluding bonuses and incentives, is calculated. Taken together with the results of Mer- cer's 2017/2018 Compensation Planning Survey of nearly 500 employers — which suggest some Canadian employers plan to take advantage of improving economic con- ditions to make strategic investments in top talent — this makes it critical that employers get this investment right. At a time when overall salary increase budgets remain under pressure, simply off ering top performers higher salary in- creases than average employees — in some cases, nearly double — risks creating holes in other parts of the EVP, undermining HR and overall business goals. Measure often Many organizations struggle to get this bal- ancing act right. It's not enough to ask: "Do we pay top performers more?" Organiza- tions also need accurate measurement to know if pay decisions are having the desired impact, and be able to look employees in the eyes and be fully transparent about how those decisions are made. Less than half of the companies practis- ing pay-for-performance assess the align- ment between performance ratings and compensation decisions, according to the Compensation Planning Survey. A lack of measurement is surprising when Canadian employers say that two of the top three factors infl uencing compensa- tion budget decisions are concerns about employee retention — cited by 69 per cent of survey respondents, and concerns about talent attraction, cited by 59 per cent. Em- ployers that don't keep retention and at- traction goals front and centre for measure- ment will not be able to allocate budgets in the most eff ective way. Getting the compensation piece right is critical to business success, but com- pensation strategy won't be eff ective if it is disconnected from overall talent strategy. Other key factors driving the eff ectiveness of talent strategy have nothing to do with compensation but with the overall culture. Nurture strong teams High among these is the growing desire of people to work with the best and brightest. at's understandable, with 40 per cent of employees expecting their workplace to be- come even more team-based over the next two years, according to the Talent Trends study. Workers know that as performance measurement becomes more dependent on achieving team goals and increased col- laboration, their own compensation and promotion prospects will be aff ected by the quality and performance of their team. is makes the role of managers even more important to the effectiveness of performance management. Strong people managers can help to attract, nurture and retain top talent. ey can help to set in- dividual and team goals, and inspire and motivate employees to achieve them. And they can create development plans for em- ployees and make sure they are given ap- propriate opportunities to benefi t from those plans. Provide meaningful feedback Receiving good feedback on performance is another high priority for employees. ey want discussions that focus on their development, but only one in four believe their organization is doing enough to keep their skills relevant, according to the Talent Trends study. e lack of development and career progression are the main reasons given by three in 10 employees who say they are planning to leave their organization de- spite being satisfi ed with their role. is poses a signifi cant problem for 82 per cent of companies that are increasingly fo- cused on building talent from within, rather than buying it from outside. So too does the fi nding that more than a quarter of employ- ees — mostly millennials — don't see a long- term career at their current employer. Emphasize the full package Although headlines suggest millennial workers change jobs on average every two years, employers can slow this churn by tak- ing a holistic approach to employee rewards and doing a better job of communicating the total reward proposition. Unless employees perceive their own "promotability" and understand the re- wards available at the next level, they may come to believe there is no path forward at their existing employer, looking elsewhere for a better experience. Make it personal Further complicating performance manage- ment is the growing trend toward person- alization of the employee experience. While pay for performance remains important to most workers, organizations are finding that no single employee value proposition can resonate with all their workers now that there are as many as fi ve generations in the workplace, each with diff ering expectations of what their job should provide. Increased personalization of the EVP is more than just a way for organizations to create what the Talent Trends study identi- fi ed as a growing expectation among em- ployees for "a workplace for me." It's also a way for organizations to optimize the work- force and achieve goals more effi ciently and eff ectively. Be fl exible One way to achieve this is through fl exible work options. Today's employees increas- ingly want to integrate their work and per- sonal lives to "make work work" by fi tting it into their own unique situation. Over- whelmingly, the preferred way to do that is through time off — meaning having more of it, the fl exibility to spread it out, or working fewer hours for less pay. Companies have started to adapt to this new reality, but while nearly two-thirds of them already off er some elements of fl exible work, only half say it is a core part of their employee value proposition, according to Talent Trends. Meanwhile, one-third of employees say they have had a request for a fl exible work arrangement turned down, and one-half feel that working part-time or remotely would negatively aff ect their pro- motion prospects. Play the long game As the economy improves, a growing number of companies will be able to off er competitive compensation and benefits to desirable employees. But for a pay-for- performance philosophy to be successful, employers need to think about more than just money. Emphasizing compensation re- wards at the expense of non-compensation rewards will ensure that any HR strategy falls short, no matter how much money is thrown at top talent. By marrying HR strategies with a culture that employees fi nd attractive and respon- sive to their needs, employers can turn pay- for-performance into a winning strategy — for the organization and employees. Allison Griffi ths is a principal and leader of workforce rewards at Mercer Canada in Toronto. For more information, visit www.mercer.ca. COMPENSATION FEATURES Emphasizing comp rewards at the expense of non-comp rewards will see any HR strategy fall short about much more than pay

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