2012 Total Rewards Survey
The Path Forward: Transforming Potential Into Value
Aon Hewitt Webinar
Copyright © 2012 Aon Corporation
To protect the confidential and proprietary information included in this material, it may not be disclosed or
provided to any third parties without the approval of Aon Hewitt
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What Do We Mean by Total Rewards?
Everything an employee gets and perceives as valuable or rewarding
Environment
Leadership & Culture
Work Environment
Work Life Balance
etc…
Benefits
Health & Wellness
Retirement/Savings
Paid Time Off
etc…
Development
Career Opportunities
Learning & Development
Goals & Coaching
etc…
Compensation
Base Salary
Short-term Incentives
Stock/LTI Awards
etc…
Experiential
Financial
Co
mp
an
y P
ers
on
al
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Total Rewards: Confused & Dissatisfied
More than half of employees do not know how their
pay is determined
Health benefits satisfaction is declining
Most employees do not understand the value of their
pension plans
• 80% fear they will not have enough money in
retirement
Roughly half do not see long-term opportunities
with current employer
• 43% believe they must change employers to
advance
More than half do not have clarity on skills they
should be developing
Eroding trust and confidence in leadership
• 57% do not trust their senior leadership
Global Engagement & Work Experience
1 our of every 2 employees disengaged
– 1 out of 8 actively disengaged
1 out of every 6 chooses to leave annually
– 10%+ of high performers have left their employer
since the economic downturn
– Some estimates suggest 25%+ are preparing to
leave
42% are not energized by their work
40% are generally stressed to the point of feeling
“burnt out”
64% are physically exhausted when they get home
from work
22% do not think they are in very good health
28% are not motivated to be healthy
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
Why Conduct a Total Rewards Survey?
Because, broadly speaking, it is failing to deliver…
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Survey Responses from 749 Organizations
17%
31%31%
21%
Number of Employees
Industry %
Manufacturing 19.4%
Finance & Insurance 15.6%
Healthcare 11.7%
Other Services 7.5%
Technology 6.6%
Retail 6.3%
Education 5.4%
Professional, Scientific & Technical 5.4%
Oil, Gas, Construction & Mining 3.2%
Utilities 3.1%
Accommodation & Food Services 3.0%
Telecommunication 2.2%
Transportation & Warehousing 2.2%
Wholesale Trade 2.2%
Government 2.0%
Industry
Fewer than 1,000
1,000 to 5,000 5,000 to 25,000
More than 25,000
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Input from 825 Respondents
Role %
Human Resources 32%
Benefits 27%
Compensation 22%
Total Rewards 13%
Executive Office 2%
Finance 2%
Business Unit Leader 1%
Learning & Development 1%
Respondent Role
4%
24%
41%
13%
17%
Respondent Level
C-Suite
EVP, SVP
or VP
Director
Manager
Professional
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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High Aspirations for Total Rewards…
Total Rewards Priorities for 2012 Survey
Response
Improve Employee Engagement 58%
Improve Alignment with Business Objectives 52%
Improve Ability to Retain Talent 48%
Improve Ability to Attract Talent 44%
Take a More Holistic View of Rewards 40%
Reduce Benefits Costs 39%
Improve Alignment to Individual Performance 37%
Create a Roadmap to Manage Total Rewards for 3-5 Years 35%
Improve the Return on Total Reward Investments 25%
Introduce New/Innovative Programs 22%
Create or Improve Programs Targeted to Top Performers 22%
Redesign Programs Around Major Internal/External Factors 18%
Reduce Reward Program Cost 10%
Introduce More Choice 8%
Segment Rewards by Employee Groups 6%
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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…But Mediocre Execution
SAY it is critical But actually DO 87% Align Total Rewards with Business Strategy 56%
86% Have a Total Rewards Strategy in Place 25%
75% Communicate Total Rewards Effectively 33%
50% Differentiate Total Rewards for Performance 18%
46% Gather Facts to Drive Total Reward Decisions 37%
41% Manage Total Rewards as a Portfolio 9%
37% Gather Input from Employees 28%
33% Use Total Rewards as a Differentiator 10%
24% Be an Innovator or Early Adopter 15%
43% do not have a sense of total rewards ROI
50% do not have reliable data on reward preferences of key employee groups
51% do not measure reward program effectiveness and use results to plan changes
And…55% indicate only minimal change is required!
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Different Approach at High Performing Companies?
Who are the High Performers?
For this study, “high performing” or “The Best” organizations are defined as those that achieve the highest levels
of:
Revenue against objectives
Innovation
High employee engagement
Using this definition, we found 150 organizations in our study sample, representing approximately 20% of the
total number of participating organizations.
Those that did not meet all three criteria are defined as “The Rest.”
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1. The Best Articulate Clearer/Different Goals
The Best are almost 2X
MORE LIKELY to have
declared Total Rewards
an area of focus AND to
have a clearly stated
strategy
The Best are much
more focused on
achieving future above
average
competitiveness in the
upper quadrants of
Total Rewards (less
difference in desired
competitiveness of pay
and benefits)
% Targeting Above
Competitive Level
Leadership Development
Culture
Learning
Manager Effectiveness
Career Opportunities
Challenging Work
Work Life Balance
We have a clearly stated
Total Rewards strategy
Total Rewards a key area
of focus
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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2. The Best Balance More Inputs for Decisions
Critical Inputs to Total Rewards Strategy and Design
Gather market data to assess competitiveness
Alignment with business objectives
Gather cost data
Communicate effectively
Gather analytics/facts to drive decisions
Ensure compliance
Gather input from HR
Gather input from employees
Gather input from business/regional leaders
Understand and apply "best practice(s)"
Be innovative
Understand generational differences
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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3. The Best Connect More to Business/Employees
Programs Aligned with the Business Effectiveness of Total Rewards Communications (Number in parentheses indicates top 10 importance rank for all companies)
Culture (5)
Challenging work (1)
Base Pay (7)
Health Care Benefits (Medical, Vision, Dental) (4)
Long-term incentives / Options / Restricted shares (3)
Pension / Defined Benefit (10)
401(k) / Defined Contribution (2)
Short-term Incentives / Variable Pay (6)
Wellness Programs (9)
Paid Time Off (8)
Online website is effective Total
Rewards communication
vehicle
Have flexible Total Rewards
design to meet needs of diverse
workforce
Communicate effectively
Social media is effective Total
Rewards communication
vehicle
Understand and implement best
practice
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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4. The Best Define Effectiveness Differently
Use of Total Rewards Success Metrics
Employee engagement
Cost vs. budget
Employee turnover
Higher employee satisfaction with programs
Modeling of Total Rewards spend against key
business objectives
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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5 .The Best Experience Better Results
Better Human
Resource
Outcomes
Better
Business
Outcomes
Employees understand the value of
the Total Rewards Package
Engagement trending UP
in past 18 months
Engagement trending DOWN
in past 18 months
Operational Efficiency
M&A Objectives
Customer Service Aims
Quality Goals
Currently Effective in Achieving:
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Consequences Are Costly
The survey results identified three major consequences for companies that do not manage total rewards
effectively:
1. Missing valuable input from employees, which may lead to lower engagement and higher turnover
2. Missing opportunities to manage total rewards as a portfolio, which may lead to higher costs and lower
effectiveness
3. Introducing unnecessary risk into their total rewards approach
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Consequence 1: Not Hearing Employee Voice
Three of the top four total reward priorities for 2012
are
– Improve engagement (58%),
– Improve retention (48%)
– Improve attraction (44%)
These are all about improving the perception of total
rewards in the eyes of employees and prospective
employees.
Still, the survey results tell us that only 37% of
companies say it is critical to gather data from
employees, and only 28% are actually doing so.
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Current Investment
Current Effectiveness
Point of
Diminishing returns
No Investment Change &
Increased Effectiveness
Decreased Investment & No
Effectiveness Change
1
2
Risk
Zone
“Win/Win”
Zone
ROI
Zone
Risk
Zone
Increase Reward
Effectiveness
Decrease Reward
Effectiveness
Decrease
Rewards
Investment
Increase
Rewards
Investment
Efficient Frontier
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Consequence 2: Sub-Optimizing the Portfolio
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Consequence 3: Taking Unnecessary Risks
We do not
consider
this risk
as we
manage
rewards
We have
clearly
identified
this risk
We have a
process and
measures
in place to
assess this
risk
We regularly
monitor and
report
on this risk
(e.g., to
leadership)
We have
mitigation
strategies in
place to
manage this
risk.
FINANCIAL RISK The Best 5% 9% 27% 47% 12%
EXECUTION RISK The Best 12% 15% 35% 26% 12%
ALIGNMENT RISK The Best 18% 15% 29% 31% 7%
REGULATORY RISK The Best 11% 7% 27% 30% 25%
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Change is Desired
Companies Operating in 1 of 3 Modes
Catching Up
– Creating a strategy
– Aligning leadership
– Addressing structure and culture
Moving Forward
– Centralizing responsibility for reward
strategy
– Pushing for more tailored approaches
– Increasing performance orientation
and differentiation
– Shifting cost and risk to employees
– Pushing for better communication
Pulling Ahead
– Innovating
– Using total rewards as a differentiator
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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The Way Forward is Clear
Barrier to Change (Top 3 Responses) The Best The Rest
Little/No Awareness of Total Reward Objectives 32% 45%
Leaders not Aligned 23% 34%
Organization Structure 23% 27%
Cultural Barriers 29% 33%
Budget Constraints 71% 72%
HR Structure, Governance and Decision Rights 15% 13%
HR Resource Constraints 41% 34%
Global Framework and Local Application 26% 18%
Moving forward involves addressing the barriers to change.
Here’s what’s clear:
1. HR owns most of the barriers (or at least has a strong say)
2. Setting direction and aligning leaders is a good place to start.
3. Implementation challenges should not be underestimated
Source: 2011 Aon Hewitt Engagement 2.0 Employee Survey
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Time for Breakthrough Thinking
High aspirations and mediocre
execution are producing a lot of
pressure for change.
This is a time for breakthrough
thinking that may require bold new
ideas, including new ways of
looking at the issues.
To help our clients meet some of
the challenges highlighted in this
material, we have been presenting
a new framework for total rewards.
This new model complements the
four-quadrant model presented
earlier. It is intended to stimulate
new thinking around where to focus
energy, effort, and expense in total
rewards
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Getting Started: Pick a Point in the Process
The Best Apply Six Sigma Thinking
Define clear outcomes and expectations for total
rewards
Gather multiple inputs to guide decision making
Use facts to drive decisions and work to optimize the
whole package in terms of ROI
Implement changes as a system
Measure outcomes and use the measures to evaluate
results and plan for subsequent corrective actions
To Improve Effectiveness, Manage Total Rewards as a Process
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Your Questions
