J18V2 reprints mem - WorldatWork · 2018-04-03 · Susan Ginsberg, Ed.D. I Work & Family Life Steve Gross I Mercer Regina Hack, CCP I Motorola Angela Keller, CCP I Cox Communications

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Ken Abosch I Hewitt Associates

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Ronnie Moholane, GRP I Anglogold

Marie Mohammed, CCP I University of British Columbia

John Munoz, CCP I Total Rewards Strategies

Cathy Peffen, CCP, PHR I Marriott Vacation Club International

Daniel Purushotham, Ph.D., CCP, CBP I

University of Connecticut

Dow Scott, Ph.D. I Loyola University

Thomas Sondergeld I Hewitt Associates

Carolyn Wiley, Ph.D., SPHR I Roosevelt University

Implications of Employer-Supplied Connectivity Devices

on Job Performance, Work-Life and Business Culture

Gayle Porter, Ph.D. I Rutgers, The State University of New Jersey

Technology allows connectivity 24/7, and many employers are — or are considering —

furnishing handheld electronic devices to members of their workforces. This can

facilitate work efficiency and improve work-life effectiveness. It may also communicate

to employees that they are expected to never disconnect from work, and potentially

either foster resentment or enable unhealthy work behaviors. The study featured in this

article explored the prevalence of employer-supplied connectivity devices, along with

users’ work habits, beliefs about their companies’ culture and perception of the intended

message when their employers supplies these devices.

Compensation, Reward and Retention Practices

in Fast-Growth Companies

Patricia K. Zingheim, Ph.D. I Schuster-Zingheim and Associates Inc.

Jay R. Schuster, Ph.D. I Schuster-Zingheim and Associates Inc.

Marvin G. Dertien I ERI Economic Research Institute

The study featured in this article provides insight into how top executives of fast-growth

companies have managed the transition from startup to sustained fast growth from the stand-

point of talent-management strategies, practices and programs. Interviews with members

of senior-leadership teams were used to learn how these successful companies have

moved beyond startup. The leadership challenge is to sustain business growth and

success while stabilizing a workforce of high-performing key talent who possess the

company’s core competencies. These fast-growth companies have chosen an integrated

view of total compensation and total rewards, including training, development and career

opportunities. They customized their performance-based compensation approaches.

Understanding Employee Attraction and Retention

as Key Drivers in a Down Economy

Stacey Randall I IMR Research Group Inc.

In this economy, organizations need a focused yet big-picture view of employee

motivation and engagement. A key component is to understand that which employees

say is important and to determine the factors driving loyalty. In a survey conducted by

the authors, employees were asked to rate the importance of 44 wide-ranging work-

place attributes. The rating of each workplace attribute combined with how strongly

it influences loyalty to an organization — based on statistical analysis — determine

where on a motivator matrix the attributes fall.

06

Executive SummariesSecond Quarter 2009 | Volume 18 | Number 2

❚ Organizational Culture ❚ Compensation ❚ Performance & Recognition

❚ Business Strategy ❚ Benefits ❚ Development & Career Opportunities

❚ Human Resource Strategy ❚ Work-Life

Journal

Content

Key

22

40

877-951-9191www.worldatwork.org

Contents © WorldatWork 2009. WorldatWork members and educational institutions may print 1 to 24 copies of any WorldatWork-published article for personal, non-commercial, one-time use only. To order 25 or more print presentation-ready copies, or an electronic copy for distribution to colleagues, clients or customers, contact Gail Hallman, [email protected] at Sheridan Press, 717-632-3535, ext. 8175. To order full copies of WorldatWork publications, contact WorldatWork Customer Relationship Services, [email protected], 877-951-9191.

Second Quarter 2009

5 Second Quarter | 2009

Using an Analytical Approach to Increase Retention in

High-Growth Countries: An Example in India

Fermin A. Diez, CCP, SPHR I Mercer

Freescale’s India business was experiencing high turnover and needed to reduce

the turnover rate. In this case study, the authors discuss how HR debunked several

myths, which allowed it to make changes to increase retention. Part of the organiza-

tion’s success came from coupling the quantitative data with a deep understanding

of the qualitative data. Its analysis was filtered through not only human resources and

management, but it was well rooted in employee feedback on what makes someone

stay or leave the company.

CFOs See Business Impacts of Work-Life Flexibility,

But They Can’t Execute for Strategic Benefit

Cali Williams Yost I Work+Life Fit Inc.

In an era of rapid change, work-life flexibility becomes a strategic imperative, not just

a perk. The author’s company co-sponsored a study, which found that CFOs — the

front-line financial decision-makers — do see work-life flexibility as a strategic lever to

achieve broad business impacts. In addition, more than one-half have increased their

personal use of work-life flexibility. However, a wide gap emerged between CFO aware-

ness and the organizational culture and strategic infrastructure required to execute a

coordinated strategy.

Holistic Pay Modeling: Getting the Complete Executive Pay Picture

Melissa L. Means, CCP I Pearl Meyer & Partners

Often missing from a compensation-oversight tool kit is a more far-reaching and

specific line of sight into what a particular executive has the potential to earn. A holistic,

or dynamic, pay analysis can model how the individual elements of complex executive

compensation programs will behave singly and cumulatively during the short- and long-

term for a wide range of stock prices and company financial performance outcomes.

Such an analysis helps executives, HR leaders and directors evaluate and better under-

stand the total potential payouts of an executive compensation program.

78 Published Research in Total Rewards

84 Facts & Figures

Also

on the

Inside

48

59

68

Increasingly, technology has redefined work

relationships by creating more options for doing

work anytime, anyplace. The connectivity of a home

computer and Internet access first made it easier to work

from home. Proliferation of cell phones then allowed

new mobility without being “out of touch.” Handheld

devices (like RIM’s BlackBerry, Palm’s Treo and Apple’s

iPhone) offer remote capabilities of telephone and

Internet access, as well as schedule maintenance and

entertainment features.

Anecdotal evidence suggests an increasing number of

employers are amenable to employee use of these devices;

some expect their employees will use them and may even

supply them. Technology cost is high enough that receiving

an employer-supplied device (and paid connection service)

may be viewed as a highly valued benefit to individual

employees while still being a relatively inexpensive

investment for organizations compared to other benefits.

However, despite the potential that these devices could

serve as a support for work-life effectiveness, their use

does not ensure they will lead to work-life effectiveness.

Rather than facilitate work-life effectiveness by offering

flexibility, the same device could increase the degree

of job interference through nonwork activities due to

perceived organizational norms.

Implications of Employer-

Supplied Connectivity Devices

on Job Performance, Work-Life

and Business Culture

Gayle Porter, Ph.D.

Rutgers, The State University of New Jersey

❚ Work-Life



Second Quarter 2009


The study featured in this article was undertaken as a step into an area not

receiving much research attention. Technology is changing the nature of work,

and it is time to advance more thoughtful considerations of how specific changes

in employer practices, such as supplying handheld devices to employees, are

perceived by individuals being asked to interact with technology. While this study

represents an initial exploration, it is a starting point to set direction for future,

more in-depth research.

The project’s goal was to begin looking at employer-promoted use of hand-

held devices and, specifically, how this promotion is viewed by employees from

a variety of companies, industries and work situations. A portion of the study is

an exploration into the prevalence of using devices and of employers supplying

devices by looking at type and size of company, total-rewards-related policies and

a sampling of employee attitudes about device use.

Beyond these generalities, a variety of specific expectations arose about how

individuals assess usefulness of connectivity devices. Results are offered in

relation to each expectation and surrounding perceptions and attitudes. In addition

to informing future research, practical applications are referenced at times in the

discussion of results and elaborated on in the conclusion.

Within this study’s survey instrument, the terminology “company-supplied”

appears in items, rather than “employer-supplied.” In this report, those two

references mean that the organization absorbed device expense, rather than the

individual. “Company,” “employer” and “organization” are used interchangeably.

Similarly, to accurately extend previous research, measurement items include refer-

ence to the balance of work with other life interests. This report references those

items as written, while recognizing in general discussion that the trend in business

usage is toward terms such as “work-life effectiveness” that carry less implication

of equal weighting than “work-life balance.”

METHODOLOGY

An online survey asked respondents for information about their employers’ reward-

related practices (Heneman 2007); the functional area of their job; their responsibility

level; and certain personal demographics including age, race, gender, education,

marital status, number of children and number of divorces. Other items pertained

to each individual’s personal use of a handheld connectivity device, referred

to as a “device” and described as one that allows for multiple functions, such as

telephone, e-mail and scheduling capacity. The survey also included questions

on whether employers supplied such devices, how employees learned the expec-

tations connected to accepting a device, the message they believed the company

sent by providing (or not providing) such devices, and how device use affected

their job performance and ability to balance work with other life interests.

A list of items on which respondents could check their level of agreement (a five-

point, Likert-type response format ranging from strongly disagree to strongly agree)

8 WorldatWork Journal

allowed for aggregation into scales representing (a) the extent to which they view

their work environment as a high-pressure culture and (b) segmentation preference

(clear boundaries between work time and nonwork time) (Kreiner 2006).

The survey was distributed in two data-collection waves. The first was a broad

distribution to university alumni, resulting in 312 usable responses. The second

wave was a targeted panel distribution through the survey software provider,

which reached an additional 315 respondents prescreened only to be working

full time with at least a bachelor’s degree to correspond generally to the alumni

sample. Together, these data collections yielded 627 survey respondents.

Surveys were supplemented by eight individual interviews of subjects who had

not participated in the survey but were similar in education and professional status

to the larger sample. These people viewed the survey’s preliminary results on five

sets of charts and were invited to comment on any portion they found of interest

or to which they had a reaction that might help with results interpretation.

A more complete overview of the methodology and demographics (as well

as the findings) can be obtained by reading Implications of Employer-Supplied

Connectivity Devices (Porter 2009).

RESULTS

Two hundred seventy-one people (43 percent) reported currently being users of

a handheld device as defined in this study; 351 said they were nonusers. The 351

nonusers were asked if they were “thinking of becoming a user within the next

6-12 months,” to which 38 percent replied “yes.”

The correlation between gender and device use was insignificant. Regarding

marital status, 39 percent of single people reported being users, along with

44 percent of married people and 65 percent of those in domestic-partner

relationships. Sixty-five percent of people with children were users, compared to

40 percent of those who reported having no children. No significant correlation or

notable trend exists when comparing education and being a current user.

Figure 1 offers an overview of users by generational category. Age stereotypes

related to technology might have led to an expectation that the percentage of

users would be higher among the younger age groups. However, additional

factors should be considered. For example, looking back to the initial release

of these devices, early marketing efforts typically were targeted to higher-ranking

businesspeople, and price as a potential deterrent might vary by age. Therefore, another

useful comparison is to look at the position or level of the users and nonusers.

The most heavily represented group in this sample was midlevel employees.

In terms of the functional responsibilities of respondents, those who classified

themselves in business development had the highest user rate at 72 percent,

followed by sales (63 percent), legal (60 percent) and IT or MIS (51 percent).

People from local companies had a lower user rate (39 percent), but an incon-

sistent trend emerged based on company scope. Regional companies had a


51-percent user rate and multinational companies were at 47 percent, but national

companies had a below-average 41 percent. The differences, when compared on

company size, are not a clear trend.

What Are Device Users’ Work Habits?

This section primarily focuses on the responses of the group of 271 people who

identified themselves as device users.

Allowing for the fact that the device might have been turned on at times during

which little or no use occurred, a question asked, “How many hours per day do

you average active use of the device?” The most common responses were three

and four hours. Sixty-two percent of the respondents answered one, two, three

or four hours of active use, leaving 38 percent who said they averaged five to

14 hours of active use.

Users more readily admitted to working weekly hours well beyond a 40-hour

standard (See Figure 2 on page 10). Users (on the left side) were more likely to

agree with the statement that they often worked more than 50 hours per week.

Those who disagreed or strongly disagreed with this statement were more likely

to be the nonusers (on the figure’s right side).

Another item asked, “Thinking back to before you used a handheld device, how

many hours per day do you now use the device in what you, at that time, consid-

ered ‘off hours’ or nonwork time?” In general, people perceived that, with the

device, they extended their use into time previously defined as nonwork time.

This was an open-response box, so people could have reported zero, but no

one did. There were only eight nonrespondents to this item. Even if we consider

those people as possibly having no perceived increase in hours, it would only

constitute 3 percent of the 271 users.

Some caution is advised on this result. Although the placement on the survey

would have implied this to be work-related use, the reference to work was not

FIGURE 1 Respondents to the Survey by Generation

Device User?

Ge

ne

rati

on

Traditionalists

Baby Boomers

Gen X

Millenials

Yes No

200 150 100 50 0 50 100 150 200


explicitly built into the item, leaving some potential for people to be counting

nonwork use of the device in this response.

Respondents also were asked to comment on when they turned off the device.

The most common response, from 158 people, was their device was never turned

off. When asked whether they believed they got “carried away” with use of the

device, it was nearly an even split between those who said “yes” and those who

said “no.”

SPECIFIC RESEARCH EXPECTATIONS

Expectation: The majority of people will say that use of their devices

enhances job performance. TRUE.

As predicted, the majority of respondents who are device users believed usage

enhanced their job performance. Only four people said device use interfered

with performance.

When asked to comment on the relationship of device use to job performance,

199 people offered elaboration. The most common response (71 people) was that

it gave access to tools needed to do their jobs, without having to be at the office

location. Rather than access to tools, 52 others mentioned contact with people,

including colleagues, employees and customers or clients. Twenty-five people

stressed the importance of response time with these contacts, which was facilitated

by having the device.

Although only four people said their device use interfered with performance,

seven individuals noted negatives. Among other responses, eight people

commented on the benefit of being able to more easily work across time zones;

13 mentioned greater task efficiency; four mentioned time management and five

the ability to multitask.

FIGURE 2 Relationship of Device Usage and Working More Than a 40-Hour Standard Workweek

Device User?

Oft

en

> 5

0 h

ou

rs/w

ee

k

Strongly

agree

Agree

Neither

Disagree

Strongly

disagree

Yes No

100 80 60 40 20 0 20 40 60 80 100

Percent


Expectation: The majority of people will say that use of their devices

enhances their ability to balance home and other commitments. TRUE.

Using the same response categories as with job performance, people also

indicated the extent to which the use of a handheld device enhanced their ability

to balance work with home and other commitments. The prediction that a majority

would express a positive effect was upheld by 60 percent indicating that usage

either greatly or moderately enhanced their ability to balance (See Figure 3).

Sixty-two people (24 percent) said it had no effect; and 16 percent felt their use

of the device interfered with their ability to balance.

Comments were provided by 181 people on the relationship between device use

and enhancement of ability to balance. The most common response (31 people)

was the benefit of being able to get out of the office for personal needs or events

involving children. Eighteen people noted actual gains in time through use of

their devices. Twenty-five respondents commented on benefits to family through

direct use of the device. These benefits fell into two categories: using the device

for family scheduling and being able to stay in contact with family.

Of comments regarding interference with ability to balance, the most frequent

comments (14 people) centered on the idea that having the device makes it feel

like one is always working. Ten people commented on the general interference

with family time.

Closely aligned with general interference with family time were comments from

eight people that noted complaints from family.

Of the 181 comments offered, 93 people made clearly positive comments.

This breakdown is shown in Figure 4 on page 12.

Thirty-nine people were negative in writing about the demands imposed by

device use; 24 commented on both the good and bad aspects; and 25 people

claimed no effect or their comments could not easily be classified.

FIGURE 3 Impact on Ability to Balance Work with Home and Other Commitments

100

80

60

40

20

0

Greatly enhances

Moderately enhances

Noimpact

Interferes with balance

Pe

rce

nt 69%

89%

62%

41%


Expectation: Employees will believe that organizations are as likely to

distribute devices based on level of job as to distribute based on job function.

SOMEWHAT TRUE.

If distributed by level, devices could be seen as reward for achievement, and even

become a status symbol in the organization. Responses indicating that companies

distribute both according to level and job function suggested this may not be the

case. Further, when people in companies that supplied devices were asked directly

whether receipt of a company-supplied device was considered a status symbol or

sign of importance in the organization, 44 percent said “yes” and 56 percent said

“no.” People in companies that did not supply devices to any employees were asked

whether it would be a status symbol or sign of importance to the organization to

receive a device if the company began the practice. Again, 44 percent said “yes”

and 56 percent “no.” Combined, these items suggest a substantial perception of

status or importance attached to receiving a company-supplied device, but it is

not the majority opinion.

Expectation: In organizations that supply devices, employees will be more

likely to describe the culture as one that expects them to be accessible outside

of traditional work hours. TRUE.

Overall, combining the “always be accessible” group with ”better customer acces-

sibility” and both ”working more” and ”work all the time,” a substantial number

(99 people) expressed an expectation for work to carry into personal time.

This perception accounted for 42 percent of respondents to this specific item

and 37 percent of all the respondents who identified themselves as device users.

The three most prominent message categories:

Always be available to work❚

This is a tool to do your job more efficiently or effectively❚

This affirms your status or importance in the organization.❚

Among the remainder were 29 people (11 percent) who relayed specific infor-

mation coming from the company that emphasized this was a company asset,

FIGURE 4 Breakdown of Positive Comments: Device Use Enhancing Ability to Balance

Work with Family and Other Commitments

Can leave office for personal

and children’s needs

Family scheduling and contact

Misc. benefits

Actual gains in time

34%

19%

27%

20%


recipients must not lose or abuse the devices, and it was important to take security

precautions regarding information on the device (See Figure 5).

One intent of this question was to elicit comments indicating that the company

communicated boundaries on use that would either clarify or offset any percep-

tion that 24/7 connectivity was expected. Eight people wrote comments and most

were broad statements, such as:

Use with caution.❚

Use at appropriate times.❚

Use at your discretion.❚

Even among those eight, only two people relayed specific comments about the

type of boundaries of most interest in this study: “Use them to help communicate

during travel time” and “use them if you need to, don’t stress over them though.”

Expectation: Few organizations that supply devices have written policies

related to use and boundaries to use. NOT TRUE.

In addition to asking people what message they felt was implied by the company

supplying devices, another item asked them about more explicit communication:

“When employees receive a company-supplied handheld device, their under-

standing of the company’s expectations about when and how to use the device

is based on:

A written policy describing appropriate use and boundaries to use❚

Oral instructions on appropriate use and boundaries to use❚

General understanding of the company’s culture and expectations❚

Their own best guess about intended use.❚

Compared to anecdotal evidence prior to this data collection, it was somewhat

surprising to see that 42 percent of people responding to this item said their

companies had written policies about device use. However, comments from the

supplemental interviews suggested that such policies are most typically either to

communicate the importance of security measures (don’t lose it) or emphasize that

it is a business tool and not for personal use. The comments on what employees

FIGURE 5 Perception of Company Message When Devices Are Supplied

Always be available to work

Tool to do assigned job better

Affirms status, level or importance

Other

42%

24%17%

17%


perceived as the message given when supplied devices seemed to support the

idea that written policies were not setting other types of boundaries (for example,

“We expect you to turn this off to allow blocks of uninterrupted family time in the

evenings and on weekends” or “If you need to make a phone call while driving,

pull off the road before placing your call”).

This data collection did not secure information about the content of the written

policies referenced by these 153 people. Although the expectation that “few” orga-

nizations would supply written policies was not upheld, the author suspects these

policies do not reflect the type of content that formed the basis for this expectation,

and research is needed to determine the actual content of these policies.

Option to Decline a Device. In those cases when a connectivity device was a

help in job performance and could enhance ability to balance work with family

and other commitments, the employer’s practice of supplying such devices would

likely be seen as a positive feature of that organization’s culture — an indica-

tion of company support. Yet, those situations did not cover every respondent.

The question that arises is whether a person who was offered a device could

decline without penalty. If someone anticipated that use of the device would

be detrimental to either job performance or work-life balance, could that indi-

vidual simply say “no thank you” and still be considered serious about the job?

Would declining the device cause lower potential for promotion?

A total of 379 people said their companies supplied devices to some employees.

Most of these respondents also gave some response to the question of whether

an employee could decline without jeopardizing either their current job or their

promotion potential (373 and 371 respondents, respectively).

About one-fifth of the respondents for each question were convinced that people

could not decline a device without penalty, whereas around one-third indicated

no jeopardy in declining a device in their companies. The relative importance of

these proportions, and the large “I don’t know” group, may be a “glass half full

or glass half empty” type of question. An optimistic interpretation would say that

four-fifths of respondents — a sizeable majority — did not see the declination of a

device as harming job or promotion potential. The pessimistic interpretation would

be that two-thirds of respondents — again a majority — did not feel confident

that declining a device was an OK choice (See Figure 6).

Differences between current job consideration and promotion potential were

slight but consistent in the trend away from a “yes” answer. This hints that declining

might have been more of a factor for advancing in the organization than for simply

staying employed. The overall result on these two questions seemed to align with

the perceived tendency to supply devices based on status or level in the organi-

zation such that declining was seen as failure to conform to the image or actual

responsibilities attached to advancing in the company.

Perhaps of most concern were the “I don’t know” responses. Employers supplying

devices, or thinking of this practice for the future, might want to consider the


implications of that decision, and their distribution criteria, with these results in

mind. If the device is offered as a general benefit or “perk,” employees should

know they are free to decline; if it’s considered necessary to job performance,

employees should be well informed on that aspect of the job requirements.

Segmentation/Integration Preferences. Another scale included in the survey

measured the extent to which respondents prefer clear boundaries between their

work and nonwork lives, such that neither spills into the other. Samples of the

four items averaged for this scale score were, “I don’t like work issues creeping

into my home life” and “I don’t like to have to think about work while I’m at

home.” High scores on this scale indicate stronger preference for segmentation.

Low scores indicate people who are most comfortable with integration of work

and nonwork.

Recall that 48 percent of survey respondents belong to Generation X and 18

percent were Millennials. There was a strong negative correlation between age

and segmentation preference, meaning younger people had stronger preference

to keep boundaries between work and nonwork. There was a significant nega-

tive correlation between segmentation and number of children — fewer children

relating to stronger preference for segmentation. Perhaps having more children

necessitates flow of some family-related attention into work time and, thus, more

acceptance of some movement in the other direction, as well.

Segmentation preference negatively correlated to education — less education

related to stronger preference for segmentation, but this sample consisted of all

college graduates, and level of education also was highly correlated with age.

No significant relationship existed between segmentation preference and gender.

In terms of organizational support, there was a corresponding four-item scale

to determine respondents’ perception that their company supplied opportunity

for segmentation. Sample statements include “Where I work, people can mentally

leave work behind when they go home” and “My workplace lets people forget

FIGURE 6 Can Employees Decline a Company-Supplied Device without Jeopardizing Their Job (left)

or Their Promotion Potential (right)?

200

175

150

125

100

75

50

25

0

Yes No Don’t Know

Pe

rce

nt 34%

(126) 31%(114)

19%(72)

20%(75)

47%(175)

49%(182)


about work when they’re home.” Responses were on a five-point scale ranging

from “strongly disagree” to “strongly agree.”

A positive correlation exists between segmentation preferred and the perception

it is supported in their companies, suggesting that many people who prefer high

segmentation were successful in positioning themselves in companies that they

believed support that preference.

Within this sample, a fairly strong preference emerged for segmentation and,

although segmentation was not always supplied to the extent desired, the majority

did not indicate they were working in a high-pressure organizational culture.

Expectation: People who prefer work-life segmentation will have less

favorable views on the impact of device use on performance and the impact

of device use on their ability to balance home and other commitments.

TRUE FOR PERFORMANCE ONLY.

As a handheld device can facilitate working anywhere/anytime, there was an

expectation that having one would allow more leakage across boundaries from

work into nonwork time. Results of this study indicated this is happening. People

who prefer work-life segmentation might then experience some increased pressure

to allow violation of their desired boundaries between work and other commit-

ments. Recognition of this possibility further led to the expectation that these

people might have a generally less favorable view on the enhancements offered

by device use — one enhancement being to work performance and the other

being the ability to balance work with other commitments. To clarify, this is not

an expectation that they would have negative views necessarily, but rather that

their views would be less favorable than others’.

This sample had a high representation of people preferring segmenta-

tion. To facilitate looking at differences, the sample was split into categories.

Those scoring highest on the segmentation preference scale (4.00 or higher) were

labeled “segmentation preference.” A total of 357 people met this criterion. For a

contrasting group, those scoring below 3.00 were labeled “integration preference,”

representing those most comfortable with permeable boundaries between work

and nonwork. Seventy-eight people were in this category. Those in the midrange

(192 people scoring 3.00 through 3.99 or missing data) were dropped from this

comparison to give a more clear-cut contrast in preferences.

One-way analysis of variance determined that, statistically, there is a difference between

the two groups in their responses to the effect of device use on job performance.

This can be seen visually in Figure 7 and Figure 8. Those with strongest prefer-

ence for segmentation still showed a majority of responses citing enhancement,

but they were a little more conservative in their positive responses than those

with strongest preference for integration. In the segmentation group (Figure

7), 80 percent agreed that device use enhanced performance — 31 percent

reported it greatly enhanced it and 49 percent reported it moderately enhanced it.


The integration group (Figure 8) showed a total of 95 percent agreeing that device

use enhanced performance — 61 percent reported it greatly enhanced it and

34 percent it moderately enhanced it.

No one in the integration group said “no impact.” In contrast, 19 percent in the

segmentation group reported “no impact.” One possible interpretation is that those

who constrain device use to maintain the work/nonwork boundaries see less effect

to their overall performance than those who are more willing to expand work

into other times and places.

The original speculation was that most people would indicate that device use

enhanced job performance, but that those preferring segmentation would be less

favorable. Using only the two categories of responses indicating that performance

is enhanced (greatly enhanced plus moderately enhanced), the segmentation

preference group does show a less-favorable response than the contrasting inte-

gration preference group. From a practical standpoint, however, the shift is

offset in the neutral response of “no impact.” In these self-reports, people most

comfortable with integration of work and nonwork believed their performance

was enhanced more strongly than those who preferred segmentation believed

their performance was enhanced. But, the majority of those preferring segmenta-

tion did report enhanced performance.

FIGURE 7 Impact on Performance Reported by Those with Strongest Segmentation Preference

Moderately enhances

No impact

Interferes

Greatly enhances

31%

1%

19%

49%

FIGURE 8 Impact on Performance Reported by Those with Strongest Integration Preference

Moderately enhances

Greatly enhances

Interferes

5%

61%

34%


There was insignificant difference between these two groups in reports of their

ability to balance work with family and other commitments.

There was no relationship between whether people preferred segmentation or

integration with their perception of a pressure culture.

Expectation: People who prefer work-life segmentation will be more likely

to perceive that declining a company-supplied device could jeopardize their

promotion potential. UNCLEAR.

Those who are most comfortable with integrating work and nonwork activities also

had more of a tendency to think one could decline a company-supplied device

without jeopardizing their potential for future promotion.

In comparison, those with the strongest preference to segmentation (main-

taining boundaries between work and nonwork) were both less likely to answer

“yes” and less likely to answer “no.” The majority of these people responded

that they didn’t know — nearly twice as high a proportion as among those with

integration preference.

It seems logical that those preferring integration would welcome a device

facilitating permeable work and nonwork boundaries, but that doesn’t mean

the reverse is true. No evidence is in this data collection that people with high

segmentation preference were against having a device. Yet, it is apparent in this

result that those people were less sure about what it would mean to decline if

a device was offered.

The initial expectation stated that those preferring segmentation would be more

likely to perceive jeopardy in declining. That expectation would be untrue if

tested only by comparing the clear “no” answers (i.e. it could not be declined

without jeopardizing promotion potential), which was a smaller proportion among

those with segmentation preference. If, however, anything other than a clear “yes”

answer (i.e, some level of belief that it could negatively impact future promotions)

was considered, the expectation would be upheld as true. Additional research is

needed to determine what thoughts underlie that hesitation to respond “yes” or “no.”

It could be a concern that there would be negative impact on promotion potential

(although having no confirming evidence), or a belief that there is no impact on

promotion (but not really having any experience or information to be sure).

Expectation: People who prefer work-life segmentation will have less favorable

interpretations of why companies supply such devices. NOT TRUE.

In the total sample, 269 people offered comments on what they felt the message

was when a company supplied handheld devices to some segment of their

employees. Of that 269, a little more than one-half (154 or 57 percent) were

identified as having strong preference for segmentation of work and nonwork.

Their comments did not reveal much evidence of the segmentation group having

less favorable interpretations of that company practice.


PRACTICAL IMPLICATIONS

AND SUMMARY COMMENTS

Using components of the WorldatWork

Total Rewards Model, this study’s

results have implications for reward

policies and practices.

Business Strategy

The business strategy must include

a decision on the importance of

connectivity for times and places

other than the standard workday and

work site. This decision extends to

the possibility of supplying devices

allowing for such connectivity and

then determining who gets them.

Vast differences exist in the message

employees construe relative to

whether their company is currently

supplying devices to some group of

employees. In this study, the individ-

uals are from different companies, so

different messages might be accurate.

However, with a high number of people having to infer the message rather than

receiving a written policy (and the content of those policies in question), it’s likely

that a sample within one organization would also show wide variations. There

is strong support — as least as self-reported by respondents — that use of these

devices enhances performance. If the practice of supplying devices is adopted for

performance enhancement or any other reason that aligns with company strategy,

the only way to ensure that employees will grasp the true intent is to communicate

it. Whether people are receiving a device or simply are aware that others receive

them, they should understand the rationale for that practice in terms that link to

strategic objectives.

Work-Life

Work-life interface issues are a major consideration in supplying devices and

communicating expected use. This factor is woven into the organization’s culture

and through HR and total rewards strategies. The organization’s prevailing culture

will shape employees’ beliefs as to how new technology is to be incorporated

into work patterns when no explicit explanation is offered (or, perhaps, when

one is offered but unsupported by the cultural norms). This study did not find

all the expected variation-based preferences for segmentation versus integration.

RESOURCES PLUS

For more information related to this paper:

www.worldatwork.org

Type in any or all of the following keywords

or phrases on the search line:

❚ Connectivity

❚ Hand-held device

❚ Culture.

www.worldatwork.org/bookstore

❚ Employee Engagement Fundamentals —

A Guide for Managers and Supervisors

❚ Battling to Be the Best — Why Companies

Compete for Best-Place-to-Work Lists

❚ Culture at Work — Building a Robust

Work Environment to Help Drive Your

Total Rewards Strategy.

www.worldatwork.org/education

❚ W2: The Flexible Workplace — Strategies for

Your Organization, Certification Course

❚ W4: Organizational Culture Change —

A Work-Life Perspective, Certification Course

❚ T4: Strategic Communication in Total Rewards

Certification Course.


Yet, although respondents did not typically identify their organizations as high

pressure, 42 percent in this sample believed the message in receiving a device was

to always be available. In companies professing support for work-life effectiveness,

it is even more important that a clear message is given on how (and how much)

technology is to be used in what traditionally was considered personal time.

Performance and Recognition

This survey’s results highlight that employer-supplied devices do have a role in

the company’s reward strategy, and these results may help in considering possible

perceptions among those who do not receive devices.

Engagement and Satisfaction

Engagement and satisfaction are recognized as important for talent retention.

For those individuals who find that handheld devices help them perform better and

balance life demands (or believe they would do so, if they had one), employer-

supplied devices are having a positive effect. Conversely, an employee who feels

overtly pressured for 24/7 connectivity would likely feel less satisfaction, particu-

larly if the device is imposed.

Motivation and Retention

There is evidence of variation in reactions reported in this study, including the

tendency of people who prefer work-life segmentation to have a more conserva-

tive view of the performance enhancement through having a device. If there is

latitude in requirements for doing the job, an organization might be wise to assess

in advance whether people would view a supplied device as a tool for engage-

ment versus a demand for sacrifice of personal time. Further, employees should

know whether it is OK to decline a connectivity device without jeopardy to job

and/or promotion potential.

This study offers initial information to help avoid negative potentials for employers

that provide or plan to provide handheld connectivity devices to employees.

To the extent that employee perspectives differ on desirability of these devices,

the employer could formulate practices allowing for differences or, certainly,

to accurately relay the intent when differences are not easily accommodated.

The study also gives some indication of how employees are receiving informa-

tion about expectations for use of connectivity devices. Although there was higher

evidence than expected of written policies, related comments highlight further

questions about those policies’ content. The importance of prevailing organiza-

tional culture is emphasized as an important information source through which

expectations are interpreted.

This research included a cross-section of employees from a range of compa-

nies, industries and work situations to provide a general overview of the issues.

Where significant patterns and trends exist, it suggests important commonality of


Heneman, Robert L. 2007. SHRM Foundation’s Effective Practice Guideline Series. Implementing Total Rewards

Strategies: A Guide to Successfully Planning and Implementing a Total Rewards System. Alexandria, Va.:

Society for Human Resource Management.

Kreiner, Glen E. 2006. “Consequences of work-home segmentation or integration: a person-environment fit

perspective.” Journal of Organizational Behavior, June: 485-507.

Porter, Gayle. 2009. Implications of Employer-Sponsored Connectivity Devices. Scottsdale, Ariz.: WorldatWork.

WorldatWork. 2009. “What is total rewards?” http://www.worldatwork.org/waw/aboutus/html/aboutus-whatis.html.

Viewed: Feb. 18, 2009.

REFERENCES

AUTHOR

Gayle Porter, Ph.D., is a professor of management

at Rutgers, The State University of New Jersey, and

an author and consultant on topics of workplace

performance. Before beginning an academic career,

her industry experience included technical work in

the oil and gas production industry, and finance and

accounting positions with a Fortune 500 company.

Since shifting to a human-capital focus, she has

designed and conducted organizational training

programs and employee-development seminars for

audiences across multiple industries in service and

manufacturing environments. Dr. Porter received her

Ph.D. in management and human resources from The

Ohio State University. Among other recognitions for

high-quality instruction, she received the Lindback

Distinguished Teaching Award, given for lifetime

contributions to teaching. In addition to her member-

ship in WorldatWork, Dr. Porter is active in the Society

for Human Resource Management (SHRM) and the

Academy of Management.

perceptions in a broad population. It still remains for each reader to judge whether

those results would apply in his/her organization.

The study results, however, do provide a starting point for discussion of why

the company might (or might not) want to consider providing devices, things to

consider about implementation to ensure it is seen as a positive option in the

total rewards program, and specific concerns of clear communication regarding

expectations for use. The purpose of this research is not to prescribe what an

employer’s strategy should be on furnishing electronic connectivity devices to its

employees. Rather, it is to put data into the discussion. ❚

WEB EXTRA

To review the full report titled “Implications of Employer-Sponsored Connec-

tivity Devices,” go to the WorldatWork Journal page: www.worldatwork.org.

worldatworkjournal.

Read the full WorldatWork sponsored research report, “Implications of

Employer-Sponsored Connectivity Devices”

http://www.worldatwork.org/waw/adimLink?id=32005&nonav=yes

from Author Gayle Porter, Ph.D.

How do executives reengineer HR practices to

adapt to changes in company goals and needs?

The study featured in this article is based on

interviews with CEOs and other leaders of fast-growth

companies about the “how and why” of talent manage-

ment during challenging times. Most companies have

a strategy to grow their business. But companies that

are evolving from startup to solid full-fledged growth

companies, like those in this study, often face chal-

lenges. This paper shows how a group of companies in

the United States evolved their compensation, reward

and retention practices while they successfully made

this transition. Practices and lessons learned from

executive interviews have applicability not only to

companies that are attempting such a fast-growth curve

but also to midsized companies similar in size to the

survey participants.

Results from this study show that during rapid growth,

executive leaders are willing and able to make changes

to adapt to different challenges and opportunities as

they move from startup to sustained growth. The results

of this study describe these changes and provide testi-

mony to leaders diagnosing and responding to the need

Compensation, Reward

and Retention Practices

in Fast-Growth Companies

Patricia K. Zingheim, Ph.D.

Schuster-Zingheim and Associates Inc.

Jay R. Schuster, Ph.D.


Marvin G. Dertien

ERI Economic Research Institute

❚ Compensation



Second Quarter 2009


to be agile in managing and treating essential talent as they move to sustain

their business success.

In fact, executive leaders in the surveyed companies have dramatically adapted

compensation, reward and retention practices to match changing talent-manage-

ment needs. They abandoned practices that provided value during the startup

phase but were no longer providing value and shifted to solutions that deliver

a workforce with the capability to add value and that can grow to meet the

company’s evolving needs as a full-fledged, solid fast-growth company.

Schuster-Zingheim and Associates Inc. studied a convenience sample of

20 fast-growth West Coast U.S. companies selected from ERI Economic Research

Institute’s database of 4,628 companies based on fast growth in revenue.

These 20 companies had HR and line executives who were willing to be tele-

phonically interviewed in depth for an extended period, answer the authors’

questions based on a patterned interview, and provide the detailed information

needed for a thorough understanding of the changes they made to compensa-

tion, reward and retention practices as they journeyed from a startup to a solid,

full-fledged growth company. Criteria for inclusion were a history of fast growth

as well as the willingness to have their CEOs, CFOs, chief operations executives

and HR leaders participate in extensive structured interviews using the survey

instrument in the Appendix on page 38.

In the authors’ experience, direct interviews with senior members of the execu-

tive team provide the best opportunity to learn the “what, why and how” of

fashioning a successful workforce model through strategies, practices and leader-

ship actions that work. While this type of study does not provide the large samples

that Internet or mailed questionnaires can generate, this methodology does ensure

that the input provided is from the people who actually lead the companies,

formulate the strategies and champion, implement and evaluate those strategies

to ensure they are working as expected.

The 20 companies studied are fast-growth West Coast companies compared

to other U.S. companies. Median revenue for the surveyed companies was

$467 million in the last year of the three-year growth period. Figure 1 on page 24

shows a comparison of the percent increase in revenue growth during the same

three-year period between the studied companies and other companies with the

Standard Industrial Classification (SIC) codes of survey participants and all U.S.

companies with all SIC codes, using ERI Economic Research Institute’s database.

The median revenue growth of the 20 surveyed companies was 141 during the

three-year growth period compared to 47 percent for 470 companies with the same

SIC codes as the survey participants and 37 percent for the 4,608 U.S. compa-

nies (publicly traded companies that had revenues of at least $10 million at the

start of the three-year growth period and had revenues throughout that period).

This means that the survey participants were fast-growth compared to not only all

other companies but also to other companies most similar to them.


Concurrent with revenue growth, the workforce also grew in size for the studied

companies. During that same three-year period, their workforces had a median

growth of 109 percent while the other companies with the same SIC codes had

a median growth in their workforces of 20 percent, as Figure 2 shows. For each

statistic that had positive revenue growth, the corresponding statistic for employee

growth shows that both the survey participants and the other companies grew

revenues faster than number of employees.

Five of the 20 companies studied are semiconductor manufacturers or suppliers

of semiconductor components, systems or solutions; five represent a variety of

electronics, computer hardware, digital and telecommunications product providers;

three provide business-software solutions; two are biopharmaceutical companies;

two provide bioanalytical or specialty medical products; two provide consumer

products/services or business services via the Internet; and one is a business

equipment manufacturer.

Interviews with members of executive teams indicated the surveyed compa-

nies moved quickly from the startup phase to being a solid, full-fledged growth

company. They have experienced growing pains as their human-capital prac-

tices and processes catch up with their fast growth. Leaders said they found

their startup workforce that included career gamblers, transients and free agents

was no longer as effective as it had been as they continued to grow into a

larger company. Instead they needed to upgrade and stabilize the workforce as

business needs changed. Interview results suggest that a strong startup hiring

strategy of stock options and signing bonuses did not have retention value,

FIGURE 1 Revenue Growth of Surveyed Fast-Growth West Coast Companies Compared to U.S. Companies

10th percentile 69% -11% -8% $369 million

25th percentile 94% 15% 12% $413 million

Median 141% 47% 37% $467 million

Mean 196% 81% 69% $453 million



Number of

Companies 20 470 4,608

Statistic

Surveyed

Fast-Growth West

Coast Companies

Other Companies

with Same SIC

Codes of Survey

Participants*

All U.S. Companies

(All SIC Codes)*

Revenues

of Surveyed

Fast-Growth West

Coast Companies

in the Last Year

of the Three-Year

Growth Period

Three-Year Growth in Revenues

* Other companies with SIC codes of survey participants and all U.S. companies represent publicly traded companies that had revenues of at least $10 million at the start of the three-year growth period and had revenues throughout that period. Information provided from ERI Economic Research Institute’s database.


did not necessarily relate to an individual’s value and did not reward or retain

high-performing key talent who possess the company’s core competencies for

the sustainable longer term. As these companies became full-fledged growth

companies, leaders indicated they needed to shift to a growth culture — not just

the company’s growth but also the individual’s development and career growth.

Figure 3 on page 26 summarizes the transition that these companies faced as

they grew from startups to solid, full-fledged growth companies.

RETENTION

Talent retention is of critical importance for companies shifting from startup to

fast growth. Keeping the best people closest to the organization’s core competen-

cies, leaders said, is important as they must selectively identify and retain the

people who are essential to their “going forward” business model. The retention

focus for these surveyed companies is on people who possess the company’s

core technology competencies (engineers, scientists and other technical talent)

and people who are close to the product development and marketing process.

After the company’s core technologies, leaders most frequently mentioned

marketing jobs and other technology-based jobs (e.g., manufacturing engineers,

software specialists). One objective mentioned by several respondents is “to keep

the best talent from going to a larger company.”

The leaders interviewed believe that in good economic times and bad they

must retain the people who perform and have competencies and skills that

match the business’ core talent needs. They accept that key talent will go for

FIGURE 2 Workforce Growth in Number of Employees of Fast-Growth West Coast Companies

Compared to Other Companies with Same SIC Codes

10th percentile 25% -25% 946

25th percentile 47% -4% 1,056

Median 109% 20% 1,240

Mean 160% 41% 1,550

75th percentile 150% 63% 1,708

90th percentile 381% 118% 2,592

Number of

Companies 20 465

Statistic

Surveyed

Fast-Growth West

Coast Companies

Other Companies with

Same SIC Codes of

Survey Participants*

Number of Employees

of Surveyed

Fast-Growth West

Coast Companies in

the Last Year of

the Three-Year

Growth Period

Three-Year Growth in Number of Employees

* Other companies with SIC codes of survey participants represent publicly traded companies that had revenues of at least $10 million at the start of the three-year growth period and had revenues throughout that period. Information provided from ERI Economic Research Institute’s database. Five of the other companies were missing employee data for the first year of the three-year growth period


the “best deal.” They believe retention of key talent requires two fundamental

leadership actions:

Understand and address the fragile balance of people staying or leaving based ❚

on the “deal” offered compared to the deals offered by other companies in terms

of pay, career growth and development, leadership, people, the company itself

and interesting, creative work — that is, total rewards.

Appreciate key talent by making them feel important, that they count and that ❚

they are adding value, and include them in the company’s future.

Figure 4 shows the retention strategy that leaders interviewed said has worked

best, the most common retention strategy or program that did not work and the

most common next steps for retention.

TOTAL REWARDS

Leaders in the surveyed companies provided their approaches to the elements of

an integrated total rewards strategy.

FIGURE 3 From Startup to Solid, Full-Fledged Growth Company

Startup

❚ Start company quickly.

❚ Recruit workforce rapidly.

❚ Be less selective.

❚ Fill chairs.

❚ Welcome entrepreneurs.

❚ Pay to hire: stock-option

grant and signing bonuses

at hire.

❚ Informal pay: “let’s make a

deal”; free agent.

❚ Retain everyone.

❚ Provide retention bonuses.

❚ Hit or miss; not an

established framework.

❚ Difficulty competing

with larger companies’

established programs.

Solid, Full-Fledged Growth

Company: Beyond Startup

❚ Sustain growth and

success for long term.

❚ Stabilize workforce

of high performers.

❚ Upgrade workforce.

❚ Be more selective.

❚ Secure core technologies/

competencies.

❚ Do not secure everyone to be

an entrepreneur; need people

who create worth by being

creative and dedicated.

❚ Pay for performance: results,

skills, value added, contributions.

❚ Flexible, not rigid.

❚ Stepping up/refining perfor-

mance management, metrics

and skill definitions.

❚ Retain high performers.

❚ Use new retention strategy that

combines and integrates pay

and total rewards and reflects

the company’s uniqueness

and culture.

❚ Strong focus on employee

development and career growth.

❚ Accelerated career growth

as individual adds value.

Element

Business objective

Workforce strategy

Hiring strategy

Pay strategy

Retention strategy

Career growth


Engagement

Leaders in surveyed companies view employee engagement as essential, core or

important and work to enhance employee engagement. In contrast, companies

are split on the importance of employee satisfaction. Seven of the 20 companies

reported employee satisfaction is not important or is minimally important for

professional workers, while six companies said employee satisfaction is important

or very important.

Culture

The survey participants had no common ground on their definition of culture.

Cultures mentioned by more than one participant were a success-oriented culture

(having a successful business to attract and reward key or top-performing talent), a

performance culture (valuing high performers), a fun culture, an enabling culture,

a growth culture and a culture focused on the company’s science/engineering.

Managers’ Role

Executives interviewed view the supervisor/manager role, in order of mention,

as involving training, leadership, coaching, setting an example as a role model, setting

business direction and engaging people in it, and facilitating workforce perfor-

mance. For one company, strongly holding the CEO, executive vice presidents

and heads of functions accountable for retention and recruitment of key talent

has created one of the most successful talent-management programs in the

industry. Another company requires its managers to be available to their people

Type of Strategy Percent of Companies Retention Strategy

(N = 20)

Retention strategy 35% ❚ Combine pay and development/career growth

integrated program into one program that works best.

15% ❚ Focus on development/career growth program.

10% ❚ Provide rapid promotion.

10% ❚ Focus on the key and core talent who are currently

needed to grow business.

10% ❚ Provide exciting work.

10% ❚ Focus on the company itself (e.g., fast-growth

or strong technology).

5% ❚ Maintain a family atmosphere.

5% ❚ Provide “fair and equal treatment” to all people.

Most common retention 30% ❚ Stock options and hiring bonuses

strategy or program that 15% ❚ Bureaucratic, rigid or slow programs

did not work 15% ❚ Copying the practices of other companies such

as larger companies

10% ❚ No retention strategy or program did not work

Most common next step 25% ❚ Stay the course.

for retention 20% ❚ Increase communications.

15% ❚ Improve the career track/skill-pay program

or expand it to include additional roles.


all the time, but not oppressively so. One leader interviewed for this study said,

“I’m accountable for talent retention, motivation and development and willing to

play this role to the hilt.”

Training and Development

Leaders in the study companies said training and development are important,

particularly for professionals or people in technology jobs. Objectives are to

keep the company’s core competencies or technologies current and fresh and

to retain key talent. Surveyed companies either provide training and devel-

opment opportunities and let the individual take the initiative or provide as

much training and development as the individual wants. In addition to more

work-related skills such as new products, customer service or selling principles,

training may involve paying for advanced degrees (master’s degrees and Ph.D.s),

and classes in fields important to the company may be held on company prem-

ises. Only two survey participants mentioned that they review training results,

(e.g., results of the growth of talent compared to the expenditures on individual

and companywide bases). Several companies mentioned integrating training,

development, goals and pay.

Career Opportunities

These companies are not only fast-growth in company revenues but also fast

growth in providing career opportunities, as several believe this is why the

best people come and why the best leave. Several provide an accelerated and

concentrated career path for the technology and marketing professions. Most of

these companies accelerate careers as people add value and take on new account-

abilities and responsibilities. One company has a strategy to keep one career step

ahead of its competitors and shows job candidates a detailed comparison of its

career-growth opportunities compared to that of its two largest competitors and

demonstrates specifically how career growth at any level is several times faster

than that at the large competitors.

The surveyed companies provide parallel career paths to the manager role,

particularly in core technologies or competencies. Job rotation is important for six

surveyed companies as a part of career development or to periodically provide

fresh opportunities.

Communications

Some key communications messages senior leaders use include: “Reinvent your-

self every year” (in terms of growth), “Change is a way of life” and “Make

innovation a way of life.” Communication is constant, open, clear, complete and

welcoming. These companies are linking messages — communication involves

not only updates on the company’s performance but also how people can influ-

ence it and gain from it as well as how an individual is doing. The most common


medium for communication is the intranet, followed by manager-employee face-

to-face communication.

TOTAL COMPENSATION PRACTICES

One CEO said, “If we don’t pay for performance to grow our business, what do

you suggest we pay for?” Nineteen of the 20 surveyed companies reported they

pay for performance or results — one described it as paying for creativity and

innovation that generate business results. Three reported paying strongly for

performance/results, with three encouraging poor performers to leave. Figure 5

summarizes the surveyed companies’ compensation and benefits practices.

Survey participants typically said they have an integrated view of their pay

and rewards programs. The majority described their most successful program as

an integrated program — either total compensation or total cash compensation.

One-fourth of the companies said none of their pay and rewards programs did not

work, likely because these companies view individual compensation programs as

contributing to an integrated rewards and retention program.

Pay Competitiveness

Competitive base pay is seen as a core element but not the whole picture.

It is important, along with career opportunities, to recruit key talent. Adjectives

surveyed companies added in front of competitive base pay include “reasonable,”

“fair,” “fully” and “remaining.” Fourteen of the 20 companies pay above market

for their key talent.

Variable Pay

All but one of the surveyed companies have some form of short-term and/or long-

term variable pay (excluding recognition programs). Eighteen of the 20 companies

have variable pay of some form for the professional workforce.

Cash incentives are the most frequent form; two companies plan to add a cash

incentive in the future — one because stock options have run their course and

the other to supplement the performance share plan. Eight mentioned having all

employees incentive-eligible as it is essential to bond people to the company and

to link people to performance results.

Cash incentives are tied to performance metrics — some combination of compa-

nywide, individual, functional or team-performance metrics. Depending on the

company, incentive opportunity may have significant upside to reward the high-

performing key talent.

Of the 14 companies providing some form of stock below managers, most use

these programs to reward high-performing key talent strongly and vary award size

based on individual performance and organizational level. Companies typically

provide direct stock grants or stock options annually or regularly, although one

provides stock options for retention and another at promotion.


FIGURE 5 Total Compensation Practices of Surveyed Fast-Growth Companies

Element Percent of Companies Compensation and Benefits Practice

(N = 20)

Overall objectives 95% ❚ Pay for performance or results.

85% ❚ Pay for competencies and skills,

particularly for key talent.

Competitiveness 100% ❚ Pay at least at market.

70% ❚ Pay above market for key talent.

Most successful program 40% ❚ Combined total compensation program

30% ❚ Incentive/variable pay program

25% ❚ Combined total cash compensation program

15% ❚ Skill or career-track program for technical people

Failures 45% ❚ Stock options

25% ❚ None of their pay and rewards programs

Base-pay increases 40% ❚ Tie base pay to the individual’s growth as well

as skill growth, contributions to the company,

performance and improvement.

40% ❚ Link base pay only or primarily to performance.

20% ❚ Provide formal skill or career-track/levels program for

base pay and development for at least professionals

with key technologies or core competencies.

Variable pay/incentives 95% ❚ Short-term and/or long-term variable pay of

(excluding recognition) some form (cash or stock)

80% ❚ Cash incentive with or without stock or stock options

10% ❚ Only stock options

5% ❚ Only performance share plan, with shares earned

based on profit and revenue growth

70% ❚ Cash incentive for key nonmanagement talent

10% ❚ Adding key nonmanagement talent to the cash

incentive next year

10% ❚ Adding a cash incentive plan in the next year or two

40% ❚ Cash incentives for all employees

40% ❚ Stock options below managers

30% ❚ No direct stock grants/awards or stock options

below managers

20% ❚ Direct stock grants/awards below managers

5% ❚ Performance share plan below managers

5% ❚ Either direct stock grants or stock options

below managers

Recognition 95% ❚ Have a recognition program.

5% ❚ Do not have a recognition program.

50% ❚ Provide significant stock or cash awards

for significant contributions.

35% ❚ Report their recognition programs are not

important now.

Employee benefits 90% ❚ Pay competitive or near-competitive benefits.

10% ❚ Pay more than competitive benefits.

Most common future plans 25% ❚ Improve performance measurement, metrics

or scorecard.

20% ❚ Add or expand eligibility in a cash incentive plan.

15% ❚ Refine or expand the skill-pay/career-track program.

15% ❚ Increase communications.

15% ❚ Stay the course.


Stock Options

Nine of the surveyed companies reported that their stock option program did not

effectively work. Three companies mentioned that their hiring bonuses did not

work. A key human-capital issue during the transition from startup to full-fledged

growth company was the impact of stock options and signing bonuses for the

following reasons:

Often the best people would leave the company to reload or get new stock ❚

options and a new signing bonus at another company.

The value of the hiring package depends on when the individual was hired ❚

(especially if the stock was volatile) and not on the individual’s value to the

business.

Some employees who had valuable stock options became entitled. ❚

Stock options at startup create a gambling mentality, which does not match a ❚

full-fledged growth company’s mentality.

The value of stock options is unpredictable, as their value is based on not only ❚

company performance but also the performance of the company’s industry and

the general economic climate.

Company growth may not continue at its startup or current pace, and setbacks ❚

may occur.

As the company continues to grow, fewer stock options per person are available. ❚

The companies that moved from stock options have shifted to an integrated

compensation and rewards program, including individual growth and development

as well as direct stock awards, a stronger emphasis on cash incentives or, in one

company, a performance share plan.

Recognition

Of the 19 companies with a recognition program, seven reported that their recogni-

tion program is not important now as either recognition does not fit the culture or

the company has moved away from earlier recognition programs. Nine companies

with recognition programs, however, provided significant stock or cash awards

for significant contributions. These recognition programs reward, for example,

breakthroughs, unexpected contributions to income growth, inventions, significant

contributions, new clients and new projects. For one company, the award for an

invention that adds business value or for unexpected contributions to income

growth is $100,000 at a minimum and has been $300,000 in stock and cash.

Benefits

Employee benefits, especially health care, are considered a basic and important

foundational element but are not a defining or determining factor in attracting or

retaining talent as competitors for talent also offer employee benefits.


Challenges

Executives in the surveyed companies report their biggest challenges in pay

and rewards are defining the metrics and skills for technology jobs because

of evolving technologies, measuring creativity that adds to business growth or

profitability and performance management. They are planning for the future —

one-fourth of the companies plan to improve performance measurement, metrics

or their scorecard.

Figure 6 summarizes the predominant strategies for career and total compensa-

tion of the surveyed companies.

Program Evaluation

“Keeping our best people correlates with our business success. That provides us

with proof positive that we are on the right course,” said one leader. In evaluating

the success of their pay and total rewards programs, leaders most commonly

look to correlate measures of company performance. Secondarily, they want to

lower turnover of key talent. They do not use employee attitude or engagement

survey results to determine program success but rather use outcome-oriented,

objective metrics. Figure 7 summarizes the metrics that surveyed companies use

to evaluate pay and reward programs.

EXAMPLES OF SUCCESSFUL, INTEGRATED PROGRAMS

Four examples typify the study results. All found that the programs that worked

for a startup could not sustain the company to match its growth and evolving

talent needs.

FIGURE 6 Summary of Predominant Career and Total Compensation Strategies of Surveyed

Fast-Growth Companies

Element Predominant Strategy

Career ❚ Strong focus on key competencies and skills

❚ Career acceleration for key talent

Base pay ❚ At least fully competitive for key talent

❚ Performance- or skill-based

Variable pay ❚ Extensive cash incentives, with agile metrics that change

as business directions and plans change

❚ Less stock option usage, as it creates workforce instability

❚ Some direct stock grants

Recognition ❚ Mixed usage

❚ Significant cash or direct stock awards for breakthroughs

or significant contributions

Competitiveness ❚ Strongly or aggressively competitive for high-performing

key talent

Benefits ❚ Cost of entry


Example 1: “Grow Your Career for a Lifetime”

One company providing integrated hardware and software automation systems

for the semiconductor industry has moved from a culture of “getting rich on

options” to the longer-term development and investment in talent. The objec-

tive is to upgrade and stabilize a high-performing professional workforce and

to keep pay up to the individual’s value. Its “Skill Plus Plan” pays at the 75th

percentile for the top 25 percent of each job family in the technology and

marketing areas. A “skills panel” evaluates each technology, engineering and

marketing employee on performance and skills against a scorecard every six

months; the company manages out people who are not growing and have

obsolete skills by slowing their base pay so they are attracted away. The 50

percent top performers in a band on the scorecard earn a lump-sum award that

increases as a percent of base pay for each year that the individual is in the

“top half.” Along with the lump-sum awards that the individual can choose to

have paid in cash or stock, other incentives such as project incentives provide

significant upside award opportunity.

This company has moved away from stock options, hiring bonuses and stay

bonuses that did not work (and the company has run out of options) to sustain a

stable workforce and now focuses on an integrated program of performance-based

total cash compensation, development and career growth. It accelerates careers

for technology talent with a good track record of contribution and has a coaching

system and buddy system to help manage careers. The communications message

is “Join us, and we will help you grow your career for a lifetime,” not “We will

take care of you.”

Example 2: “Encourage the Best to Remain and Others to Improve or Leave”

This specialty medical products company has a total rewards approach with acceler-

ated careers, strong coaching, exciting work, open and welcoming communications,

FIGURE 7 Metrics Used to Evaluate Pay and Reward Program Success

Type Percent Program Evaluation Metric

Company performance 40% ❚ High company performance, results, profit

20% ❚ Growth of company

10% ❚ Growth of quality talent

Talent retention 40% ❚ Low turnover of key talent (best people, people

with key technologies and leading-edge technology)

20% ❚ General employee retention

10% ❚ Length of service (top 50% of people,

technology people)

Competitive level 5% ❚ Company is competitive for talent

5% ❚ Rewards are commensurate with company’s

perception of what people are worth


and a pay, incentive and stock-ownership program encouraging the best to stay and

others to leave or improve. It believes that pay must be reasonable but aggressive and

employee engagement is critical and uses its exciting science and reputation to attract

talent. The top 25 percent of key talent earn large salary increases, cash and stock

awards and promotion to higher-impact roles (not necessarily management roles).

About 20 percent of the workforce work in the long-term nature of product

research and development, so performance may not be realized for several years,

and the company is betting on their contributions. For these people, the company

provides progressing” base-pay adjustments, progressing incentive awards and

progressing direct stock grants based on the individual’s contribution to date and

in expectation of project success. All employees are eligible for an annual incentive

based one-third on company income, one-third on division profit contribution and

one-third on individual goals set by the manager. Recognition is limited to a cash

or direct stock award, with a ceremony for “making a difference.”

Example 3: “People Are 50 Percent of Our Cost and 100 Percent of Our Success”

This semiconductor manufacturer’s compensation program is called “Great Prod-

ucts for Great Customers.” The objective is to pay the senior technology people

well and develop everyone in the company. Everyone has the opportunity to

grow, and rapid promotions occur at an accelerated rate by keeping one step

ahead of the competition and looking for opportunities to move individuals into

more responsible and developmental roles. This company has career tracks for

its broadbanded jobs based on the labor market; a scorecard is used to review

salaries, with increases that occur as often as a manager suggests and are signifi-

cant for exceptional results. An annual incentive bases incentive opportunity on

the potential to influence the company’s performance and is based one-third on

company, one-third on organizational unit and one-third on individual results.

In addition to hiring stock options, this third company annually provides a direct

stock award (based on a combination of the individual’s role and performance) to

all employees except the top executives, as the direct stock award grant has more

predictable value than a stock-option grant. This company views the core of paying

people as significant direct stock grants for significant contributions and also has what

it terms a “Super Contribution Award” that is paid in direct stock for significant busi-

ness contributions on projects, new products, new customers, etc., typically to sales,

marketing and engineering individuals. The CEO and an executive panel recommend

this important annual award and the awards are subject to board approval. The CEO’s

view is that it is essential to get great people and keep them regardless of the cost.

Example 4: “Fast Growth Means Great People Paid in a Combination

of Development and Job Performance”

This specialized electronic systems and components company’s objective is to have

a stable professional workforce and a longer-term perspective on talent management


not only by communicating that the

company wants people for the longer

term and wants to develop them but

also by trying to lock them into the

company. Its “People First Program”

combines development, career

growth, performance management

and pay and replaces stock options

and signing bonuses that created

workforce instability. This company

provides technical, marketing and

sales employees with individualized,

written “employment agreements”

that provide benefits and features

for one year and are renegotiated

the next year.

These agreements delineate the

obligations of the company and the

individual in terms of goals, skills

and rewards; commit a manager to

an individual for one year for training,

developing and coaching each month

with write-ups; provide contingent

base-pay adjustments based on goal, project and other performance metrics; have

an “out” for the company if business performance or economics substantially change,

so it is not a contract; and define incentive eligibility and metrics for the year.

The individual chooses whether the incentive award is to be paid in cash or stock.

Most often key talent receives two salary increases per year; if not, the message is

to look for another job, as the company is trying to manage out the poor performers

to the marginally average performers by managing base pay relative to the competi-

tion. With the cash incentive, the top 75 percent of the workforce is paid at the 75th

percentile of the labor market, with the rest paid considerably lower.

SUCCESSFUL PRACTICES

Leaders from the study companies described a variety of pay and total rewards

practices that have been successful in retaining key talent, with the following

being typical:

A focus on career growth, including career opportunities for all employees, career ❚

acceleration for key talent, and technical career-tracks and skill-pay programs

that communicate development and pay in one package. When people become

a number and the company does not focus on their development and career

growth, they leave.

RESOURCES PLUS


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Compensation, Benefits & Total Rewards —

A Comprehensive Guide for HR Professionals.


❚ C17: Market Pricing — Conducting a

Competitive Pay Analysis, Certification Course

❚ C11: Performance Management — Strategy,

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Sharing the company’s success with people to make them feel part of the ❚

organization and its momentum.

Moving off stock options and retention bonuses that destabilize the workforce ❚

and do not sustain the organization for the long term although they put out the

initial startup fire.

Providing integrated pay and total rewards programs customized to the workforce ❚

segment (core technology talent, sales/marketing talent, other talent).

Ensuring compensation keeps pace with career growth. Pay key talent well; pay ❚

the most for the best talent — they are worth the investment.

Hiring for creativity, the potential for creativity and “idea people,” and rewarding ❚

those people well.

Focusing on the company’s core technologies — for example, the company is ❚

run by technology people, not finance or lawyers; the company values science

and does its own research and development, manufacturing and quality control.

Business success and hiring great people serving as a magnet for attracting other ❚

key talent.

LESSONS LEARNED

Executives interviewed gave advice about program design, including:

Identify and focus principally on high performers and key talent who have ❚

essential competencies and skills and who make a measurable difference to the

business. Develop a pay and rewards program that retains them longer.

Plan for the stabilization of the workforce for the long term as the company grows ❚

or if the company has a temporary downturn.

Implement an understandable, not complex, integrated retention, pay and rewards ❚

program, as the company’s fast growth can create confusion. Evolve and refine

the program as needs change. Remain agile as it relates to human-capital prac-

tices.

Capitalize on company growth by taking advantage of the company’s image as ❚

a new player in the marketplace and by going where other companies (likely

larger and/or slower-growth companies) are not.

Do not make commitments to “early people,” as a fast-growth company most likely ❚

will outgrow them and hope they move on. Actively manage the poor performers

to improve or leave, using compensation to facilitate the individual’s decision.

Accept that people go for a better deal, so make the deal most effective for ❚

both the company and the talent who the company most wants to retain.

The company must also gain something in the deal — people must continue

to develop skills and increase their value added to the business if the company

pays a premium.


CONCLUSIONS

This study provides insight into how the top executives of fast-growth companies

on the West Coast of the United States have managed the transition from startup

to sustained fast growth from the standpoint of talent-management strategies,

practices and programs. Candid interviews with members of senior-leadership

team, not questionnaires, were used to learn how these successful companies

have moved beyond startup.

The leadership challenge is to sustain business growth and success while stabi-

lizing a workforce of high-performing key talent who possess the company’s core

competencies. To do this, these fast-growth companies have chosen an integrated

view of total compensation and total rewards, including training, development and

career opportunities. They have customized their performance-based compensa-

tion approaches. But their objective is the same — to retain high-performing key

talent by providing significant pay and rewards, making certain that pay and

rewards keep up with an individual’s value and accelerating career growth based

on an individual’s development and track record of solid contributions. ❚

AUTHORS

Patricia K. Zingheim, Ph.D., and Jay R. Schuster, Ph.D.,

are partners in Schuster-Zingheim and Associates

Inc., a globally recognized pay and rewards consulting

firm located in Los Angeles and founded in 1985.

They consult with a wide range of companies throughout

the world on the development of total rewards, incen-

tives and other pay solutions. Dr. Schuster and

Dr. Zingheim received the Keystone Award from

WorldatWork in 2006. They were selected as pay and

motivation gurus in The Guru Guide, and are authors

of three rewards books: High-Performance Pay: Fast

Forward to Business Success (WorldatWork 2007),

Pay People Right! Breakthrough Reward Strategies

to Create Great Companies (Jossey-Bass 2000) and

The New Pay: Linking Employee and Organizational

Performance (Jossey-Bass 1996). They are also authors

of more than 300 papers in business magazines on the

subjects of rewards and organizational effectiveness.

Both are contributors to publications such as Fortune,

Across the Board, The Wall Street Journal, Working

Woman and BusinessWeek. They have appeared on

many television, cable and radio programs including

CNBC, CNN, NBC and CBS. They speak throughout

the world to leadership audiences interested in creating

a high-performance workplace through people.

Their Web site is www.paypeopleright.com.

Marvin G. Dertien is a member of the ERI Economic

Research Institute staff. ERI Economic Research

Institute was founded in 1987 to provide compensa-

tion, benefits and HR research for private and public

organizations in the form of reports and software

database products. ERI research is widely used by

more than 10,000 client organization and subscribers.

Dertien has more than 40 years of experience in

compensation and human resources and is trained

in multiple programming code languages and statis-

tical analysis. He has published articles in Personnel

Journal, WorldatWork Journal and Compensation and

Benefit Review.



would like to understand how your company

does the following:

1 | What are your current challenges and strategies

related to retention and also pay and rewards

for employees?

2 | What practices have been successful, and

what have been less successful in helping

accelerate or maintain business growth?

3 | To what extent does your company pay for

performance? How does it work? What have

been the results?

4 | What next steps or actions do you plan to take?

5 | What suggestions and recommendations do you

have for other companies seeking fast growth?

6 | What has been especially successful relative

to communications and gaining workforce

understanding, acceptance and engagement?

RETENTION

7 | What workforce-retention strategies and

practices have proven most valuable to your

business growth? Please describe your compa-

ny’s most pressing talent-retention challenges.

8 | What has been your experience relative to why

employees leave or stay with the company?

9 | Please describe your company’s strategy

related to talent retention.

10 | What skills and competencies are critical

to your company to retain and why?

11 | What role do you believe the following play

in workforce retention?

❚ Overall employee satisfaction

❚ Employee engagement

❚ Organizational culture

❚ Supervisor/manager/leadership relations

❚ Work environment

❚ Communications

❚ Training and development

❚ Career opportunity

❚ Base pay

❚ Incentives/bonuses

❚ Recognition and recognition awards

(cash or noncash)

❚ Employee benefits (e.g., health insurance,

retirement, PTO)

❚ Work-life benefits (e.g., flexible hours,

job sharing, job rotation)

❚ Other (explain).

APPENDIXFocused Interview Guide for Study of Workforce Retention, Pay and Rewards in a Sample

of Fast-Growth West Coast U.S. Companies

Schuster-Zingheim and Associates Inc. is exploring strategies, practice and evaluative experiences and

comments regarding workforce retention, pay and other rewards for employees, particularly hard-to-retain

employees. We have selected a sample of fast growth, West Coast companies for this study to gauge the

impact talent-management strategies and practices related to retention, pay and rewards have on business-

growth performance. We are studying how the West Coast’s fastest-growth companies address critical

HR management issues, including the workforce retention challenges and solutions, and pay and rewards

(which includes paying for performance).

Our objective, if you are willing, is to gain insight into your practices, why you follow them, what the results

are, and what you have learned about these workforce issues as a result of using these workforce practices.

The companies studied will not be listed, and individual input will not be attributed to you in any way.


12 | What practices have worked best for

retention? Why?

13 | What practices have not worked well

for retention? Why?

14 | What is the next action you plan to improve

retention? Why?

15 | What is the role of the executive team and

managers in talent retention?

16 | How do you evaluate the effectiveness of your

company’s retention strategy and practices?

PAY AND REWARDS

17 | What pay and reward strategies and practices

have proven most valuable to your business

growth? Please describe your company’s most

pressing pay and reward challenges.

18 | Please describe your company’s strategy

related pay and rewards for the workforce.

For hard-to-retain employees?

19 | To what extent does your company pay

for performance for the workforce? Why has

your company adopted this strategy?

❚ Not a strategy

❚ Not truly pay for performance —

although say we pay for performance

❚ Pay market

❚ Pay for competencies and skills

❚ Pay for performance and results

❚ Pay very strongly for performance and

results — with strong pay differentiation

based on performance

❚ Some combination (what combination?).

20 | What has been challenging and what has

been successful in measuring employee

performance? Competencies and skills?

21 | If your company pays for performance for

the workforce, please describe how pay for

performance works in your company. What is

the program? How would you evaluate

the program’s success?

22 | What pay and reward practices and programs

have worked most successfully? Why?

23 | What pay and reward practices and programs

have not worked well? Why?

24 | What is the next action you plan for pay

and rewards? Why?

25 | How do you evaluate the effectiveness of

your company’s pay and rewards strategy

and practices?

26 | What has been particularly effective in

communicating pay and rewards for employee

understanding, acceptance and engagement?

SUMMARY

27 | What are your company’s lessons learned about:

❚ The role of workforce retention, pay and

rewards in your accelerated business growth

❚ Retaining employees

❚ Pay and rewards, including paying for

performance if your company pays employees

for performance.

Thank you very much for your participation.

N ews of the state of the economy is flooding

the marketplace with startling and increasing

unemployment rates, speculation of mass

layoffs, buyouts and bankruptcies. It makes for nervous

chatter at the water cooler and on blogs but different

chatter in the C-suite and management ranks.

Among the more savvy and forward-thinking execu-

tives there is an increase in discussion centered on the

new and unprecedented opportunity to acquire top

talent. Talent is flooding the marketplace and according

to the Corporate Executive Board, 24 percent of corpo-

rate leaders said “making critical talent plays” will be one

of their biggest challenges in 2009 (Corporate Executive

Board 2009).

The study also found that one in four top high-

performing employees expects to leave his/her current

job in the next 12 months, up from one in 10 during the

12 months previous to the study. Considering the cost

of turnover, loss of productivity and how employee

engagement and loyalty strongly influences the orga-

nization’s financial health, and combining those factors

Understanding Employee

Attraction and Retention As Key

Drivers in a Down Economy

Stacey Randall

IMR Research Group Inc.

❚ Human Resource Strategy



Second Quarter 2009


with the need for an organization to be able to emerge stronger from this economic

downturn, understanding employee motivation becomes critical.

The economic recession is uncovering a unique opportunity to garner top talent

and is placing retention efforts at the forefront of forward-thinking management

discussions. Management, including total rewards professionals, must be careful to

avoid the thought that the recession “will finally make those employees feel lucky

to have a job and remove their sense of entitlement.” Assuming the employees

will “fall in line” is a dangerous and slippery slope managers and/or leaders can

easily find themselves sliding down, with negative consequences. An organization

or its management with this attitude, may find that the best employees are biding

their time until the economy improves and they exit the organization. According

to a 2008 Leadership IQ study, 47 percent of top performers are actively looking

for a job, but only 18 percent of low performers are.

Based on a survey by IMR Research Group Inc. (2008) of more than 1,900

full-time employees in the United States, the key to understanding employee

motivation lies in an analysis of both what employees say is important in the

workplace as well as what drives employee loyalty. IMR Research Group uses

multitiered assessment of employee loyalty through a model called the Employee

Motivator Matrix (EMM).

UNDERSTANDING THE MODEL

Looking at what employees say is important as well as determining the factors

that actually drive loyalty gives organizations a focused, yet big-picture view of

employee motivation and engagement. In the IMR survey, employees were asked

to rate the importance of the 44 workplace attributes, ranging from “a high degree

of trust between management and employees” to “creativity and independent

thinking is valued” to “a relaxed work environment.” The rating of each workplace

attribute combined with how strongly it influences loyalty to an organization

(based on statistical analysis) determines where on the EMM the attributes fall.

While the information is used by the authors’ company for its EMM tool, the ratings

provide solid input for organizational evaluation of loyalty.

Figure 1 on page 42 provides two dimensions. “Stated importance” (the bottom

axis) reflects what employees explicitly indicate is important to them when rating

the workplace attributes (i.e., articulated, on-the-surface motivators). “‘Derived

importance” or unarticulated importance (the left axis) is determined using

statistical analysis, obtained by computing the degree of correlation between

the attributes with the “likelihood of recommending the company to others as a

good place to work” — an attribute that the authors consider the best measure

of loyalty. Attributes in each quadrant are important to understand, but focusing

resources on the workplace attributes in the top right quadrant, which are high

in “stated” importance as well as strongly correlated with loyalty, will effectively

increase loyalty and reduce turnover.


KEY DRIVERS

In any economy, retaining top talent should be a priority, but it is especially

important in a recession. But trying to figure out how to retain talent, and recruit

when needed, can become overwhelming when an organization is faced with

many possible workplace areas on which to focus resources. However, resources

focused on the key motivating drivers will increase employee loyalty and satisfac-

tion and boost retention rates.

The Trust Factor

Trust is a key driver of employee loyalty and engagement, as shown by its placement

in the top right quadrant of Figure 1. Numerous research studies in recent years

have consistently shown trust to be of critical importance to today’s workers. When

employees lack trust in management, productivity decreases, morale sinks and an

“us versus them” culture emerges, undermining an organization’s health and future.

According to the Institute for Corporate Productivity (i4cp) (WorldatWork 2008),

most organizations recognize that trust is an important consideration in their success,

but many employees don’t feel it is being nurtured internally. The main culprit is

senior-management credibility, which is seen as a problem in a quarter of companies.

In the institute’s study of hundreds of companies, one of five respondents does not

feel his or her organization engenders trust. Forty percent thought trust is nurtured

FIGURE 1 Metrics Used to Evaluate Pay and Reward Program Success

Added Value/Unspoken Motivators

❚ Leadership with vision

❚ Vision/goals/mission clearly communicated

❚ Creativity and independent thinking valued

❚ Continuous innovation viewed as vital

❚ Organization reflects the employee’s

values, aspirations and beliefs

Lo

w

Hig

h

Low-Yield Attribute

❚ All other 26 attributes measured

Key driver/high impact on loyalty

❚ High level of trust between management

and employees

❚ Influence on goals/strategy related to job

❚ Professional development encouraged

❚ Empowered to use own judgment

❚ New ideas encouraged and tried out

❚ Passionate and motivated employees

Expected/Minimum Requirement

❚ Recognizes/rewards excellent performance

❚ Open communications across all levels

❚ Opportunities for advancement

❚ Good benefits

❚ Generous paid time off

❚ Fair compensation for job asked to do

❚ Reasonable number of hours worked

Low High

Stated Importance

De

rive

d I

mp

ort

an

ce


only to a moderate extent. When segmented between low- and high-performing

companies, the difference is starker: Forty percent of low-performing companies

feel their organizations do not nurture trust, while only 16 percent of respondents

from high-performing companies feel the same.

A solid strategy to increase trust, and reduce time wasted, rests in providing an open

and transparent working environment that strengthens the organization, as employees

spend less time engaging in distracting chatter and more time in productive work.

Other Key Drivers

Employees also indicate that they need to influence goals and strategy; feel

empowered to use their own judgment; and find that new ideas are encour-

aged. One way to know if the organization’s employees feel empowered and

influence their work is how they express opinions of their work. For example,

do they use the word “own” or portray ownership in referencing their projects

and responsibilities? Employee opinion surveys are also significant in this area.

Another key driver is offering professional development, and organizations

making professional development a high priority and an ongoing endeavor will

capitalize on strengthening employee loyalty.

Addressing the key motivation drivers will result in more motivated employees.

IMR’s research indicates that — in this economy — focus is renewed on working

with passionate and motivated employees, as this affects the day-to-day life within

an organization and directly influences the happiness and focus of employees. It has

become imperative for organizations to keep an eye on the morale of their workforce

and work to keep it positive through effective communication about the state of the

organization, the industry and the employee’s role in the organization.

Unspoken Motivators

The key drivers previously discussed are articulated by employees as important.

Equally insightful are the unarticulated or unspoken attributes (Figure 1: top left

quadrant). These attributes are unique in that they can provide employers with

an opportunity to delight recruits and employees and further the organization’s

competitive positioning for the best talent.

Two of the top five unspoken motivators relate to creativity and innovation.

America’s economic future may rest on the ability to innovate, and if workers under-

stand how brainstorming and other creative-thinking sessions can contribute to

the organization’s bottom line, they will feel their input is valued. Other unspoken

motivators relate to the organization itself and its leadership. Employees desire

to work for a leader with vision and an organization reflecting their (employees’)

values, aspirations and beliefs. These unspoken motivators have a low-stated

importance according to employees but a high-derived importance, which means

they don’t stand out as critically important in the employee’s mind, but efforts to

improve these will greatly affect attraction and retention.


Minimum Requirements

The expected or minimum require-

ments (Figure 1: bot tom r ight

quadrant) have a high-stated impor-

tance and low-derived importance.

Feedback from surveyed employees

indicates these minimum require-

ments are important, but they do

not increase loyalty. The minimum

requirements quadrant — in which

fair compensation, good benefits

and generous paid time off fall —

can best be described as “cost of

entry” attributes. However, it is the

authors’ experience, and it is impor-

tant to note, that failing to meet these

minimum requirements will result in

lower initial attractiveness and greater

loss of employees over time.

The final quadrant is the low-

yield attributes (Figure 1: bottom left

quadrant), which have low-stated

importance and low-derived importance. They are not good indicators of employee

loyalty, and resources focused on these attributes are ultimately wasted.

THE GENERATIONAL DIFFERENCE: KEY DRIVERS

Unlike any time in U.S. history, four generations are in the workforce at the same

time, each with distinguishing characteristics.

For the purpose of the author’s study the three dominant generations — by size —

are included. The fourth generation, the Matures, is a relatively small percent of

the workforce and not statistically viable for the survey’s purpose. The generations

in the workforce are as follows:

Generation Y (also called “Millennials”) (74 million are less than 30 years of age) ❚

Generation X (slightly less than 50 million are between 30 and 45 years ❚

of age)

Baby Boomers (76 million workers are between 46 and 64 years of age). ❚

Many managers, consultants and researchers feel that this generational difference

is significant and plays an important factor in employee engagement. For example,

Berkshire Associates (2008) noted:

Outside your office door, everything may appear fine, but tension may

be brewing among your Baby Boomer, Generation X and Generation Y

workforces. How can managers and HR work together to optimize each

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group’s strengths while creating a productive and satisfying environment

for all three styles?

The core of this tension originates from differing work values and

perceptions of relationship with employers.

Understanding the differences between these three groups will allow

you to effectively use their experiences and diverse views. It’s your job to

figure out how you can best build your environment to balance the needs

of cross-generational workers in your company.

The generational consideration is one that is somewhat controversial.

Author Frank Giancola wrote recently (2008):

The generational approach has many serious weaknesses. First, academics

believe that two of its main premises lack support and that the Cohort

Generation is not worthy of serious study. Second, there is disagreement

among experts over the birth periods and number of generations, making

defining a generation a problematic task. Third, people born near the start

or end of a generation exhibit characteristics of two generations. Fourth,

the Baby Boom generation is long enough to cover parents and their

children. Fifth, research shows that the most valued and defining rewards

of some generations are valued equally or higher by others. Finally, recent

research shows that generational conflict at work has been exaggerated.

These weaknesses make the Cohort Generation a challenging concept

for HR professionals and provide a valid rationale to focus on other talent

strategies. The best advice comes from Gallup: Organizations need to

understand employees as individuals to determine whether they share the

same interests and values as the organization. Intensive candidate interviews

and employee surveys are needed to gain this knowledge. HR programs

based on the deeply flawed generational approach increase the chances

of suboptimal organizational performance and wasted resources.

(A Cohort Generation is a group of people who experience the same historical

events at about the same age.)

In addition, a study by Sirota Survey Intelligence indicates that the generational

employee engagement differences are small (WorldatWork 2008a).

The authors, however, believe that the differences are strong and that the genera-

tional differences are important to consider in attracting, motivating and retaining

employees. IMR Research Group’s survey results are presented here.

Millennial Motivators

As employers get to know the latest generation to join their ranks, they are thirsty for

information on how to attract, retain, manage and maintain loyalty from this genera-

tion. Figure 2 on page 46 presents the key drivers motivating this generation.

Particular to this generation is working for an organization with open commu-

nication across organizational levels. Millennials are highly motivated by bosses


who help them understand how they

fit into the larger picture — to under-

stand why they are being asked to

do what they do, which begins with

open communication. The Millennial

generation is the first to be included

in its own family budget discussions,

so members are accustomed to a seat

at the table. Organizations leveraging

this attribute will find ways to allow

this generation to influence goals

and strategies as they relate to their job and allow this generation to share new

ideas and try them out. Millennials value their creativity and independent thinking,

and though they are looking for direction and guidance, they want to be valued

for what they bring to the table.

Generation X Motivators

As the Baby Boomers begin to retire,

the business world will rely heavily

on Generation X to lead organiza-

tions. Figure 3 presents the key drivers

motivating members of Generation X.

Gen Xers coined the term “life-

long learners,” thus opportunities

for learning and the encouragement

of professional development are

uniquely important to this generation.

This generation is at midcareer, and

as members continue to climb the

corporate ladder, receiving fair compensation for the job they are asked to do is an

important key driver. They also need to feel trusted and empowered to use their own

judgment and influence their goals and strategies, especially when leading teams.

Baby Boomer Motivators

Millions of Baby Boomers will pass retirement age in the next 10 years, but with

the financial hit many retirement funds have taken recently, this generation may

not be in a hurry to retire. However, the decision to keep working is not solely

based on financial reasons. In addition, Boomers are becoming known as the

“sandwich generation” as they deal with aging parents and growing children, many

of whom return home after graduating college or never leave. With new stress and

pressure on their time, members of this generation will be looking for balance

in their work and personal lives.

FIGURE 3 Generation X Key Drivers

❚ Fair compensation for the job asked to do



and employees

❚ Opportunities for learning

❚ Professional development is encouraged



❚ Influence over goals/strategy related to job

FIGURE 2 Millennial Generation Key Drivers

❚ Open communication across all levels




and employees




It is easy to deduct from the key

drivers motivating this generation

that they want to influence job

goals (they want their experience

recognized and respected), to be

able to try new ideas, to have their

creativity and independent thinking

valued and to be empowered to use

their own judgment. And unlike the

Millennials and Generation X, the

Boomers expect that individual and

team successes will be celebrated,

which is in line with their leadership style of leading by consensus and having a

team perspective. Figure 4 represents key drivers for Baby Boomers

CONCLUSION

Employee engagement directly impacts profitability, and organizations are wasting

resources — human and financial — unless the focus is on policies and practices

that are going to provide the best return on investment in helping to attract as

well as retain talent. Organizations must figure out how best to retain their top

talent to be well positioned for an economic resurgence. Understanding what

drives employee motivation and loyalty is key to the sustainability and growth

of an organization. ❚

FIGURE 4 Baby Boomer Key Drivers



and employees



❚ Individual and team successes celebrated



Corporate Executive Board. 2008. Executive Guidance for 2009. http://www.executiveboard.com/2009guidance/

pdf/Exec_Guidance_TC_Web.pdf. Viewed: Jan. 15, 2009.

Branham, Leigh. 2005. The Seven Hidden Reasons Employees Leave.

Berkshire Associates. 2008. The Generation Factor — Understanding how differences in generations affect

your workforce. www.berkshireassociates.com/infocenter/whitepapers.aspx. Viewed: Feb. 25, 2009.

Giancola, Frank. 2008. “Is the Generation Gap a Bogus Issue?” workspan, November: 23.

IMR Research Group Inc. 2008. Work/life Survey: Attraction & Retention Scorecard.

Taylor, Craig. 2004. “Retention Leadership,” T&D, March.

WorldatWork. 2008. “Organizations Are Failing to Create Trust Internally.” Newsline: Aug. 21. http://

www.worldatwork.org/waw/adimComment?id=28005. Viewed: Feb. 25, 2009.

WorldatWork. 2008a. “Employee Engagement Differences Across Generations Relatively Small.” Newsline:

April 3. http://www.worldatwork.org/waw/adimLink?id=25544Viewed: Feb. 25, 2009.

REFERENCES

AUTHOR

Stacey Randall is the founder and chief consultant of SBR Consulting LLC and is the workplace futurist for IMR

Research Group Inc. As an employee retention specialist, she works as a generational consultant and leads

IMR’s proprietary work-life attraction and retention scorecard for companies and city groups across the United

States. She can be reached at [email protected].

It is difficult to keep productivity levels up when faced

with high levels of employee turnover. However, it

is generally the feeling that these levels of turnover

are a necessary cost of doing business in high-growth

countries. Historically, turnover has been perceived to be

mainly a pay issue, as market levels increase much faster

than inflation, thus making it hard to keep up with the pay

increases offered by some competitors. Therefore, most

answers to this problem typically, yet incompletely in the

author’s view, have had pay solutions at their core.

That had certainly been Freescale Semiconductor’s expe-

rience to date in India, where the company has two design

centers with a combined population of close to 1,600.

The company’s turnover rate in India in 2007 exceeded

its historical range. Turnover was highest in some segments

of the individual contributor (IC) population. Thus, when

looking at ways to lower the turnover rates in India,

attention was focused on the entry-level professionals

(IC-1),and the next two levels above (IC-2 and IC-3).

In the past, the company tried a variety of market-

driven, pay-related solutions. In other words, in keeping

with the company market-positioning philosophy, the

company followed what others did in terms of increases

and retention packages. Midpoints to a carefully derived

market sample were painstakingly pegged out, and

Using an Analytical Approach

to Increase Retention in

High-Growth Countries:

An Example in India

Fermin A. Diez, CCP, SPHR

Mercer

❚ Human Resource Strategy



Second Quarter 2009


Freescale followed closely the advice of consultants in terms of expected market

salary movements. Competitors were benchmarked in terms of retention packages

and deferred cash was given, equivalent to a substantial portion of annual base,

to those employees who stayed with the company for three years. Turnover rates

were in line with other companies in the industry.

Yet benchmarking just to keep up with the market was not the answer; the

company wanted to be below others in its turnover, or more precisely, Freescale

wanted to be above others in its labor productivity. Being as good as the competi-

tion was not acceptable. For the HR team to “walk the talk” and be a true business

partner, it needed to add value and differentiate Freescale from its competitors. HR

needed to do something, not just different but also better, than the competitors

to achieve this objective.

Using a comprehensive approach, the company analyzed its practices around

recruiting, pay and development, which management thought could potentially

impact turnover rates.

From the beginning, it was established that a level of zero turnover was not

only unattainable, but perhaps unhealthy. Freescale operates on a forced curve

performance management philosophy, and it wanted turnover to be roughly in

line with the expected percentage of lowest performers. Thus it embarked on a

quest to not only reduce turnover in India by 25 percent, but also reduce turnover

at the highest levels of performance to as close to zero as possible.

As a starting point, the company carried out an in-depth analysis of turnover

and retention at the India Design Centers (IDC). In doing so, these principles

were followed:

Support business strategy: It was necessary to ensure current and proposed HR ❚

practices supported IDC’s strategy by improving productivity due to increased

retention. It is difficult, by its nature of being a design center, to precisely

measure productivity at IDC. Management decided to use a proxy whereby the

number of resources allocated to each successful project was measured, as was

whether the project was delivered on time. In those projects where the team

experienced a minimum of turnover during the three- to six-month period a

project usually takes, the likelihood of timely success was greater. Admittedly,

this is a crude measure, but one that the entire IDC leadership team could relate

to and agree with.

Understand turnover drivers: It was critical to understand what was driving ❚

unwanted turnover in the organization. From the beginning, HR went beyond

the pay-related hypothesis and considered many of the reasons for turnover

that management passed along or learned from exit interviews. The focus of

analysis started here, and these anecdotal data were either discarded or turned

into theories through this process.

Be data-driven: To diagnose retention issues, HR analyzed detailed 2007 data ❚

from the Noida and Bangalore operations. Specifically, HR wanted to ensure that


the debate was focused on data rather than opinions. For example, a belief held

by a portion of the management team was that turnover among female employees

was higher than among male employees, while others believed the opposite.

Another typical example was the debate on whether employees from tier one

educational institutions had a higher probability of success. HR sought to end

the “my-opinion-is-better-than-yours” discussions by bringing in unequivocal data.

Use a systems view: HR analyzed a variety of factors affecting retention to ❚

determine the best, most sustainable, solutions. Specifically, the linkages among

human-resources policies were sought. This investigation asked:

Does the pay system support career-development plans? -

Are entry-level salaries tied to turnover results? -

Are recruiting profiles adequately linked to work-life balance findings? -

By examining these links HR wanted to find the keys necessary to achieve its

goals of doing things differently and better.

Measure impact: Employee opinion survey results were not by themselves adequate. ❚

The company felt the need to measure and track retention impact at the manager

level, and to hold the managers — not just human resources — accountable.

TURNOVER DRIVERS

HR examined a comprehensive list of known and potential drivers of turnover

according to the results of interviews with managers as well as with HR staff.

The results of exit interviews, which had been routinely carried out to date,

were also included. This first level of analysis yielded three categories of drivers:

external drivers, organizational drivers and individual drivers. The breakdown of

each of the drivers follows.

External drivers: ❚

Pay levels -

Competition -

Overseas opportunities. -

Organizational drivers: ❚

Job profiles -

Involuntary resignations -

Performance ratings -

Dissatisfaction with manager -

Promotion opportunities. -

Individual drivers: ❚

Higher education -

Relocation -

Low performance -

Educational institution -

Tenure -

Gender. -


One issue contemplated during initial analysis was the low validity of infor-

mation gained during exit interviews. HR decided to conduct a new, revised

set of interviews with employees that had left Freescale India during 2007.

Seventy-seven percent of these former employees were contacted. The former

employees were again asked the reasons why they left the company. This approach

yielded better results, as there was no longer the pressure of departing while

“leaving the doors open,” particularly if the new job “didn’t work out” and

members of this group felt the need to return. For these employees interviewed,

the top three reasons for attrition accounted for 71 percent of total attrition.

These top three reasons were:

Higher studies: Employees left to pursue a higher degree in their field (usually ❚

a master’s degree in electronics engineering, although it could also mean

a doctorate).

Relocation: The employees left to live closer to their own or their spouse’s ❚

home town.

Discontent with the job profile: This item refers to whether the employee ❚

enjoyed his or her job. This was particularly important in the case of Bangalore,

where recent cancellations of a few projects meant employees had idle time.

More specifically, it could also mean that the company was not delivering on

the promise it made to employees when the company was recruiting them.

Some employees felt the company was not delivering on that promise.

The results are quite consistent among employees currently in different salary

grades. Higher studies and relocation are key turnover reasons at IC-1 and IC-2

levels, while job profile is a common concern for all levels (See Table 1).

TABLE 1 Top Attrition Reasons

Job Level

Attrition Reason IC-1 IC-2 IC-3

Higher studies 32% 16% 8%

Job profile 25% 24% 31%

Relocation 24% 20% 8%

Better pay 5% 10% 15%

Dissatisfaction with manager 1% 4% 8%

Low performance 5% 4%

Overseas opportunity 2% 8%

Involuntary 3% 6% 15%

Performance rating 1% 4%

Own venture 2% 8%

Transfer 2% 8%


EXTERNAL DRIVERS: PAY LEVELS

The influence of pay on turnover was the first target of review, as this was

receiving the highest attention from IDC’s management. However, the phone

interviews had put forth a group comprised of less than 10 percent of the inter-

viewees who had left for pay reasons. Compa-ratios for this group were verified,

and HR discovered that in only five of those cases was company total cost (CTC)

actually less than the company median. In fact, median CTC of the attrition

population was in keeping with the overall company and market median.

This was an important finding, as it led to additional research (See Figure 1).

Even though it was established that pay was not a major cause for total turnover,

it was clear that it contributed to at least some of the turnover levels. HR was

particularly concerned with the number of individuals who had a 1 (highest)

performance rating but who were paid below 0.9 compa-ratio. This led to the

implementation of a new policy whereby individuals who were rated 1 would

be paid at a minimum of 0.9 of their salary grade.

ORGANIZATIONAL DRIVERS

Drivers in this area included: performance ratings, dissatisfaction with managers

and promotion opportunities.

Performance Ratings

A turnover analysis conduced by performance level revealed that the company

was losing more employees rated 1, 2 or 5 than it wanted. (For reference, the

Freescale performance rating scale is presented in Figure 2.)

In fact, a substantial percentage of the turnover was among employees

rated 2, 3 or 5. As expected, this was a major cause for concern, as this is

precisely the group of employees the company wanted to retain. However, the

figures revealed a nearly 100-percent turnover of those rated 4, so at least

FIGURE 1 Comparatio Versus Performance Rating

1.75

1.50

1.25

1.00

0.75

0.50

1 2 3 4 5

Co

mp

a-r

ati

o

0.8695510.997831

1.02891 1.02648 0.935374

Appraisal Grouping


at the low-performance level, the organization’s practices were effective in

eliminating lower performers (see Figure 3 on page 54).

Dissatisfaction with Managers

One of the questions HR wanted to explore was what impact did managers have

on turnover rates? Thus, HR checked to determine which managers had the highest

turnover rates, hoping to find commonalities that could be addressed. Table 2

(on page 55) shows the managers with the highest turnover rate in their areas.

The table specifies the business group they belong to, the percentage of turnover

for each, the rating of those employees turning over in each manager’s care, the

performance rating of the managers themselves and lastly the overall index score

for the particular manager in the employee survey. This score is a composite

of the scores related to each manager’s competency level against the Freescale

leadership competencies, as measured by the employees in their group. It ranges

from a possible low of zero to a high of 1.00.

The findings were that the top 15 highest-attrition contributors (managers) lost

more of raters 1, 2 and 5 versus 3 and 4. This was not good news. Many of these

managers had been rated a 1 by their superiors. This crucial discovery led to

FIGURE 2 Freescale’s Performance Rating Scale

Rating Definition Highlights

1

2

3

4

5

Overall performance, including

both results and behaviors,

represents the highest level of

contribution.


both results and behaviors, repre-

sents a high level of contribution.



needs to improve to increase

overall contribution.



does not meet the expected level

of contribution.

Less than six months active.

❚ Exceeds all expectations

❚ Difficult rating to achieve year

over year

❚ Highest opportunity for career

progression and development

❚ Eligible for significant rewards

❚ Meets all expectations

and may exceed some

❚ Opportunity for career

progression and development

❚ Eligible for competitive rewards

❚ Meets most expectations

❚ Opportunity for career progres-

sion and development targeted

at improving performance

❚ Eligible for limited rewards

❚ Does not meet expectations.

❚ Performance needs to improve

❚ Identify and document actions

to improve

❚ Development opportunities

targeted at improving perfor-

mance in current assignment

❚ Not eligible for rewards


several actions on HR’s part, including showing these results to the managers

themselves as a way to stress the need to live the Freescale leadership tenets.

A new training program for first-time supervisors was developed and rolled out.

The program addresses “how things get done” as an important company value.

Finally, HR immediately changed the performance management system whereby

turnover rates would be considered a key metric for all managers.

FIGURE 3 Turnover by Performance Rating

Rater 1

Rater 2

Rater 3

Rater 4

Rater 0/5

34%

4%

8%

24%

31%

TABLE 2 Managers with Highest Attrition

Business Manager Turnover Turnover Manager Employee Survey

Group Profile Percentage Performance Rating Manager Score

A A1 3 (Rater 2, 5), 3 (Rater 3) 67% 2 0.26

B B1 4 (Rater 1, 2), 4 (Rater 3) 62% Left 0.38

C C1 2 (Rater 1, 2), 2 (Rater 3) 50% 2 0.52

C C2 2 (Rater 1, 5), 1 (Rater 3) 50% 1 0.65

D D1 4 (Rater 1, 2, 5), 2 (Rater 3) 47% 1 0.06

A A2 5 (Rater 1, 2, 5) 42% 1 0.23

E E1 4 (Rater 2, 0) 40% 2 0.15

C C3 3 (Rater 1, 2) 38% 2 0.58

D D2 3 (Rater 2), 2 (Rater 3) 36% 2 0.29

C C4 2 (Rater 0), 1 (Rater 3) 33% 1 0.51

F F1 2 (Rater 2, 0) 33% 2 0.52

G G1 5 (Rater 2, 5, 0) 31% 2 0.73

G G2 4 (Rater 2, 5, 0) 31% 2 0.61

G G3 4 (Rater 2, 5, 0), 1 (Rater 3) 28% 2 0.44

H H1 4 (Rater 2, 5), 1 (Rater 3) 27% 2 0.28

C C5 1 (Rater 2), 2 (Rater 3, 4) 27% 2 0.43

A A3 2 (Rater 2, 5) 27% 2 0.18

B B2 5 (Rater 2, 5) 27% 1 0.35


Promotion Opportunities

A particularly worrisome bit of news was that a high percentage of exiting

employees were high performers with several years of experience. These were

employees who were potentially ready, or even overdue, for a promotion.

In high-growth markets, there is a dilemma about speed of promotions.

Does an organization promote employees in these markets before the employees

are ready and couple the promotion with additional training to help individuals

grow? The risk is of unprepared managers leading work groups, with perhaps

a loss of productivity. Or does an organization wait until employees are ready

to be promoted, at the risk that competitors will think the employees are ready

for a promotion, recruit the employees and thus create a higher turnover of

good employees? The company’s career-planning guidelines establish the number

of years that an employee should take to move from one level to the next.

The implication was that each year the company should be promoting no less

than 15 percent of employees at each level to maintain healthy levels of “build

versus buy” talent policies. Freescale’s promotion rates were lower than that.

This analysis led to a change in promotion guidelines and training programs

to better tie in with strategy. In the future, formal job-rotation programs will

support development policies.

In addition, HR learned that the market differentials between these three IC

levels were in the order of 50 percent to 75 percent. However, the market average

salary increase for last year was 13 percent to 16 percent in Freescale’s industry.

HR used this range to adjust its midpoints. Applying simple mathematics, if the

midpoints are moving roughly the same as the company is providing increases,

it would not be possible to move individuals up in the salary range. The impli-

cations were troubling: The organization was not promoting its employees

fast enough, which meant it needed to hire from the outside to cover gaps.

These employees from the outside were coming in at premiums above market.

The resulting differential in salary levels created additional problems that

management had heard before (“the best way to get a salary increase in this

company is to leave and come back”). In addition, it became apparent that the

organization needed to make changes in its compensation policies to solve this

problem. Among the actions contemplated were to hire at a higher market rate

(thus reducing midpoint differentials), provide above-market salary increases

and break these increases into two times a year to help retention and reduce

cash-flow issues.

INDIVIDUAL DRIVERS

Three of the individual drivers analyzed included (1) the educational institutions

that were the source of the company’s employees, (2) tenure and (3) gender.


Educational Institutions

An item of substantial discussion about the company’s India recruiting strategy is whether

the company should hire only students from tier one educational institutions (such as

IIT, Bits Pilani), or whether it should expand to recruit more from tier two schools.

An analytic approach provided a chance to determine if tier one students were more

likely to stay with the company longer than tier two students. While the company

was unable to find any differences in performance from tier one to tier two, it

discovered that tier one entry-level employees were more inclined to leave sooner

and go for higher education. This finding suggested widening the recruiting profiles

for entry-level employees.

Tenure

Data also showed that attrition for employees with less than one year of tenure

was higher than the overall average. Attrition for employees with less than three

years of tenure was also a major concern. This finding led the organization to

question the efficacy of its selection decisions and its onboarding process.

The highest attrition was among employees between the first year and the

second year of tenure with the company (See Figure 4). Higher studies, relocation

and job profile were the top reasons for attrition among this group. Sixty-one

percent of the overall attributed population consisted of lateral hires, even

though the tenure range and median of entry-level and lateral hires was the same.

For employees with more than three years of service, need for promotion,

strategic work, different exposure, relocation due to marriage and better pay were

key reasons for attrition. These were all important in helping to change recruiting

profiles and adapt new policies aimed at retention.

FIGURE 4 Attrition by Tenure

60

50

40

30

20

10

0

< 6 months

6 months - 1 year

1 year - 1.5 years

1.5 years - 2 years

2 years - 2.5 years

2.5 years - 3 years

3 years - 3.5 years

> 3.5 years

Pe

rce

nt

17%20%

16%

9%

21%

31% 32%

48%

Tenure

25%

40%

15%


Gender

Female attrition was slightly higher

than male attrition. Yet, although

female attrition was higher, their

median tenure was marginally better

than that of the male population.

This information will be used to

help in the efforts to make Freescale

a “best place to work” in India.

SUMMARY

Freescale’s India business was expe-

riencing high turnover. It was losing

nearly as many people as it was hiring

above entry level, and it was hiring

nearly as many people at level IC-2

as it was losing in the next lower

level. These were not healthy signs

and ones that motivated the company

in its search for data-driven solutions

that addressed turnover from a total

rewards standpoint.

HR’s study debunked several

myths, which allowed HR to make

several changes to increase retention. These included changes to recruiting profiles,

manager and employee-training programs, career-planning and development plans

and pay policies. HR also developed a dashboard shared between line manage-

ment and human resources to monitor the turnover rate as well as the impact on

turnover. To date, the results have been encouraging. Turnover is down by more

than one-third, which is better than the established target.

Part of the organization’s success came from coupling the quantitative data

with a deep understanding of the qualitative data. Its analysis was filtered was

through not only human resources and management. But it was well rooted in

employee feedback on what makes someone stay or leave the company.

In the end, the objective of helping improve productivity as a means to help the

business improve is on its way toward achievement. Having a set of metrics to

provide a guide is helpful, but it is an area in need of further improvements.

The company’s management believes that it is closer to answering the question

of whether or not the company is delivering on its employment-value proposition.

Management now knows what it will take to deliver on this proposition, and it

has taken steps to draw closer to that delivery.

RESOURCES PLUS


www.worldatwork.org



❚ Employee feedback

❚ Employee retention

❚ Turnover.




❚ Culture at Work — Building a Robust

Work Environment to Help Drive Your

Total Rewards Strategy

❚ Champion of Change — How to Build

Support for HR Initiatives and New Programs,

Second Edition.


❚ T1: Total Rewards Management


❚ T4: Strategic Communication in Total Rewards


❚ Pricing Critical Skills and Unique Positions



Finally, the biggest lesson came from taking an integrated approach to reten-

tion by deeply analyzing a variety of turnover drivers. HR expects to save a

substantial amount on recruiting costs alone, on top of the improvements in

quality, on-time delivery and overall project costs. But the highest benefit will be

enhancing the work environment at IDC to ensure employees are further valued,

properly compensated for their efforts and have clearer career opportunities

within the company. ❚

AUTHOR

Fermin A. Diez, CCP, SPHR, is a worldwide partner

and head of sales for Mercer in Asia Pacific. He has 25

years of experience in human resources in consulting as

well as corporate roles in Asia, Australia, Latin America

and the United States. He has also taught at the post-

graduate level at the University of Puerto Rico and at

the Universidad del Sagrado Corazón. During the time

of this project, he was the vice president of human

resources, Asia Pacific, at Freescale Semiconductor.

Diez has a bachelor’s degree in psychology from

the University of Michigan and a master’s of busi-

ness administration from the Wharton School at the

University of Pennsylvania. He has served on the

board of directors of WorldatWork and is a frequent

author and reviewer for WorldatWork publications.

He can be reached at [email protected].

CFOs See Business Impacts

of Work-Life Flexibility,

But They Can’t Execute

for Strategic Benefit

Experts predict that the rate of change to which

organizations and individuals will have to adapt

will increase in the coming years (Kotter 2008).

The rise in energy costs and the worsening recession

are two recent examples of rapid change, and many

organizations lacked the f lexibility and agility to

respond creatively. Nimble response to change requires

decision makers to be open to new ideas in how,

when and where work is done, and life is managed.

These new ideas can become business realities through

the strategic use of workplace flexibility.

Through a combination of flexible and reduced sched-

uling, teleworking, job sharing, sabbaticals, compressed

workweeks and the use of contract workers, leaders

can adapt organizational operations to address business

challenges and seize opportunities. These workplace-

flexibility strategies can reduce labor costs, improve work

flow planning, expand client service, leverage technology,

reduce real-estate overhead, increase environmental

Work-Life ❚

Cali Williams Yost

Work+Life Fit Inc.



Second Quarter 2009


sustainability, improve disaster preparedness and lower health-care costs, to list

a few potential positive business outcomes. And the strategies help employees

at all levels flexibly manage their work and their lives to meet their needs and

the organization’s needs.

Historically, workplace flexibility as an HR strategy to attract and retain talent

has received the most attention. This paper examines the perceptions of CFOs to

determine if these front-line, financial decision makers see what the survey termed

“work-life flexibility” as a strategic lever CFOs can apply to respond to changes

in the business. A survey was developed to determine if the culture, policies and

procedures in the CFOs’ organizations would support the rapid execution of a

business strategy that included work-life flexibility. In other words, did the aware-

ness and the organization align?

To answer these questions, BDO Seidman LLP (BDO) and Work+Life Fit (WLF)

cosponsored the 2008 CFO Perspectives on Work Life Flexibility study to gauge

CFO points of view on work-life flexibility’s potential business impact. The study

found that a majority of CFOs do see the broad potential results of work-life

flexibility. And more than one-half have increased their personal use of work-

life flexibility during the past few years. However, a wide gap emerges from

the study’s findings between CFO awareness and the organizational culture and

strategic infrastructure required to execute a coordinated flexibility strategy.

The study’s findings can guide efforts to more effectively integrate work-life flex-

ibility into the day-to-day operational decision-making and execution of business

strategy in response to external and internal change.

METHODOLOGY

The national telephone survey was conducted by a third-party research firm, Market

Measurement Inc. The study examined the opinions of 100 CFOs at companies

with at least 5,000 employees from a pure random sample of approximately 1,800

organizations in the United States. For this study’s purposes, work-life flexibility

was defined in the questionnaire as having adequate time for what is important

to you both personally and professionally, as well as flexibility in how you allocate

that time.

FINDINGS

Several findings emerged including:

CFOs are aware of the influence of work-life flexibility on the business. ❚

With a formal approach to flexibility, CFOs are more likely to see the effect on ❚

profitability and the business, and they predict continued use in a downturn.

CFOs report personal awareness and use of work-life flexibility. Despite CFO ❚

awareness, a lack of organizational alignment behind work-life flexibility will

limit strategic impact.


Aware of the Influence of Work-Life Flexibility on the Business

The survey found that CFOs recognize broad potential business impacts of work-

life flexibility. When asked, “How important is work-life flexibility to the future

profitability of your organization?” 66 percent of the CFOs said, “somewhat” or

“very” important; 45 percent said “somewhat” important; and 21 percent said

“very” important.

Digging deeper into the specific impacts, almost all 100 CFOs surveyed recog-

nized the value of work-life flexibility as a talent-management strategy, with

90 percent and 88 percent indicating it has a “high” or “moderate” impact on

improving retention and recruitment, respectively. A majority of CFOs recog-

nized “high to moderate” business benefits from work-life flexibility that went

beyond talent, including improved employee productivity, differentiation from

competitors, minimizing environmental impact and reducing health-care costs

(See Table 1).

As shown in Table 1, the surveyed CFOs were less likely to see how work-life

flexibility could reduce real-estate costs (34 percent) and enhance customer service

(34 percent). This was somewhat surprising given the potential real-estate cost

savings from having a portion of the workforce telework or shift hours, and the

potential for improving customer service by using flexibility to reduce turnover

and extend customer-service coverage across time zones. However, it should be

noted that one-third of the CFOs did recognize these potential benefits.

TABLE 1 Impacts of Work-Life Flexibility (Percentage of CFOs Citing “High” to “Moderate”

Impacts of Work Life Flexibility)

Retention

Recruitment

Productivity

Comp.

Differentiation

Environmental

Impact

Health-care

Costs

Real-estate

Costs

Customer

Service

Percent of CFOs Saying “High” to “Moderate”

0 20 40 60 80 100

90%

88%

75%

72%

68%

53%

34%

34%


At the time the survey was conducted (in late May 2008), approximately one-

third (38 percent) of respondents reported that their organizations had reduced

their workforce in recent years. Employee layoffs were the most common form

of downsizing. However, almost one-third (30 percent) of the CFOs innovatively

used flexibility as a force-reduction strategy, allowing them to stay connected to

employees. They offered a combination of contract project-based work (24 percent),

reduced hours with full benefits (3 percent) and unpaid sabbaticals with full benefits

(3 percent). These findings confirm a historical precedence for a flexible approach

to downsizing that goes beyond job cuts. This is particularly important as the

economy moves deeper into a recession and financial decision makers seek to

achieve additional labor-cost savings. Layoffs are not the only option.

The Importance of a Formal Approach to Flexibility

The study found that having a formal organizational approach to work-life flex-

ibility made a difference in CFO awareness of the business benefits. Of the 100

CFOs who participated in the study, 39 percent, or almost two of five, work in

organizations with formal work-life flexibility policies and procedures.

Within these organizations with a formal approach to work-life flexibility, CFOs

were more likely to report that work-life flexibility is important to future profitability,

with 75 percent indicating it’s “very important” or “somewhat important” (versus

66 percent for all CFOs who responded). Eighty-seven percent of the CFOs whose

organizations have flexibility policies and procedures predicted the use of flexibility

will either increase or remain the same despite the economic downturn.

The fact that a majority (59 percent) of CFOs from organizations with a formal

approach to flexibility identified nontalent-related motivations as the primary

drivers for flexibility in their companies might partially explain their higher level

of support regardless of economic conditions. These drivers included:

Increased amount/complexity of work (28 percent) ❚

Competition (21 percent) ❚

Globalization (10 percent). ❚

Thirty-six percent of CFOs with flexibility policies and procedures cited the

competition for talent as the most important driver, and 5 percent responded

“don’t know.”

Personal Awareness and the Use of Work-Life Flexibility

The CFOs’ awareness of work-life flexibility didn’t stop with the organization.

A majority of the 100 CFOs (53 percent) reported an increased use of personal

work-life flexibility during the past several years, with 14 percent indicating that

the increase was substantial. More than 80 percent reported being satisfied with

their personal use of work-life flexibility, with 31 percent reporting they were

very satisfied.


Flexible hours and teleworking were most common, with the majority of

CFOs surveyed reporting a “high” or “moderate” use of flexibility in their hours

(63 percent), followed by “working from other locations/telecommuting” (27 percent).

Approximately one in four CFOs (26 percent) have, at some point, reduced the

average number of hours they worked by five to 10 hours per week, with 16

percent reducing their schedule by at least five hours per week and the remaining

CFOs (10 percent) reducing it by at least 10 hours.

A Lack of Organizational Alignment Behind Work-Life Flexibility

The majority of CFOs do recognize the broad business and personal applications

of work-life flexibility. However, the likelihood that this awareness will translate

into a strategic use within the business is limited by the fact that only 13 out of

the 100 CFOs work for organizations with a formal approach to flexibility and

have a leadership team who sees flexibility as a business strategy, not a perk.

In other words, while a majority of CFOs understand how beneficial work-life

flexibility can be personally and to the business, 87 percent work in organi-

zations that do not have the cultural and procedural alignment necessary for

work-life flexibility to be part of a business strategy that rapidly responds to

business change. Without a formal approach in place and a like-minded manage-

ment team, this wide awareness-action gap must be bridged before a CFO could

use work-life flexibility as a strategic lever in the decision-making process.

Lack of Formal Approach to Flexibility

As noted earlier, less than one-half of the CFOs (39 percent) reported that their

organizations offer a formal approach to flexibility in the form of policies or proce-

dures. This does not mean that the remaining 61 percent of organizations don’t

have work-life flexibility. There may be pockets of ad hoc, informal flexibility on

where, when and how work is done. Or perhaps the responding CFO is unaware

of the formal policies and procedures in place. Regardless, these statistics mean

that no recognized organizational structure exists around work-life flexibility that

could guide a rapid response to change.

While policies and procedures alone do not guarantee the effectiveness of

work-life flexibility, they do provide guidelines against which to execute a stra-

tegic application flexibility to achieve a specific business goal. In other words,

a policy and procedure for reducing schedules would make it much easier for

a CFO to make schedule reductions part of his or her labor-cost saving strategy

in response to an economic downturn. A majority of the CFOs’ organizations

(61 percent) lack a formal approach to work-life flexibility. Therefore, the systems

are not in place to guide rapid, consistent execution.


Leadership Team Sees Flex as a Perk/HR Program, Not a Business Strategy

The absence of a formal approach to flexibility was not the only area of misalign-

ment between CFO awareness and organizational capacity identified in the survey.

Almost two-thirds (62 percent) of the CFOs who worked in organizations with

flexibility policies and procedures felt their management team viewed work-life

flexibility to be an informal perk or human-resources program. Only one-third

(33 percent) felt their leaders believe work-life flexibility is a business strategy to

manage talent, resources and work flow, showing that having a formal approach

to flexibility does not guarantee that the leadership will perceive work-life flex-

ibility strategically. Given these findings, it is clear that when faced with a business

challenge requiring rapid, flexible response, a minority of the senior leadership

team would consider work-life flexibility to be a strategic solution.

For Flex to Succeed, Business Leadership, Not Just HR Alone Must Champion It

Regarding the responsibility for flexibility, a majority (75 percent) of the 100 CFOs

agree that for work-life flexibility to succeed, it is “very important” for business-

unit leaders to be involved and supportive. Further reinforcing the importance of

direct business-line involvement, close to two-thirds (65 percent) felt that work-life

flexibility cannot be successful if the HR department is the only champion.

This is another area where the awareness of the CFOs does not match the action

being taken in their organizations. Considering that only 13 of the 100 CFOs

said they work for organizations with a formal approach to flexibility and with

a leadership team that sees it as a business strategy, it is unclear that work-life

flexibility is “on the radar screen” of HR. It is even less likely that business-unit

leadership is actively supporting the work-life flexibility strategy development and

implementation process.

Overcoming Common Organizational Obstacles to Flexibility

Sixty-two percent of CFOs in organizations with flexibility policies and proce-

dures reported that their senior leaders see flexibility as an informal perk or HR

program. Therefore, it is unsurprising that 37 percent of the 100 CFOs were “highly”

concerned that an organizational obstacle to the use of flexibility rests with senior

management, who is unconvinced of the benefits. The other obstacles provoking

a high level of concern with the CFOs surveyed related to implementation:

A concern that it must be offered to either all employees or no employees ❚

(45 percent)

Concerns that employees will abuse flexibility (32 percent) ❚

Fears that flexibility in the workplace will reduce worker productivity (32 percent). ❚

Few considered a lack of perceived need for work-life flexibility (15 percent) or

a lack of familiarity with the work-life flexibility concept (9 percent) to be high-

level obstacles. In other words, the awareness exists. The challenges CFOs saw

related to buy-in to strategic implementation.


Overcoming Common Personal

Obstacles to Flexibility

Organizational obstacles were not

the only challenges that CFOs felt

stood in the way of successful work-

life flexibility. The CFOs identified

personal concerns that would be

equally challenging. When asked

to identify “significant” obstacles

that would keep them from person-

ally pursing work-life flexibility, the

majority of CFOs cited common

roadblocks such as:

Importance of face time with others ❚

in the organization (76 percent)

Demands and workload of the job ❚

(72 percent)

Concerns about how they would ❚

be perceived by other employees

at their level (62 percent)

Concern that it could hurt their ❚

career (58 percent).

CFOs who work for organiza-

tions with flexibility policies and

procedures were significantly less likely (67 percent) to indicate that “face time”

would be a significant obstacle to pursuing work-life flexibility than the CFOs

in companies without a formal approach (86 percent). This is further evidence

that a formal approach to flexibility does help individuals overcome personal

fears related to flexibility.

IMPLICATIONS

In an era where rapid change is no longer the exception, but the rule, flexibility

in where, when and how work is done and life is managed is an imperative.

Strategic work-life flexibility provides business leaders and individuals with an

important lever for responding to challenges and opportunities. Survey findings

provide insights to guide individuals focused on integrating work-life flexibility

strategies into the day-to-day strategic business decision-making process.

A majority of CFOs are aware of organizational and personal impacts of work-

life flexibility. These front-line, financial decision makers recognize the broad

potential business applications of work-life flexibility, including managing talent,

competitive differentiation, and reducing environmental impact and health-care

costs. A majority of CFOs who work for organizations with a formal approach

RESOURCES PLUS


www.worldatwork.org



❚ Work-life flexibility

❚ Attract and retain

❚ Flexible schedules.


❚ Work-Life Effectiveness — Bottom-Line

Strategies for Today’s Workplace



❚ Workforce Engagement —Strategies

to Attract, Motivate and Retain Talent.


❚ W1: Introduction to Work-Life Effectiveness —

Successful Work-Life Programs to

Attract, Motivate and Retain Employees


❚ W2: The Flexible Workplace — Strategies

for Your Organization, Certification Course


A Work-Life Perspective, Certification Course.


to flexibility believe the primary drivers behind flexibility strategies are the

work load’s complexity, competition and globalization. But more can be done

to connect the dots to enhance their understanding, particularly in the areas of

customer service and real-estate cost management.

A majority of the CFOs also personally use work-life flexibility to manage their

own work and personal responsibilities, which increases their recognition of how

individuals in their organizations benefit from flexibility as well.

The study also identified a wide gap between the CFOs’ awareness and the

cultural and procedural alignment necessary for work-life flexibility to be part

of a business strategy that rapidly responds to business change. Only 13 out

of the 100 CFOs in the study said they work for organizations with a formal

approach to flexibility and with a leadership team who believes work-life flex-

ibility is a business strategy. This limits the chance that a majority of CFOs will

be able to use flexibility as a strategic lever. By contrast, this gap also provides

an opportunity. Implications for work-life flexibility strategy development and

implementation include:

Use up-front “branding” of work-life flexibility within the culture as a business ❚

strategy for managing talent, resources and workflow. If flexible schedules, tele-

working, reduced schedules, compressed workweeks, sabbaticals and project-based

work are viewed as informal perks or HR programs by senior leadership, then

they will not be seen as part of the strategic decision-making process. Up-front,

flexibility in where, when and how work is done needs to be positioned as both

a business strategy and a personal work-life management strategy.

Involve business line leadership in the development and implementation of strategic ❚

work-life flexibility from the beginning. Too often, HR is the sole champion of work-

life flexibility within an organization. And as the CFO survey found, this will have

limited influence in terms of integrating work-life flexibility into the day-to-day

business operations. Leverage the CFOs’ awareness of how work-life flexibility

can help them achieve a variety of important profit and business objectives to

encourage line leaders to be involved and supportive throughout the process.

In addition to leaders understanding the benefits of flexibility, ensure organiza- ❚

tional obstacles related to effective implementation are addressed. Overcoming the

organizational obstacles about which the CFOs expressed a high level of concern

requires developing the work-life flexibility strategy in partnership with line lead-

ership. Unlike a policy or a program that must apply equally to all regardless of

circumstances, everyone has access to the same process to determine what type

of flexibility will work for them personally and for the business. But not everyone

is guaranteed the same type of flexibility. As part of business operations, formal,

flexible work plans should be reviewed periodically and, if they are not meeting

their goals established by the business and the individual in terms of performance

and productivity, should be discontinued. ❚


Kotter, John P. 2008. A Sense of Urgency. Boston: Harvard Business Press.

REFERENCE

AUTHOR

Cali Williams Yost is the founder and CEO of Work+Life

Fit Inc., a consulting firm that specializes in developing

innovative business-based work-life flexibility strate-

gies for organizations and individuals. Clients include

BDO Seidman LLP, the United States Navy, Ernst &

Young, Barclays Global Investors and Quaker, as well

as thousands of individuals. Yost has been consulting

since 1995, first at the Families and Work Institute

and then at Bright Horizons Family Solutions. She has

a master’s of business administration from Columbia

University and is the author of Work+Life: Finding the

Fit That’s Right for You (Riverhead/Penguin Group

2005). Yost writes the Work+Life Fit Blog, available

at www.worklifefit.com, and is an expert blogger for

Fast Company magazine. She can be reached at

[email protected].

BDO Seidman LLP, co-sponsor of the CFO Survey,

is a national professional services firm providing assur-

ance, tax, financial advisory and consulting services

to a wide range of publicly traded and privately held

companies. BDO Seidman serves clients through

37 offices and more than 400 independent alliance

firm locations nationwide. As a member firm of BDO

International, BDO Seidman LLP serves multinational

clients by leveraging a global network of resources

comprised of 626 member-firm offices in 110 coun-

tries. BDO International is a worldwide network of

public accounting firms, called BDO member firms,

serving international clients. Each BDO member firm

is an independent legal entity in its own country.

Melissa L. Means, CCP

Pearl Meyer & Partners

Holistic Pay Modeling:

Getting the Complete Executive

Pay Picture

Growing public scrutiny of executive compensa-

tion means that for many companies, it’s a matter

of when — and not if — they will be required

to defend the design and administration of executive

compensation programs. Directors, executives and HR

leaders must be able to tell a compelling story about the

thinking behind decisions and outcomes, supported by

evidence of a solid, far-reaching framework underlying

the full complement of pay elements. Absent such a

detailed understanding of how the entire confluence

of possible factors in various scenarios could affect

compensation levels, companies may face controversy

over unexpectedly large payouts.

The traditional tools of compensation analysis bring

important information to the decision-making process.

A competitive analysis allows companies to compare the

overall structure and expected payout of a compensation

package against that of peer companies as well as data from

surveys at target or actual performance-achievement levels.

This is, in some organizations, known as a bench-

marking analysis. A tally sheet calculates an executive’s

total earnings as of a single point in time for all elements

❚ Compensation



Second Quarter 2009


of compensation, from salary and bonus to deferred compensation, pension and

severance arrangements, assuming target or actual performance-achievement levels

based on a single stock price.

However, often missing from the oversight tool kit is a more far-reaching and

specific line of sight into what a particular executive has the potential to earn.

A holistic, or dynamic, pay analysis can model how the individual elements of

complex executive compensation programs will behave singly and cumulatively,

during the short- and long-term, for a wide range of stock prices and company

financial-performance outcomes. The analysis should include projected payouts

over time for base pay (generally not affected by company financial or stock

performance), total potential cash compensation (generally affected by company

financial performance only), potential long-term incentive values using various

instruments (generally affected by stock performance and, in some cases, by

both company financial and stock-price performance), and a combination of all

elements to assess total potential direct compensation. Such an approach makes

it possible to calculate the complete, combined value of the total compensation

package, reducing the likelihood of unexpected payouts that may generate contro-

versy. Moreover, by its nature, such a model affords the opportunity to appeal to

those who prefer a qualitative approach to data as well as those more comfortable

with a visual approach. This pay-model approach is exhibited in Figure 1.

A holistic pay model can address critical, high-level compensation issues including

the following:

Whether the current compensation program has the appropriate performance ❚

orientation

Whether there is, or should be, a balanced focus on company financial and ❚

stock-price performance

Whether short- and long-term incentive payouts are aligned to an appropriate ❚

level of performance achievement

FIGURE 1 A Complete Picture of Executive Compensation

Holistic Pay Model

Forecasts the total potential

dynamic pay opportunity

during a period of time based

on various levels of stock

& financial performance

Tally Sheets

Annual tally of all pay

components based on

current plan design

Competitive Analysis

Annual, point-in-time

analysis of executive pay

relative to the market

(proxy and survey data)


Whether the current compensation mix is appropriate ❚

Whether the emphasis on time- and/or performance-based, long-term incentive ❚

awards is appropriate

To what extent the incentive programs support the organization’s business strategy ❚

and projected time period

To what extent executive payouts are aligned with incremental shareholder returns ❚

and whether the company can afford such executive payouts.

THE PICTURE TELLS THE STORY

Unlike most static, one-dimensional pay analyses, a holistic pay analysis should

be presented in a set of three-dimensional charts that vividly illustrate the extent

to which incremental changes in stock or company financial performance result

in changes in potential pay levels. The impact of differences in performance

results for a holistic pay model should be less like a row of dominoes falling in

a predictable and static pattern, and should be more like a flag blowing in the

wind where changes in wind strength and direction (i.e., performance) results in

changes to the flow of the flag itself (i.e., potential compensation payouts).

To understand how this crucial analysis may take shape from a three-dimensional

graphic perspective, it’s helpful to look at the individual elements that feed such

an analysis. Figures 2 through 5, on pages 71 and 72, present this graphic perspec-

tive. It is important to note that the color in the graphs reflect the range of payout

opportunities for each compensation program element. Base salary, shown in

Figure 2, remains fairly static as it does not increase or decrease based on company

financial or stock performance. Total potential cash compensation, shown in

Figure 3, encompasses base salary plus annual incentives, which changes the

shape of the three-dimensional graphic based on the impact of company financial

performance. Long-term incentives including, for example, instruments such as

stock options and performance-based restricted stock also change the graph-

ic’s shape, based on company financial and stock price performance (Figure 4).

Taken together, the three-dimensional graph shown in Figure 5 provides a view of

total potential direct compensation and how the potential payouts are impacted

by a range of company financial and stock-price performance.

At a high level, the example compensation package for a CEO outlined in

Figures 2 through 5 suggests the current annual short-term incentive program

modestly rewards for company financial performance up to the 50th percentile

and provides for more leveraged payout opportunities when performance is above

such levels. This example also highlights how a long-term incentive plan that is

delivered through the use of performance-based restricted stock is affected by

both company financial and stock-price performance. Overall, total potential direct

compensation (including all elements of compensation) for the sample CEO high-

lights a compensation program that is equally balanced by both company financial

and stock performance. Figures 2 through 5 also highlight the CEO’s potential to


earn a minimum of $400,000 (base salary only) to a maximum of $7.9 million for

outstanding performance achievement for all elements of compensation.

ASSUMPTIONS AT THE HEART OF A HOLISTIC PAY ANALYSIS

Data about the current and future state of the business and the range of possibilities

in terms of company performance and stock-price performance is needed to make

reasonable predictions about future outcomes, providing a benchmark from which

potential payout scenarios may unfold. The assumptions and recommendations

for company financial and stock price performance should be unique to each

FIGURE 2 Individual Components of Executive Compensation: Base Salary

$800,000

$400,000

$0

95%80%

65% 50%

35%20%

5%20%

35%50%

65%80%

95%

Company

Performance

Stock

Performance

$400,000 – $800,000

FIGURE 3 Individual Components of Executive Compensation: Total Cash (Base Plus Annual Incentive)

$2,100,000

$1,800,000

$1,500,000

$1,200,000

$900,000

$600,000

$300,000

$085%

65%

45%

25%

5% 20%35%

50%65%

80%95%

Company

Performance

Stock

Performance

$1,800,000 – $2,100,000

$1,500,000 – $1,800,000

$1,200,000 – $1,500,000

$900,000 – $1,200,000

$600,000 – $900,000

$300,000 – $600,000


company and are based on a range of data points, but are generally focused

based on the following:

The ❚ look-back approach: Historic performance during reasonable periods of time.

The ❚ look-around approach: Historic performance of similar companies during

reasonable periods of time

The ❚ look-forward approach: External forecasts of company performance

The ❚ management outlook: Internal forecasts of company performance

The ❚ expected-value approach (stock performance only): Annualized expected

return using the Black-Scholes Model.

FIGURE 4 Individual Components of Executive Compensation: Performance-Based Restricted Stock

95%80%

65% 50%

35%20%

5%20%

35%50%

65%80%

95%

Company

Performance

Stock

Performance

FIGURE 5 Individual Components of Executive Compensation: Total Potential Direct Compensation

$8,000,000

$7,000,000

$6,000,000

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

$085%

65%

45%

25%

5% 20%35%

50%65%

80%95%

Company

Performance

Stock

Performance

$7,000,000 – $8,000,000

$6,000,000 – $7,000,000

$5,000,000 – $6,000,000

$4,000,000 – $5,000,000

$3,000,000 – $4,000,000

$2,000,000 – $3,000,000

$1,000,000 – $2,000,000

$0 – $1,000,000

$1,500,000

$1,300,000

$1,100,000

$900,000

$700,000

$500,000

$300,000

$100,000

-$100,000

$1,100,000 – $1,300,000

$900,000 – $1,100,000

$700,000 – $900,000

$500,000 – $700,000

$300,000 – $500,000

$100,000 – $300,000

-$100,000 – $100,000


Look-Back Approach

Using the look-back approach, such analyses should include the review of a

company’s historical stock-price and financial metric performances during a

reasonable period (10 years, for example), based on the metrics used in the

short- and long-term incentive plans. A look-back analysis may reflect a shorter

time period if the company has significantly changed its business strategy, made

acquisitions or recently gone public.

Look-Around Approach

For this analysis, it is important to evaluate stock price and the same financial

performance metrics used for the look-back approach for the same period of

time for a peer group or industry or financial index. It also may be helpful to

compare that same financial and stock price performance for a couple financial

indices (for example, annual shareholder returns for the Dow Jones and Standard

& Poor’s indices for a specified period of time). However, this analysis may be

limited by some indices’ lack of financial performance information for all metrics

or by how the data is calculated. Financial performance history for an index can

be very different from the peer group and the look-back approach for a particular

company. Indices also tend to provide more conservative results than peer-group,

industry or company-specific performance information.

Look-Forward Approach

Information may be culled from sources such as Value Line and investor/analyst

reports. Such forward-looking projections are helpful in understanding the expecta-

tions of institutional investors and analysts, which often project future stock price

and some aspects of financial performance for a one-to-three-year period of time.

Management Outlook

Management typically develops internal performance projections based on the

company’s strategic business plan for a one-to-three-year period, which also

should be considered in developing assumptions for a holistic pay model. In the

experience of Pearl Meyer & Partners, the outlook of management really set the

assumptions for such an analysis, given management’s knowledge and expertise

regarding the business and expectations of the company’s future performance.

Expected-Value Approach (Stock Performance Only)

The Black-Scholes model assists in calculating an annualized expected rate of

return for a company’s stock price, based on assumptions such as stock price

volatility, dividend yield, risk-free rate, etc. Given that this data is used in

calculating the expected value (also known as the SFAS 123(R) expense) of a

company’s stock options, it should also be considered in developing assump-

tions for a holistic pay model.


The assumptions used in a holistic pay analysis also are helpful in assessing

the company’s overall financial performance against its peers or a general index.

That analysis can reveal whether an appropriate degree of stretch/challenge is built

into the financial performance objectives for the short- and long-term incentive plans.

It also can provide important information about the total potential incremental

return to shareholders relative to executive payouts.

It is important that all inputs used in the assumptions are carefully vetted by

management and HR leaders first, and then with the compensation committee

before beginning a holistic pay analysis. Otherwise, they may be diverted by a later

debate about the validity of the initial assumptions on which the analysis was based.

The more conservative the assumptions used in a holistic pay model, the more

conservative the potential pay outcomes and vice versa; therefore, it is extremely

important to develop and use assumptions that are appropriate, reasonable and

in line with management and shareholder expectations; otherwise the analysis

may provide inaccurate information.

Additionally, ensuring that management and HR leaders understand the assump-

tions and the model at the beginning of the process will reduce the likelihood

of push back when company leaders see the results of their potential payouts.

Given that evaluating compensation using a holistic pay model is a relatively

new approach, it is possible to elicit strong initial reactions from management

as a result of the analysis putting a more detailed spotlight on an individual’s

total potential compensation opportunity.

HOLISTIC PAY-MODEL FINDINGS SPARK ROBUST DISCUSSIONS

In addition to clarifying financial and competitive issues, a holistic pay analysis

can be the catalyst for robust, fact-focused, meaningful discussions around the

broader economic ramifications and appropriateness of existing compensation

programs. Figure 6 outlines a tabular format for displaying data in a holistic pay-

model analysis that can be used in conjunction with three-dimensional graphics,

and highlights various questions that could be asked relative to another CEO total

potential payout example.

Additional questions that can also spark a robust discussion with management,

HR leaders and directors include:

Are potential executive payouts appropriate at all levels of performance, including ❚

achievement at the upper and lower range of financial and stock-price results?

Is there an understanding of the range of potential payouts associated with the ❚

current compensation program?

Are the incremental changes in total direct compensation tied to changes in company ❚

and/or stock-price performance sufficient to drive desired outcomes/behaviors?

Is the company rewarding truly meaningful performance? ❚

Is there an appropriate degree of focus on company versus stock-price performance? ❚

Does the program overemphasize time-based rewards? ❚


How well does the plan adhere to the firm’s compensation strategy and philosophy?❚

Is the compensation program aligned with shareholder interests and expectations?❚

Holistic pay-model results may trigger many responses, including changes to the

level or mix of total direct compensation; a re-examination of performance metrics

and goal-setting processes; restructuring of incentive programs and payouts; or an

entirely fresh look at the compensation philosophy. The analysis may also result in

no changes to the current compensation program, as a company may find that its’

current compensation program, as designed, performs exactly as it was intended

and appropriately aligns with shareholder expectations.

Pearl Meyer & Partners’ experience is that it is important to ensure enough time

is provided for management, HR leaders and directors to fully understand, consider,

debate and interpret the results of a holistic pay model to be able to develop

next steps for the compensation program. Many companies have completed such

analyses during the off season for compensation (usually during the summer) to

provide plenty of time for consideration of this tool and its results.

POTENTIAL OUTCOMES

Holistic pay analyses also provide a valuable perspective on aspects of performance

for which more traditional industry and peer-group data models do not always

provide a complete picture. For example, when compensation is mainly driven

FIGURE 6 Key Discussion Topics

Company Performance

10% 30% 50% 70% 90%

1 Is CEO compensation appropriate for company

and stock-price performance between the

10th-20th percentile?


and stock-price performance at the 50th percentile?


and stock-price performance between the

80th-90th percentile?

4 Is an incremental change in total direct compen-

sation of 9.7 percent (30th to 70th percentile for

company performance only) sufficient to drive

desired behaviors?

5 Is enough of the total direct compensation

package driven by company performance?

6 Is an incremental change in total direct

compensation of 67 percent (30th to 70th

percentile for stock performance only) appropriate

for the results generated?

7 Is an appropriate amount of the total direct

compensation package driven by stock-

price performance?

8 Is the mix between company and stock-price

performance appropriate?

9 Does this compensation program have a true

pay-for-performance orientation?

10 What behaviors does this type of compensation

program drive?

Percentiles

$3,267,271 $3,668,954 $3,947,292 $4,264,576 $4,967,100

$6,746,835 $7,140,518 $7,426,767 $7,844,140 $8,446,664

$9,156,771 $9,558,454 $9,836,782 $10,254,075 $10,856,600

$11,566,706 $11,968,389 $12,246,638 $12,664,011 $13,266,536

$15,046,270 $15,447,954 $15,726,202 $16,143,575 $16,746,100

$3 668 954 $3 947 292 $4 264 576

,518

6,782

664 0111

1

2

3

4,5

6,7 8,9,10

Sto

ck

Pe

rfo

rma

nc

e

10%

30%

50%

70%

90%


by individual, stock and company

financial performance, most tradi-

tional analyses separately assess

those metrics. In contrast, a holistic

pay analysis should give a detailed

picture of the interplay of those

performance-based elements under

a variety of company financial and

stock results and the impact on actual

payouts, including the relative value

of each element to the total package;

a comparison of incremental pay to

incremental changes in company

and stock-price performance; and

a comparison of incremental pay to

incremental total shareholder return.

That, in turn, can help a company

determine i f its compensation

program is driving the intended

results and behaviors and make

changes as needed (for example, by

modifying the program to focus more

on performance outcomes beyond

one-year bonus opportunities to

encourage a more long-term focus among executives, or by adjusting threshold

and maximum performance levels in the firm’s short-term incentive plan, or by

introducing additional long-term incentive instruments and opportunities).

Volatile industries in which performance tends to veer from “feast to famine” also

can get important insights from the empirical data provided by a holistic pay model.

For example, a company might want confirmation that compensation aligns with

its philosophy of providing zero payouts for underperformance, target payouts for

expected levels of performance and maximum payouts for exceeding performance

expectations. A holistic pay model would reveal exactly how executive pay would

track against the company’s potential market value for the long term, as opposed to

needing to rely on a “gut feeling” about whether a program is working as intended.

Additionally, a holistic pay analysis can assist in communicating the potential

value of compensation packages to executives, including the precise link between

payouts and performance. This is especially useful when market downturns affect

performance and limit bonus potential. The data would make clear that execu-

tives still would have opportunities to bank future results regarding elements of

compensation tied to stock-price performance and relative to future results under

a multiyear performance-based long-term incentive plan.

RESOURCES PLUS


www.worldatwork.org



❚ Executive pay

❚ Compensation program

❚ Incentives.


❚ Executive Compensation —

An Introduction to Practice & Theory

❚ Incentive Pay —

Creating a Competitive Advantage

❚ Reading & Preparing Proxy Statements —

A Guide to the SEC Disclosure Rules for

Executive and Director Compensation,

Second Edition.


❚ C6: Principles of Executive Rewards


❚ C6A: Advanced Concepts in Executive

Compensation, Certification Course

❚ Determining Pay For Executives



LOOKING AHEAD

The U.S. Securities and Exchange Commission’s (SEC’s) drive for expanded

reporting of executive compensation programs could make holistic pay modeling

an even more powerful tool. Ideally, the analysis should compare total potential

compensation for an executive with comparable data from the external market.

However, such detailed information currently is not subject to disclosure by

companies in the Compensation Discussion and Analysis (CD&A) section of their

proxy statement, but may be forthcoming as the SEC continues to fine tune and,

in some cases, heighten its reporting requirements.

CONCLUSION

The tools on which compensation decision makers typically rely, including tally

sheets and competitive analyses, provide a solid and necessary set of data but repre-

sent information that is somewhat limited and static. Augmenting such perspectives

with a holistic pay analysis allows companies to engage in a deeper and more

meaningful analysis of the appropriateness and effectiveness of compensation

plans and their potential outcomes, which can help companies make decisions

that are more thoughtful, well-reasoned and defensible to shareholders. ❚

AUTHOR

Melissa L. Means, CCP, is a managing director in Pearl

Meyer & Partner’s Boston office, where her areas of

expertise include total compensation strategy, executive

compensation, board of directors compensation, short-

and long-term incentive compensation strategy, and

design and governance practices. She specializes in

working with firms across all industries ranging in size

from small, pre-IPO organizations to large multinational

corporations. Means is a recognized speaker and writer

on various executive and board compensation topics.

Prior to joining Pearl Meyer & Partners, Means held

various executive compensation consulting positions

at Mercer and Towers Perrin. She also served as a

manager and director of compensation and benefits for

a large for-profit health-care organization and a pre-IPO

software firm. She holds a bachelor of business admin-

istration degree from Miami University of Ohio. She can

be reached at [email protected].

Survey Data Valuable Tool for Hiring in Tough Economy

In this time of continued belt tightening, company hiring needs to be smarter. That’s why

organizations need market intelligence to hire the right talent at the right price. To stay competi-

tive, employers need to know what other companies are paying in various labor markets.

When it comes to setting pay scales for senior-management roles, an overwhelming majority

of organizations (82 percent) use national survey data. A new WorldatWork survey, Job Evalu-

ation and Market-Pricing Practices, shows that compensation managers rely on industry data

for sales positions and local data for administrative or production jobs. Market pricing, the HR

practice of analyzing the “going rate” for benchmark jobs in relevant labor markets to set pay,

has become the primary job-evaluation method in most organizations, especially when pricing

senior-level jobs. A majority (95 percent) of survey respondents indicated that pricing senior-level

jobs against the market was somewhat to very effective for attracting and retaining top talent.

In addition, the research found few organizations use compensation consultants to evaluate jobs.

Only 16 percent use them for senior-level jobs; the majority (67 percent) relies on the in-house

compensation manager or analyst. And the research also found that 80 percent to 90 percent

of responding organizations use at least two survey sources to price jobs against the market.

(www.worldatwork.org)

Telework Increasingly Popular Option at U.S. Employers

The number of U.S. employees who worked remotely at least one day per month increased

39 percent the past two years, from approximately 12.4 million in 2006 to 17.2 million in 2008,

according to WorldatWork. In its survey brief Telework Trendlines 2009, WorldatWork reports

that the sum of all teleworkers — employees, contractors and business owners — has risen

17 percent, from 28.7 million in 2006 to 33.7 million in 2008. In the five-year period since 2003, the

total number of once-a-month telecommuters in the United States has risen 43 percent — from

23.5 million to 33.7 million Americans. The survey found that the number of employee telecom-

muters in the United States increased 39 percent, from 12.4 million in 2006 to 17.2 million in 2008.

A shift is also reported among full-time telework to occasional telework. The number of employed

teleworkers who work remotely at least once a month grew, while the number of those who work

remotely almost every day decreased slightly. (www.worldatwork.org)

Layoffs Lead to Corporate Knowledge Drain

When workers walk out the door, often their corporate knowledge goes with them. A new study

by the Institute for Corporate Productivity (i4cp) found that 30 percent of respondents believe

they retain knowledge poorly or not at all when workers leave, 49 percent think they’re doing

only “OK” at preserving corporate knowledge and 20 percent think they are doing well or very

well in knowledge retention. Survey results also showed that 78 percent of respondents said their

organizations do not have a specific person or team responsible for knowledge-retention plans,

and 68 percent reported their companies don’t have a specific operating budget for knowledge

retention. The survey found that 61 percent of respondents said their companies do not have a

formal knowledge-retention initiative under way, 62 percent said they don’t measure the effective-

ness of their knowledge-retention efforts and 26 percent do so only to a small extent. According

to the survey, 63 percent of respondents said lack of time was the No. 1 reason hindering effective

knowledge-retention practices, 49 percent said their company does not offer enough financial

support for knowledge retention and 49 percent said lack of management support was a key

stumbling block. (www.i4cp.com)

Published Research in Total RewardsA review of total rewards, compensation, benefits and HR-management research reports.

(Compiled by the editors from the WorldatWork Newsline column at www.worldatwork.org.)



Second Quarter 2009


Health-Care Cost Increases Stagnant, CDHP Plans Up

U.S. employers expect health-care cost increases to remain at 6 percent, and more companies

plan to adopt consumer-directed health plans (CDHP) next year in an effort to control cost

increases, according to a recent survey. The survey by Watson Wyatt found that the median

rate of health-cost increases is expected to remain at 6 percent in 2009, although it is nearly

twice the rate of inflation. Fifty-one percent of companies offer their workers a CDHP, which

is up from 47 percent in 2008; 8 percent are expected to adopt a CDHP by 2010. The survey

also found that companies with at least half of their workers enrolled in a CDHP have a two-

year cost trend (4.6 percent) that is 25-percent lower than non-CDHP sponsors (6.1 percent).

(www.watsonwyatt.com)

Canadian Baby-Boomer Business Owners Delay Retirement

Due to Recession

The recession is now leading business owners to put off their retirement. A recent survey by the

Royal Bank of Canada about registered retirement savings plans found that more than 37 percent

of Baby Boomers who own their own business are planning to delay their retirement because

of the current economic conditions. The survey found that 28 percent of all Baby Boomers said

they planned to delay retirement. Survey results show that 43 percent of respondents said they

will put off retirement for a year or two, 37 percent said they would continue to work for three to

five years longer than initially planned and 9 percent were unsure. Thirty-two percent of retiring

Baby Boomer business owners plan to never fully retire, compared to 13 percent of average

Boomers; and 37 percent of retiring Boomer entrepreneurs expect to be completely retired at

age 65, compared to 47 percent of the Canadian Boomer average. (www.rbcroyalbank.com)

Board Members to Get Double-Digit Raises for Third Year

Individual directors and full boards of directors will see their third year of double-digit increases

in compensation. According to The Corporate Library’s Annual Director Pay Survey: Director

Pay 2008 the median increase in total board compensation was just under 11 percent, and the

median increase in compensation for individual directors was almost 12 percent.

The survey also found:

❚ Median total board compensation for S&P 500 firms is more than $2 million.

❚ Median total compensation for individual directors of S&P 500 companies is just under

$200,000.

❚ In contrast to their CEO colleagues, compensation for directors in the S&P 500 did not

increase by more than that for directors of smaller companies.

❚ Company size is the greatest influence on board and director compensation.

The report also compares total board compensation and director compensation policy at some

of the most prominent financial-services companies that were involved in the subprime lending

crisis. The survey is based on compensation data from more than 3,000 public companies and

23,000 directors. (www.thecorporatelibrary.com)

Defined Contribution Plans Favored for Retirement

Workers are increasingly seeing defined contribution (DC) plans — 401(k)-type plans — as their

primary retirement plan type. About two-thirds of workers said DC plans are their most important

plan for retirement, according to a new study by the Employee Benefit Research Institute (EBRI).

The study’s key findings: Overall, 67.1 percent of participants in a retirement plan had a defined

contribution plan as their primary plan in 2006; this is more than double the level found in 1988;

correspondingly, a smaller percentage of workers had a defined benefit retirement plan as their

primary plan: 30.9 percent in 2006, substantially lower than the 56.7-percent level found in 1988.

In addition, 30.1 percent of nonagricultural wage and salary workers age 16 and over had a salary

reduction plan (such as 401(k) plans) that they considered as their primary retirement plan in

2006, compared with just 7.5 percent in 1988. (www.ebri.org)


Nearly Half of HR Professionals Plan to Delay Retirement

HR professionals have joined the ranks of employees who plan to delay retirement, with nearly

half of surveyed respondents indicating such. The 15th annual “Top Five Total Rewards Priori-

ties” survey by Deloitte and the International Society of Certified Employee Benefit Specialists

(ISCEBS) found that 44 percent of respondents plan to delay retirement; 76 percent of respon-

dents said they are delaying retirement so they can actually afford retirement. Survey results

show that 48 percent of respondents plan to participate in wellness and disease-management

programs to maximize their current health status, 44 percent plan to increase their level of

contributions to their private savings, 35 percent plan to initiate formal retirement planning and/

or estate planning through resources other than through their employer, and 33 percent expect to

increase contributions to their qualified retirement plans like 401(k)s. The survey also found that

56 percent of respondents said their No. 2 personal concern was the investment performance of

their 401(k) or other employer-sponsored savings/profit-sharing plan, and 55 percent said their

No. 2 concern was their ability to earn additional rewards that allow them to stay on top of

inflation and advance in real economic terms. (www.deloitte.com or www.iscebs.org)

Workplace Conflict Can Harm, Help Companies

A new poll reveals the most common causes of workplace conflict are warring egos and person-

ality clashes, poor leadership, lack of honesty, stress and clashing values. The poll of more

than 350 HR professionals in Canada, conducted by Psychometrics Canada, found that in

many cases workplace conflict has severely crippling effects on productivity, staff engagement

and working relationships. The poll also found that when conflict is properly managed, it can

benefit organizations and employees by leading to better solutions to problems. Further, the poll

found that 76 percent of respondents have seen conflict result in personal insults and attacks,

43 percent have witnessed someone being fired, 81 percent have seen conflict lead to someone

leaving the organization, and 77 percent have seen conflict result in sickness or absence.

(www.psychometrics.com)

Workers Continue to Stress about Making Ends Meet, Retirement

The money woes continue for workers: A new report reveals that half of respondents are stressed

about making ends meet, and 59 percent are concerned that money from their pensions and 401(k)s

won’t be there when they need it. According to research from Boston College, workers lost about

$2 trillion worth of stock value held in individual retirement accounts, 401(k)s and other defined

contribution plans in 2008. The Workplace Options Job Satisfaction Survey found:

❚ Seventy-four percent of workers are currently stressed by their jobs.

❚ Of the 50 percent of workers stressed due to financial concerns, 65 percent were Hispanic,

54 percent black and 47 percent white.

❚ Workers in the manufacturing industry reported the highest level of financial stress at

69 percent, followed by 55 percent of workers in finance and real estate.

❚ While only 22 percent of workers nationwide said financial stress is hurting their ability to

do their job, 41 percent of workers in manufacturing and 36 percent in finance and real

estate said it was.

❚ Government workers are experiencing comparatively low levels of stress, with only

44 percent reporting they are stressed about their personal finances.

❚ Women and men were equally worried about retirement savings.

Survey Methodology

The national survey on financial stress, conducted by the North Carolina firm of Public Policy

Polling Jan. 17-20, 2009, polled 568 adults. The survey has a margin of error of +- 4.1 percent.

(www.workplaceoptions.com)


Workers Believe Employer-Sponsored Wellness Benefits Lower Health Costs

Fifty-one percent of American workers believe wellness benefits offered by their employer are

successful at lowering health-care costs, a new study found. Despite this, the “Principal Financial

Well-Being Index” found that two-thirds of workers (up from 60 percent one year ago) expect

increased premiums this year ,and 43 percent of workers (up from 38 percent one year ago) expect

to pay higher deductibles. The survey found that, when offered, 79 percent of workers (up slightly

from 74 percent one year ago) take advantage of educational tools and resources offered by their

employer, while 77 percent (up from 59 percent) participate in blood sugar and cholesterol screen-

ings. The survey also found that 53 percent of respondents said better overall physical health and

38 percent said lower personal health-care costs are the most encouraging reasons to participate

in a wellness program, if offered by their employer. More than one-third (38 percent) said receiving

an incentive or reward would encourage them to participate in a wellness program. Sixteen

percent of workers indicated they have access to educational tools or resources at their work

site; 13 percent receive fitness-center discounts; and 11 percent have access to on-site health

screenings, educational wellness seminars and on-site fitness facilities. (www.principal.com)

Long-Term Incentive Grants Expected to Continue to Decline

A recent survey found that 2009 long-term incentive (LTI) grant values are likely to decline more

than 10 percent overall, with companies that actually change their grant values doing so by

decreasing their grant values by more than 20 percent at median. The Quick-Take Survey by

ExeQuity also found that a number of companies had not yet secured compensation committee/

board approval for their 2009 equity grants, and those companies were anticipating a decrease of

more than 30 percent at median. Survey results show: 2009 long-term incentive values will likely

fall substantially; total 2009 LTI grant values across general industry (including companies that

do not change grand values and those that do) likely will show a fall of greater than 10 percent

and for those changing their grant values, the median 2009 LTI grant value will fall 20 percent or

more. The survey also found that approximately 62 percent of respondents intend to hold grant

values steady, while 38 percent indicated that their values would change; the median change was

a decrease of 20 percent in their LTI values. Survey results show the greatest declines in grant

values are among those companies that have yet to approve 2009 awards. The survey results

also suggest that aggregate market data will show a decrease of more than 10 percent in the LTI

values awarded in 2009. (ww.exqty.com)

Asset Management Fees Face Challenges in 2009

Asset management fees remained stable in 2008 but are likely to be under pressure in 2009,

according to a report. Mercer’s 2008 Asset Manager Fee Survey found that alternative investment

strategies have the highest fees for each dollar of investor capital allocated. Survey results show

that the most expensive mainstream category was global emerging markets equity, with median

fees in the sector averaging about 0.9 percent. Median fees for Eastern European equity and

Chinese equity were similarly high, according to the report. According to survey results among

segregated large cap/all cap equity products, Canadian equity was the cheapest, with median

fees ranging from 0.25 percent to 0.35 percent. Australia, New Zealand and the United States’

equity averaged around 0.4 percent to 0.5 percent. United Kingdom equity all-cap products are

nearly 0.6 percent. Asia, Europe, Japan and global equity continue to be the most expensive,

with median fees averaging 0.5 percent to 0.7 percent. (www.mercer.com)


U.K. Companies Fear Impact of DB Plans on Their Business

A new pension survey shows that nearly 90 percent of companies in the United Kingdom

with a defined benefit (DB) pension plan are concerned about its impact on their businesses.

The PricewaterhouseCoopers survey polled 98 companies and found that firms plan to take

greater control of pension funding negotiations with trustees. Survey results show a significant

increase in companies’ desire to reduce or remove their pension risks despite constraints like

cost, lack of cash and insufficient capacity from insurance providers to which these risks may

be transferred. (www.pwc.com)

Weight-Loss Programs Key Component of Wellness Initiatives

Of those organizations that offer wellness programs, nearly half offer a weight-loss program,

a recent survey found. When asked about their primary reason for offering a wellness program,

46 percent of respondents cited controlling health-care costs followed by 35 percent who said

they want to help workers enjoy better overall physical health.

The survey also found:

❚ Common screening and treatment initiatives are flu-shot programs (82 percent), health-risk

assessments (73 percent) and health screenings (69 percent). Sixty percent of program

sponsors offer smoking-cessation programs.

❚ In the area of fitness and nutrition, the most prevalent initiatives include weight-loss/

management programs (49 percent), wellness competitions like walking and fitness chal-

lenges (48 percent), and healthy food choices in the cafeteria or snack areas (42 percent).

About one-third of program sponsors offer on-site fitness equipment (33 percent) or off-site

fitness programs/subsidies (32 percent).

❚ Common approaches for disseminating health and wellness information include online

resources (61 percent), health fairs (57 percent), nurse-advice hotlines (53 percent) and

wellness newsletters (52 percent).

❚ The survey found that four-fifths of wellness program sponsors use incentives like prizes

and raffles (39 percent), gift cards (32 percent), cash rewards (22 percent) and insurance-

premium reductions (22 percent).

While only 13 percent of respondents said they measure the return on investment (ROI) of their

program, about half of respondents say they benefit through improved worker health and morale.

Of those employers who do measure ROI, 78 percent reported a positive return, with the majority

seeing returns in the range of $1.01 to $4 for each dollar spent. (www.ifebp.org)

Survey Finds Keys to Managing Off-Site Employees

A new report shows that as the recession deepens and the job market seems to be getting worse,

employers are working hard to optimize their efficiency and engagement with all employees —

including off-site employees. The Conference Board’s “Meeting the Challenges of a Dispersed

Workforce: Managing Across Language, Culture, Time and Location” found that to make managing

an off-site employee a mutually rewarding experience, several factors must be taken into consid-

eration. Major findings of this study include:

❚ More than 60 percent of the respondents surveyed agreed that managing same-site

employees is easier than managing distance employees.

❚ Nearly 80 percent of the respondents believe that the extra costs of enabling employees

to work at a distance do pay off.

❚ Managers’ perceptions of the job they’re doing differs from that of distance employees —

53 percent of managers surveyed reported spending more than one hour a week developing

working relationships with distance employees, whereas only 18 percent of employees

believed that their managers spent that much time with them.

❚ Five practices were found to be shared among effective distance teams: in-person meet-

ings; clear agreements on accessibility; good use of group software; adequate company

support; and clearly defined roles for members. (www.conference-board.org)


IT Industry Employees Say They Want to Change Jobs in 2009

Nearly all surveyed workers in the IT industry indicated they plan to look for better career opportu-

nities this year. The latest research by The IT Job Board found that almost nine in 10 techies plan

to change their job in 2009. More than half said they wanted to find better career opportunities

and 45 percent said they wanted to look for a new job in order to earn more money. The survey

also found that two-thirds of techies plan to further develop their technical skills through a new

job, and more than half said a career change would help them improve their work-life balance.

Survey results show that of the 11 percent of respondents who do not plan to look for a new job

this year, 46 percent said it was because they were happy with their current job, and 36 percent

said the volatile economic climate would prevent them from looking. (www.theitjobboard.co.uk)

Expat Nonessentials Being Cut To Reduce International Business Costs

More than three-quarters of survey respondents are cutting back on nonessential business

travel in an effort to reduce costs in the international arena, according to ORC Worldwide’s Flash

Survey: Cost Savings Initiatives survey that asked employers about their plans to reduce costs

in the international arena. One way to save money if a company has developmental/training

and early career assignment is to dispense with some of the higher-priced expatriate extras by

implementing tiered policies, ORC suggests. Some companies have implemented cost-effective

cost-of-living allowances in host locations where high-quality goods and services are readily

available, according to ORC. Where possible and depending on facts like job responsibilities

and family size on location, some employers are implementing less costly housing policies like

eliminating assistance with home-country property management. (www.orcworldwide.com)

Number of Companies Freezing Salaries May Continue to Rise

One-quarter of U.S. companies surveyed have instituted a salary freeze, a number that may rise

to one-third by the time 2009 budgets are finalized. According to a Mercer survey, the wors-

ening economy is to blame for the reshaping of corporate forecasts. The Mercer survey found

that organizations that still plan increases for 2009 have trimmed these by 0.5 percent from the

level cited in October. Three-quarters of respondents are making or considering a base salary

increase this year and are budgeting 3.2 percent overall, which is down nearly 0.5 percent from

mid-October projections of 3.5 percent. In a survey three months ago, 24 percent of respon-

dents planned to reduce their base-pay budgets from their April projections by 0.5 percent,

and 18 percent planned to increase their budgets from their April projections to an average of

3.8 percent. Twelve to 18 months ago, just 5 percent of companies planned to freeze salaries for

all or a portion of their staff, according to Mercer. (www.mercer.com)

Canadian Cite Health Issues as Key Reason for Retiring

One-quarter of retired workers in Canada cited health issues as the main reason for their retire-

ment, and 9 percent of preretired Canadians believe that health issues will cause them to

retire, found an annual poll. The 19th Annual RBC RRSP poll found that qualifying for a pension

(24 percent) and company downsizing (13 percent) were other top reasons for retirement. According

to survey results, when retirees were asked what the best gift they could receive in retirement was,

53 percent said good health and 30 percent said no financial worries. For those who have yet

to retire, 38 percent said no financial worries and 34 percent said good health. The survey also

found that 51 percent of retired Canadians have changed their lifestyle to ensure a healthy retire-

ment, 80 percent of those who did change their lifestyle said they have a better diet, 69 percent

are exercising more and 64 percent are attending regular medical appointments. (www.rbc.com)

Facts & Figures Statistics from this issue of WorldatWork Journal

87 percent of the CFOs whose organiza-

tions have flexibility policies and procedures

predicted the use of flexibility will either

increase or remain the same despite the

economic downturn (PAGE 62).

Volatile industries in which performance tends

to veer from “feast to famine” can get impor-

tant insights from the empirical data provided

by a holistic pay model (PAGE 76).

Seven of 20 companies reported employee

satisfaction is not important or is minimally

important for professional workers, while

six companies said employee satisfaction is

important or very important (PAGE 27).

Leaders of fast-growth companies said they

found their startup workforce that included

career gamblers, transients and free agents

was no longer as effective as it had been as

they continued to grow into a larger company

(PAGE 24).

A holistic, or dynamic, pay analysis should

include projected payouts over time for base

pay, total potential cash compensation, poten-

tial long-term incentive values using various

instruments, and a combination of all elements

to assess total potential direct compensation

(PAGE 69).

The top three reasons for attrition, according

to Freescale’s analysis, were: higher studies,

relocation and discontent with the job profile

(PAGE 51).

44 percent said “yes” and 56 percent said

“no” when people in companies that supplied

devices were asked directly whether receipt of

a company-supplied device was considered

a status symbol or sign of importance in the

organization (PAGE 12).

Work-life interface issues are a major consider-

ation in supplying devices and communicating

expected use (PAGE 19).

Less likely

Surveyed CFOs were less likely to see how

work-life flexibility could reduce real-estate

costs (34 percent) and enhance customer

service (34 percent) (PAGE 61).

Employee loyalty

The key to understanding employee motiva-

tion lies in an analysis of both what employees

say is important in the workplace as well as

what drives employee loyalty (PAGE 41).

Cell phones or PDAs

60 percent of respondents indicated that

mobile devices such as cell phones or PDAs

either greatly or moderately enhanced their

ability to balance work with home and other

commitments (PAGE 11).

Exit interviews

77 percent of former Freescale employees

in India who left in 2007 were contacted for

interviews (PAGE 51).

66% of CFOs indicated work-l i fe

flexibility is “somewhat” or “very”

important to future profitability (PAGE 61).

76% of CFOs indicated that the impor-

tance of face time with others

in the organization was a significant obstacle

to work-life flexibility (PAGE 65).

$467 million is the median revenue

for the “ fast-growth” West

Coast companies surveyed for the article,

“Compensation, Reward and Retention Practices

in Fast-Growth Companies” (PAGE 23).

24% of corporate leaders said “making

critical talent plays” will be one

of their biggest challenges in 2009 (PAGE 40).

47% of top performers are actively

looking for a job, but only 18

percent of low performers are (PAGE 41).



Second Quarter 2009

Documents

J18V2 reprints mem - WorldatWork · 2018-04-03 · Susan Ginsberg, Ed.D. I Work & Family Life Steve Gross I Mercer Regina Hack, CCP I Motorola Angela Keller, CCP I Cox Communications