Mission Executive Committee of the Board of Directors...Telework Advisory Group are part of the WorldatWork family. WorldatWork Management Team President 480/951-9191. Canada Post

Mission

WorldatWork Journal strives to:

z Advance the theory, knowledge and practice of total rewards management.

z Contribute to business-strategy development that leads to superior organizational performance.

z Provide an outlet for scholarly total rewards writing and research.

Executive Committee of the Board of Directors

Chair I Tracy J. O. Kofski, CCP HR Director, Baking and Organizational Effectiveness, General Mills

Vice Chair I Sara R. McAuley, CCP Executive Vice President & CHRO, Tygris Commerical Finance Group Inc.

Secretary/Treasurer I David Smith, CCP Vice President, Human Resources, AGL Resources

Past Chair I Margaret “Maggie” Gagliardi, CCP Senior Vice President, Global Compensation & Benefits, American Express Co.

Member I Anne C. Ruddy, CCP, CPCU President, WorldatWork

Editorial

Publisher I Anne C. Ruddy, CCP, CPCU

Executive Editor I Ryan M. Johnson, CCP

Senior Editor I Jean Christofferson

Editor I Robert E. King, [email protected]

Contributing Editors I Andrea Ozias, Carrie Clark

Review Coordinator/Permissions Editor I Marie Finke

Design

Senior Manager, Marketing, Communications and Creative Services I Barry Oleksak

Art Director I Jamie Hernandez

Creative Services Manager I Rebecca Williams Ficker

Senior Graphic Designer I Kris Sotelo

Graphic Designers I Linh La, Melissa Neubauer

Circulation

Circulation Manager I Barbara Krebaum

Som

os P

hoto

grap

hy

WorldatWork (www.worldatwork.org) is a global human resources asso-ciation focused on compensation, benefits, work-life and integrated

total rewards to attract, motivate and retain a talented workforce. Founded in 1955, WorldatWork provides a network of more than 30,000 members and professionals in 75 countries with training, certification, research, confer-ences and community. It has offices in Scottsdale, Arizona, and Washington, D.C.

The WorldatWork group of registered marks includes: WorldatWork®, workspan®, Certified Compensation Professional or CCP®, Certified Benefits Professional® or CBP, Global Remuneration Professional or GRP®, Work-Life Certified Professional or WLCPTM, WorldatWork Society of Certified Professionals®, and Alliance for Work-Life Progress® or AWLP®. WorldatWork Journal, WorldatWork Press and Telework Advisory Group are part of the WorldatWork family.

WorldatWork Management Team

President I Anne C. Ruddy, CCP, CPCU

Vice President, Strategy & Public Relations I Don Griffith

Director, Information Development, Public Affairs and Publishing I Ryan M. Johnson, CCP

Vice President, Professional Development I Bonnie Kabin, CCP

Director, Human Resources I Kip Kipley, CBP, SPHR

Executive Director, AWLP I Kathie Lingle, WLCP

Vice President and CFO I Greg Nelson, CCP, CPA

General Manager, Washington, D.C. I Paul Rowson

Vice President, Marketing and Channel Management I Betty Scharfman

Director, Business Systems I Jennifer Strauel, CCP

WorldatWork Advisory Board Chairs

WorldatWork advisory boards identify current and future strategic issues and topics in compensation, benefits and the work experience. Their suggestions, as well as input from other sources, help determine the technical content of WorldatWork products and programs such as conferences, forums, seminars and publications.

Benefits Advisory Board I Debra A. Weafer, CCP, CBP Vice President, Compensation & Benefits, BlueCross BlueShield of Massachusetts

Compensation Advisory Board I John Bremen Practice Leader, Watson Wyatt

Executive Rewards Advisory Board I Randolph W. Keuch Vice President, Total Rewards, H.J. Heinz

WorldatWork Local Networks I Chad Atwell, CCP Global Compensation Solutions Leader, Hewitt Associates LLC

Global Advisory Board I Fermin A. Diez, CCP Director, AsiaPacific Freescale Semiconductor

This publication is a special benefit of membership in: Global Headquarters: In Canada: WorldatWork P.O. Box 4520 14040 N. Northsight Blvd. Postal Station A Scottsdale, AZ 85260 USA Toronto, ON M5W 4M4

Phone: 480-922-2020; Toll-free: 877-951-9191 Fax: 480-483-8352; Toll-free fax: 866-816-2962 E-mail: [email protected] Web site: www.worldatwork.org

WorldatWork Journal (ISSN 1529-9457) is published quarterly by WorldatWork, 14040 N. Northsight Blvd., Scottsdale, AZ 85260, as a benefit to members, who receive an annual subscription with their membership. Subscriptions in the United States and United States possessions are $130 per year; in other countries sub scriptions are $165 per year. Periodicals postage- paid at Scottsdale, AZ 85251 and at additional offices. POSTMASTER: Send address changes to WorldatWork Journal, 14040 N. Northsight Blvd., Scottsdale, AZ 85260; 480/951-9191. Canada Post (CPC) publication #40823004.

WorldatWork neither endorses any of the products, services or companies ref er enced in this publication nor does it attest to their quality. The views ex pressed in this pub li ca tion are those of the authors and should not be as cribed to the officers, mem bers or other spon sors of WorldatWork or its staff. Noth ing herein is to be construed as an at tempt to aid or hinder the adoption of any pending legislation, regulation or in ter pre tive rule, or as legal, ac count ing, actuarial or oth er such pro fes sion al ad vice.

© 2008 WorldatWork. All rights reserved. WorldatWork: Registered Trademark ® Marca Registrada. Printed in U.S.A. No portion of this publication may be reproduced in any form without express written permission from WorldatWork.

Rejection Rate: Between July 1, 2007 and June 30, 2008, the rejection rate of papers submitted to WorldatWork Journal was 47.7 percent.

Reprints: For bulk reprints contact: Gail Hallman at 800-352-2210, Ext. 8175, or [email protected].

Manuscripts: WorldatWork Journal welcomes manuscripts. See guidelines and review process at www.worldatwork.org, or contact any member of the editorial staff.

Letters: Readers are invited to submit letters for publi-cation. Letters are pub lished as space permits and are subject to editing.

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Ensure WorldatWork e-mail communications are delivered directly to your inbox and avoid company blocks and filters. Ask your technology department to allow WorldatWork communications to reach you. For more information call toll free, 877-951-9191.

Third Quarter 2008

Reviewers

WorldatWork Journal thanks the following individuals for reviewing manuscripts during the editorial cycle for the Third Quarter 2008 issue. Subject-matter experts, including members of WorldatWork’s advisory boards, review all manuscripts.

Julie M. Adamik, CCP, CBP, CEBS I Employee Benefits Training & Solutions

Harold N. Altmansberger, CCP I Goalsharing Consulting LLC

Chad R. Atwell, CCP I Hewitt Associates

Dianne Auld, GRP I Pick ‘n Pay

Nathan B. Aycock, CCP I ESPN Inc.

Steven J. Bloomfield, CCP, SPHR, NCC I American Express Incentive Services

Eleni Bottos, CCP, GRP I Salary.com

David W. Cheatham, CCP I The Coca-Cola Co.

William H. Clampitt, CCP, DBA I Clampitt Associates

Christine M. Costello, CCP, MLHR I American Greetings Corp.

Roy W. Cureton Jr., CCP, CEBS, SPHR I Cureton & Associates

Charles M. Csizmar, CCP I CNC Compensation Group

Sherjuana Davis, Ph.D., CCP, GRP, SPHR

Fermin A. Diez, CCP I Freescale Semiconductor

Sean D. Delaney I Microsoft Operations Pte Ltd.

Tracy A. Engstrand I Fabcon

William A. Faris, CCP I Princeton University

Mark S. Fogel, SPHR I Leviton Manufacturing

Nancy K. Grimshaw, CCP, PHR I CedarCrestone

Joi Gardner, CCP, PHR

Peter Jauhal I Winton Capital

Vivian Jennings, CCP, CBP, GRP I Bell Aliant Regional Communications

Becky E. Johnson, CCP, SPHR I RREEF Management Co.

Alan M. Judes I Strategic Remuneration

Deborah Marsh, CCP, CBP, CEBS I Nautilus Inc.

William Parsons I Amalfi Consulting

Mark E. Pittel, CCP I Sullivan, Cotter & Associates Inc.

Hesan A. Quazi, Ph.D. I Nanyang Technological University

Laura Anne Roach, CCP I Xactly Corp.

Roland Ruiz I Hay Group

Esther E. Scarpello, CCP, CBP I University of Nebraska at Omaha

William R. Sheridan, CCP I National Foreign Trade Council Inc.

Gary E. Starzmann, CCP, CBP, GRP, SPHR I Radford Surveys + Consulting

Mariana Uzcategui I Mercer

Guy J. Van Tiggelen, CCP, CBP, CPA I LifeBridge Health

Kurt Wolfer, CCP I Hamilton Sundstrand

Journal

Content

Key

z Organizational Culture z Compensation z Performance & Recognition

z Business Strategy z Benefits z Development & Career Opportunities

z Human Resources Strategy z Work-Life

A Study on Reward Communications:Methods for Improvement of Employee Understanding Dow Scott, Ph.D. I Loyola University Chicago

Richard S. Sperling, CCP I Hay Group

Tom McMullen I Hay Group

Bill Bowbin, CCP I Hay Group

This study covers current communications practices supporting five reward components:

organization reward strategy and philosophy; base pay; base-pay increases; short-term

variable pay; and benefits. A majority of compensation professionals report that their

reward communication practices are ineffective. This paper covers current practice,

perceived effectiveness of practice and recommendations on how to improve reward

communications.

A Framework for Conducting Work-Life Return on InvestmentJessica R. Deares I ICF International

Rebecca R. Harris Mulvaney, Ph.D. I ICF International

Margery Leveen Sher I ICF International

Lance E. Anderson, Ph.D. I ICF International

Jennifer L. Harvey, Ph.D. I ICF International

Return on investment (ROI) is a common calculation for determining a business initia-

tive’s financial benefit; however, it can be difficult to determine an accurate estimate

of ROI for less tangible programs. This paper presents a quantifiable, research-based

approach for measuring the ROI of work-life initiatives. The authors review research that

connects an organization’s work-life benefits to employees’ job attitudes. In turn, these

job attitudes are linked to key outcomes affecting the organization’s bottom line.

Issues and Strategies to Employ and Retain Senior Workers in the United States Lauren Eyster I The Urban Institute

Richard W. Johnson, Ph.D. I The Urban Institute

Eric Toder, Ph.D. I The Urban Institute

This paper reviews the challenges faced by Americans, usually 55 years old and older,

looking for employment and employers that wish to hire them. The paper describes

current employer strategies to hire and retain these workers and identifies current

strategies and practices that could improve employment opportunities.

06

Executive SummariesThird Quarter 2008 | Volume 17 | Number 3

21

31

Third Quarter 2008

877/951-9191www.worldatwork.org

Contents © WorldatWork 2008. 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.

5

Also

on the

Inside

Third Quarter | 2008

85 Published Research in Total Rewards

88 Facts & Figures

Reward Management In Multinational Enterprises: Global Principles; Local StrategiesRobert J. Greene, Ph.D., GRP, GPHR, CPHRC I Reward $ystems Inc.

This paper examines whether reward systems that have proven to be effective in some

cultures are likely to work as well in other types of cultures. Hypotheses are presented

that can be used to anticipate how effective different methods and processes for

managing performance and rewards might be in multinational enterprises that span

multiple cultures.

A Globally Mobile Workforce: HR’s RoleAdele M. Yeargan, CRP, GMS, GPHR I Hewitt Associates

With the ever-growing number of employees stationed around the world, the design and

administration of benefits and compensation programs for international assignees have

become more complex. This paper focuses on applying a global perspective to talent

and on how this new viewpoint changes the way human-resources professionals need

to manage and leverage mobility when creating workforce strategy plans.

China and Total Rewards: A Look at Workforce Issues and Business StrategyPengpeng Zhou I University of Minnesota

The challenges related to attraction, motivation and retention in China are explored.

In addition, the two basic, and usually misleading, factors influencing the development

of a business strategy in China (a low labor cost and a large workforce) are discussed.

The Successful Implementation of Reward and Recognition Practices at an Insurance Group in AustraliaJeremy Caird I DHL Express

Nuvan Aranwela I Accumulate

This paper reports on the introduction of a reward and recognition (R&R) program

within an insurance company with approximately 10,000 employees. The program was

piloted in two large business units and subsequently implemented across the company.

This paper describes the implementation and change-management activities resulting

in a 30-percent increase in employee satisfaction.

45

55

65

73

Tom McMullenHay Group

W hy do most organizations do a poor job

communicating their reward programs?

According to Hay Group’s global employee

opinion research (the 2008: Hay Group Insight Employee

Opinion Database), only 35 percent of employees under-

stand how their organizations’ reward programs work.

While a .350 batting average is outstanding for a baseball

player, having only 35 percent of employees understand

the manner in which they are paid seems unacceptable.

Many compensation professionals are apt to tout the

meaningful impact that reward programs can have on an

organization’s effectiveness — that is, when employees

understand and are engaged by these programs.

So why aren’t more total rewards professionals “putting

their mouth where their money is?”

It should be a no-brainer to communicate the objectives

of reward programs, the value of the investment in

people and the details of the program. After all, rewards

are often an organization’s largest controllable expense.

Previous research shows that some organizations get it

right, but for the majority, reward communications gener-

ally falls short (Scott, McMullen, Sperling and Bowbin

2007; Scott, Sperling, McMullen and Wallace 2003).

Research shows a relationship between reward-

communications effectiveness and employee engagement

and business results. Mulvey, LeBlanc, Heneman and

A Study on Reward Communications:Methods for Improvement of Employee Understanding

Dow Scott, Ph.D.Loyola University Chicago

Richard S. Sperling, CCPHay Group

z Benefits

Bill Bowbin, CCPHay Group

Third Quarter 2008



7 Third Quarter | 2008

McInerney (2002) found a positive correlation between the amount of knowledge

employees have about their reward program and their satisfaction with their job

and the organization. Studies conducted by both Hay Group and Towers Perrin

found that the most effective organizations provide reward information more

frequently and in greater depth than other organizations (McMullen, Stark, Royal

2008 and Gherson 2000). These studies found that high-performing organizations

do a much better job than their respective peer groups in:

z Communicating the purpose and intent of total rewards programs with employees

z Frequently communicating the value of total rewards

z Engaging line managers more directly in reward-communications processes

z Evaluating the success of reward programs.

The authors’ 2007 survey of WorldatWork members found that for some organi-

zations, reward communication was one of the greatest strengths, but for others

it was the greatest weakness (Scott, McMullen, Sperling and Bowbin 2007).

In identifying the most effective characteristic of his organization’s reward program,

survey respondent Bruce Lasko at Avaya said, “Surprisingly, it’s not the value.

It’s the communication. We’ve spent years spending hundreds of millions on

providing benefits that employees didn’t value, understand or even know existed.

Regularly communicating the ‘total value’ … significantly improved the effectiveness

of our rewards programs.”

Any research on reward communications must address the tricky balance between

communicating enough information about reward programs for employees to

understand them and the inevitable need for organizations to keep some informa-

tion private. Proponents of open reward communications contend that without

employee understanding, reward programs will not align or motivate employee

effort toward achieving business objectives. However, even those favoring reward-

program transparency point out that a level of employee privacy must be preserved,

and that a completely open reward program, where everybody knows what

everybody else is paid, could foster jealousy and resentment.

The great interest in reward communications found through the authors’

previous research and in the compensation literature, coupled with age-old debates

concerning the level of pay transparency versus secrecy, became the mandate for

conducting this in-depth study of pay communications. The research project’s

objective was to learn:

z The type of reward information being communicated to employees

z The degree to which survey respondents understand the organization’s reward

strategy and philosophy

z The degree to which survey respondents understand how base pay, pay increases,

incentives and benefits are determined and administered

z The methods used to communicate reward information and the effectiveness

of these methods

z Innovative methods used to communicate reward information.

8 WorldatWork Journal

DATA COLLECTION AND SAMPLE CHARACTERISTICS

A sample of WorldatWork members were invited to participate in this study.

The survey was open from Dec. 1 to Dec. 20, 2007, and took approximately 20 to

30 minutes to complete. While the authors suspected that a long, detailed survey

could diminish the response rate, a brief survey would not provide the insights

being sought regarding reward communications policies and practices. In the end,

the authors were pleased with receiving 394 valid responses. One response was

dropped from the analysis, as only a few questions were answered.

Responses were from a diverse range of industries and organization sizes, as

shown in Figures 1 and Figure 2. Most respondents identified themselves as midlevel

and senior compensation professionals (42 percent and 36 percent, respectively).

Nine percent of respondents were officers or senior-level executives, 9 percent

were emerging or junior-level compensation professionals and 4 percent were

consultants and academics/educators.

FINDINGS

This study covers communications used for five reward components:

z Organization reward strategy and philosophy

z Base pay

z Base-pay increases

z Short-term variable pay

z Benefits.

The survey’s findings varied by reward category. Most respondents (81 percent)

reported that their benefits communications were “effective” or “very effective.”

Fewer, but still more than half, of respondents reported the same positive views

of their communications of base-pay increases or variable pay (59 percent in both

cases). Only 44 percent reported that their base-pay program communications

FIGURE 1 Survey Respondents by Organizational Size (Number of Employees [EEs])

< 1,000 EEs

1,000 to < 5,000 EEs

5,000 to < 20,000 EEs

20,000 + EEs

21%

25%

26%

28%


were “effective” or “very effective,” and 33 percent had the same view of the

effectiveness of their communication of reward philosophy and strategy.

This is troubling but unsurprising; troubling, because it’s likely that a reward

program’s effectiveness is diminished when employees do not understand its

purpose. Unsurprising, because it’s often more difficult, and more revealing, to

communicate beliefs regarding how employees should be paid and the intentions

of various reward programs than it is to communicate the more specific purpose

and mechanics of base and incentive pay.

It stands to reason that benefits communication is reported as effective for a variety

of reasons. While benefits programs are complex, most organizations communicate

them more thoroughly than other reward programs. Further, organizations tend to

allocate substantial resources to their benefits communications efforts. (Interestingly,

only 9 percent of the respondents in this survey reported having a separate budget

for reward communications.) Organizations have a better track record with commu-

nicating benefits information, perhaps due to legal requirements to communicate.

Organization Reward Strategy and Philosophy

Digging deeper into employee understanding of reward strategy and philosophy

shows further variation (See Table 1 on page 10). Only a small number of respondents

believe that most employees (61 percent or more) understand any of the reward

strategy and philosophy subcategories that were surveyed, and, in each case, more

respondents believe that only some employees (up to 40 percent of employees)

understand all aspects of the reward strategy and philosophy. The least understood

subcategory is the rationale for the mix of reward elements, where 70 percent of

respondents reported that few or some of their employees understand the rationale

for reward mix, and only 13 percent of organizations reported that most employees

understand. In contrast, respondents indicated that more employees understand the

FIGURE 2 Survey Respondents by Industry

Other

Manufacturing

Finance and insurance

Health care and social assistance

Professional, scientific and technical services

11%

43%

15%

11%

20%


guiding principles of the overall reward program, how reward programs are linked

to business results, employee eligibility for reward programs, and the rationale for

the performance measures used in variable-pay programs. Even in these cases,

however, respondents in only 33 percent to 36 percent of the organizations indicated

that most employees understand these strategic reward issues.

These responses strongly suggest that most organizations are not using reward-

program communications as an opportunity to reinforce possible employee influence

on performance and business results. Organizations would be better served to

improve the line of sight between employees’ impact on the end results of the

business and how this performance relationship is reflected in the organization’s

reward-program design and management.

Ninety-four percent of respondents reported using multiple methods to commu-

nicate reward strategy and philosophy. Of the eight surveyed methods, the median

number used was six. Organizations surveyed indicate a positive link between the

number of reward communications methods used and employee understanding.

This underscores the importance of “strategic redundancy” in communicating and

reinforcing important reward messages.

The most prevalent methods, however, are not always perceived as most effec-

tive, as shown in Table 2. The least effective methods (blogs/electronic bulletin

boards and nonelectronic bulletin boards/other posting), however, were used

by the fewest respondents.

There is a mix of good news and bad news here. The good news is that most

organizations are using communication methods judged “effective” or “very effective,”

TABLE 1 Response to “Rate Employee Understanding of Reward Strategy and Philosophy”

Some Employees Half of Employees Most Employees (Up to 40%) (41% – 60%) (61% or More)

The guiding principles of the overall reward program 42% 23% 35%

How the reward program links to business results 43% 22% 36%

Why certain employees are eligible for a reward program and other employees are not 46% 20% 33%

The principles and rationale for the design of the base-pay program 49% 27% 24%

Why pay targets or minimums and maximums are set at the amounts they are 59% 22% 20%

The principles and rationale for the design of the variable-pay program 50% 24% 27%

Why the organization selects the performance measures it uses for variable-pay programs 45% 22% 33%

The principles and rationale for the design of the benefits program 44% 26% 30%

How the compensation mix of base pay, variable pay and benefits was established 70% 17% 13%

Due to rounding, percentages may not total to 100%.


they are using less effective methods much less, and they are using multiple methods

to reinforce key messages and connect with a wide array of audiences. The bad news

is that despite these efforts, only 7 percent of respondents judged their communica-

tions of reward strategy and philosophy to be “very effective,” and only an additional

26 percent judged their communications to be “effective.” The strong message is that

communication sent does not equal communication received. Furthermore, simply

one communication may not be enough to make key reward messages stick.

Base-pay Communications

In general, employees have a better understanding of base-pay ranges than

they do of actual pay levels, as Table 3 on page 12 indicates. Organizations that

widely communicate salary-range information generally do not communicate

actual salary data. Even so, about one-half of respondents reported that fewer

than 40 percent of their employees know the salary range for their own job.

The authors’ collective consulting experience has been that most employees

know at least their own salary ranges, and that internal job postings do a pretty

good job at revealing salary-range information for any open positions. To be

sure, job-posting systems have put an unintended spotlight on reward programs

— and all their warts — for many organizations. This may be forcing HR and

line managers to re-evaluate what they should and should not communicate to

employees. When employees do not know the salary range for their job and

TABLE 2 Rate Method EFFECTIVENESS for Communicating Reward Strategy and Philosophy

Use Not Marginally Very Method Effective Effective Effective Effective

E-mail or letter from employee’s supervisor, human resources or senior management 90% 3% 36% 45% 16%

Intranet or Internet sites, CDs/DVDs or other digital information 78% 5% 39% 37% 19%

Printed materials, e.g., newsletters, brochures and leaflets 83% 2% 32% 48% 18%

Individualized compensation or total rewards statements sent to employees 69% 0% 12% 36% 52%

Meetings led by human resources or compensation professionals 83% 0% 15% 46% 39%

Meetings led by line management 77% 3% 30% 39% 29%

Blogs and electronic bulletin boards where an employee can react to statements 28% 25% 50% 20% 5% others have posted

Bulletin boards or other kinds of posting in the workplace (not electronic) 51% 24% 51% 21% 4%

Overall, how effectively does your organization communicate reward strategy and – 16% 51% 26% 7% philosophy information?



for higher-level positions to which they might aspire, it is more difficult for

them to understand the different levels of contribution the organization expects

from incumbents in various jobs. Thus, a major opportunity is missed to use the

base-salary program to inform and influence employees’ career planning and

development goals.

Respondents reported widespread use of e-mail, letters, the intranet or Internet,

printed materials, individual compensation reward statements, meetings with HR or

compensation professionals and meetings with line management to communicate

base-pay information (See Table 4).

Eighty-eight percent of respondents reported using multiple methods to communi-

cate base-pay information. The median number of methods used was five. And the

number of methods the organization used to communicate to employees was signifi-

cantly related to the overall assessed effectiveness of base-pay communications.

Even though multiple methods were used to communicate base pay, and those

methods were in most cases judged to be effective or very effective, more than

one-half (56 percent) of the compensation professionals responded that their

overall base-pay communications was ineffective or marginally effective.

Base-pay Increases

Sixty-six percent of reward professionals believe that most of their employees

understand the amount of the pay increase they will receive (See Table 5). However,

21 percent of respondents reported that up to 40 percent of employees do not

know the amount of the increase they are to receive. Further, a substantial number

of respondents indicated that most of their employees did not know:

z The goals, rationale or intent regarding why base-pay increases were distributed

in the way they were (45 percent)

TABLE 3 Rate Employee UNDERSTANDING of Base-Pay Communications


The salary range minimum and maximum for the position the employee holds 49% 18% 32%

Salary ranges for jobs in the employee’s job family or for similar jobs 60% 17% 23%

Salary ranges for all or most jobs in the organization 71% 13% 16%

Average pay for employees in the same job or grade 67% 18% 15%

Average pay by grade for employees in the same job family 74% 15% 12%

Average pay by grade for all employees in the organization 76% 13% 11%

Actual pay for all employees 76% 11% 13%



z The percentage of employees who received a zero increase (83 percent)

z The range or average increase given to employees in the same work unit or in

similar jobs (47 percent), or to eligible employees (40 percent).

When employees do not understand how salary increases are determined, the

average increase, the range of increases and the like, they lack the context that

would enable them to understand the rationale for base-salary increases they

receive (or don’t receive) and how they are rewarded as compared to others in

TABLE 4 Rate Method EFFECTIVENESS for Communicating Base Pay










Overall, how effectively does your organization communicate base-pay information? – 15% 41% 36% 8%


TABLE 5 Rate Employee UNDERSTANDING of Base-Pay Increases Communications


Amount of increase the individual employee will receive 21% 13% 66%

Range of increases or average increase given to employees in the same work unit or for similar jobs 47% 23% 29%

Range or average increase given to eligible employees 40% 22% 38%

Percentage of employees who received a zero increase 83% 5% 12%

Actual increase amounts given to employees within their department or work unit 67% 13% 20%

Actual increase amount given to all eligible employees 64% 13% 22%

Goals, rationale or intent of why base-pay increases were distributed the way they were 45% 25% 30%



the organization. The ability to interpret the messages given by base salary is

important to the motivational value of those increases.

As shown in Table 6, the most widely used methods to communicate base-pay

increases are e-mails or letters and meetings with line management. What’s more,

79 percent of respondents reported using more than one method to communicate

base-pay increases. The median number of methods is four. Each method surveyed

is used by more than one-half of respondents, except for blogs and bulletin boards,

which were considered ineffective or marginally effective by most respondents

who use them.

Overall, 59 percent of the respondents believe they effectively communicate

pay-increase information. Organizations using multiple methods to communicate

base-pay increase information consider themselves to be effective at communi-

cating this information.

Short-term Variable Pay

Seventy percent of organizations communicate variable-pay performance targets

to their employees and, as such, 30 percent either do not establish variable-pay

targets or do not communicate them to employees. Further, the authors’ work

found that a majority of the organizations communicate targets, and few commu-

nicate the average, which is as follows:

z Payout based on performance targets (20 percent)

TABLE 6 Rate Method EFFECTIVENESS for Communicating Base Pay Increases










Overall, how effectively does your organization communicate base pay increase information? – 10% 31% 44% 15%



z Payout for each level of performance (14 percent)

z Amount of variable pay distributed to eligible employees (11 percent).

According to respondents, the most effective methods for communicating infor-

mation about short-term variable pay are e-mail or letters from the employee’s

supervisor, human resources or senior management; printed materials; individual-

ized compensation or total rewards statements sent to employees; and meetings

led by line management (See Table 7). Fifty-nine percent of respondents indicated

that they believe their organization effectively communicates variable-pay infor-

mation and the link between performance and rewards. Blogs and electronic and

traditional bulletin boards are used infrequently and are most often rated

ineffective or marginally effective. Again, the more methods used to communicate

short-term variable-pay information, the higher respondents rated the effectiveness

of their variable-pay communications.

Employee Benefits

Other than blogs and electronic or traditional bulletin boards, respondents use

most methods to communicate their benefits programs and rate them as effective

(See Table 8 on page 16). The authors suspect the legal requirements to commu-

nicate benefits-program details heavily influence these ratings. Overall, 81 percent

of the respondents reported that their organizations were effective or very effective

in communicating benefits information.

TABLE 7 Rate Method EFFECTIVENESS for Communicating Short-term Variable Pay









How effectively does your organization’s short-term variable-pay communications describe the link between performance – 9% 32% 41% 18% and rewards?

Overall, how effectively does your organization communicate short-term variable-pay information? – 9% 32% 46% 13%



Opportunities to Improve Communications

This study has revealed several promising ways to connect with employees and

explain the intent of reward programs and the approach used to determine indi-

vidual pay levels. They are:

z Take a page from marketing

z Involve line managers

z Pilot test and evaluate

z Engage employees in a benefits conversation

z Establish a communications budget.

While some of these approaches are more involved than others, each can help

employees acquire a better understanding about how their rewards are determined

and why they are paid what they are paid. The correct mix of approaches can

give organizations “more bang for their buck,” thus increasing the “total value” of

the reward program without spending any additional reward dollars.

Take a Page from Marketing. Few organizations use marketing strategies and

tools to communicate reward policies and programs such as branded reward

programs (24 percent), segmented communications to specific employee groups

(25 percent) or using promotions or contests (16 percent). Organizations applying

these marketing techniques did so with success, indicating they were effective or

very effective: 56 percent, 74 percent and 49 percent, respectively. Segmenting

employee groups and tailoring reward communications to these groups can help

connect messages with the audience. McDonald’s Corp. has a particularly effective

TABLE 8 Rate Method EFFECTIVENESS for Communicating Employee Benefits










Overall, how effectively does your organization communicate employee-benefits information? – 2% 17% 51% 30%



way of branding its reward communications and actively marketing its reward

program to employees (Emerson, Morajda and Scott 2007). McDonald’s used the

phrase “adding it up” as a byline for all compensation communications, which

was a variation of its successful and well-known “I’m lovin’ it.” The company also

used similar colors for communications and dramatic pictures to draw attention

to the compensation communications. Finally, McDonald’s used multiple media

including printed materials, Web sites and e-mail blasts.

Involve Line Managers. Respondents indicated that line managers tend to be

either marginally effective (59 percent) or not effective (20 percent) in communi-

cating rewards. This is certainly discouraging news. But it’s also a huge opportunity.

Organizations can and should leverage the line manager’s role to reinforce the objec-

tives and key concepts of reward programs, field questions employees might have

and (hopefully) limit rumors or inaccuracies that inevitably bubble up. However, this

will only occur if managers understand and support the reward programs and take

on a sense of ownership of them. Employees expect a lot out of their managers and

tend to trust the information they receive from them. Whether viewed as “parental

figures” or standard bearers of the organization’s values, line managers shape the

work climate — in essence what it feels like to work in the organization. As the

adage goes, employees don’t leave bad organizations, they leave bad managers.

Pilot Test and Evaluate. A third opportunity to improve pay communications

and enhance employee understanding comes as a product of a formal evalua-

tion of reward-program effectiveness, something most organizations do not do.

Those that evaluate reward programs and, in particular, pilot test them before

implementation rate their communications programs as more effective then

those who do not. It’s common sense that evaluating the effectiveness of reward

programs would yield valuable insights into how to improve them, especially in

terms of their alignment with the organization’s strategy. A specific approach for

evaluating reward programs is detailed in a WorldatWork Journal paper by Scott,

Morajda and McMullen (2006).

Engage Employees in a Benefits Conversation. Health-care cost management

and retirement investing are two important opportunities to communicate. As org an-

izations are asking employees to take greater responsibility for their health-care

and retirement decisions, and in many cases, requiring that employees pay for

a much larger share of these benefits, organizations are obliged to educate their

employees on how to make sound decisions.

Forty-nine percent of the organizations that responded offer employees the oppor-

tunity to attend retirement-investment training, and 79 percent indicated that the

training is effective. However, only 29 percent of organizations report offering such

training. This indicates that a large percentage of companies that do not provide

retirement-investment training should, and for those who do, finding ways to increase

the participation rate is important.


This same rational can be applied

to helping employees understand and

manage their own health-care costs.

Few companies offer such training

(22 percent), and yet 73 percent of

those that do, consider it effective.

More can and should be done to

engage employees in a conversation

about health-care cost management.

Only 39 percent of employees take

advantage of this opportunity in

those organizations that offer such

training. A huge opportunity exists

to communicate important informa-

tion regarding the ever-growing issue

of health-care cost management.

Establish a Communications Budget. Only 9 percent of the organizations

create a separate budget for communicating information about rewards. Although

most organizations invest at least minimal resources to communicate new reward

programs and changes to existing programs, one must ask the question of whether

organizations are making enough of an investment in reward-program communica-

tions. The authors believe that budgeting for reward communications at both the

development and implementation stages of reward programs as well as for ongoing

communications would increase the likelihood that these communications would

be done more effectively.

CONCLUSIONS

Even though the reported level of employee understanding of reward programs

is low, respondents strongly believe that reward communications impact:

z Organization effectiveness and performance (78 percent)

z Employee satisfaction with pay (81 percent)

z Employee retention (79 percent)

z Employee engagement or motivation (78 percent).

Interestingly, reward professionals believe that certain methods of communi-

cating rewards are very effective, but employee understanding of even some basic

reward information is lacking. Does this mean that methods used to communicate

reward information are, in reality, not very effective at all, or that most employees

are generally not interested in this information?

The authors are not certain. Employee lack of understanding can likely be

attributed to some of both. However, given the importance of having employees

understand the fundamentals of their organization’s reward programs, this gap

cannot be ignored.

RESOURCES PLUSFor more information related to this paper:

www.worldatwork.org Type in this search phrase on the search line:

z “Benefits Communication.”

www.worldatwork.org/bookstore

z Developing a Strategic Benefits Program: How-to Series for the HR Professional

z The Best of Communicating Total Rewards: A Collection of Articles from WorldatWork

z Communicating Total Rewards: How-to Series for the HR Professional.

www.worldatwork.org/education

z T4: Strategic Communication in Total Rewards.


While this paper describes ways to improve reward communications, a funda-

mental review of reward communications is needed in many organizations.

To develop effective reward communications, organizations should:

z Articulate the purpose of the communications, to make clear what they want

employees to do or understand as result of the communications.

z Take the time to understand the needs and the characteristics of the audience,

and to tailor key messages to the diverse interests and motivations of the employee

population.

z Consider using individualized total rewards statements to communicate the value

of total rewards.

z Employ “strategic redundancy” in communicating core reward messages through

a variety of media and methods.

z Involve senior leaders and line managers in reward communications, but prepare

them first.

z Evaluate the effectiveness of reward communications to ensure that they enhance

employee understanding.

The research reflected in this paper suggests that organizations need not just

have the conviction to communicate their reward programs better, they also need to

plan and budget for these communications. In the end, an organization’s investment

in reward communications is small when compared to the size of reward invest-

ment and the overall return on investment that reward communications can yield if

employees understand the reward program and the purpose of that program. z

Dow Scott, Ph.D., ([email protected]) is a professor of human resources at Loyola University Chicago and president of Performance Development International Inc. He is a nationally recognized compensation and human-resources program evaluation expert, with more than 100 publications. Dr. Scott’s teaching, research and consulting have focused on the creation of effective teams, employee opinion surveys, performance improve-ment strategies, and pay and incentive systems, and the development of high-performance organizations.

Richard S. Sperling, CCP, ([email protected]) is a senior consultant in the Chicago office of Hay Group. He works with clients to design and value jobs, build effective organization structures, and develop and implement reward systems. He has designed leading-edge approaches to analyzing, understanding, designing and valuing work in clients’ increasingly complex and varied organizational settings.

Tom McMullen ([email protected]) is the U.S. reward practice leader for Hay Group, based in Chicago. He has more than 20 years of combined HR

practitioner and compensation consulting experience. His work focuses primarily on total rewards and perfor-mance-program design, including rewards-strategy development and incentive-plan design. Prior to joining Hay Group, McMullen worked for Humana Inc. and Kentucky Fried Chicken Corp. in senior compensation analyst roles. He holds bachelor of science and master of business administration degrees from the University of Louisville.

Bill Bowbin, CCP, ([email protected]) is a senior compensation consultant in the Chicago office of Hay Group Inc. Bowbin’s primary focus is helping organizations develop and implement effec-tive compensation programs. He is also a national trainer for Hay Group’s job evaluation seminars. He holds a master of arts degree from the Institute of Labor and Industrial Relations at the University of Illinois at Urbana-Champaign and a bachelor of science from the College of Commerce and Business Administration at the University of Illinois.

AUTHORS


Emerson, Lisa, Dennis Morajda and Dow Scott. 2007. “Implementing Pay Programs at McDonald’s: The Art and Science of Making Good Ideas Work.” Incentive Pay: Creating a Competitive Advantage. Edited by Dow Scott, Scottsdale, Ariz.: WorldatWork Press.

Gherson, Diane J. 2000. “Getting the Pay Thing Right.” workspan. June: 47-51.

Mulvey, Paul W., Peter V. LeBlanc, Robert L. Heneman and Michael McInerney. 2002. “Study Finds that Knowledge of Pay Process Can Beat Out Amount of Pay in Employee Retention, Organizational Effectiveness.” Journal of Organizational Excellence. Autumn: 29-42.

McMullen, T.D., M.J. Stark and M.A. Royal. 2008. Most Admired Reward Programs: Lessons Learned. WorldatWork Total Rewards WorldatWork Conference, Philadelphia.

Scott, K.Dow, Thomas D. McMullen, Richard S. Sperling and Bill Bowbin. 2007. “Reward Programs: What Works and What Needs to be Improved.” WorldatWork Journal. Third Quarter: 6-21.

Scott, K. Dow, Dennis Morajda and Thomas D. McMullen. 2006. “Evaluating Pay Program Effectiveness.” WorldatWork Journal. Second Quarter: 50-59.

Scott, K. Dow, Richard S. Sperling, Thomas D. McMullen and Marc M. Wallace. 2003. “Linking Compensation Policies and Programs to Organizational Effectiveness.” WorldatWork Journal. Fourth Quarter: 35-44.

REFERENCES

A Framework for Conducting Work-Life Return on Investment

Businesses increasingly are demanding that their

investments provide a return on investment (ROI).

However, quantifying less tangible benefits,

such as employee attitudes, performance, training and

other talent-management factors, can be difficult. Simply

compiling usage figures and extrapolating savings is a step

in the right direction, but is not enough. Human behavior

is complicated and not easily quantifiable. It requires more

complex analysis to determine an accurate estimate of the

financial return gained through personnel programs.

This paper presents a model and approach toward

measuring ROI for work-life initiatives that is quantifiable,

research-based and inclusive of a number of the key

outcomes often associated with these programs.

This model builds upon evidence that the type, quality and

quantity of work-life benefits offered in an organization

can have an immediate impact on employees’ job percep-

tions, beliefs and attitudes. In turn, these factors influence

important (and costly) outcomes, including turnover and

job performance. Specifically, the authors draw upon

evidence that work-life benefits positively affect percep-

tions that the organization is supportive of employees

and their families, and that work-life benefits decrease

work-life conflict (Allen 2001; Casper 2000; Thomas and

Ganster 1995). Both of these concepts have been found

to relate to two important employee attitudes: job satisfac-

tion and organizational commitment (Kossek and Ozeki

1998; Meyer et al. 2002; Rhoades and Eisenberger 2002).

In turn, these attitudes predict turnover and job perfor-

mance (Judge et al. 2001; Meyer et al. 2002; Tett and Meyer

1993), two concepts that can be translated much more

readily into dollar amounts (See Figure 1 on page 22).

Work-Life z

Jessica R. DearesICF International

Rebecca R. Harris Mulvaney, Ph.D.ICF International

Margery Leveen SherICF International

Lance E. Anderson, Ph.D.ICF International

Jennifer L. Harvey, Ph.D.ICF International

Third Quarter 2008




This paper reviews the literature supporting each relationship illustrated in Figure 1.

Specifically, the sections are divided according to the three sets of linkages:

z The impact of benefits offered on family-supportive organization perceptions

(FSOP) and work-life conflict

z The impact of FSOP and work-life conflict on job satisfaction and organizational

commitment

z The impact of job satisfaction and organizational commitment on turnover and

job performance.

Following the description of these relationships is an overview of a methodology

for calculating ROI that uses a combination of organizational inputs (e.g., number

of employees, average employee salary, etc.), results from an employee survey and

statistical relationships from the established literature.

IMPACT ON FSOP AND WORK-LIFE CONFLICT

Family-supportive organization perceptions are defined as employees’ general

beliefs regarding the extent their organization seems caring, encouraging and

accommodating toward employees’ family lives. While several factors can influ-

ence FSOP, the family-friendly benefits that an organization offers serve as one

of FSOP’s primary antecedents. For example, if an organization offers a variety

of useful family-friendly benefits, employees will tend to have a stronger view of

the organization as family supportive.

Alternatively, a lack of work-family benefits may lead employees to perceive that

the organization is unsupportive of their personal lives. Research has supported this

notion. For example, Allen (2001) reported a significant positive correlation between

FSOP and all family-friendly benefits offered (r = .19). Note that this relationship

merely focuses upon whether benefits were available, regardless of whether the

FIGURE 1 How Job Perceptions, Beliefs and Attitudes Tie to Organizational Outcomes

Work-Life Programs Job Perceptions, Beliefs and Attitudes Outcomes

Benefits Offered

Family-Supportive Organization Perceptions

Work-Life Conflict

Job Satisfaction

Organizational Commitment

Turnover

Job Performance

Predicted based on cumulative findings of published researchCalculated within the organization


employees surveyed actually used the benefits. Although factors such as usage of

work-family benefits and perceived support from supervisors also are important in

the development of FSOP (Allen 2001; O’Driscoll et al. 2003), research suggests that

the mere availability of work-life benefits serves as an indicator that the organiza-

tion values its employees’ personal lives. This relationship can be calculated in a

specific organization by surveying employees on their current FSOP, as well as on

their FSOP if the organization did not offer certain work-life programs.

Similarly, the availability of family-friendly benefits appears to be negatively

related to work-life conflict, as employees may feel additional strain between

work and family roles if work-life benefits are not offered on work-life conflict.

For example, in a meta-analytic review, Gajendran and Harrison (2007) found

a significant inverse relationship between telecommuting and work-life conflict

(r = -11). Thus, some research has supported the notion that family benefits can

lessen employees’ pressures and conflicts between work and home. Using the

same method described for FSOP, the effect of an organization’s family-friendly

benefits on work-life conflict can be determined by surveying employees on their

current levels of work-life conflict and by comparing the results to the work-life

conflict that employees would experience if the organization did not offer these

family-friendly benefits. (This technique will be discussed in further detail within

the context of the ROI methodology.)

Thus, the availability of family benefits has an impact on factors such as FSOP

and work-life conflict, and the effect of an organization’s specific work-life benefits

on these variables can be calculated by surveying employees. The next step is

to consider how these work-family perceptions and experiences affect broader

organizational attitudes, including job satisfaction and organizational commitment.

IMPACT ON JOB SATISFACTION AND ORGANIZATIONAL COMMITMENT

Perceived organizational support (POS), which encompasses FSOP, is the perception

that the organization values and cares for its employees and their well-being.

The relationship POS has with two important employee attitudes, job satisfaction

and organizational commitment, has been studied extensively. In a comprehen-

sive meta-analysis that summarized the results from numerous studies on the

antecedents and consequences of POS, Rhoades and Eisenberger (2002) found

that POS has a strong positive relationship with job satisfaction and organiza-

tional commitment (r = .59 and r = .60, respectively). Though less research has

been conducted on FSOP than POS, it appears that when supportive organi-

zational perceptions are limited to the family domain, supportive perceptions

remain strongly correlated with job attitudes. For example, Allen (2001) found

correlations between FSOP and job satisfaction, as well as between FSOP and

organizational commitment, that were only slightly smaller than the relationships

established between these variables and the broader concept of POS (r = .53

and r = .48, respectively). Comparable results have been obtained for constructs


similar to FSOP, including work-family culture and informal work-family support

(Gordon, Whelan-Berry and Hamilton 2007; Thompson and Prottas 2005). In sum,

this research indicates that when employees perceive their organizations to be

supportive of their personal lives, they are more likely to be satisfied with their

jobs and committed to their organizations.

While the perception of an organization as family supportive is an important

antecedent to job attitudes, the experience of work-life conflict also is a factor

in how employees feel about their jobs. Numerous research studies have found

support for an inverse relationship between work-life conflict and job satisfaction

(Allen 2001; Aryee, Srinivas and Tan 2005; Gordon, Whelan-Berry and Hamilton

2007; Grandey, Cordeiro and Crouter 2005; Kinnunen, Geurts and Mauno 2004;

van Steenbergen, Ellemers and Mooijaart 2005), as well as between work-life

conflict and organizational commitment (Allen 2001; Aryee, Srinivas and Tan

2005; Caster et al. 2002; Gordon, Whelan-Berry and Hamilton 2007; Meyer et al.

2002; van Steenbergen, Ellemers and Mooijaart 2007). In a meta-analytic review

of the research on work-life conflict, Kossek and Ozeki (1998) found that the

correlation between work-life conflict and job satisfaction generally is between

-.36 and -.27. Similarly, a meta-analysis on organizational commitment found the

relationship between work-life conflict and affective commitment to the organiza-

tion (an emotional attachment versus commitment due to calculation of costs or

commitment due to feelings of obligation) to be between -.34 and -.06 (Meyer et al.

2002). Although the latter interval is rather wide, a statistically significant inverse

relationship exists between work-life conflict and affective commitment; however,

the absolute strength of this relationship may vary under differing circumstances.

Overall, ample evidence indicates that when employees experience strain between

their work and personal lives, they are less likely to be satisfied with their jobs

or committed to their organizations, as the jobs often are perceived to interfere

with their personal lives.

Thus far, evidence indicates that the work-life benefits offered by an organization

affect factors such as FSOP and work-life conflict, and these perceptions and

experiences related to work-family issues have a strong influence on broader work

attitudes, including job satisfaction and organizational commitment.

IMPACT ON TURNOVER AND JOB PERFORMANCE

Employee attitudes are an important factor in job performance, especially in

predicting turnover. Job satisfaction is one of the most widely studied employee

attitudes, likely because of its significant role in predicting important organiza-

tional outcomes. The concept of “a happy worker is a productive worker” has

been largely debated in the literature. However, with correlations ranging from

.30 to .38 between job satisfaction and performance, recent research has shown

a clear relationship between these two factors ( Judge et al. 2001; Schleicher,

Watt and Greguras 2004; Wright, Cropanzano and Bonett 2007). This relationship


is thought to exist as positive feelings toward an entity (such as a job) drive

positive behaviors (such as good performance) that favor or support that entity.

The relationship is particularly strong in jobs and occupations that are more

complex (Judge et al. 2001).

Unsurprisingly, job satisfaction also is widely accepted as a predictor of turnover

(Kammeyer-Mueller et al. 2005; Tett and Meyer 1993). In fact, many posit that dissat-

isfaction with one’s job actually starts the turnover process (Kammeyer-Mueller et al.

2005). This relationship is relatively well established in the literature, but it also is

worth noting that, while it was not formally included in this model, job satisfaction

also predicts a host of other negative workplace behaviors (commonly referred to as

withdrawal behaviors), such as absence at work and failure to attend meetings.

Organizational commitment, specifically affective commitment (emotional

attachment) shares similar relationships with job performance and turnover.

Evidence indicates that affective commitment has an even stronger and more

proximal relationship with turnover than job satisfaction (Kammeyer-Mueller et

al. 2005; Tett and Meyer 1993). Furthermore, affective commitment is predictive

of job performance and also of behaviors that represent “going the extra mile”

for co-workers and the organization (often referred to as citizenship behaviors)

(Meyer et al. 2002). In other words, there is considerable evidence that when an

employee identifies with and has an emotional attachment to the organization,

he/she will work harder and be less likely to look for employment elsewhere.

CALCULATING ROI USING THE MODEL

While evidence points to a relationship between work-life programs in general

and more tangible organizational outcomes, this evidence alone is insufficient to

signify ROI for a particular program in a specific organization. To estimate ROI

within a single organization, perceptions of work-life initiatives from employees

in that organization must be measured, and benchmark salary, cost and turnover

data from the organization must be gathered.

In using this model to determine ROI, the authors recommend an approach with

three primary steps:

z Administer an employee questionnaire.

z Gather organizational data.

z Calculate ROI based on organizational data, employee questionnaire results and

statistical relationships from the established literature.

Administer an Employee Questionnaire

Using this ROI model, an evaluator must collect employee data on perceptions

of how a particular program affects employee work-life conflict, as well as FSOP.

To gather this information, the evaluator must measure each of these constructs

(FSOP and conflict), then have each employee complete the same set of measures,

assuming the organization did not have the work-life policy(ies). This allows


the evaluator to calculate the difference in FSOP and work-life conflict that can

be attributed to a work-life policy(ies). (This approach applies when the work-

life program or policy already is in place in the organization; however, this

approach also can be used in the more ideal scenario of a pretest/post-test design.

That design would assess the FSOP and work-life conflict constructs before

the work-life program is implemented and again after the program has been

in place for a period of time. The difference in the constructs before and after

implementation would then be calculated and used to determine the ROI.)

Gather Organizational Data

There also are five organizational inputs that should be relatively easy to attain

for most HR departments:

z Number of employees

z Average employee salary

z Turnover rate from the previous year

z Cost of turnover

z Cost of work-life programs.

For consistency, it is important to determine up front who will be counted in this

data. For example, a conservative estimate may only use number, average salary

and turnover rate of full-time employees. Cost of turnover will be different in every

organization, but generally it includes:

z Separation costs, including the cost of administrative functions related to termina-

tion and exit interviews, severance packages and unemployment compensation

z Replacement costs, including the expense of tasks such as attracting applicants,

interviews, testing, moving expenses and pre-employment administrative

expenses

z Training costs, including the expenditures on formal and informal training

z Vacancy costs (or savings) — the added costs/savings realized while the position

is vacant (Pinkovitz, Moskal and Green 2006)

z Work-life program costs including all costs associated with the implementation

of the work-life programs being covered by the employee questionnaire.

These inputs allow an evaluator to eventually link other data points back

to quantifiable figures and, ultimately, dollar amounts.

Calculate ROI

Once data on the impact of policies on work-life conflict and FSOP is gathered

and organizational data is collected, the evaluator can use established statistical

estimates of the extent to which one factor (such as organizational commitment)

predicts another factor (such as turnover) to determine ROI.

Using this model, an evaluator can use the statistical estimates to calculate

how the differences in FSOP and conflict (attributed to the policy or policies)

affect satisfaction and commitment, and how these differences, in turn, impact


turnover and performance. Differences

in turnover then can be translated into

dollar amounts using organizational

estimates of cost of turnover, rate of

turnover and number of employees.

Differences in performance can be

translated into dollar amounts using

the number of employees and salary

information. It is estimated that one

standard deviation of performance, in

terms of dollars, for a given job equals

approximately 40 percent of the mean

salary for the job (Schmidt, Hunter

and Pearlman 1982). In other words,

if performance improves or goes

down by one standardized increment

of change among a group of people,

the financial impact on the organiza-

tion is approximately 40 percent of

the average salary of that group of people.

These calculations result in an estimate of the total annual savings from the

reduced turnover and increased performance that can be attributed to work-life

programs. Finally, by subtracting the annual cost of the policies of interest, it is

possible to determine the net benefit obtained from the work-life programs.

LIMITATIONS OF APPROACH AND CONCLUSION

While this model allows for a practical, scientifically based estimate of ROI, it is

important to note several limitations. First, the differences in conflict and the

FSOP are measured by asking employees to estimate what their experience would

be if the program or policy did not exist. This is not as rigorous as conducting a

full evaluation in which these factors would be measured, for example, pre- and

post-implementation, but this method is much more practical in most organizations

where policies and programs already exist.

Next, the statistical estimates that can be used to calculate differences in

organizational commitment, job satisfaction, turnover and performance are

based on research that occurred in other organizations and potentially other

industries. When implementing this model, this limitation is addressed by using

statistical estimates from meta-analyses, or studies that combine results from

many different, previously published studies. This method is an established way

to control for differences that occur from study to study that may account for

differences in results.


www.worldatwork.org Type in this search phrase on the search line:

z “Work-Life ROI.”


z Work-Life Effectiveness: Bottom-Line Strategies for Today’s Workplace

z Life at Work: Beyond Compensation and Benefits.


z W1: Introduction to Work-Life Effectiveness—Successful Work-Life Programs to Attract, Motivate and Retain Employees

z W2: The Flexible Workplace— Strategies for Your Organization

z W4: Organizational Culture Change— A Work-Life Perspective.


Finally, the results are dependent on the evaluator collecting good, reliable

organizational data on factors such as cost of turnover, turnover rates and salary

information. In light of this, the authors tried to include only pieces of data that

would be reasonably accessible to most organizations.

In sum, a framework has been presented that allows organizations to determine

the extent of the financial returns resulting from work-life programs. By linking

employee attitudes related to work-life benefits with more global organizational

attitudes and outcomes, and by combining these results with readily available

organizational data, it is possible for businesses to determine an empirically

supported estimate of the ROI of specific work-life programs. With thoughtful

implementation, the use of such a method will allow organizations to stop assuming

that work-life programs are beneficial and, instead, actually determine the total

dollar impact specific benefits have on the business. z


Jessica R. Deares, an associate with ICF International, has experience in personnel and organizational research, consulting and human resources. Her past work has included job analysis, training, workforce development and assessment, workforce planning and staffing, performance management, retention, recruitment and selection, and compensation systems. She has conducted research in areas including leader-ship, psychological contracts, performance management and survey nonresponse and has presented her work at national conferences. Deares is currently working toward her Ph.D. in industrial/organizational psychology at The George Washington University.

Rebecca R. Harris Mulvaney, Ph.D., a manager at ICF International, has experience in managing and conducting organizational research and consulting projects with public- and private-sector organizations. Her primary areas of expertise include work-life issues, workforce development, human and organi-zational performance measurement and assessment. Dr. Mulvaney’s work on work-life issues and other topics has been published in peer-reviewed journals and magazines and presented at national professional conferences. Mulvaney holds a Ph.D. in industrial/organizational psychology from The Pennsylvania State University.

Margery Leveen Sher has more than 30 years of experience in the fields of child care, early childhood education and work-life. In 1985, she co-founded a child-care/work-life consulting firm, Fried & Sher Inc. In 2000, Caliber Associates acquired Fried & Sher and Sher became a principal with Caliber, running the child care/work-life practice. In 2005, ICF International acquired Caliber, and she now runs its global work-life practice. She has worked with numerous corpora-tions, government agencies, nonprofit organizations and foundations, ranging from the White House to Marriott International to United Way. Sher is an accomplished speaker and writer who has published many articles and newspaper and newsletter columns, as well as Child Care Options: A Workplace Initiative for the 21st Century (Oryx Press 1994). She has served on a number of nonprofit boards of directors,

including Northern Virginia Family Service and the Metropolitan Washington Work-Life Coalition. In 1994, she was one of the incorporators of the National Learning Institute, and serves as its president. She is also the founder of the TRS Fund for the Community, which provides grants to small nonprofits in Northern Virginia. A graduate of Leadership Washington, Sher has received several awards including, in 1984, Child Care Professional of the Year in Fairfax County, Va., as well as the 2003 Individual Achievement Award from the Metropolitan Washington Work-Life Coalition. She holds a master’s degree in developmental psychology from Rutgers University.

Lance E. Anderson, Ph.D., a vice president at ICF International, has 20 years of experience directing or conducting research projects to develop, evaluate and improve on human resources management tools. He has completed projects dealing with workforce improvement, selection and placement, performance improvement, standards development and certification, development of educational and training require-ments, and leadership development. Dr. Anderson has published articles or book chapters on a variety of topics related to organizational research. Dr. Anderson is an expert in study design, data collection, statistical analysis, project management and project implemen-tation. He holds a Ph.D. in industrial/organizational psychology from Bowling Green State University.

Jennifer L. Harvey, Ph.D., a manager with ICF International, has led or participated in projects with public, private and military organizations in the areas of employee satisfaction, workforce assessment and analysis, survey research and development, statis-tical analysis, job analysis, competency modeling, selection test development and validation, military leadership and research evaluation. She has conducted research in work motivation, job satisfaction, feedback, leadership, emotional regulation and applicant reac-tions. Dr. Harvey has authored a book chapter on job analysis and has presented her work at several profes-sional conferences. Harvey holds a Ph.D. in industrial/ organizational psychology from the University of Akron.

AUTHORS

Allen, Tammy D. 2001. “Family-Supportive Work Environments: The Role of Organizational Perceptions.” Journal of Vocational Behavior. June: 414-435.

Aryee, Samual, E. S. Srinivas and Hwee Hoon Tan. 2005. “Rhythms of Life: Antecedents and Outcomes of Work-Family Balance in Employed Parents.” Journal of Applied Psychology. June: 132-146.

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Issues and Strategies to Employ and Retain Senior Workers in the United States

A s the United States population ages and the

number of people reaching traditional retirement

ages increases, employers may need to attract

and retain more older workers, many of whom are highly

experienced, knowledgeable and skilled.

This paper reviews the challenges faced by older

people looking for employment and employers that wish

to hire them; describes current employer strategies to

hire and retain these workers; and identifies current

strategies and practices that could improve employment

opportunities for older workers.

THE CHANGING RETIREMENT LANDSCAPE

The crucial question is whether the coming demographic

changes will lead to higher employment rates and later

retirements. Several factors suggest that employment rates

for older Americans will rise in the coming years.

z Improved health and declines in physical job demands

leave older people better able to work today than in

the past (National Center for Health Statistics 2006;

Johnson, Mermin and Resseger 2007; Steuerle, Spiro

and Johnson 1999).

Development & Career Opportunities z

Lauren EysterThe Urban Institute

Richard W. Johnson, Ph.D.The Urban Institute

Eric Toder, Ph.D.The Urban Institute

Third Quarter 2008




z Recent Social Security changes increase work incentives at older ages. The normal

retirement age for full Social Security benefits recently increased from 65 to 66

and will reach 67 for those born after 1959. The rise in the normal retirement

age will reduce annual retirement benefits for those who take up benefits before

they are age 67.

z Delayed retirement credits have been raised to increase the rewards for taking up

benefits after the normal retirement age, and Congress has repealed the retire-

ment earnings test for beneficiaries past the normal retirement age. The retirement

earnings test, still in place for workers between age 62 and the normal retirement

age, reduces Social Security benefits for employed recipients who earn more than

a limited amount.

z Changes in employer-provided pension and retiree health benefits are also likely

to encourage boomers to remain at work.

The Switch from Defined Benefit to Defined Contribution Plans

During the past 30 years, employers have been shifting from traditional defined

benefit (DB) pensions to defined contribution (DC) plans (Pension and Welfare

Benefits Administration 2001-02), which do not encourage early retirement.

Because contributions continue as long as plan participants remain employed

and workers with a given account balance can receive the same present value of

lifetime benefit regardless of when they chose to begin collecting, DC plans do not

generally penalize work at older ages. Friedberg and Webb (2005) estimated that

the changed incentives in DC compared with DB plans lead people in DC plans

to work about two years longer on average than if they were DB participants.

The Erosion of Retiree Health Benefits

The erosion in employer-provided retiree health benefits is also likely to limit

early retirement. Retiree health insurance, which pays health expenses for early

retirees who have not reached the Medicare eligibility age of 65, facilitates leaving

work by reducing costs arising from the loss of employer health benefits. Workers

offered retiree health benefits by their employers retire earlier than workers who

lose their health benefits when they stop working (Johnson, Davidoff and Perese

2003; Rogowski and Karoly 2000). Rising health-care costs and the introduction

of an accounting rule in 1993 requiring employers to recognize on their balance

sheets the full liability of future retiree health costs have led many employers to

terminate their retiree health plans. In 2005, 33 percent of employers with more

than 200 employees offered retiree health benefits, down from 68 percent in 1988

(Kaiser Family Foundation and Health Research Educational Trust 2005).

THE RESULT: PEOPLE ARE WORKING LONGER

Perhaps in response to these various trends, older adults are now working longer

than they did 20 years ago. Between 1985 and 2007, the share of men in the


labor force increased from 46 percent to 52 percent at ages 62 to 64 and from

24 percent to 34 percent at ages 65 to 69 (Bureau of Labor Statistics 2008).

The increase in labor-force participation among men older than 65, when Medicare

eligibility begins, suggests that the desire for health-insurance coverage is not the

sole factor boosting participation rates. During the same period, female labor-force

participation rates rose from 29 percent to 42 percent at ages 62 to 64 and from 14

percent to 26 percent at ages 65 to 69, reflecting the aging of a cohort of women

with higher participation rates at younger ages than earlier cohorts.

Several surveys also suggest that boomers intend to continue to work into

old age, although not necessarily at full-time employment (AARP 2003; Mermin,

Johnson and Murphy 2007). An AARP poll found that 38 percent of older workers

want to phase into retirement gradually, instead of leaving the labor force alto-

gether (AARP 2005). Obstacles remain to lengthening work lives, however,

discouraging employees from working longer and employers from hiring and

retaining them.

CHALLENGES CONFRONTING WORKERS AND EMPLOYERS

On the labor supply side, Social Security payroll taxes create disincentives to work

at older ages for people who have spent most of their adult lives in the labor

force. Social Security benefits are based on average indexed monthly earnings,

computed over the 35 years with the highest indexed earnings. For workers with

fewer than 35 years of employment, an additional year of work and contributions

eliminates a year of zero earnings from the benefits computation, often raising

the worker’s future benefits substantially. But for those with longer employment

histories, an additional year of work will raise future Social Security benefits only

if current earnings exceed adjusted earnings in the least remunerative of the top

35 years already used in the computation. This gain in benefits is not typically

large enough to compensate for the additional payroll taxes that the workers must

pay (Butrica, et al. 2004).

Even for workers who have not completed 35 years of qualified work, the net

increase in Social Security benefits is often small because the benefits formula favors

people with low lifetime earnings over those with high lifetime earnings. In addition,

people with spouses who earn substantially more than they do often receive no

additional Social Security benefits in return for the payroll taxes they pay, because

many end up collecting benefits based on their spouse’s earnings history.

Certain fringe benefits also discourage work at older ages. Workers in DB pension

plans often lose pension wealth if they work beyond the plan’s normal retirement

age. Retiree health benefits also encourage retirement before age 65 by providing

affordable health insurance before Medicare eligibility for people who choose to

stop working (Buchmueller, Johnson and Lo Sasso 2006). Although traditional DB

plans and retirement health benefits are becoming less common, they still cover

a significant portion of the workforce, especially in the public sector.


Federal laws and regulations complicate employer efforts to provide the flexible

work options that many older people prefer, discouraging them from remaining in

the labor force. For example, restrictions on DB pension payouts to active workers

make it difficult for workers to phase into retirement because many cannot afford

to reduce their work hours without access to their pension benefits. Also, until

recently, age-discrimination laws made it difficult for employers to offer phased retire-

ment programs that treat certain older workers differently from others. However, in

response to a recent Supreme Court ruling, the U.S. Equal Employment Opportunity

Commission issued new regulations in July 2007 clarifying that the Age Discrimination

in Employment Act does not prohibit employers from favoring older workers over

younger workers (ven when the younger workers in question are age 40 or older.

CURRENT EMPLOYER STRATEGIES TO HIRE AND RETAIN OLDER WORKERS

This section describes employer strategies to help attract and retain older workers.

The first group of strategies encompasses flexible work arrangements and includes

a wide range of alternatives to the traditional full-time, 9 a.m. to 5 p.m. five-days-

a-week work schedule at a single place of employment. Flexible arrangements can

be a powerful tool to retain or attract older workers who may be willing to extend

their careers only if they can free themselves from standard work schedules.

The second group of strategies includes phased retirement alternatives and

focuses especially on the design of benefits packages that might encourage people

to remain with the same employer longer. These include part-time work arrange-

ments allowing employees to retain health and retirement benefits, programs

to rehire former employees as contractors, other creative ways of retaining the

services of former employees part time, and alternative ways of making pension

benefits available to those still working or removing the penalty for additional

work existing in many DB plan arrangements.

Flexible Work Arrangements

Flexible work arrangements may appeal to older adults who no longer wish to

work traditional full-time schedules. Flexible work arrangements include part-time

employment, flexible work schedules, telework, contract work and job sharing.

Flexibility may also include arrangements enabling workers to perform new work

tasks in different ways or change the organization’s work design.

An important benefit of flexible work arrangements is that they can enable

employees to extend their careers with the same employer or in the same occupa-

tion or industry instead of moving to self-employment or to different occupations

or sectors where part-time work schedules are more common (such as retailing).

Part-Time Employment. Part-time employment helps employees balance demands

of their work and personal lives. According to an AARP survey, nearly seven in 10

workers who have not yet retired plan to work into their retirement years or never

retire (AARP 2003).


While older workers have many reasons to want to work part time, a potential

issue is its impact on pensions, health benefits and other employee benefits.

Internal Revenue Service (IRS) regulations under the Employee Retirement Income

Security Act (ERISA) limit a company’s ability to pay benefits from a DB pension

plan to employees who continue to work for them, while retaining the plan’s

tax-exempt status, although these limits were reduced in 2006. Employers may

no longer wish to bear the same share of health-insurance premiums for part-

time workers as full-time workers, but federal law may limit their ability to adjust

their contributions.

Flexible Work Schedules. The Bureau of Labor Statistics (2005) reports that in

2004, 27.5 percent of the labor force had flexible schedules enabling them to vary

the time they began or ended work. Only about 10 percent of workers, however,

were enrolled in formal, employer-sponsored flex-time programs. While flexible

schedules are becoming more prevalent, the Fair Labor Standards Act (FLSA)

somewhat restricts private employers’ use of flexible schedules and compensatory

leave by requiring them to pay overtime wages to hourly employees who work

more than 40 hours in a week. Although the FLSA protects workers who do not

wish to work more than 40 hours in a week from potential employer pressure

for overtime work to meet short-term needs, it also limits some flexible arrange-

ments that employees and employers may prefer. The federal government may be

able to make better use of flexible schedules because the FLSA allows it to grant

compensatory leave instead of overtime pay to employees who work more than

40 hours in a week.

Job Sharing. Job sharing is defined as an arrangement that allows two or more

employees, each working part-time, to share responsibility for a single job and

arrange their vacations and days off so one is always at work during the normal

workweek (WorldatWork 2007a). Job-sharing arrangements can help employees as

they move from full-time work to part-time work. Employers may benefit from the

enhanced skill sets that often result when two experienced people share a single job.

It requires clear delineation of work responsibilities and frequent communication

among the job sharers and their manager.

Changing Jobs Within the Company. Sometimes a way to facilitate shifts to

part-time work, this option can also offer new opportunities to older employees

who have become less motivated in their existing position and are seeking new

challenges, or it can enable employees to shift to new positions better suited to

their changing capabilities or preferences.

Telework. Under telework arrangements, employees work either from home or

from teleworking centers closer to home than their normal workplace. The main

benefit of teleworking is the saving of commuting time.

Off-site work possibilities are increasing as the number of workers in such

sectors as financial services, information technology and communications services

rises. The number of Americans whose employer allowed them to work from home


at least one day a month grew from 9.9 million to 12.4 million between 2005 and

2006, an increase of 25 percent (WorldatWork 2007b).

Snowbird Programs. Snowbird programs allow employees to shuttle between

two locations seasonally. The programs are especially appealing to workers who

seek warmer climates in the winter months and cooler climates in the summer.

Snowbird programs are economically viable for organizations in sectors such as

retailing and health-care services in which the customer base also migrates from

north to south in the winter months.

PHASED RETIREMENT PLANS

Workers in DB pension plans have strong economic incentives to retire from

their current employer and may face lesser employment opportunities at other

firms. Employers often face significant legal barriers to offering their employees

pension benefits while still working or opportunities to participate in phased

retirement plans.

Employees may have limited opportunities to phase into retirement gradually

with their current employers in part because benefits plans generally inhibit

these arrangements. Employers, however, are continuing to switch from DB to DC

retirement pension plans, which can more easily distribute retirement payments

to employees still on the job. Many employers are also learning how to design

phased retirement arrangements, either formal or informal, that can survive legal

challenges. These trends will provide more opportunities for employees to take

phased retirement in the future.

Employers often are willing to work out phased retirement, but only as an

informal arrangement (Hutchens and Grace-Martin 2006). As a result, unionized

firms and establishments that are part of larger organizations are less likely

to permit phased retirement because unions and large bureaucracies gener-

ally oppose informal arrangements, preferring arrangements agreed on through

collective bargaining or imposed as part of overall personnel rules. Firms that

have flexible work practices in general (flex time, employment of part-time

workers, job sharing) are more likely to allow phased retirement. Hutchens and

Grace-Martin (2006) found that having a DB plan does not by itself reduce the

probability of allowing phased retirement after controlling for firm size and

unionization status.

Employees who switch from full-time to part-time work often change employers

instead of phasing into retirement with the same employer (Hutchens 2007).

Less than 10 percent of workers age 62 to 64 surveyed in the “Health and Retirement

Study” transitioned from full-time to part-time work during a two-year period,

and approximately one-half of those who made the transition changed employers

(Even and Macpherson 2004). Skilled white-collar workers are more likely to take

phased retirement than nonphased retirement, and blacks are more likely to take

nonphased retirement (Chen and Scott 2006). Those who take phased retirement


have higher levels of education, household income and wealth than those who

do not take phased retirement.

The federal government has an older workforce than most employers, with

approximately 60 percent of workers eligible for retirement in the next 10 years.

While the federal government is a leader in developing flexible workplace prac-

tices, it does not do much to facilitate gradual transitions from work to retirement.

It offers a DB pension plan encouraging early retirement, especially for workers

hired before 1984 under the old Civil Service Retirement System (CSRS), but also,

though to a lesser degree, for those participating in the post-1984 Federal Employee

Retirement System. However, the Office of Personnel Mangement (OPM) recently

proposed legislation allowing federal agencies to bring back retired employees

on up to a half-time basis, while continuing to pay full retirement benefits (Barr

2007). Employees would not earn additional retirement credits from their work.

The OPM also proposed revising the CSRS formula so employees could continue

to work part time at the end of their careers without incurring the current penalty

against their retirement calculation.

Some business practices facilitate phased retirement. These include age-neutral

pension plans, pension arrangements under traditional DB plans enabling

employees to continue working without losing pension benefits, formal plans

by companies to transition their older employees to part-time work, and use of

former employees as contractors.

Age-Neutral Pensions

Beginning in the late 1990s, some large employers converted their DB plans to

cash-balance plans, but age-discrimination claims created uncertainty about the

legality of these conversions, halting new conversions for several years. While it

now appears that the courts will uphold the legality of cash-balance conversions,

more employers seem to be terminating or freezing DB plans completely and

replacing them with DC plans (Munnell et al. 2006).

The share of private-sector workers participating in traditional employer-spon-

sored DB plans has been declining steadily for the past quarter-century, dropping

from 39 percent in 1980 to 20 percent in 2006 (Bureau of Labor Statistics 2006;

Pension and Welfare Benefits Administration 2001-02). During the same period,

the share of private-sector workers participating in any type of retirement plan

(traditional DB, other or both) increased from 47 percent to 51 percent. The shift

away from DB plans has been accelerating in recent years (VanDerhei 2006).

Deferred Retirement Option Plans (DROPs)

Many state and local governments have recently instituted deferred retirement

option plans (DROPs) as a way of getting around the work disincentives produced

by DB plan formulas. Under a DROP, a worker who reaches retirement age can

continue working and receive contributions to a retirement fund equaling the


pension benefit he or she would have received if retired. The worker does not

receive a cash pension benefit, but the amount contributed to the DROP account

accrues interest until he or she actually retires. Upon retirement, the employee

starts receiving the same annual pension benefit he or she would have received

if terminating employment at the retirement age, and he or she can withdraw the

funds in the DROP account either as a lump sum or as an actuarially equivalent

retirement annuity. In effect, the addition of a DROP makes the DB plan age

neutral because the present value of the employee’s lifetime retirement benefit

does not depend on the retirement date. At the same time, the employee is not

receiving any cash pension benefits until retirement.

Under some plan designs, DROPs can be used to force out employees, especially

if the plan is available only between the earliest retirement age specified in the

plan and the normal retirement age (Calhoun and Tepfer 1998). Further, private-

sector employers considering DROPs must deal with a host of complex legal issues

under the tax law and ERISA relating to rules against back-loading pension benefits

and against discrimination favoring highly compensated employees. These legal

complications have limited the use of DROPs in the private sector.

Transition to Part-Time Employment

Before enactment of the Pension Protection Act of 2006 (PPA), IRS regulations did

not allow firms to pay retirement benefits from DB plans before termination of

employment, except in a limited way. PPA allows payment of benefits to in-service

workers who are age 62 or older, although new regulations under PPA are still

pending. Even before this change, some firms have instituted programs allowing

older workers to reduce their hours gradually, either in their current job or a new

job, while still receiving some pension and health benefits. Other employers are

able to meet regulatory requirements and pay retirement benefits to older workers

by terminating the employees and rehiring them part time. The law is unclear

about what constitutes termination of employment, so it would seem that some

interval would need to pass between terminating and rehiring before the former

employee could be counted as a new hire.

Hiring Former Employees as Independent Contractors

As an alternative to paying pension benefits to active employees, the firm could

terminate employment and then rehire the former employee as a consultant or

independent contractor. Independent contractors do not receive employee benefits,

but independent contractor status does enable former employees to receive full

retirement benefits while working for their previous employer.

While there are no restrictions on paying DB benefits to former employees who

are independent contractors, issues arise in determining whether the provider of

labor services is really an independent contractor. Because independent contractor

status can be used to evade taxes and avoid labor laws, the tax law has a complex


20-part test of what constitutes an independent contractor. One important compo-

nent of that test is whether individuals set work conditions — the how, when

and where. Independent contractor status may not be ideal in cases in which the

employer wishes to access a worker’s labor services regularly and predictably for

tasks the employer defines and manages. Instead, contracting arrangements are

more suitable for short-term projects or for temporary time periods.

Other Arrangements to Retain the Services of Retirees

Companies developed other creative ways to continue to employ older or retired

workers on an intermittent or part-time basis. Some companies, for example, recruit

retirees to help on short-term projects. Others have programs to shift workers into

a mentoring role.

OTHER STRATEGIES

With the Boomers reaching retirement age and some observers forecasting labor

shortages, government and other service providers — such as employment agencies,

nonprofit organizations and community colleges — are beginning to tailor their

programming and services to individuals age 50 and older.

Helping Older Workers Find Employment

Sources of job-search assistance for older workers are proliferating rapidly in the

private sector. Tools geared specifically to older workers include job Web sites,

job fairs, books and articles, job centers, recruiters and career counseling services.

This growing cottage industry has defined its client base as older workers and

is reaching out to workers age 55 and older, and sometimes to workers who are

as young as age 40.

The public sector is also developing targeted services and often implementing

them with the help of private providers. It employs many strategies and tools used

in the private sector to help older workers find employment opportunities, but

it often targets those with limited skills or employment experience by providing

additional assistance.

As job services to older workers become available through the public and private

sector, navigating the myriad of service options may be the next challenge for

older workers to find the assistance they need. The following section describes

some various services and access points for older workers. For the total rewards

professional, these services may prove to be resources for attracting employees as

part of a talent-management strategy.

Job and Career Centers

Older workers can typically find job-search assistance at government-funded job

and career centers — One-Stop Career Centers and Senior Community Service

Employment Program (SCSEP) sites. One-Stops provide job-search assistance


(among other employment and training services) to all workers regardless of

income, while SCSEP sites provide employment and training services to low-

income individuals age 55 and older.

Employment Web Sites

A growing industry of online job-assistance services is being tailored specifi-

cally to older workers. Internet job sites and job banks that target older workers

are becoming increasingly popular, and they are beginning to court workers

and job seekers age 40 and older, not just the 55-and-older age group (Olsen

2007). Some Web sites are industry-specific, listing job openings in fields such

as engineering and health care that are targeted to older workers or retirees

with skills in high demand.

Job Counseling

At One-Stop Career Centers, staff and older worker specialists provide job coun-

seling to older workers seeking new employment. These staffers can identify

high-growth industries, companies with job openings and the skills needed to

obtain these jobs. Staffers counsel older workers on how to pursue job openings,

interview with employers and deal with various age-specific issues.

Other counseling services help older workers find temporary or part-time

work, full-time careers or business opportunities. Senior Employment Resources,

a private nonprofit organization, provides targeted job-search activities and job

counseling to adults age 50 and older (Senior Employment Resources 2007).

Its volunteer staff is composed of retired professionals who counsel older job

seekers on career directions, resumes and interviews, as well as networking.

SCORE, a national nonprofit association funded by the U.S. Small Business

Administration, offers counseling to budding entrepreneurs.

Training Older Workers to Meet Employer Needs

Some older workers may have difficulty obtaining the training they need to move

into new jobs or receive promotions (Frazis, Gittleman and Joyce 1998) because

employers, who provide most job training in the U.S., are more likely to offer

training opportunities to midcareer workers. However, some community colleges

and publicly funded employment and training programs are targeting older adults

for training and creating educational tracks that meet their employment needs.

Publicly funded training programs have been serving older workers for decades.

Although previous legislation authorized special funding blocks for older workers,

the Workforce Investment Act of 1998 (WIA), the federally funded employment and

training program, combined employment and training monies under one funding

stream for all adults to provide universal access to these services. This legislation

does, however, allow states and local areas to give priority to special populations,

such as older workers, when deciding how to allocate training funds (United States


Department of Labor 2007). State and

local dislocated worker programs

funded through WIA serve a growing

number of older workers.

Some community colleges are

leading efforts to develop job training

opportunities for older workers to meet

local labor-market needs. They often

collaborate with local and state work-

force agencies and workforce investment

boards for funding, labor-market

information and mutual referrals.

Public-Private Partnerships

A main objective of government

workforce-development agencies

has been to foster the development

of partnerships among key stake-

holders. These stakeholders include

employers, industry and economic

development groups, secondary and

postsecondary educational institutions, service providers and other nonprofit

community organizations. At the state and local level, relationships are often

developed through the workforce-investment boards, half of whose membership

must be selected from the employer community. In addition, states and local

areas are developing special initiatives to bring together these partners, especially

employers and industry groups, to promote the skilled workforce that employers

need. States engaged in these strategies include Arizona, Arkansas and Iowa.

Employer involvement is crucial to the success of these efforts.

Given the competing time demands on employers and industry-group representa-

tives, participating in a partnership or initiative can be difficult. Their involvement

depends on their perception that they will benefit from investing time and resources

in a partnership. Also, information to educate employers on hiring and retaining

older workers needs to be presented in a quick and useful format. Strategies to

engage employers center on creating and maintaining partnerships to create employ-

ment opportunities and educating employers on the value of older workers.

SUMMARY AND FUTURE PROSPECTS

Employers, government, nonprofit organizations and community colleges are

beginning to develop strategies to attract and retain older workers. As the older

population increases — particularly with the aging of the Baby Boomers —


www.worldatwork.org Type in any or all of the following search keywords on the search line:

z “Mature Workers”

z Flexibility

z “Baby Boomers”

z Phased retirement.


z The Best of Attraction and Retention: A Collection of Articles from WorldatWork

z Workplace Flexibility: Innovation in Action

z Workforce Engagement: Strategies to Attract, Motivate and Retain Talent.


z W2: The Flexible Workplace— Strategies for Your Organization.


and the growth in the middle-aged population slows, older adults are becoming

an increasingly important labor source.

Employers’ ability to tap into this underused resource in the coming years

could be the key to avoiding labor shortages and maintaining economic growth.

For employers, the challenge is to develop workforce policies appealing to older

workers without sacrificing productivity. Unlike most younger adults, who must

work full time to maintain their living standards, many older people have accumu-

lated substantial savings or gained access to regular retirement incomes and thus

can afford to work part time or stop working completely. They can be especially

selective in their job search and turn down offers that do not suit them. The wage

may not be the most important element of the employment package for many older

Americans. Instead, they may assign more significance to how well employment

opportunities allow them to combine work with other priorities, such as leisure

activities and family-care responsibilities.

Many older workers prefer workplace flexibility, and increasing numbers of

employers are offering flexible arrangements, including part-time work, flexible

work schedules, job sharing and telework. Phased retirement arrangements are

another option for employers trying to attract older workers, although formal

programs remain rare. Phased retirement plans allowing experienced workers to

reduce their work schedules at their career employers can benefit the older worker

and the employer. Firm-specific skills built by workers during their careers are lost

when older workers are forced to change employers to reduce work hours.

A key issue for future employment prospects is how the business community

will respond to the increased availability of older workers. Relatively few

employers have actively begun to recruit older workers, primarily because they

foresee no worker shortages. The industries that have most vigorously recruited

older workers, such as health care and energy, already face imminent labor

shortages. As the population ages and increasing numbers of employers experi-

ence attrition of key personnel, more employers may adapt workplace polices

appealing to older people. However, some observers who point to the long-term

stagnation of hourly earnings for most workers and believe that globalization

may enable people working overseas to help continue to meet the American

economy’s employment needs dispute claims that labor shortages are inevitable

in the United States and express doubt that the demand for older workers will

soar (Freeman 2006).

The work of the federal Taskforce on the Aging of the American Workforce

may create new strategies to promote employment at older ages. The task force

identified ways to promote self-employment opportunities, provide technical assis-

tance to programs serving older workers, improve retirement and financial literacy

among older people, and increase awareness of the advantages that older people

can offer employers. These efforts may raise employment rates among older adults

and help meet the challenges of an aging workforce. z


AARP. 2003. Staying Ahead of the Curve 2003: The AARP Working in Retirement Study. Washington, D.C.: AARP.

AARP. 2005. Attitudes of Individuals 50 and Older toward Phased Retirement. Washington, D.C.: AARP.

Barr, Stephen. 2007. “OPM Suggests Retirement Reforms.” Washington Post, April 17, D.4.

Buchmueller, Thomas C., Richard W. Johnson and Anthony T. Lo Sasso. 2006. “Trends in Retiree Health Insurance, 1997 to 2003.” Health Affairs. 25(6): 1,507–16.

Bureau of Labor Statistics. 2005. “Workers on Flexible and Shift Schedules in May 2004.” http://www.bls.gov/news.release/flex.nr0.htm.

Bureau of Labor Statistics. 2006. “National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2006.” Washington, D.C.: U.S. Department of Labor.

Bureau of Labor Statistics. 2008. “Federal Labor Force Statistics from the Current Population Statistics.” http://data.bls.gov/PDQ/outside.jsp?survey=ln.

Butrica, Barbara A., Richard W. Johnson, Karen E. Smith and C. Eugene Steuerle. 2004. “Does Work Pay at Older Ages?” Washington, D.C.: The Urban Institute.

Calhoun, Carol V. and Arthur H. Tepfer. 1998. “Deferred Retirement Option Plans (‘Drop Plans’).” http://benefitsattorney.com/modules.php?name=Content&pa=showpage&pid=14. Viewed: May 15, 2008.

Chen, Yung-Ping and John C. Scott. 2006. “Phased Retirement: Who Opts for It and toward What End?” Washington, D.C.: AARP Public Policy Institute.

Even, William E. and David A. Macpherson. 2004. “Do Pensions Impede Phased Retirement?” IZA Discussion Paper 1353. Bonn, Germany: Institute for the Study of Labor.

Frazis, Harley, Maury Gittleman and Mary Joyce. 1998. “Correlates of Training: An Analysis Using Both Employer and Employee Characteristics.” Industrial and Labor Relations Review. Vol. 53, No. 3: 443–62.

Freeman, Richard B. 2006. “Is a Great Labor Shortage Coming? Replacement Demand in the Global Economy.” NBER Working Paper 12,541. Cambridge, Mass.: National Bureau of Economic Research.

Friedberg, Leora and Anthony Webb. 2005. “Retirement and the Evolution of Pension Structure.” Journal of Human Resources. Vol. 40, No. 2: 281–308.

Hutchens, Robert. 2007. “Phased Retirement: Problems and Prospects.” Work Opportunities for Older Americans Series 8. Chestnut Hill, Mass: Center for Retirement Research at Boston College.

Hutchens, Robert and Karen Grace-Martin. 2006. “Employer Willingness to Permit Phased Retirement: Why Are Some More Willing Than Others?” Industrial and Labor Relations Review. Vol. 59, No. 4: 525–46.

REFERENCES

WEB EXTRA

To view the entire report by The Urban Institute titled “Current Strategies to Employ

and Retain Older Workers,” go to http://www.urban.org/publications/411626.html.

Lauren Eyster is a research associate in The Urban Institute’s Center on Labor, Human Services and Population. She studies policies and programs affecting American workers and their families, namely employment and training programs under the Workforce Investment Act of 1998, and work supports such as child care and food stamps.

Richard W. Johnson, Ph.D., a principal research associate at The Urban Institute, is an economist specializing in health and income security at older ages. He is an expert on older Americans’ employ-ment and retirement decisions. Recent studies include

analyses of occupational change at older ages, changes over time in job demands, and the impact of health-care costs, elder-care responsibilities and spousal disability on retirement decisions.

Eric Toder, Ph.D., is a senior fellow at The Urban Institute and the Urban-Brookings Tax Policy Center, where he performs and supervises research on tax policy and retirement policy. He previously held a number of positions in the U.S. government, including deputy assistant secretary for tax analysis at the U.S. Treasury Department. Dr. Toder received his Ph.D. in economics from the University of Rochester in 1971.

AUTHORS


Johnson, Richard W., Gordon B.T. Mermin and Matthew Resseger. 2007. “Employment at Older Ages and the Changing Nature of Work.” AARP Public Policy Institute Report No. 2007-20. Washington, D.C.: AARP. http://assets.aarp.org/rgcenter/econ/2007_20_work.pdf.

Kaiser Family Foundation and Health Research Educational Trust. 2005. “Employer Health Benefits: 2005 Annual Survey.” Menlo Park, Calif., and Chicago: Kaiser Family Foundation and Health Research Educational Trust.

Mermin, Gordon B.T., Richard W. Johnson and Dan Murphy. 2007. “Why Do Boomers Plan To Work Longer?” Journal of Gerontology: Social Sciences. 62B(5) S286–94.

Munnell, Alicia H., Francesca Golub-Sass, Mauricio Soto and Francis Vitagliano. 2006. “Why Are Healthy Employers Freezing Their Pensions?” CRR Issue in Brief 44. Chestnut Hill, Mass.: Center for Retirement Research at Boston College.

National Center for Health Statistics. 2006. “Trends in Health and Aging.” http://209.217.72.34/aging/TableViewer/tableView.aspx?ReportId=313.

Olsen, Elizabeth. 2007. “Some Web Job Sites Put Out ‘Gray Hair Welcome’ Signs.” The New York Times, January 14.

Pension and Welfare Benefits Administration. 2001-02. Private Pension Plan Bulletin: Abstract of 1998 Form 5500 Annual Reports. Washington, D.C.: U.S. Department of Labor.

Rogowski, Jeannette and Lynn Karoly. 2000. “Health Insurance and Retirement Behavior: Evidence from the Health and Retirement Survey.” Journal of Health Economics. Vol 19, No. 4: 529–39.

Senior Employment Resources. 2007. “Senior Employment Resources.” www.seniorjobs.org/. Viewed: May 15, 2008.

Steuerle, C. Eugene, Christopher Spiro and Richard W. Johnson. 1999. “Can Americans Work Longer? Straight Talk on Social Security and Retirement” Policy 5. Washington, D.C.: The Urban Institute.

United States Department of Labor. 2007. “Senior Community Service Employment Program (SCSEP)” www.doleta.gov/seniors/. Viewed: Aug. 1, 2008.

VanDerhei, Jack. 2006. “Defined Benefit Plan Freezes: Who’s Affected, How Much, and Replacing Lost Accruals.” EBRI Issue Brief 291. Washington, D.C.: Employee Benefit Research Institute. www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3628. Viewed: May 15, 2008.

WorldatWork. 2007a. The WorldatWork Handbook of Compensation, Benefits & Total Rewards. Scottsdale, Ariz: WorldatWork; 700.

WorldatWork. 2007b. “2007 Survey Brief: Telework Trendlines for 2006.” Scottsdale, Ariz.: WorldatWork.

Reward Management In Multinational Enterprises: Global Principles; Local Strategies

How effectively and appropriately multinational

enterprises (MNEs) reward performance signifi-

cantly influences workforce effectiveness. “Going

global” presents several types of challenges including:

1 | Conforming to local laws and regulations

2 | Adapting to local cultures

3 | Competing effectively in diverse labor markets

4 | Developing strategies and programs that are consistent

with organizational culture

5 | Efficiently administering programs.

Conforming to local laws and regulations is primarily

a technical issue, with specific answers. Each organiza-

tion must identify the relevant rules in each location and

decide how it ensures that its total rewards programs do

not violate them. It must decide whether to use outside

experts or its own staff to ensure compliance. Coping

with the competitive realities faced in each local labor

market is also a technical issue, about which much has

been written. The supply/demand balance for specific

skills, the role of third parties such as unions, the cost

of living and the nature of organizations competing

in the market all influence the workings of the labor

HR Strategy z

Robert J. Greene, Ph.D.,

GRP, GPHR, CPHRCReward $ystems Inc.

Third Quarter 2008




markets. For example, multinationals are facing challenges in China due to the

shortage of experienced management personnel. The shortage is exacerbated by

the reality that using expatriates or third-country nationals is often too expensive

or difficult because of language barriers and other impediments to effectiveness.

But global rewards professionals have tools to deal with these challenges, albeit

not without difficulty.

Cultural diversity challenges may be the most daunting of all. Effectiveness in

dealing with multiple cultures is best met by practicing the “3 Rs” of cross-cultural

management. To effectively attract, retain, motivate and satisfy a high-quality

workforce, MNEs must recognize cultural differences, respect the rights of those

with differing values and beliefs and reconcile the issues raised by these differences

(Trompenaars and Hambden-Turner 2004). Many United States-based organizations

are ethnocentric, which means they believe the culture prevailing in the U.S. is the

correct one and act accordingly. Surveys by Trompenaars and Hofstede (Hofstede

1990) show American organizations to rank low in cross-cultural integration.

This impedes efforts to turn cross-cultural challenges into opportunities.

Cultural differences within global workforces create daunting challenges for

rewards management practitioners. Concepts such as rewarding individuals based

on their performance have proven devilishly difficult to implement and to make

work effectively in some parts of the world. Perhaps it is challenging to make

pay for performance work well in some cultures, as the theories supporting

the use of this practice may not apply in all cultures. Most research that led to

formulating these theories was conducted on Western/Northern employees in

Western/Northern organizations by Western/Northern researchers. One could

therefore ask the question: “Would these research findings hold up in other

parts of the world?”

Figure 1 is based on research by Trompenaars and Hofstede, who identified

cultural differences among countries by measuring the extent to which the char-

acteristics existed in samples of the populations. Both researchers used cultural

“dimensions” to describe contrasts across national borders. The dimensions cited

in the figure can be defined as follows:

z Communitarian (group-/society-oriented) versus individualistic (self-oriented)

z Particularistic (circumstances or who is involved should impact actions) versus

universalistic (one set of rules to be applied to everyone in all situations)

z Ascriptive/ascribed status (how one is treated depends on who they are) versus

achieved status (all status is earned through achievements)

z Outer-directed (person not in control; external forces impact outcomes) versus inner-

directed (“can do” attitude caused by the belief that results follow effort and skill)

z High power difference (hierarchy and authority are prominent) versus low power

difference (less differentiation by level and more democratic processes).

No country’s culture exactly matches either of the two admittedly exaggerated

profiles in Figure 1. But differences among national cultures are significant, a fact


supported by research and experience. And these differences have been shown to

have a material impact on the success of HR strategies and programs. By contrasting

polar profiles, the full range of cultures can be appreciated, enabling HR practitio-

ners to develop robust strategies that can cope with a wide range of difference.

This paper examines whether the principles underlying reward systems that have

proven to be effective in Western/Northern (W/N)-type cultures are likely to hold

in Eastern/Southern (E/S) and other types of cultures. Hypotheses are presented

that can be used to anticipate different levels of effectiveness for various strategies

and programs. Implications for global organizations are examined, with a focus

on the overarching issue: whether one reward strategy should be implemented

globally or if local customization should be applied to strategies and programs.

It should be noted that the cultures prevailing in any single W/N organization

may well vary from the W/N profile, despite being in a country with a W/N

culture. For example, organizational cultures in many startup high-tech American

companies are person-focused rather than task-focused (what is commonly

thought of as the “Silicon Valley culture”). The reaction of employees to a

particular reward strategy/program may, in these organizations, take on many

characteristics of the E/S cultural profile. Further complicating the anticipation

of culture’s impact is the reality that units or occupational clusters within a W/N

corporate culture may have their own subcultures. For example, the research and

development function may be more E/S, a byproduct of the type of work being

done and the nature of the individuals who perform it. As a result, it is perilous

to assume a particular approach will be acceptable to all employees, even when

the organization’s overall culture fits the country’s cultural profile. Trompenaars

and Hambden-Turner (1998 and 2004) point out that there is as much variance

within a country as there is across countries. Given the way country borders are

FIGURE 1 The Contrast Between Conceptually Polar Western/Northern and Eastern/Southern Cultural Profiles

Eastern/Southern Cultures Western/Northern Cultures

Characteristics of cultures: Characteristics of cultures:

z Communitarian z Individualistic

z Hierarchical z Egalitarian

z Particularistic z Universalistic

z Ascribed status z Achieved status

z Person-focused z Task-focused

z External control z Internal control

z Intuitive/holistic z Analytical/reductionist

z High power difference z Low power difference

Countries with cultures that favor this profile: Countries with cultures that favor this profile: Japan, China, Egypt, Indonesia, Turkey, Brazil, United States, United Kingdom, Canada, Australia, Venezuela, South Korea, France, Greece, Italy, Norway, Sweden, Switzerland, Germany, Netherlands Spain, Russia, Egypt


being adjusted (i.e., the Balkans and Eastern Europe), it may even be necessary

to define cultures for specific societies, rather than countries.

CULTURAL DIFFERENCES’ INFLUENCE

ON REWARD-SYSTEM EFFECTIVENESS

W/N cultures support individual rewards based on individual performance.

The majority of direct compensation is typically in the form of merit pay in W/N

organizations. Individual performance criteria and standards are established in

advance, and rewards are tied to results compared to these standards. Performance

appraisals and rewards based on appraisal results are a result of a cultural bias

that argues for distributing rewards differently among individuals. Also, “telling

it like it is” is common practice. Identifying where an employee succeeded and

failed is not only acceptable — it is expected of managers. But this approach is

not as acceptable in more collectivist and person-focused cultures, as it will cause

the employee to “lose face” and/or it will conflict with the belief that outcomes

are not under the control of individuals. Other more effective and more culturally

compatible methods may be needed. The anthropologist Edward T. Hall differenti-

ates between “high context” cultures (such as Japan), where intensive socialization

makes the restatement of values and expectations largely unnecessary and “low

context” cultures (such as the U.S.) where explicit communication is needed to

define what is expected (Hall 1976). In the high-context culture, it is often not

necessary to explain why rewards are administered in a particular manner or what

the expectations are for each party involved in the process. In a low-context culture,

the lack of specificity will likely be to reduce the process’ effectiveness.

The practice of basing rewards on performance at an individual level may

not fit well in the more E/S cultures. When the prevailing view is that it takes

everyone to achieve continuous improvement (for example, in Japan and several

Asian countries), the act of singling out one employee’s contributions (or lack

thereof) may not be accepted, or at least emphasized much less. As work is

generally assigned to teams, rather than individuals, it may be difficult to convince

employees that accurately measuring the relative contribution of each person is

even possible. When everyone does whatever needs to be done at the time, the

concept of measuring individuals against specific objectives or performance stan-

dards is tough to defend.

The universalistic character of W/N cultures favors the same set of rules for

everyone, with performance measured against established expectations and

rewards based on appraisals. But close personal relationships may cause poor

results to be overlooked in particularistic cultures, as the relationship must be

preserved. It is hard for Western managers to accept this particularistic point of

view, as evidenced by the negative reaction to “nepotism” experienced in the U.S.

In Asian or Latin American countries, it may be reasonable to give preference to

family members because there is an established trust and a belief that the family


members would not do anything to damage the family reputation or their standing

within the family, thus making them a better risk than a stranger.

Many E/S cultures believe that who is being evaluated and rewarded should be

a consideration. For example, in an ascriptive culture, if a graduate of a highly

respected university is contributing little to the organization, it might be assumed

that circumstances caused this. An ascriptive culture focuses on who the person is

and their status. As the person’s quality has already been ascribed to the person

by the status of that school’s graduates, it is difficult for evaluators to attribute

poor performance to the person. Therefore, the conclusion may be that the person

should not be penalized for poor results.

Another dominant belief in W/N cultures is that people are typically in control

of their destiny and should be held accountable (the “can do” culture). However,

a significant portion of the world’s population believes that fortune and external

forces determine outcomes much more than individual effort. For people holding

that belief, it is difficult to establish causation for good or poor performance

or to sell people on tying rewards to a measure of individual contribution.

This is particularly true when/if an employee extends his/her best effort. The top

HR executive of a major corporation in the Middle East once asked the author,

“How do you motivate someone who believes that no matter what they do, the

result is determined by Allah’s will?” Tough question.

W. Edwards Deming’s tenets of quality management posit that individuals should

not be held responsible for outcomes determined by the “system.” Companies in

W/N cultures often try to limit accountability to those things believed to be deter-

mined by individual effort. But job-related results are still viewed as the primary

basis for determining career/compensation consequences in the West/North. In a

collective culture, the tendency is to focus efforts on creating a consensus about

the best way to do something and then to attribute successes and failures to the

overall system, which includes everyone. This would argue for an egalitarian

distribution of rewards.

HYPOTHESES ABOUT THE IMPACT OF CULTURE

ON REWARD MANAGEMENT

The aforementioned contrasts between polar cultures can be compressed into test-

able hypotheses, which are related to the research of Trompenaars and Hofstede.

Hypothesis Number 1

Measuring individual performance and basing rewards on the appraisal will be

more acceptable in cultures that are individualistic than in cultures that are

collectivist. Employees from countries such as the U.S., the United Kingdom,

Canada, Denmark, the Netherlands and Australia tend to be more individualistic

in their orientation than employees from Egypt, Mexico, India, Japan, France and


Venezuela, who will be more likely to prefer performance be measured and

rewarded at an aggregated level, as they believe results require collective effort.

Hypothesis Number 2

Rewarding the individual for meeting performance standards will be more accept-

able in cultures that believe in internal control than in cultures that believe in

external control. Employees from countries with “can do” mind-sets, such as the

U.S., the U.K., France and the Netherlands, will more readily accept personal

responsibility for results than will employees from countries such as Venezuela,

China, Russia, Kuwait, Egypt, Saudi Arabia and India, who will be more likely to

believe outcomes are due to forces at least partially outside their control.

Hypothesis Number 3

Rewarding individuals based on what they accomplish rather than who they are

will be more acceptable in cultures that are achievement-oriented than in cultures

that are ascription-oriented. Employees from countries such as the U.S., Australia,

Canada, the U.K. and the Netherlands will tend to accept rewards based on what

people have accomplished more than will employees from countries such as Egypt,

Japan, China, Russia, Mexico and France, who will be more likely to believe the

individual’s status/qualifications should be considered.

Hypothesis Number 4

Employees from universalistic cultures will believe that the same policies, methods,

processes and standards should apply to rewarding all employees, as opposed

to those from particularistic cultures. Employees from countries such as Canada,

the U.S., Sweden, the U.K., Australia, the Netherlands and Germany will tend to

believe in one set of rules applying to everyone under all circumstances more than

employees from Venezuela, Russia, China, India, Japan and France, who accept

that the person’s identity and the circumstances should be considered.

Hypothesis Number 5

Employees from countries with low power-difference cultures will expect to partici-

pate in setting performance standards, determining results achieved and agreeing

on an appropriate reward with the supervisor. Those from high power-difference

cultures will be less willing to accept this approach. Employees from Germany,

the Netherlands, the U.K., Australia, Canada and the U.S. are more apt to be

active in the process and challenge the supervisor when there is disagreement

on performance or rewards than will employees from countries such as Mexico,

Venezuela, France and China.

These hypotheses, if supported, should be a consideration for human-resources

practitioners when designing reward-management systems for use across diverse

cultures. Knowing how employees are likely to react when they are evaluated


and rewarded in particular ways is

valuable and enables HR to consider

what to do to, if anything, to accom-

modate cultural differences.

ONE GLOBAL REWARDS

STRATEGY OR MANY?

A global organization can adopt one

global-rewards strategy and set of

programs, use different strategies/

programs for each locale/country/

region or agree on a set of global

guiding principles and then allow

some latitude for local customization

as long as the principles are adhered

to. The more universal the strategy,

the easier it is to align all employees

and units with organizational values

and objectives. The more locally

specific the strategies, the easier it is

to conform to local laws, culture and

competitive practices. Organizations

attempting to use reward vehicles

such as stock options for all employees globally find that many obstacles are

presented by local realities: laws prohibiting ownership in foreign corporations,

dramatically different pay levels that make the value of the options enormous or

insignificant, data privacy laws blocking access to the information necessary to

administer the program, established local practices causing employees to view

the options differently, etc.

A global organization with a strong universal culture may wish to adhere to

the values and principles that guide behavior for all employees. However, the

factors just discussed can weigh in to force some relaxation of consistency and

to make local accommodations. Such an organization can rely more heavily on

expatriates to fill critical slots throughout all operations globally if it wishes to

ensure things are done according to corporate policy. The use of a global cadre

that is fully socialized can set the tone for operations everywhere, even when

they only occupy key management roles and work with workforces dominated

by local nationals. Although this practice has been used by MNEs headquartered

in developed countries, particularly the U.S., Britain and Japan, more developing

countries are adopting legal limitations on the use of “foreigners” and/or are

applying considerable social pressure to more quickly fill key slots with local

nationals. In October 2006, a government mandate was issued requiring all HR


www.worldatwork.org Type in the following search keyword on the search line:

z Multinationals


z The Best of Global HR: Five Years of International Articles from WorldatWork

z Compensating Globally Mobile Employees: How-to Series for the HR Professional

z Global Rewards: A collection of articles from WorldatWork

z Equity at Work: Constructing a Broad-based Stock Option Plan.


z GR1: Total Rewards Management

z GR7: International Remuneration — An Overview of Global Rewards

z GR9: Strategic Communication in Total Rewards.


directors in a major Middle Eastern country to be nationals within a relatively

short period of time, which sent employers scrambling to find qualified people or

to invest in high-speed training. A decision like this influences reward strategy,

as expatriate remuneration packages can be largely homogeneous, with focused

variations relating to different living costs and tax structures to keep expatriates

“whole” wherever they are assigned. The homogenization becomes more difficult

when local nationals and third-country nationals replace expatriates.

For a global organization concerned about the high cost of using expatri-

ates and/or the negative reaction to a globally homogeneous strategy in some

countries, options exist. Research shows that the use of expatriates is generally

declining, replaced by more short-term project assignments and extended business

commuting. Growth in the use of inpatriate assignments allows local nationals to

be brought into headquarters for extended periods. The purpose of these inpatriate

assignments may be to socialize future managers to the organization’s culture,

provide them with management training and/or have them educate corporate

personnel about their home countries and how to successfully do business there.

Infosys recently won an award for its program that assigns graduates hired in the

U.S. to India for a six-month tour to acquaint them with the company’s way of

operating and to socialize them into the Infosys culture before sending them back

to work in the U.S.

No matter which approach is used, it is inevitable that treating people differ-

ently with respect to their reward packages will create challenges. How dramatic

the differences are and how long they will persist will impact the reactions of

incumbents. Everyone is subject to the “grass is greener” syndrome when someone

else is treated differently. However, by understanding the potential legal, economic

and cultural conflicts that may arise, an organization can craft reward strate-

gies that minimize negative reactions or uneconomic practices. When the plant

manager in one country wants to distribute an incentive pool in an egalitarian

fashion and the plant manager in a neighboring country chooses to differentiate

between individuals/units, it is wise to understand why they would choose to do

this differently before mandating consistency. There may be much more gained

in the form of employee acceptance and motivation by allowing differences than

by insisting on similarity.

The increased use of global teams consisting of members from different occu-

pations/functions, different countries and different organizational levels raises

additional issues relating to reward strategy. Some team members may be co-located

while others are in different countries and time zones, causing them to interact

asynchronously. Although it would seem those working “shoulder to shoulder”

would be more concerned about reward consistency than those who are sepa-

rated, any differences in how and how much members are rewarded can be

divisive. If a Chinese engineer receives a $1,000 USD cash incentive award

while an American colleague receives $4,000 USD for a similar contribution,


it may make little difference that the award is the same percentage of base salary

for both. If they shop together in San Francisco to celebrate the project’s success,

the difference in award size will be apparent. And if the team leader awards some

individuals more because their contribution is thought to be greater, the cooperative

fabric of the team could unravel. Such differentiation is apt to be viewed as inap-

propriate by members from collectivist cultures, even though they acknowledge

the value of the contributions of those rewarded more richly.

EVALUATING THE EFFECTIVENESS OF REWARD STRATEGIES

Evaluation of strategies and programs is typically done as an “after the fact” exer-

cise, often when things have deteriorated to an intolerable level. This is unfortunate,

as it is often too late to do anything but damage control. It is possible to perform

evaluations of why strategies and programs seem to work in some contexts and

whether other contexts are sufficiently similar to project success in those loca-

tions. This enables the organization to anticipate problems in transferring practices

across locations and cultures before they become a reality. For example, Lincoln

Electric prospered for decades in the U.S. with a reward strategy that consisted of

“output-based” rewards (a.k.a., piecework) for individuals and a gainsharing plan

that rewarded everyone for overall success. This highly successful strategy worked

reasonably well when it was implemented in the company’s new operations in

England and Mexico, but failed to gain acceptance in parts of Europe and in Japan.

The failure was largely due to cultural conflicts, which seemingly could have been

anticipated if in-depth research on the characteristics of each culture had been

done before attempting implementation.

CONCLUSION

Managing rewards globally requires an understanding of context, especially cultural

context. A strategy or program producing outstanding results in one place may be

ineffective somewhere else due to cultural differences. Every organization should

attempt to recognize, respect and reconcile those differences. By analyzing the

cultural diversity within its workforce, an organization can anticipate potential

problems and decide how to formulate strategy and solutions. z


Robert J. Greene, Ph.D., GRP, GPHR, CPHRC, is the CEO of Reward $ystems Inc. in Glenview, Ill. He has published more than 80 articles and book chapters and was awarded the first Keystone Award for attaining the highest level of excellence in the field by the American Compensation Association (now WorldatWork). He has designed and taught certification

courses and seminars for numerous professional associations around the world. Dr. Greene serves on the faculty for DePaul University in its master of business administration and master of science in human-resource management programs in the U.S., Europe and the Middle East.

AUTHOR

Hall, Edward T. 1976. Beyond Culture. New York: Anchor Books.

Hofstede, Geert. 1990. Cultures and Organizations. New York: McGraw-Hill.

Trompenaars, Fons and Charles Hambden-Turner. 1998. Riding The Waves of Culture: Understanding Diversity in Global Business. 2d Ed., Nicholas Brealy. New York: McGraw-Hill.

Trompenaars, Fons and Charles Hambden-Turner. 2004. Managing People Across Cultures. Hoboken, N.J.: John Wiley & Sons.

REFERENCES

A Globally Mobile Workforce: HR’s Role

W ith the ever-growing number of employees

stationed around the world, the design and

administration of benefits and compensation

programs for international assignees has become more

complex. This paper focuses on applying a global

perspective to talent and on how this new viewpoint

changes the way human-resources professionals need to

manage and use global mobility as a tool when creating

workforce strategy plans. By proactively employing a

global-mobility strategy, HR professionals can ensure

their global-mobility programs play a vital role in the

organization’s overall workforce strategy.

The term global mobility refers to the purposeful cross-

border deployment of employees to accomplish one or all

of the following goals: execute a specific business objective,

develop an individual’s global-leadership skills and/or

instill a corporation’s global-mission initiative. Global

mobility, so defined, elevates its role from a tactical event

to a strategic practice and separates it from the adminis-

trative and limited terms of relocation and international

assignment management. HR has traditionally created

policy and managed expatriates on temporary interna-

tional assignments. Yet this newly emerged definition of

HR Strategy z

Adele M. Yeargan,

CRP, GMS, GPHRHewitt Associates

Third Quarter 2008




mobility now encompasses short-term assignees, regional commuters, rotational

assignments and one-way permanent international moves. The author’s experience

also proves that companies often include extended business trips in their defini-

tion of mobility as well — due to tax and work permit compliance concerns, and

domestic, intra-country moves — due to their unique workforce challenges within

emerging-market countries.

HR’S ROLE IN GLOBAL MOBILITY MUST MOVE

FROM TACTICAL TO STRATEGIC

It is essential for HR (both local and global) to view itself as part of the global-

workforce solution. The previous best-practice policies no longer adequately

respond to an organization’s needs. HR needs to adapt — fast.

The changing business climate requires an agile and deliberate HR attitude,

as well as the infrastructure and planning that can be both strategic and tactical

to support mobility in all of its new guises. It is the author’s experience that a

dynamic workforce demands the use of various types of assignments, cross-border

relocations and multifaceted international hiring practices, such as local foreign

hires, virtual teams and permanent moves.

Mobility has always played a tactical role within HR, but rarely has it been

elevated to a strategic position. Until now, the typical domestic policy has covered

relocation benefits with the understanding that the move was permanent or

one-way, whereas international policy was designed around a temporary period,

usually short (three months to a year) or long (one to five years). As such, these are

not merely physical moves but defined “assignments,” which require thoughtful,

strategic workforce planning to ensure the best use of talent, considering the

complex, multijurisdictional realities of crossing borders.

As a practical example, consider the growth in domestic mobility within coun-

tries where relocating was not a common practice one year ago (e.g., China and

India). The complexities surrounding domestic moves in these countries are more

akin to an international than a domestic move in the United States or the United

Kingdom. Moving within an emerging market, region or country varies from city

to city, presenting barriers to relocation (from education for children to variable

dialects and the ability to leverage local networking to facilitate business relation-

ships). This creates the need for companies to look at each location and the local

landscape strategically to make the right staffing decision for the business, while

also addressing the issues facing the employee and family and providing the solu-

tions to facilitate relocation.

HR cannot only play a strategic role, however. The tactical elements and

complexities of global mobility remain and require solid HR policy and procedure

to manage effectively. There are many aspects of compensation, tax treatments

and reporting, work-permit compliance and benefits (ranging from pensions to

medical coverage) to consider. And, corporate liability for tax withholding —


even for business travelers — is getting more stringent as governments are seeking

to maximize tax revenue and ensure a tighter control over international labor and

work-permit availability. It is not unusual to see Bill Gates, Microsoft chairman,

lobbying the United States government to ease visa quotas so companies can

have freer access to talent from whatever country can produce it. These country-

imposed limitations lend to the growth of offshoring as companies shift to capture

labor advantages.

HOW MOBILITY CAN CONTRIBUTE TO A GLOBAL WORKFORCE STRATEGY

With vision and practical planning, mobility can be an organization’s newfound

strategic device. A global-mobility strategy is not without its challenges in effective

application and execution, but with a well-thought-out policy and strategic workforce

objectives, companies can enhance many aspects of their workforce acquisition,

placement and management with an effective global-mobility strategy.

To understand global mobility’s reach and consequent impact on a company’s

global-workforce strategy, consider it within the framework of each of these critical

areas of HR management:

z Talent management and development

z Compensation

z Performance and return on investment (ROI)

z Learning

z Compliance and risk management.

Talent Management and Development

Many progressive, flat organizations use international mobility as part of the

requirements for career growth and even require such experience as a means

to attain executive positions. A successful global-mobility program can produce

dividends for the company and the individual. In many areas, mobility can affect

talent at crucial points in their career — such as attraction, development and

retention. The author has found that performing candidate assessments is a great

first step to ensure preparation for an assignment. To truly capitalize on this

evaluation, organizations need to follow through and use this insight to develop

career plans and build candidate pools for assignments in general and global

leadership roles, in particular.

Using international assignments to develop global working skills provides

cultural exchange opportunities (corporate and geographical), leading to the

development of a profound depth of skill for management in a global and diverse

environment. More organizations are realizing the investment value of this inter-

change of both culture and skills and are being creative and strategic in how they

manage global talent to maximize tangible returns. This visible, global image for a

company attracts a wider and more sophisticated talent pool from which to recruit.

(More information on this topic can be found in the work of Black, Morrison and


Gregersen, (1999), where they cite the four T’s of global-leadership development

(travel, transfer, training and teams)). From a cost-management perspective, devel-

oping candidate pools can offer the company an international choice for talent

placement. With certain citizens having worldwide income-tax implications, a pool

could offer alternative candidates who are less costly to move. Candidate pools

may no longer be limited to key talent focus but can be broadened to include a

wide span of skills and band levels.

Compensation

As organizations begin to see cross-border mobility as more of a standard and

required operating practice to meet business objectives than a specialized role

or career event, compensation programs and packages will need to address the

complexities of equity on the global playing field — in reality and perception.

And global-mobility experts can help.

As experts in this field know, it is a near-impossible task to level set global-

compensation structures due to the country-to-country variables influencing an

overall package, such as pensions and social programs. Yet, it is this highly critical

aspect of HR management that provokes questions and skepticism from govern-

ments and employees as they attempt to scrutinize corporate practices to ensure

fair and equitable treatment.

The basics of supply and demand are at the core of this subject, and will

continue to define how talent is paid, for years to come. Even so, myriad examples

exist of how companies operate with what appears to be a blind view to the world

around them. This includes the common notion that expatriates are more expen-

sive than local talent. In reality, in developing countries such as India, Westerners

are now more economical and more available than local employees at the top

manager level. Just as companies seek new labor markets to gain cost advantages,

this financial edge shrinks rapidly as local economies are quick to mature and

demand equity for labor as well as other local operating costs.

What commonly results from a misalignment among compensation, mobility

and talent management are hybrid assignments. Although a sophisticated-sounding

label, they are usually, at best, a policy work-around used to create individual

“deals” with employees. HR’s complicity with the business to get employees where

they need them at a price point they feel they can afford — and with terms that

the employee is willing to accept — eliminates the opportunity to put in place

appropriate expatriate terms that would establish the employee on a more local

package with the unspoken intent of repatriation. The business justification is

that this makes the move cheaper than a full expatriate and, hence, affordable.

The equation’s other side is that these types of “deals” tend to be assembled

without an understanding by regional HR of a strategic downside to overall

workforce management including potential employment law and/or tax (corpo-

rate as well as individual) compliance concerns. The organizational dysfunction


in managing these types of assignments as common and accepted can become

difficult to reverse, as the practice quickly is entrenched into a philosophy about

talent assignments. Ultimately, the effect of condoning this approach leads to

visible inequity due to the blurred nature of the employee’s status as neither a full

expatriate nor a normal local employee, and the assignee is at risk of becoming

disenchanted with the company’s lack of support and global sophistication.

A global organization needs a strategy to address issues such as business timing

and cost. Expatriate compensation packages are an essential part of that design

and planning. If the business struggles to afford a standard assignment package,

it may be prudent for the organization to subsidize the assignment so it is done

correctly. Compensation professionals need to guide and lead in this area so the

organization can capitalize on the bigger picture. Clear direction to local managers,

HR and foreign payrolls is necessary on all aspects of compensation. It may be

necessary to build the case for a shared-assignment cost model between business

and corporate, with specific emphasis on a career path for the assignee (global

leadership and management positions). Companies should combine the business

need and the management-development investment goals into one calculation,

with a systematic plan to support, sustain and integrate the assignment into a

developmental structure.

Managing the administrative aspects of compensation for global assignments

requires a detailed cycle of tasks. Seek opinions from international-tax professionals

and ensure a stringent approval process for authorization on compensation and

subsequent changes to prevent local practices infiltrating an international package

that was designed to maximize cost savings and tax-planning options. Scrutinize

the way each aspect of compensation is important. Consider annual raises. Should

this be applied to an expatriate package if the package is already structured for the

position and time frame of the assignment agreement? Repatriating the employee

into a particular band structure raises potential issues. Assume there will be local

costs, tax impacts or withholding requirements applied, whether it is base salary,

annual raises, bonus, commissions or stock options.

It is unlikely that a single global policy or approach could address such complex-

ities. But a global corporate standard that links each functional HR segment

with appropriate regional guidelines can support a platform for a wide range of

functional policies to address business objectives and manage costs and compli-

ance. This ensures the integrity of the corporate vision and the workforce most

organizations are striving to attract, motivate and retain.

Policy development is only one step in any process to effectively administer

a global expatriate event. Compensation, the required cost of living differentials

and the excess tax cost are the major administrative elements of an assignment.

The common guideline that an expatriate assignment is two to three times the

domestic cost is based on using a tax-planning methodology. Without that meth-

odology, the cost can be significantly more. Other areas, such as health benefits


and retirement and pension plans, also add complexity and cost to the programs

to stay compliant and competitive. Although there are agreements in place across

numerous countries to avoid the duplication of payments into a host country’s

pension scheme, the agreements do not always work. In the case of global nomads

(individuals with multiple assignments throughout their career), the condition of

not having any single-country program fully funded can lead to a genuine pension

dilemma for these employees. Policy can address some of these elements, but the

corporate community has few options to practically and comprehensively manage

these details on a global scale. Regardless of the size of an expatriate program,

having the most up-to-date sources of information and broad delivery capabilities

is required to effectively track taxability, thresholds on local tax requirements

and country-to-country treaties that can reduce costs. A single, turnkey solution

is generally unavailable when one’s expatriate population is small, yet the appro-

priate actions are still required.

With a significant expatriate population, it becomes possible to create an

in-house solution to these complex compensation issues, but maintaining the most

up-to-date and scalable subject-matter expertise on staff — from compensation

through taxation — is a daunting task. Historically, companies relied on inter-

national tax firms to plan for and prepare tax returns. And, in about 20 percent

of cases, companies use these firms’ full-assignment administration platforms.

Amazingly, almost 69 percent of companies do not utilize any formal method,

internal or external, to track assignments (Deloitte and ORC Worldwide 2007).

With tightening restrictions for tax firms on how, what and with whom they

can deliver services due to Sarbanes Oxley, their scope of services is narrowing

with certain clients. Although this service option will not likely withdraw from

the market completely, the need to leverage a complementary team of service

providers is emerging as a viable alternative. Resources from HR outsourcing

and HR consulting are effectively integrating with HR and tax professionals, and

facilitating comprehensive assignment compensation tracking, relocation manage-

ment, tax reporting and pay delivery.

Performance and Return on Investment (ROI)

A formal set of measurable goals and achievements is needed for HR to truly

measure successful mobility. HR must have a strong commitment to defined

metrics for global mobility; otherwise, assignments cannot be valued appropriately.

A recent study by Deloitte and ORC Worldwide found that more than 86 percent

of the multinationals surveyed did not track any metrics related to international

assignment results. As a consequence, business managers will continue to rely

on assumption and hearsay to determine if an assignment is viable, never really

knowing whether an expatriate is worth the cost. The author has found that short-

term assignments are frequently used in a back-to-back fashion without any cost


analysis on results achievement or whether a single expatriate assignment would

have been more effective, without any added cost.

It is possible to achieve a clear and defined return on global-mobility investment,

but it requires an integrated, cross-HR effort. An organization must use an integrated

methodology, including the business case, individual performance tracking and career

development, to achieve an objective view on financial returns and human capital.

Aspects to address, in addition to the assignee’s job goals and the financial business

results, are actual assignment costs compared to the original and ongoing busi-

ness case. Also, long-term retention results can be measured as part of an overall

return-on-investment (ROI) strategy to integrate assignment experience back into

the organization upon repatriation. The strategic value equation for a long-term ROI

calculation remains HR’s responsibility as it crosses between long-term corporate

and short-term business objectives. HR is best positioned to demonstrate the value

of a global workforce and programs to facilitate an agile response for current and

future demands of global business. Consider the following process:

z Structure a clear business case for the assignment, and have defined financial

achievements.

z Perform an assignment cost projection and track ongoing costs.

z Build performance goals tied to the business case into the assignment.

z Monitor progress in an appropriate time frame (annually for long-term assignments,

post-assignment for short-term assignments, etc.).

z Compare assignment cost to business-case achievements.

z Factor in career-path, leadership and talent development.

Learning

Global organizations can learn from the few companies that truly live a global

vision. Whether it is a requirement that all executives have had international

assignments or that business leaders are chosen based on their diversity as well

as their skills, a clear vision and genuine commitment to that vision are what will

“globalize” an organization’s management and mind-set over time.

Both domestically and globally, a number of learning-related activities can be

instituted to quickly bring global diversity and operational practice to reality.

Cultural training for individuals and work teams can enhance positive working

awareness and effectiveness. This applies for virtual work teams as well as

employees on assignment working in a culturally different work environment

or region. In addition, training the receiving team is also important. It has been

perplexing that there has been an effort to train the expatriate manager to under-

stand the culture where he/she will work, yet not train the team with whom the

expatriate will manage about the culture of the expatriate. It is that myopic, and

often cost-centered, thinking that dominates the tactical process — it leaves no

room or expectation to consider creative actions. The cost/benefit of training the

entire team to understand each other’s culture, behavior and perspective creates


a more productive team in a shorter period.

It is important to remember that critical corporate oversight can dramatically influ-

ence global initiatives on a regional level when there is a realization that a shared

investment can produce broad and lasting results.

Compliance and Risk Management

Possibly the largest barrier to global mobility is the free movement of labor.

Each country has its own complexity of laws and unique levels of bureaucracy

for providing work permits. If an organization does not invest in a structure to

oversee and track its workforce when it crosses into other jurisdictions to work,

the risk of operating illegally, attracting fines, and tax obligations is genuine.

This is no simple matter to track, control and manage on a global basis. Therefore,

this oversight rests with HR and others. It requires the support and commitment

of corporate legal, finance and tax, although it is best structured as a partnership

with HR. One reason this is challenging to manage is that compliance applies to

more than merely cross-border assignments. Business travelers and virtual workers

are also a part of an overall tracking initiative.

Although compliance may not have been an issue for most companies in the past,

that is quickly changing. With passport scanning at every border, governments

are far better equipped to track individuals entering their country — knowing the

exact number of days spent in-country by each individual. Be forewarned: when

it becomes an issue, it will be a costly one, with financial and public-relations

consequences. Managing strict immigration and work-status compliance is critical,

because it is closely tied to tax reporting and payroll withholding and can affect

corporate taxation and exposure. Corporate tax and finance departments should

be engaged, aware, and accountable for the strategic decisions surrounding global

talent management, including its mobility.

To manage risk appropriately, a comprehensive global-risk assessment as part of a

global-business plan is helpful. This needs to integrate with and apply to any glob-

al-expatriate program or workforce outside of the company’s domestic environment.

A 2003 survey, conducted by the Foreign Policy Center in the U.K., noted that less

than one in 10 small- to medium-sized international companies working in risky

environments provided any training for their international staff for their personal

safety (Briggs 2003). The reason cited was that there was “no convincing business

case.” Leading experts agree that the business case is the staffing requirement itself.

Most corporate cultures would not purposefully avoid such training, and companies

are improving, but a mandate from corporate risk and an associated policy to guide

a consistent training program worldwide is critical.

It is essential to have progressive and well-communicated safety plans for all globally

mobile staff. Developing these plans in tandem with corporate security and engaging

communications to support ongoing information distribution will achieve the best

results. Clear security information, defined crisis-management and business continuity


plans are integral aspects of the cost

of doing business, but even more so

in the global arena where it extends

to families and is a 24/7, 365-day-a-

year necessity. Factors such as health

issues, culture, political environment,

terrorism, crime and even transporta-

tion need to be considered.

CONCLUSION

Harmonizing HR with global-mobility

and strategic-workforce planning

can create policies and practices

that are nimble enough to respond

to changing business needs. With a

globally oriented vision for organiza-

tional structure, HR can:

z Bring the vital leadership to ensure

oversight on talent management.

z Bring effective and consistent

administration adaptable to busi-

ness needs and workforce dynamics by region.

z Provide a fair, reasonable and consistent employee experience.

z Meet all the jurisdictional, legal and tax-compliance requirements, both for

companies and for individuals.

In summary, the HR professional can do the following differently to adapt to

this environment:

Proactively review current mobility policies and practices:

z Evaluate if they are country centric (e.g., largely U.S. to international).

z Adapt or expand to have a broader view to mobility, globally, regionally and

country-specific. Standardize (where possible and relevant) with an eye to local

needs and parameters.

z Perform an analysis and management approach by assignment type.

- Nonlong-term expatriates: Authorizations, local laws and practices, tax with-

holding, time-in-location tracking, etc.

- Commuter, short-term, business travelers, rotational assignments

- Global nomads (employees with back-to-back assignments).

Evaluate current methodology for reporting expatriate compensation:

z Take appropriate tax-planning steps, including leveraging treaties and recouping

tax credits.

z Develop on-assignment management procedures.

z Identify and address home and host payroll integration gaps.


www.worldatwork.org Type in the following search keyword on the search line:

z Expatriates.


z Compensating North American Expatriates: How-to Series for the HR Professional

z The Best of Global HR: Five Years of International Articles from WorldatWork

z Compensating Globally Mobile Employees: Global Rewards

z A Collection of Articles from WorldatWork: How-to Series for the HR Professional.



z GR7: International Remuneration — An Overview of Global Rewards.


Review procedures for managing logistics affecting expatriate compensation

and taxation:

z Plan for expense payment tracking at the local level, with the ability to aggregate

on a global level.

z Identify per-diem and/or cost-of-living supplement methodologies and tracking.

Develop performance criteria and ROI:

z Perform an assignment cost-benefit analysis assessment through actual financial

costs and deliverables.

z Develop and enhance the candidate pool.

z Proactively integrate career paths (executive placement criteria through

expatriate experience).

z Apply and evaluate current methodology for tracking and reporting expatriate

compensation.

Learning:

z Train for cultural awareness.

z Establish required education programs as mandatory.

z Use Web-based training.

Compliance and risk management:

z Assess procedures to track cross-border compliance for work permits and tax

reporting for official assignments and discrete movement (e.g., business travelers).

z Integrate the expatriate and nondomestic workforce into corporate-risk

assessment and planning.

z Inform legal and compliance teams of corporate liability issues related

to global mobility.

z Communicate shared responsibilities with mobile employees.

z Identify the risks, and establish agreed levels of risk tolerance.

z Establish preparedness plans for prevention and response. z

Adele M. Yeargan, CRP, GMS, GPHR, leads Hewitt Associates’ global mobility services practice. Her team manages assignments active in more than 70 countries. She specializes in developing strategic programs to harmonize a spectrum of services and disciplines surrounding global mobility and workforce

management to effectively respond to a dynamic business environment. Yeargan also consults on the design and implementation of policy and operational procedures and has done business in more than 36 countries. She can be reached at [email protected].

AUTHOR

Black, J. Stewart, Allen J. Morrison and Hal B. Gregersen. 1999. Global Explorers: The Next Generation of Leaders. New York: Routledge.

Briggs, Rachel. 2003. Doing Business in a Dangerous World. London: The Foreign Policy Centre.

Deloitte and ORC Worldwide. 2007. “Global Mobility Program Management Survey.”

REFERENCES

China and Total Rewards:A Look at Workforce Issues and Business Strategy

W ith the global economy and demographics

changing, total rewards professionals are

facing new challenges including how to

leverage labor supply and demand globally, and how

to design reward systems that are aligned with their

organizations’ business strategies and vision yet flexible

enough to adapt locally.

To meet the staffing issues that many organizations

will face with an aging workforce and the resulting

possible labor shortage, China could be a primary

alternative choice for businesses striving to meet their

talent-management challenge. China has growing busi-

ness relationships with the rest of the world, and it can

provide a large workforce; it has large economic devel-

opment potential, and it has a low cost of production.

Businesses with their home offices outside China are

already are inside China but, in some cases, struggle

with human-resource issues that were previously unen-

countered in other locations. According to the “Global

Relation Trends 2003/04 Survey Report,” (GMAC Global

Relation Services, National Foreign Trade Council, SHRM

Global Forum (2004), China is one of the most frequent

HR Strategy z

Pengpeng ZhouUniversity of Minnesota

Third Quarter 2008




and primary destinations for international expatriates, but it does present challenges

for expatriates and administrators.

The key to being better prepared to conduct business in China is to establish a

total rewards system that is consistent with an organization’s business strategy and

that can be adapted to various emerging conditions. Many multinationals follow

this tactic (not only in China but worldwide) and it was discussed in a paper in

this publication by Robert J. Greene (2008), who wrote:

A global organization can adopt one global rewards strategy and set of

programs, use different strategies/programs for each locale/country/region

or agree on a set of global guiding principles and then allow some latitude

for local customization as long as the principles are adhered to. The more

universal the strategy, the easier it is to align all employees and units with

organizational values and objectives. The more locally specific the strategies,

the easier it is to conform to local laws, culture and competitive practices.

CHINA’S TIGHT LABOR MARKET

Two basic, and usually misleading, factors influence the development of a total

rewards program in China: (1) a low labor cost and (2) a large population, which

many feel translates to a large workforce.

Low Labor Cost (But How is the Quality?)

The cost of labor is generally low in China. While benefits are at least partially

handled by the state and training is not a large expense, it is the low wages that

attract many companies. To cite an example in the compensation area, the Jan.

28, 2008, BusinessWeek reported (based on information from Mercer) that the

salary of a data-entry operator in the country is $4,034. In contrast, that position

will earn close to $31,000 in Japan and $35,400 in the United States. Similarly,

the head of sales and marketing in China will expect to earn $92,402. In Japan,

that position would secure more than $163,000 and in the United States, the

position’s salary would exceed $220,000 (McGregor 2008). The low cost of labor

attracts companies to China, as the manufacturing sector in China pays its workers

between 2 percent and 3 percent of the U.S. level on average. But two hidden

factors behind the low cost should be considered.

First, the low wages provide much lower productivity (The Conference Board

2006). The lower-cost labor productivity is at 12 percent to 13 percent of U.S. labor,

although China’s labor makes it one of the most competitive manufacturing nations

among the nations with similar labor costs. An unfortunate result of the low produc-

tivity, the low wages and the low level of training can be the low quality. The lack of

skills training for Chinese workers plays a major role in causing the quality concerns.

Organizations in China invest minimally to train their employees. In addition, organi-

zations don’t train and develop their employees in China, as the retention issue looms

large in the Chinese labor market. This applies to skilled and unskilled labor.


Second, while studies show that global salaries increased by an average of 5.9

percent in 2007, China’s gross salary increase rate is 7.2 percent (Mercer Human

Resource Consulting 2006), and the large salary increases are part of what some have

referred to as a “pay bubble” in the region. The high salary increases are a reflection

of the low base wages and are a part of the retention issue. Hay Group’s Roland Ruiz

put the description of the rapidly increasing wages best when he wrote (2007):

In China, when Chinese employees are lured away from their current jobs,

they pocket at least 40 percent more in base salary, on top of a promotion

(both in job scope and title). This compares with an average base salary

increase of 24 percent in Singapore and 21 percent in Hong Kong. However,

are companies in China seeing a 40 percent return on their pay investment

in terms of productivity, revenue or profitability? How long before this pay

bubble bursts?

Large Workforce (But Becoming Smaller)

China has the world’s largest population, but a large population doesn’t translate

to a large workforce. China will experience a dramatic population aging during

the next 40 years.

According to United Nations Population Projection (1998), China will have about

630 million people who are age 50 and older in 2050; with 529 million ages

20-49, and only 324 million under age 20 in 2050. The projection is, by the year

2025, only 30 percent of the population will be in the workforce. In comparison,

50 percent of the population was in the workforce in a period beginning in 1950

and until 2010.

The “one child per family” policy in China brought a declining birthrate and

contributed to an aging population, with this projected long-term worker shortage

(Xin and Sankar 2007).

THE ROUTE TO SUCCESS

Xin and Sankar (2007a) also noted:

In a 2006 Mercer survey of business leaders in China … the highest-ranked

concerns were building leadership capabilities (87 percent), acquiring key

talent (66 percent) and retaining key talent (64 percent) …. China’s CEOs are

asking human resources to play a critical and accountable role in addressing

these concerns.

So the HR issues of attraction, motivation and retention, which are important in

many countries, are also significant in China.

Attraction

According to O’Neal and Chai (2007), “Employment advertisements, campus hires

and job fairs are the key recruitment channels for entry-level and junior employees.

The Internet also has become popular for recruiting junior and midlevel employees,


especially among multinationals

and in private enterprise. There is

an increasing use of ‘headhunters’

for senior openings and a recog-

nition that the correct balance of

rewards is essential to recruit, retain

and engage the workforce that will

ensure China’s future.”

One way to attract Chinese talent

is by borrowing Best Buy’s China

marketing strategy; that is, use the

brand name to its fullest advantage.

Unlike in many countries (including

the United States and Canada), Best

Buy store employees in China lay out

store shelves by brand name rather

than product category. This strategy

attracts consumers, as the mass media

in the past 15 years has convinced

the population that a recognizable

brand name is connected to social status. This is the case for Chinese of all

ages. The better the organization brand name and the more attractive the corpo-

rate culture, the more effective a company will be in attracting talent in China.

There is a saying in China that it is better to sweep Microsoft’s floor than become

the CEO in an unknown company.

However, keep in mind that a strong brand name in the parent country doesn’t always

translate to the correct reputation in China. For example, some Chinese believe that

Accenture is a golf-ball manufacturer, as its advertisements feature Tiger Woods.

Motivation (and Engagement)

Two primary motivators for a Chinese worker are to be perceived as “working

hard” and to accumulate wealth. So recognition programs in China (some attached

to local customs) are appreciated by the workers. Wealth accumulation is primarily

accomplished through a paycheck.

A 2006 study reveals that only 2 percent of Chinese workers’ attitude is reflected

in the phrase “Never think of yourself, give in service to society,” whereas 26

percent of workers agreed with the statement that translated to “Don’t think of

money/fame; live a life that suits my own tastes.” (McEwen, Fang, Zhang and

Burkholder 2006). This seems surprising considering the Communist Party of China

(CPC) directed the country under a single-party system since the state’s establish-

ment in 1949, when the population was encouraged to “give in service to society.”

However, beginning in late 1978, the leadership in China began reforming the



z China

z “Total Rewards in China.”


z Global Rewards: A Collection of Articles from WorldatWork

z The Best of Global HR: Five Years of International Articles from WorldatWork.



z GR4: Base Pay Management



economy from a centrally planned program to a more market-oriented economy.

Some describe this as going from “socialism with Chinese characteristics” to “capi-

talism with Chinese characteristics.” So the trend is: Instead of worrying about

basic food or living needs, more Chinese workers are concerned about the gaining

a better taste of their own life.

Many organizations perceive Chinese workers as highly dedicated to their work.

But one survey indicates that 68 percent of employees don’t feel engaged, and 88

percent of employees were not interested in their jobs (Gallup 2004). A Towers

Perrin survey (O’Neal and Gebauer 2006) a year later defined engagement as the

willingness and ability to contribute to the organization’s success and went on to

report that only 8 percent of the surveyed workers in China were “highly engaged.”

In the United States, that number was 21 percent. In Canada, it was 17 percent.

Further, 25 percent indicated that they were “disengaged.” By comparison, that

number was 16 percent in the U.S. and 17 percent in Canada.

O’Neal and Chai (2007a) indicate that “engagement is dependent on a broad mix

of reward elements, including teamwork and fair criteria for pay.”

It is difficult to engage the worker in this country, partially because many

opportunities and alternatives (especially for top talent) exist. This raises the issue

of employee retention in China.

Retention

The Hay Group’s data shows that many companies, especially foreign multinational

companies, struggle to keep an employee in the same job for more than two

years, and local Chinese managers are, on average, five years younger than their

counterparts in Asia. Companies in China find that they must strike a fine balance

between readiness and retention. Otherwise, their competitors will “promote” and

“reward” their employees for them (Ruiz 2007a).

Leveraging the compensation portion and career-development opportunities

associated with a total rewards program may be the most important step to

retaining talent. For skilled employees, provide various forms of benefits and

involve cash payment as a strategy to prevent competitors from “stealing” talent.

For nonskilled employees, higher base pay is the key to retention (Wang 2007).

A Watson Wyatt Worldwide survey in 2005 found Chinese employees stay with

companies for:

z Good career opportunity: 30 percent

z Good compensation package: 29 percent

z Good training and personal development opportunities: 29 percent.

Total rewards professionals should consider strategies that make their company

different to the local workers. For example, a China Youth Daily-Sina.com

survey found that 73 percent of the 74,379 respondents said they never enjoyed

“any paid vacation.” A “paid vacation” could make the total rewards program a

real standout.


A BusinessWeek report (2008) seems to indicate that businesses should be

prepared to operate a benefits program with some features not found in the typical

North American company. The publication reported:

Companies operating in China are required by the government to chip into

a housing fund that’s available to their Chinese employees, who also make

contributions. When employees are ready to buy a home, they can draw

from the funds to help. About 20 percent of multinationals currently chip in

more to the housing fund than required, according to Mercer.

Multinationals further need to recognize the local labor market’s conceptions

of the various elements of the total rewards packages. In such a large country,

many different subcultures exist, and compensation-package designers should pay

particular attention to those subcultures. For example, married managers must give

a “red envelope” with different amounts of cash to unmarried employees during

the Chinese Lunar New Year. But this is popular only in southern China.

Different geographic locations require different salary levels. In the first-tier cities

including Beijing, Shanghai, Shenzhen and Guangzhou, salary could be doubled the

salaries in second-tier cities including Chongqing, Hangzhou and Chendu. But it might

be a mistake to move from first-tier cities to second-tier cities. In 2005, the first-tier

cities’ salary increase rate was 8.7 percent, while the second-tier cities’ rate was 11.4

percent (Hewitt Associates 2005). Xin and Sankar (2007) also explain:

Moving people from city to city is complicated in part because social

security and pension payments made in one city cannot be transferred to

another. Social and cultural factors can also limit mobility, while the wealth

of jobs available in the great coastal cities means there is little incentive

for workers to move.

In considering product development, there are transportation concerns in the

second-tier cities that could delay delivery time and increase costs.

THE ADVENT OF A NEW LABOR LAW

China is in the midst of its biggest modernization of labor laws and labor-market

regulation, which began Jan. 1. The labor reforms grant the individual worker more

employment protection rights enforceable by law and mean more legal certainty

for foreign employers.

“We regard the planned Chinese labor-law reforms as a breakthrough and big

leap toward international labor-market standards. Collective wage agreements,

employment rights that are enforceable by law, and dismissal protection no longer

remain taboos in China. The new labor laws have unmistakable German and British

flavors. It is a good example of China’s increasing openness to adopt foreign best

practices,” said Wolfgang Clement, chairman of the Adecco Institute and former

German minister for Economics and Labor. China’s labor reforms focus on individual

employment protection, emphasizing written labor contracts, employment promotion,

labor dispute conciliation and arbitration, equal pay and long-term job security.


“While the new laws may contribute to raising unit labor costs over time in

China, for example through salary raises, there will also be significant benefits

to foreign firms, giving corporate leadership more clarity and certainty about the

future direction of Chinese labor regulations,” said Peter Siderman, managing

director of the Adecco Institute.

The new laws provide a strategic road map for the next 10 to 15 years. They will

slow the rapid rate of workforce turnover and bring more procedural transparency

to labor-dispute resolution. They provide better protection for trade secrets and

incentives for employers to invest in vocational training for workers. They also

permit new forms of flexible work and third-party labor placement.

“Perhaps most importantly, the Chinese government will enforce new labor laws

across all provinces in a more effective way than until now. This would be one of

the most spectacular, confidence-building reforms in new China,” Siderman said

(Adecco Institute 2007).

But not everyone is wholly optimistic about the new law, admitting that chal-

lenges lie ahead. In January, Donald Straszheim, the vice chairman of Roth Capital

Partners in Los Angeles and the former global chief economist at Merrill Lynch,

wrote on the Forbes Web site:

The thrust of this is somewhere between scary and encouraging. Working

conditions in China are just awful for literally tens of millions of workers, as

they are in most emerging economies. China is certainly still an emerging

economy despite the skyscrapers, trade growth and the upcoming Olympic

Games. But I believe the new law goes too far, giving more protection

than is healthy for an economy as dynamic and fast-changing as China.

The ability for businesses to adjust to changes is crucial. While there are

many pluses in the new law, hiring and firing flexibility is sharply curtailed,

hiking labor costs and potentially becoming a drag on innovation and

productivity. The law dramatically shifts the employer-employee balance

of power to the employee.

So many challenges are ahead. z

Pengpeng Zhou is a recent graduate from the University of Minnesota, with a master’s degree in human resources and industrial relations. She interned at Microsoft, where she gained experience in leadership development as well as training and development. She received a scholarship for an MBA exchange program

from the United Kingdom’s Manchester Business School, and studied and worked in international busi-ness and human resources for four years in France. She is working on an employee development project in China, and began working on global HR issues at Cargill European headquarters in Belgium in August.

AUTHOR


Adecco Institute. 2007. “China prepares for historic labor law reforms — more rights and better protection for workers mark shift towards global standards.” Press release (Dec. 5). http://www.adeccoinstitute.com/Adecco_Institute_Press_Release_China_Labor_Market_English_Dec_5_2007.pdf. Viewed: June 25, 2008.

The Conference Board. 2006. “Low Wages Not Always Key Success Factor for Overseas Investment.” Oct. 4.

Gallup. 2004. “Living to Work” Chinese Employee Survey.

GMAC Global Relocation Services, National Foreign Trade Council, SHRM Global Forum. 2004. “Global Relocation Trends 2003/04 Survey Report.” May.

Greene, Robert J. 2008. “Rewards Management In Multinational Enterprises.” WorldatWork Journal. Third Quarter: 51.

Hewitt Associates. 2005. “Survey Average Salary Increase by City, China 2005.”

McEwen, William, Xiaoguang Fang, Chuanping Zhang and Richard Burkholder. 2006. “Inside the Mind of the Chinese Consumer.” Harvard Business Review. March.

McGregor, Jane. 2008. “The Right Perks.” BusinessWeek. Jan. 28: 43.

Mercer Human Resource Consulting. 2006. “A Global Perspective on 2007 Compensation Planning.” September.

O’Neal, Sandra and Eric Mingang Chai. 2007. workspan. November: 105.

O’Neal, Sandra and Eric Mingang Chai. 2007a. workspan. November: 102.

O’Neal, Sandra and Julie Gebauer. 2006. WorldatWork Journal. First Quarter: 13.

Ruiz, Roland. 2007. “Asian Pay Bubble: A View from the Ground.” workspan. November: 90.

Ruiz, Roland. 2007a. “Asian Pay Bubble: A View from the Ground.” workspan. November: 91.

Straszheim, Donald. 2008. “China:Tangled New Labor Law.” http://www.forbes.com/opinions/2008/01/11/straszheim-china-labor-oped-cx_dhs_0114straszheim.html. (Jan. 13) Viewed: Aug. 5.

United Nations Population Division. 1998. : 1990 World Population Prospects, 1998 Edition.

Wang, Yijang. 2007. International Human Resource Management workshop, Carlson School of Management, Spring.

Watson Wyatt Worldwide. 2005. “Why Employees Stay, China Survey 2005.”

Xin, Guo and Ramamurthy Sankar. 2007. “China and India Demographic Change, HR Challenge.” workspan. November: 96.

Xin, Guo and Ramamurthy Sankar. 2007a. “China and India Demographic Change, HR Challenge.” workspan. November: 97.

REFERENCES

The Successful Implementation of Reward and Recognition Practices at an Insurance Group in Australia

Many companies believe that reward and

recognition (R&R) can be an effective part

of their talent strategy, but when it comes to

implementing a program, they are unsure of how to

approach it. They grapple with questions like:

z What should the program look like?

z How should it work?

z How do you measure its effectiveness?

This paper provides insight to these questions, based

on Insurance Australia Group’s (IAG) experience in imple-

menting and managing an R&R program. IAG’s program

uses desired business practices and organizational

values as a common basis for recognizing performance

in a consistent manner. Its implementation benefited

from proactive change-management practices including

strong executive support and a successful pilot program.

The program proved a success, with IAG experiencing

a 30-percent lift in employee satisfaction with how the

company uses R&R to encourage good performance (from

2003 to 2005).

IAG is a leading general-insurance company, with

operations in Australia, New Zealand and the United

Performance & Recognition z

Jeremy CairdDHL Express

Nuvan AranwelaAccumulate

Third Quarter 2008




Kingdom, and has a growing presence in Asia. During the last 10 years, IAG grew

from a predominantly state-based (New South Wales) organization with revenue

of $1.6 billion USD to a multinational organization with revenue of $6.8 billion

USD. This growth occurred primarily through acquisitions.

A NEW R&R PROGRAM

By early 2003, IAG had gone through a period of significant change and rapid

expansion through acquisitions. Consequently, senior management saw the need

to reinforce a consistent and proactive culture to ensure that all employees

would become engaged and deliver on business outcomes for the reconsti-

tuted company. Also, the People & Culture department (usually called “human

resources” in many companies) saw an opportunity to create one consistent and

consolidated program where several disjointed programs previously operated.

Employee satisfaction survey results highlighted to management that employee

recognition needed improvement.

As a result of these drivers, IAG implemented a new companywide program

titled “rewardhelp.” The program’s objectives are listed in Figure 1. The program

needed to be:

1 | Owned by employees. To achieve this, IAG needed peers and not solely managers

to identify behavior requiring recognition.

2 | Based on behavior and values and not just outcomes. IAG’s management recog-

nized that business outcomes would follow if the correct behaviors and values

were reinforced.

3 | Designed to encourage repeated positive behaviors.

4 | Differentiated from regular pay (that is “base salary”). Otherwise, employees

might see rewards from the program as part their regular income.

THE PROGRAM’S WORKINGS

R&R criteria were created to reflect the company’s business objectives. Importantly,

employees could directly influence the issues or programs that served as reward

criteria. This provided a line of sight between (or ability to influence) the desired

behavior and the potential reward, a key element of truly meaningful criteria for

rewards (Lawler 2003), including recognition. Several criteria were based on one

of IAG’s core customer philosophies of helping customers in adverse situations.

This concept was further extended to include recognizing and rewarding employees

providing internal customer service to their colleagues. This approach created

an alignment between IAG’s external customer-service goals and the desired

interemployee behavior.

Other criteria were also developed including leadership, sustainability and

innovation as well as achievement. Criteria design translated into observable

behaviors that employees could be seen to demonstrate and for which they could

be recognized.


Nominations for R&R

In the rewardhelp program, any employee can nominate any other employee for

R&R. This approach is empowering for employees and ensures that managers

get to hear about, and subsequently recognize, outstanding performance they

otherwise may not have been aware of. The initial nomination process involved

completing a written nomination form and forwarding it to the nominee’s manager

through the internal mail system. The nomination would be assessed and,

if approved, the manager would then action the reward through an online reward

system (outsourced).

Different IAG business units adopted slightly different procedures to reviewing

nominations. However, an overriding objective was to create consistent R&R

activity irrespective of which nomination review procedure was adopted.

The most widely used procedure was for nominations to be reviewed by the nomi-

nee’s manager. Other approaches included a review by a committee of employees

and/or the use of specific guidelines to clarify what behaviors should be rewarded.

Business units using staff committees to review nominations reported a high

degree of program credibility due to the perceived fairness of employee involve-

ment in the process.

Ultimately, IAG found that buy-in to the program was achieved by allowing the

different business units to select their preferred procedure for assessing nomina-

tions. Regardless of the approach adopted, input was gathered from the nominee’s

immediate managers through the review process. The involvement of immediate

managers is critical as they (alongside peers) are most likely to understand the

context of the nomination, and because they usually have budgetary responsi-

bility for R&R.

Recognition — Not Just Rewards

Recognition practices, as distinct from rewarding practices, were heavily empha-

sized from the program’s inception. Management was confident that rewarding

would occur as the process was simple and because managers were given the

budget to do so. Recognizing someone requires some interpersonal effort, but

this does not come easily to all managers. IAG therefore described how managers

should recognize their people.

FIGURE 1 Rewardhelp’s Objectives

IAG’s HR department identified several objectives for the rewardhelp program:

z To improve employee engagement generally and satisfaction with R&R specifically

z To integrate R&R with the company’s remuneration strategy, which includes the objective: “to ensure that high performance is recognized and rewarded”

z To create a consistent R&R framework across the company

z To promote cultural alignment after significant organizational growth through acquisitions.


The primary format for recognition involves the employee’s supervisor or

manager recognizing the employee publicly in some way. The most common

forums for recognizing employees at IAG are team meetings or special recognition

meetings. These avenues for recognition have been identified as two of the three

most commonly used forums for recognizing staff (WorldatWork 2008).

Certificates are the primary tool for recognizing employees. The certificate

presentation acts as a focal point for the recognition meetings. Research shows that

certificates and plaques are the most commonly used recognition awards in organi-

zations (WorldatWork 2008).

IAG management expects managers to recognize their employees for every

nomination that was approved. The company also highlights rewarded people by

publicizing details in internal communications such as department newsletters.

Rewards as well as Recognition

IAG’s program combines a reward with the recognition. The format for rewarding

employees is in points that can subsequently be redeemed for reward items.

The approver, usually the employee’s immediate manager, determines the specific

number of points to allocate (i.e., to reward). Some departments identify specific

guidelines to ensure a consistent approach to R&R decisions, such as the number

of customer compliments received. The points are then automatically and instantly

added to the nominee’s online account. These points, in turn, can be redeemed

for a variety of retail vouchers and/or merchandise of the employee’s choice.

(The redeemed value of these points attract Fringe Benefits Tax (FBT) in Australia

if they exceed a certain value, and in these instances, IAG pays the FBT on behalf

of employees.) The use of reward points has several advantages:

z Points can be accumulated and so encourage repeat desired behavior as employees

strive to increase their total points to redeem a particular reward.

z Points increase in perceived value over time. By contrast, as points accumulate

their perceived value may grow, as each incremental earning is a step closer to

a desired reward.

z Points-based currency offers flexibility in how value is assigned to different

behaviors and in offering the employee choice of the final reward item.

PILOT PHASE (JULY 2003 TO MARCH 2004)

A pilot approach was adopted to ensure the new program would work effec-

tively, before implementing it companywide. For a company whose business is

managing risk through insurance products, such a risk-mitigation strategy was an

understandable step. The pilot phase also offered the opportunity to demonstrate

to those business units who had no prior history of R&R that R&R was a worth-

while activity.


Post-pilot Review and Program Improvement

The review process of the pilot included questionnaires, interviews, facilitated

group discussions and executive feedback. A decision was reached to imple-

ment rewardhelp across the whole company in Australia. Improvements to the

program included:

z An online nomination process via IAG’s employee intranet was introduced

(the approval process was already online). From a program-management point

of view, this use of technology:

- Was practical because almost all employees had direct access to a computer and

the intranet, and those that didn’t could still make paper-based nominations

- Provided a simple way to enable employees to place nominations, which was

important to drive program adoption

- Made administration, tracking and reporting of nominations much easier

- Allowed flexibility to cater for different nomination approval processes

- Enabled the program to scale up to meet requirements of a broader company-

wide implementation. Without an online system, introducing a manual program

to IAG’s 10,000 employees would have been too big and cumbersome to

do efficiently.

z Decentralization of recognition certificate production. Originally, recognition

certificates were produced centrally and forwarded to the nominee’s manager at

month’s end. Timing and quality problems resulted. The solution was to dissemi-

nate blank certificates to managers, who could then add the rewardees’ names

at their own convenience.

Two other important outcomes from the pilot review relate to the strategic

positioning of the program. First, it was confirmed that the program would be the

company’s primary R&R program, rather than one among several potential R&R

mechanisms. Second, the importance of managers recognizing their employees

was re-emphasized. IAG therefore recommitted to highlighting and reinforcing

the important role that managers play in recognizing their employees.

COMPANYWIDE IMPLEMENTATION (MARCH 2004)

Communication was integral to the implementation and represented a significant

portion of the change-management activity. IAG uses a variety of approaches in

communicating the program:

z Launch announcement. This included an e-mail from the CEO, briefings to managers,

special launch events (such as morning teas) and promotional posters.

z Cascaded briefings. Executives were briefed first to create management buy-in to

the program. They then briefed their reports, who in-turn briefed their reports,

and so on.

z Road shows and in-person briefings. Wherever possible, in-person briefings were

favored over print or e-mail communications.


z Intranet. The employee intranet was a repository of information about the program and,

later on, it became an online portal to make nominations and redeem rewards.

z Managers’ guide. This printable online guide explained how to recognize people

and process nominations. The guide also included frequently asked questions

and relevant tax information.

z Company magazine. Regular updates are included in the company magazine.

z Prelaunch distribution. Blank recognition certificates were provided for the

managers’ use.

z Champions. IAG trained 150 program champions from around the business to

promote and explain the program to their departments and teams.

Business-Unit Recognition

Business-unit R&R events were introduced where the “best of the best” from within

that business unit are recognized annually by the business-unit executive.

IAG Excellence Awards

Another new component was the introduction of the IAG Excellence Awards.

The best of the business-unit winners were nominated for the IAG Excellence

Awards, which are presented by the CEO at an annual event.

WAS REWARDHELP A SUCCESSFUL R&R PROGRAM FOR IAG?

Rewardhelp has been a success for IAG. During the pilot and the company-

wide launch phases, the program’s success was measured closely to ensure

the company was receiving adequate return on its investment in the program.

IAG’s primary measurement tools are measuring R&R activity and the use of

employee-satisfaction surveys. Measuring employee satisfaction is the most common

method used by companies when measuring the success of their recognition

programs (WorldatWork 2008).

Employee Satisfaction with Recognition: Companywide

Overall, from the pilot phase and through the subsequent companywide implemen-

tation (to the end of 2005), there was a 30-percent lift in employee perception that

IAG makes adequate use of R&R to encourage good performance relative to pre-pilot

(See Figure 2). Further, there was a 10-percent lift in the individuals’ perception that

they receive adequate recognition for their contributions (See Figure 3).

An annual employee survey is the primary measurement of the program’s

business impact. The survey contains two statements in relation to R&R and requests

employee responses. The statements are:

1 | “In my area, we make adequate use of recognition and rewards (other than

money) to encourage good performance.”

2 | “I receive adequate recognition (other than money) for my contributions/

accomplishments.”


At the business-unit level, business units showed significant increases in the

perception that R&R was adequately used to encourage good performance,

ranging from approximately 20 percent to as much as 80 percent (Figure 2).

Business units showed increases (from 2004) in the view that, individually,

employees felt adequately recognized; here, increases ranged from 5 percent to

30 percent (Figure 3). (In 2004, Unit No. 3’s increase is 0%. In 2005, Unit No.5’s

increase is 0%.)

FIGURE 3 Percentage Change in Positive Responses to the Statement: “I Receive Adequate Recognition (Other Than Money) for My Contributions/ Accomplishments,” Relative to the 2003 Response.

35%

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

% c

hang

e in

“A

gre

e” a

nd

“Str

ong

ly A

gre

e” r

esp

ons

es

Pilot DivisionsDivision

-15

-10

-5

0

5

10

15

20

25

30

35

Overall 1 2 3 4 5 6 P1 P2

2004 2005

FIGURE 2 Percentage Change in Positive Responses to the Statement: “In My Area, We Make Adequate Use of Recognition and Rewards (Other than Money) to Encourage Good Performance,” Relative to the 2003 Response

100%

80%

60%

40%

20%

0%

-20%

% c

hang

e in

“A

gre

e” a

nd

“Str

ong

ly A

gre

e” r

esp

ons

es

-10

0

10

20

30

40

50

60

70

80

Overall 1 2 3 4 5 6 P1 P2

Pilot Divisions

2004 2005

Division


Pilot Versus Nonpilot Business Units

A significant difference existed in staff perceptions between employees in business

units that were early adopters of the program (such as the pilot business units)

compared to employees in business units that adopted the program later during

the companywide implementation.

One year after the program was introduced to the pilot business units, employee

perceptions that they personally received adequate recognition relative to nonpilot

business units increased (Figure 3). The pilot business units showed increases

between 7 percent and 13 percent; while all but one nonpilot business unit showed

either no change or a decrease in perception of being personally recognized

during the pilot phase.

However, all but one business unit showed an increase in the perception that

IAG used R&R adequately to encourage performance in 2004, and this translated

to a companywide increase in positive responses to this survey question (Figure

2). For some nonpilot business units, the increase was higher than that for the pilot

business units. This unexpected outcome may be a result of the combined impact

of the phrasing of the question and timing of the survey in 2004. The question

focuses on perceptions that R&R is adequately used within business units —

a perception which may have been positively impacted as the survey was conducted

in the month following the companywide implementation of rewardhelp — a time

of extensive, companywide communication. Indeed, employee perceptions in the

nonpilot business units may have been more significantly affected, as the whole

R&R concept was new to them.

By March 2005, the program had been in place for almost two years in the pilot

group and one year for all other business units. The survey recorded increases in

positive responses to both R&R-related questions across all but one business unit

(Figure 2 and Figure 3).

The survey results indicate that IAG’s rewardhelp program had a significant, posi-

tive effect on the perception of R&R in the company. This influence was evident

from increased numbers of employees believing their business unit adequately

applied R&R to encourage performance and in individuals themselves feeling

recognized for their contributions.

Employee Engagement

The improved perception of R&R at IAG has broad impacts. For example, in March

2004, 77 percent of employees satisfied with the individual R&R they received

were also identified as engaged, as measured by their expressed desire to stay

with the company, to promote it to friends and to apply increased exertion to

achieve organizational goals. However, only 32 percent of employees not satisfied

with R&R were also engaged. This apparent relationship between an employee’s

satisfaction with R&R and his/her engagement is significant for IAG, as improving

employee engagement was an important management objective. The program’s


direct impact on satisfaction with R&R, and its apparent relationship to employee

engagement, demonstrates it is worthwhile for IAG to ensure employees are, and

feel, adequately recognized.

R&R ACTIVITY DURING THE PILOT AND LAUNCH PHASES

(JULY 2003 TO THE END OF 2004)

Program performance is also monitored by measuring nomination activity,

including nominations made, the percentage of nominations approved, and

points issued per approved nomination. This activity can be measured as the

technology driving nomination and reward activity captures, stores and reports

every nomination and reward.

Consistent with the effect of

rewardhelp in improving employee

perceptions of R&R, the average

nominations made per annum per

employee increased in the pilot and

nonpilot groups (Figure 4), as did

the number of reward points issued

through the program on a similar, per

annum per employee basis (Figure

5). The relatively speedy adoption of

the program within the pilot busi-

ness units may further reflect strong

executive support for the program in

those specific areas.

The percentage of nominations that

were approved declined year over

year until the end of 2005 (Figure 6

on page 82). During 2006-2007, the

percentage of nominations approved

increased again.

Pilot Versus Nonpilot Business Units

As with employee satisfaction with

R&R, utilization has consistently

been much higher in terms of nomi-

nations made and points issued

per employee for the pilot group.

The difference in usage levels seems

too large to be solely attributable

to a lag in uptake between the pilot

and nonpi lot business un it s .

FIGURE 4 Number of Nominations Made (Per Employee Per Annum)

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

Num

ber

of

nom

inat

ions

mad

e

(per

em

plo

yee

per

ann

um)

Period0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jul 03 – Feb 04

March 04 – Feb 05

March 05 – Nov 05

Pilot Nonpilot Overall

FIGURE 5 Points Issued Per Employee (Per Annum)

140

120

100

80

60

40

20

0

Po

ints

issu

ed p

er e

mp

loye

e (p

er a

nnum

)

Period

0

20

40

60

80

100

120

Jul 03 – Feb 04

March 04 – Feb 05

March 05 – Nov 05

Pilot Nonpilot Overall


Contributors to the difference may be

the stronger pre-existing culture and

history of R&R among pilot business

units in comparison to other groups.

Moreover, the interaction between

activity and survey responses was

somewhat unexpected. The pilot

business units typically saw larger

increases than the other business

units in positive responses to indi-

viduals feeling adequately recognized

for their own contributions, and

this is consistent with higher levels

of activity within the pilot group.

In contrast, the nonpilot business

units saw more dramatic increases

in positive responses to the percep-

tion that recognition was adequately

used by their business units to

encourage performance. This may

be a product of the respective busi-

ness units’ history of R&R. Nonpilot

business units were experiencing

new levels of structured recognition,

which produced a disproportionate

impact on the perception of recogni-

tion, relative to the level of activity.

It may also be because prior to the

program’s implementation, the pilot

business units had higher levels of

satisfaction with R&R than all but one

other business unit and were there-

fore starting from a higher base.

Despite these differences in the program’s use and the historical practices of

R&R, there was a remarkable level of consistency across business units in how

individual nominations were evaluated, in terms of the percentage of nomi-

nations approved (Figure 6) and the points issued per approved nomination

(Figure 7). Consistency in how nominations are evaluated is often cited as a

concern among organizations seeking to implement an R&R strategy and program.

IAG’s experience suggests that such concerns can be managed through effective

communications and guidelines around how nominations are to be evaluated.

FIGURE 6 Percentage of Nominations Approved

100%

90%

80%

70%

60%

Per

cent

age

of

no

min

atio

ns a

pp

rove

d

Period

0

20

40

60

80

100

Jul 03 – Feb 04

March 04 – Feb 05

March 05 – Nov 05

Pilot Nonprofit Overall

FIGURE 7 Points Issued Per Approved Nomination (Per Annum)

60

50

40

30

20

10

0

Po

ints

issu

ed p

er e

mp

loye

e (p

er a

nnum

)

Period 0

10

20

30

40

50

60

Jul 03 – Feb 04

March 04 – Feb 05

March 05 – Nov 05

Pilot Nonprofit Overall


R&R Activity After the Pilot and

Launch Phases (2006 and 2007)

Since the end of the pilot and launch

phases, the average nominations

made per annum per employee

increased to approximately four per

employee per annum. Total points

issued per employee per annum

also increased, to more than 150.

And, the percentage of nomina-

tions approved has risen to above

90 percent. The number of points

granted per approved nomination

decreased about 10 percent since

the pilot and launch phases. R&R

activity during 2006-2007 indicates

more R&R occurs and more overall

rewards per person rises, but that

the individual value of the rewards is lower. This evolution of R&R activity demon-

strates that R&R is firmly established as part of IAG’s people practices, and that

rewardhelp is being used for frequent, low-value R&R.

SUCCESS FACTORS AND LEARNINGS

In IAG’s experience, several factors made a significant contribution to the program’s

success. Collectively, they constituted effective change management for IAG:

z Executive support: IAG’s senior-management team fully supported the program’s

introduction.

z R&R budgets: IAG includes dedicated R&R budgets in all employee cost centers

to avoid managers juggling the conflicting goals of trying to reward employees

and reduce discretionary expenditure.

z Communication: As previously detailed, IAG focused strongly on communicating

the program’s introduction.

z Integration with human-resources strategy: IAG places rewardhelp in the context

of other aspects of its human-resources strategy and people-management systems.

This accelerated the program’s integration into IAG’s culture.

z Focus on recognition: A potential pitfall in implementing an R&R program is

to focus on rewards rather than recognition. Delivering recognition can be

harder to do consistently, as it requires individual and organization commitment.

At IAG, emphasis is therefore placed on the interpersonal aspect, that is, praising

employees in front of their peers.



z “Recognition Programs”

z Australia.


z Global Rewards: A Collection of Articles from WorldatWork

z Recognition at Work: Maximizing the Impact of Recognition.





z Conducting a pilot program: The use of a pilot program proved most valuable to

the subsequent companywide implementation.

There were other important learnings. First, IAG used multiple measures, such as

employee surveys and program activity, to determine if the program was succeeding.

Second, IAG endorsed flexibility in implementation. For example, it didn’t require

the different business units within IAG to adopt a one-size-fits-all approach to

reviewing nominations. Third, IAG maintains a flexible approach to the ongoing

program structure. It acknowledges that the program needs to evolve and change

to meet changing needs.

CONCLUSION

Rewardhelp is a successful component of IAG’s overall human-resources strategy

from several perspectives. In terms of the initial objectives set for the program,

it demonstrably increased employee satisfaction with R&R; and, significantly, avail-

able data suggests that this has a positive relationship to employee engagement.

It also integrates with other components of IAG’s rewards strategy and results in

high performance being recognized and rewarded. In addition, it provides a consis-

tent framework for recognition and, based on utilization data, one that is actively

used by employees day to day. Finally, through its ongoing use, the program serves

as a valuable means of communicating and promoting desired business practices

and creating cultural alignment across the company. z

Jeremy Caird ( [email protected]) is vice presi-dent, rewards & remuneration, Asia Pacific, for DHL Express based in Singapore. From 2002 to 2005 he worked in IAG’s reward & recognition team in Sydney, Australia, where he was responsible for implementing the rewardhelp program detailed in this paper. He has held HR roles in a broad range of industries in Australia, New Zealand and Singapore including transport, fast moving consumer goods (FMCG), professional services, aviation and financial services. He holds a bachelor of arts and a master of commerce degree, both from the University of Canterbury in Christchurch, New Zealand.

Nuvan Aranwela , Ph.D., (nuvan.aranwela@ accumulate.com.au) is chief strategy and technology officer for Accumulate, a specialist recognition, incentive and loyalty solutions provider based in Melbourne, Australia. During the past five years, he has been intimately involved in designing and deliv-ering such solutions for more than 50 leading global and Australia companies, including IAG. His previous experience is in management consulting, and he holds a Ph.D. in science from Monash University in Melbourne, Australia.

AUTHORS

Lawler, Edward E. 2003. Treat People Right! San Francisco, Calif.: Jossey-Bass.

WorldatWork. 2008. “Trends in Employee Recognition.”

REFERENCES

2009 Salary Budget Increases Expected to be 3.9 PercentResults from the “35th Annual WorldatWork Salary Budget Survey” show pay budgets growing

steadily from 2008 to 2009 in the U.S. and Canada. The actual increase in salary budgets was 3.9

percent in 2008 and is projected to rise again by another 3.9 percent in 2009 across all employee

categories, regions and industries, according to the survey.

Nine out of 10 employees (91 percent) in both the U.S. and Canada can expect to receive

base-pay increases this year. High performers can expect raises above 5 percent, while below-

average performers can expect 2 percent or less. The survey found that among major U.S.

metropolitan areas, organizations in Washington, D.C., report the highest 2008 salary-budget

increases for all employee categories and industries: 4.0 percent. (www.worldatwork.org)

Workers Altering Their Commutes Due to Rising Gas PricesFeeling pressure at the pump, many workers are changing their commuting habits to ease the

financial burden of rising gas prices, a survey shows. Forty-four percent of professionals inter-

viewed said higher gas prices have affected their commutes, up from 34 percent two years

ago when a similar survey was conducted. Among those who said they have altered their work

arrangements, the most common changes they reported making include increased carpooling

or ridesharing (46 percent), driving a more fuel-efficient vehicle (33 percent) and telecommuting

more frequently (33 percent). Three in 10 said they are looking for a new job closer to home.

(www.rhi.com)

Compensation Costs Higher for State Local Employers Than for Private-Sector Employers Total compensation costs for workers were 51.4 percent higher among state and local government

employers than among private-sector employers in September 2007, a reflection of the different

composition of the two workforces. Total compensation costs consist of two major categories:

wages and salaries, and employee benefits. For both of these categories, state and local govern-

ment employers’ costs were higher than those of private-sector employers: 42.6 percent higher

for wages and salaries, and 72.8 percent higher for employee benefits, according to the new

study said. (www.ebri.org)

Executive Compensation Survey Finds CEOs, Pay Tied to PerformanceThe 2007 Top Executive Compensation Report reveals that CEOs of the largest companies have a

substantial amount of their compensation tied to company performance. According to the study,

the utilities industry and the food and tobacco industry top the list of median CEO compensation.

The highest median CEO total compensation was $3.9 million for the utilities industry and $3.8

million for the food and tobacco industry. (www.Salary.com)

Younger Workers Want Advancement Opportunities, BenefitsGenerations X and Y are looking for advancement opportunities, performance-based bonuses

and a great benefits package when looking for work, but employers are out of touch with what

the younger generations want, reports a survey. The David Aplin Recruiting survey finds that the

most important incentives according to Gen X and Y employees are: opportunities to climb the

corporate ladder (90 percent), performance-based bonuses and salary increases (88 percent)

and an excellent benefits package (86 percent). (www.aplin.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.)

Third Quarter 2008




U.S. Executives Rank Lost Productivity as No. 1 Issue Impacted by Employee TurnoverA survey shows that lost productivity, followed by diminished service quality, decreased employee

morale, lost organizational knowledge and higher recruiting costs, is viewed as the biggest

problem with employee turnover. The TalentKeepers’ “2008 Employee Turnover Trends Report”

gathered detailed turnover data from more than 600 major U.S.-based organizations representing

every major industry. The report shows an increase in several training, development and employee

engagement-focused retention strategies from last year. The number of companies conducting

employee-satisfaction surveys jumped 16 percent from last year, while companies offering training

and development increased 5 percent, and onboarding and orientation programs increased by 3

percent. (www.talentkeepers-services.com/talentkeepers/index.asp)

Employees Say Teamwork, Communication Declining in Workplace A survey of employee attitudes found that workers see teamwork declining throughout their

organizations, as well as between departments, and that communications between departments

also has fallen off since last year. Already facing the challenges of a flagging economy, organiza-

tions must also deal with a workforce that sees declines in several key areas from 2007 to 2008.

The National Employee Attitude Survey (NEAS) found that employee attitudes on companywide

teamwork declined 3 percent from already weak numbers, with interdepartmental teamwork

declining 2 percent. Employee attitudes regarding communication between departments declined

3 percent. (http://neas.blr.com)

Health Premiums Now Outpace U.S. Workers’ Incomes During the past five years, premiums for employment-based health insurance in the United

States increased at a rate that far outpaced workers’ incomes, a study reports. According to the

Robert Wood Johnson Foundation’s analysis of government data, from 2001 to 2005, people who

obtained coverage for their families through their jobs saw premiums rise 10 times faster than

their incomes. Nationwide, the amount employees paid for family coverage jumped 30 percent

during that five-year period, while families’ incomes rose 3 percent. (www.rwjf.org)

CEO Total Direct Compensation Down Among Many Large CompaniesIn the face of a slowing American economy and weakening corporate performance, CEO total

direct compensation among many large companies is declining, as boards have heard the

message that pay has to be linked to performance. That is the conclusion of Mercer’s study of

U.S. CEO compensation trends, based upon analysis of the latest proxy filings of 350 companies

within the Fortune 1000. (www.mercer.com)

Employers Enhancing DC Plans to Compensate for Retirement Plan Changes Many companies that shift from traditional defined benefit (DB) pension plans to defined contribu-

tion (DC) plans, such as 401(k)s, are enhancing contributions to their DC plans, according to a

survey. However, the overall retirement value delivered by employers that provide only DC plans

is generally less than what is provided by companies with a combined DB and DC approach.

Watson Wyatt Worldwide conducted the survey, and it found that of 300 large employers, 40

percent have replaced their DB plan with a DC plan as their main retirement vehicle for new

hires in the past 10 years. More than three-quarters of these companies made enhancements to

their DC plan after freezing or closing their DB plan, with the majority (52 percent) introducing

or increasing a nonmatching contribution. (www.watsonwyatt.com)


How Much is Too Much Study Highlights American Gas Addiction While few are ready to go “cold turkey,” 38 percent of a survey’s respondents said that they

will pay anything for gas. The survey also said that Americans are clearly focused on reducing

their daily dosage (78 percent have changed their lifestyles to reduce their dependence on gas).

The study examines Americans’ commuting habits and the steps employees are taking to alleviate

the effects of continually rising gas prices. Telework Exchange, a public-private partnership

focused on promoting and expanding telework options, announced the results, which are in

“How Much is Too Much; America’s Addiction to Gasoline and Its Impact on the Workforce.”

(www.teleworkexchange.com)

U.S. Domestic Short-Term Assignments on the Rise Employers in the United States are increasingly looking to short-term and rotational assignments

to accomplish their business objectives, according to a survey. The Worldwide ERC, the associa-

tion for workforce mobility, and Cartus, a provider of global relocation and workforce development

solutions, released the “2008 Pulse Survey, New Trends in Employee Mobility: Short-term and

Rotational Assignments within the U.S. on the Rise.” It captures responses from 208 U.S.-based

HR practitioners in more than 15 industries, includes information on key forces driving the trend,

and identifies challenges for organizations and their employees.

(www.erc.org/express.shtml or homepage.cartus.com)

Survey Suggests U.S. Companies Not Effectively Using Workplace Flexibility ProgramsA rapidly shrinking talent pool, coupled with increased work-life pressures and a more diverse,

global and independent workforce, have prompted an increasing number of companies to offer

flexible work arrangements as another way to attract, retain and engage talent, according a

survey. But while companies believe that workplace flexibility is a critical retention and recruiting

tool, most do not have the structure or support in place to maximize the value that these programs

can provide, according to Hewitt Associates. (www.hewitt.com)

CEOs at Best-Performing Companies Receive Long-Term Incentive Payouts Substantially Above Target Chief executive officers whose companies financially outperformed their peers during a three-

year period received long-term incentive award payouts that were more than 50 percent above

their target, according to an analysis. Watson Wyatt Worldwide’s analysis revealed that CEOs

at high-performing companies — those with total returns to shareholders (TRS) of more than

the median from 2004 to 2006 — were rewarded with long-term incentive payouts that were 156

percent of their targets. Conversely, CEOs at low-performing companies — those with a TRS

below the median — received median payouts of 71 percent of target. Overall, CEOs earned

median payouts slightly above target, at 114 percent. (www.watsonwyatt.com)

U.S. Business Execs Struggling with Pace of Change Nearly 50 percent of business executives say that the pace of change is becoming hard or

impossible to predict, according to a survey. And it appears many companies will suffer as

change inevitably happens: almost 20 percent characterize themselves as poor or very poor

at handling such initiatives. In Corporate America, major change is almost impossible to avoid.

Every responding company has undertaken at least one major change initiative in the past year,

reports i4cp. In fact, 26 percent of American companies report that they have undertaken more

than five major changes in the last year. (www.i4cp.com)

Facts & FiguresStatistics from this issue of WorldatWork Journal

October 2006 | In October 2006, a government

mandate was issued requiring all HR direc-

tors in a major Middle Eastern country to be

nationals (PAGE 51).

12.4 million | The number of Americans whose

employer allowed them to work from home at

least one day a month grew from 9.9 million to

12.4 million between 2005 and 2006 (PAGE 35).

From 29% to 42% | Between 1985 and 2007, the

female labor-force participation rates rose from

29 to 42 percent at ages 62 to 64 (PAGE 33).

7.2% | While studies show that global sala-

ries increased by an average of 5.9 percent in

2007, China’s gross salary increase rate is 7.2

percent (PAGE 67).

30% | The projection is, by the year 2025, only

30 percent of the population in China will be in

the workforce (PAGE 67).

73% | A China Youth Daily-Sina.com survey

found that 73 percent of the 74,379 respon-

dents said they never enjoyed any paid vacation

(PAGE 69).

From 46% to 52% | Between 1985 and 2007,

the share of men in the labor force increased

from 46 percent to 52 percent at ages 62

to 64 (PAGE 32).

10% | There was a 10-percent lift in the indi-

viduals’ perception that they receive adequate

recognition for their contributions under a

program at the Insurance Australia Group

(PAGE 78).

Four | Since the end of the pilot and launch

phases of a reward and recognition program

at the Insurance Australia Group, the average

nominations made per annum per employee

increased to approximately four per employee

per annum (PAGE 83).

3.9%

Results from the “35th Annual WorldatWork

Salary Budget Survey” show pay budgets

growing steadily in the United States and

Canada. The actual increase in salary budgets

is projected to rise by another 3.9 percent in 2009

across all employee categories, regions and

industries, according to the survey (PAGE 85).

$3.9 million

The highest median CEO total compensation

is $3.9 million for the utilities industry (PAGE 85).

Most Important

The most important incentives according to

Generation X and Y employees are opportunities

to climb up the corporate ladder, performance-

based bonuses and salary increases and an

excellent benefits package (PAGE 85).

Supply/Demand Balance

The supply/demand balance for specific skills,

the role of third parties such as unions, the cost of

living and the nature of organizations competing

in the market all influence the workings of the

labor markets (PAGE 45).

44%Forty-four percent of professionals

interviewed said higher gas prices

have affected their commutes (PAGE 85).

51.4%Total compensation costs

for workers were 51.4 per-

cent higher among state and local government

employers than among private-sector employers

in September 2007 (PAGE 85).

35%Only 35 percent of employees

understand how their organiza-

tions’ reward programs work (PAGE 6).

9%In a recent survey, 9 percent of

the respondents reported having a

separate budget for reward communications (PAGE 9).

81%Most respondents (81 percent)

reported that their benefits com-

munications were “effective” or “very effective”

(PAGE 8).

Third Quarter 2008



Documents

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