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Employee Value Proposition and Total Rewards: Modernize or Risk Irrelevance September 13, 2017 © 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. Kate Hubben, Client Advocate Willis Towers Watson
Transcript

Employee Value Proposition and Total Rewards:

Modernize or Risk Irrelevance

September 13, 2017

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

Kate Hubben, Client Advocate

Willis Towers Watson

About the 2016 studies

Fielded April – June, 2016

▪ 29 markets globally

▪ 2,004 employer

respondents representing

>21 million employees

▪ 21st annual survey

Key topics covered:

▪ Attraction and retention

drivers

▪ Talent mobility and challenges

▪ EVP and total rewards

▪ Leader and manager

effectiveness

▪ Career management

▪ Performance management

▪ Pay for performance

35%

21%

18%

26%

2016 Global TM&R Study

Asia Pacific EMEA

Latin America North America

Key topics covered:

▪ Attraction and retention

drivers

▪ Drivers of sustainable

engagement

▪ Leader and manager

effectiveness

▪ Career management

▪ Performance management

▪ Health, stress, wellness

▪ Communication

Fielded April – May, 2016

▪ 29 markets globally

▪ >31,000 employee

respondents

Global Talent Management &

Rewards Study (TM&R)

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 2

Global Workforce Study

(GWS)

Modernizing your Employee Value Proposition and Total Rewards

Discussion outline

Setting the Stage

▪ What’s driving a modernization agenda

▪ Talent market context

▪ What it all means

▪ The Modernization Agenda

▪ The ROI on Getting it Right

Understanding the Drivers of Attraction, Retention and Sustainable Engagement

Modernizing your EVP

▪ Effective Leaders

▪ Work, Stress and Wellness

▪ Performance Management

▪ Total Rewards

Anticipating the Future of Work

Conclusion

Additional Information

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 3

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 4

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Modernization, relevance and what’s at stake

Creates increased pressure and stress on the workforce and a whole new

definition of what it means to be a leader

Market trend/reality

Expectations of transparency and individualization

Fast-changing technology

Demographic shift – It’s really happening

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 5

Fast-changing market

Challenges attracting employees in key workforce segments

remain high overall

Even more so for organizations operating in emerging economies

Mature Markets Emerging Markets

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 6

28%

45%

55% 54% 56%

44%

57%

66%

77% 76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

All employees Diverseemployee

populations

Critical-skillemployees

High-potentialemployees

Top-performingemployees

All employees Diverseemployee

populations

Critical-skillemployees

High-potentialemployees

Top-performingemployees

Attraction Challenges

Nearly half (48%)of employers report

hiring activity increased

Retaining key employee groups remains difficult, especially in

emerging markets

Mature Markets Emerging Markets

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 7

Close to three quarters of employers have trouble retaining high potentials

20%

28%

37%

47%44%

41%

47%

59%

70%65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

All employees Diverseemployee

populations

Critical-skillemployees

High-potentialemployees

Top-performingemployees

All employees Diverseemployee

populations

Critical-skillemployees

High-potentialemployees

Top-performingemployees

Retention Challenges

One-third (35%) of employers report

turnover activity increased

The cost of turnover puts significant value at risk

Job LevelFinancial cost of turnover

(% of annual compensation)*

% of ee’s at high

risk of turnover**

Financial cost

at risk***

Senior Manager/Executive 74% 31% 23%

Professional 59% 25% 15%

Sales & Customer/Client

Management59% 27% 16%

Business Support 48% 27% 13%

Lost productivity

Hiring

Training

Job vacancy

Probability of turnover

Financial cost at risk

Financial cost of

turnover

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 8

*FCOT measured in our proprietary benchmark database

**% at risk of turnover from 2016 Global Workforce Study ***Financial cost at risk=FCOT*% at risk of turnover

Needed: A modernization agenda to address the challenges of

today’s workplace and remain relevant

The Modernization Agenda – companies need to:

Be agile and nimbly respond to changes in business strategy and talent markets

Introduce flexibility into talent and reward plan design and delivery

Improve transparency in reward programs

Tailor programs to key segments of their workforce

Leverage technology to digitally engage employees

Transition from job security to relevance (career security)

Address work place stress

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 9

Modernizing also means getting the EVP right

Have formally articulated their EVP that is clearly aligned with what they stand for

in the marketplace, and differentiates them from other organizations with whom

they compete for talent

Understand their employees and potential candidates the same way they would

understand their external customers

Customize their EVP for employees with critical skills

Effectively communicate and deliver their EVP, leveraging technology

to understand employees and communicate differentiated messages

to them

Best practice EVP companies:

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 10

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 11

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Modernizing your EVP should be accomplished in the context of an

overarching human capital framework

Leadership

Measurement, Change Management, Communication and HR Technology

EVPEmployee Value

Proposition

Desired Culture

Human Capital

Strategy

almost 3x as likely to report their

employees are highly engaged

93% more likely to report significantly

outperforming their industry peers

financially

27% fewer regrettable new hires

in the first year

More than 10% less likely to report

difficulty attracting and retaining key

employees segments

OutcomesHuman capital dimensionsBusiness strategy

17% lower voluntary turnover

Best practice EVP companies achieve better outcomes

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 12

Getting it right starts with understanding the top drivers of

attraction

Rank

1 Base pay/salary Career advancement opportunities

2 Job security Base pay/salary

3 Career advancement opportunitiesReputation of organization as a great place to work

4 Challenging work Challenging work

5 Opportunities to learn new skills Job security

6Reputation of organization as a great place to work

Organization's mission, vision and values

7 Health care and wellness benefits Opportunities to learn new skills

▪ Companies understand the importance of competitive base pay, career

advancement opportunities and challenging work

▪ But they overestimate the importance of their mission and values and do not

place enough emphasis on job security

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 13

Employer ViewEmployee View

Comparing top drivers of attraction

You also need to understand why employees would choose to

leave your organization

Rank

1 Base pay/salary Career advancement opportunities

2 Career advancement opportunities Base pay/salary

3 Physical work environment Relationship with supervisor/manager

4 Job security Ability to manage work-related stress

5 Ability to manage work-related stress Opportunities to learn new skills

6 Relationship with supervisor/manager Flexible work arrangements

7 Trust/Confidence in senior leadership Short-term incentives (e.g., annual bonus)

▪ Companies understand the importance of competitive base pay and career

advancement opportunities

▪ But they do not acknowledge the importance of the physical work environment

and job security

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 14

Employee View Employer View

Comparing top drivers of retention

Group

Fearful

Stable and

steady

Financially

concerned

Making a

career of it

In a good

place

Key

characteristic

Don’t want to

lose my job

Don’t want my job

to change

Don’t want to lose

my paycheck

In it for the long

haul

I’m happy, for

now

Employers

can offer

Career Security

through training

to remain

relevant in the

new market

Integrated

Performance

Management to

help employees

to adapt to

changing

workplace needs

Alternative work

arrangements to

allow employees

to do same tasks

for more than one

employer

Total Reward

programs

redesigned to help

employees

with concerns

about budgeting

and financial

planning

Leadership and

managers who

support an

innovative

culture

Greater use of

pay programs

with emphasis

on LT payoffs

(Career

Management,

LTI, Pensions)

Pay for

performance

and skills

Training for high

valued skills to

remain relevant

in marketplace

Job security and the modernization agenda are not irreconcilable

Job security is a top driver of attraction and retention, but can mean different

things to different people

*Percentages represent those who selected job security as a driver of retention and who fall into this group.

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 15

26% 24% 22% 10% 19%

To achieve desired outcomes, companies must address the drivers

of sustainable engagement

Sustainable Engagement Drivers

Rank 2016 2014

1 Senior Leadership Senior Leadership

2 Clear Goals & Objectives Clear Goals & Objectives

3 Supervision Workload & Flexibility

4 Image & Integrity Image & Integrity

5 Workload & Flexibility Empowerment

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 16

What is Sustainable Engagement?

▪ Engagement – Rational, emotional and behavioral attachment to the company

▪ Enablement - A local work environment that supports productivity and performance

▪ Energy - Individual physical, interpersonal and emotional well-being at work

Sustainable engagement pays dividends...

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 17

but only one-third of employees are highly engaged

▪ Research shows that companies with high levels of

sustainable engagement outperform those lacking

energy and enablement

37%

17%

21%

25%

Global

Highly Engaged: Those who score high on

all three aspects of sustainable engagement

Unsupported: Those who are traditionally

engaged, but lack enablement and/or energy

Detached: Those who feel enabled and/or

energized, but lack a sense of traditional

engagement

Disengaged: Those who score low on all three

aspects of sustainable engagement

-13.3%

1.9%5.2%

-20%

0%

20%

12-month change in gross profit margin vs. sector

Highly engagedDisengaged Unsupported

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 18

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

In the modernization agenda, we (re)define the term “leader”

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 19

However, what the leader leads is dependent on the role within the organization

The executive-leader:

▪ Makes sure the right things are done

▪ Engages others in building and driving the business

▪ Leads others while managing outcomes/results

▪ Fosters a broad culture of success and fulfillment

The manager-leader:

▪ Makes sure things are done right

▪ Engages others in getting the work done every day

▪ Manages the work/outcomes while leading others

▪ Creates a local environment for success and

fulfillment

Manager Executive

In simplest terms, a leader

is someone who leads –

not necessarily a specific role or title

(e.g., a manager or executive)

What makes a leader effective?

There are key areas of leadership effectiveness that are “universal”

Professional People

Pioneering

Handling a wide range of

people issues across teams and

functions. Interacting assertively

with people to achieve results.

Understanding and adapting to

the needs of others.

Impact created through:▪ Engagement

▪ Successful Teams

▪ Communication

Impact created through:▪ Managed Risk

▪ Service & Product Delivery

▪ Expert Reputation

Applies expertise and deep

knowledge. Uses strong

analytical and reasoning

capability. Investigates and

solves problems using

specialist expertise.

Driving success, change and

growth. Seizing commercial

opportunities and outperforming

competitors. Generating

imaginative solutions and a long-

term vision.

Impact created through:▪ New Product/Markets

▪ Organizational Transformation

▪ Organizational Growth

Based on our research, the requirements of the leader are guided by three performance factors and the

impacts needed from the leader

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 20

Our research indicates that the emphasis on performance factors

changes, depending on leadership level

The emphasis

on certain

areas shifts

depending

on scope of

role in the

organization

Managers tend to focus more on the

professional side than other levels of leadership.

And the impacts they create are related more to

operational activities.

Successful Executives focus more on the pioneering

factor – but they don’t lose focus on professional or people;

they are still bringing their domain expertise to bear, and

industry leadership. Additionally, the people side of their role is

still a key area of focus.

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 21

Manager Executive

Our organization develops leaders who will be able to meetchanging business needs

Strongly Agree/Agree

64%

So what are companies doing around leadership development?

Overall, there is room for improvement

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 22

My organization makes effective use of a leadership competency model

Strongly Agree/Agree

61%

Currently have

46%

Which of the following HR technologies

does your organization currently have or

plan to add in the next year or two?

Leadership development

Plan to add in next year or two

35%

No plans

20%

Employees give senior leadership low marks on key aspects of

their role

Item Percent Favorable

How would you rate the job that senior leadership is doing to:

Grow the Business 52%

Manage Costs 47%

Develop Future Leaders 39%

Senior leadership behaves consistently with the organization's core values 52%

I believe the information I receive from senior leadership 50%

I have trust and confidence in the job being done by the senior leadership

of my organization48%

Senior leadership at my organization has a sincere interest in employees'

well-being 44%

Fewer than half (46%) of the next generation of leaders think

their organization does a good job of developing future leaders

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 23

Less than 20% of employers are removing or redeploying blockers,

or using software for succession management

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 24

Succession Management process: Employer view

Uses work assignments and talent movement to develop leaders 75%

Uses actual succession plans to fill vacancies 60%

Links our succession management process with other talent and reward

programs (e.g., performance management, compensation)38%

Uses psychometric tests to assess potential 28%

Uses software to enable succession management 18%

Removes/Redeploys "blockers" to provide development opportunities to top

talent16%

Succession management is a key enabler of developing future leaders. There’s a significant opportunity for employers to do more.

Employees give their immediate managers better marks than

senior leaders

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 25

Given the importance of managers, there is still room for improvement

My immediate supervisor/manager: Employee view

Treats me with respect 72%

Assigns tasks suited to my skills and abilities 66%

Clearly communicates goals and assignments 55%

Encourages new ideas and new ways of doing things 54%

Listens carefully to different points of view before

reaching conclusions54%

Helps remove obstacles to doing my job well 52%

Is effective at differentiating performance between high and low

performers52%

Makes fair decisions about how my performance links to pay decisions. 48%

Has enough time to handle the people aspects of the job 46%

Coaches me to improve my performance 44%

The responsibility-respect mismatch: Less than half of all employees

think the role of the manager is respected

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 26

Yet so much is expected of them, and having the necessary skills is the number one

facilitator of performance management

Which of the following are

facilitators of your

performance management

experience at your

organization?

The People manager role is

highly respected in my organization 45%

My line manager/

supervisor has the

necessary skills

42%

Lack of effective

feedback is the

#1 barrierto the performance

management experience

Managers

are spending

3 to 4 hours

per employee/year on managing

performance

Inadequate time

spent in their role as

people manager

So what does it take to be an effective leader?

Effective leaders demonstrate these key competencies

Source: Willis Towers Watson 2016 Global Workforce Study – Global.

Rank How effective is your manager at… Favorable*Not

Favorable*

1 Developing Talent (creating developmental opportunities, coaching

and mentoring, giving feedback) 56% 20%

2 Leading Change (identifying change needs, driving change,

addressing concerns) 54% 20%

3 Engendering Confidence and Trust (demonstrating reliability, being

open and honest, being consistent) 53% 20%

4 Building Effective Teams (forming teams, creating shared purpose,

identifying talent needs) 54% 19%

5 Displaying Entrepreneurial Spirit (perceiving subtle changes,

thinking boldly, pursuing opportunities) 54% 21%

6 Focusing on Customers (identifying needs, developing

relationships, developing solutions) 52% 20%

7 Articulating the Vision (communicating the vision, translating the

vision, showing commitment) 52% 21%

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 27

Engagement levels are significantly higher among employees who rate

their managers favorably on these competencies

*Among those who answered favorably/unfavorably, percentage who are highly engaged

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 28

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Two-thirds of employers globally identify stress as the top

workforce health risk issue

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 29

Source: 2015/2016 Global Staying@Work Survey

Stress (64%)

Lack of physical

activity (53%)

Poor nutrition (31%)

Lack of sleep (30%)

Stress (85%)

Unplanned absences

(45%)

Stress (74%) Stress (72%)

Lack of physical

activity (58%)Stress (44%)

Overweight/ Obesity (70%)

Lack of physical

activity (61%)

Overweight/ Obesity (45%)

Lack of physical

activity (52%)

Lack of sleep (30%)

Stress (75%)

Poor nutrition (50%)

Lack of physical

activity (46%)

Lack of physical

activity (45%)

Poor nutrition (36%)

Lack of sleep (31%)

Overweight/ Obesity (43%)

Overweight/ Obesity (47%)

Poor nutrition (41%)

Overweight/ Obesity (31%)

Presenteeism (35%)

Poor nutrition (30%)

Overweight/ Obesity (32%)

Presenteeism (23%)

Presenteeism (40%)

Global US Canada EuropeLatin

America Asia PacificRank

1

2

3

4

5

The employer role: Move from ‘pull’ (encouragement) to ‘push’

(driving change) gradually – build employee permission.

Trust: There is a strong connection between health engagement

and the broader employment deal. Address concerns on privacy

of personal information.

Social connections: Leverage worksite and

support interactions and competitions around

health. Important for managers to be effective

advocates of employer programs.

New technology: Use technology, peer groups

and personal communication to motivate action.

So what does it take to build a culture of health and well-being?

1

2

3

4

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 30

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 31

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Performance management and “going ratingless” are in the spotlight

What are companies actually doing?

Is your organization planning to make any

of the following changes to your performance

management process?

Already

taken action

Planning to

take action

Considering

taking action

Neither

planning nor

considering

taking action

Focus on increasing frequency and improving quality

of performance conversations/dialogue between

manager and employee33% 23% 24% 19%

Using performance management to evaluate/measure

future potential28% 20% 25% 27%

Implementing new enabling technology (e.g., to

support crowdsourcing or enable mobile platforms)15% 16% 21% 48%

Eliminating performance ratings/scores entirely 8% 3% 15% 74%

Eliminating performance ratings/scores for performance

management but keeping for compensation purposes5% 4% 14% 77%

▪ Very few employers have gone or are considering going ratingless

▪ Most are focusing on having more and better performance

management conversations

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 32

Employees continue to say that performance management –

as they experience it – is not very helpful

The extent to which you agree with the following statement: Employee View

People are held accountable for their performance at my organization 56%

The people who evaluate me have clear visibility of my performance on the job 56%

My performance was accurately evaluated in my most recent performance review 52%

My organization does a good job explaining our performance management process 50%

My performance reviews have helped me improve my performance 48%

High-performing employees in my organization are rewarded for their performance 46%

There is a clear link between my job performance and my pay 45%

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 33

This represents a lost opportunity to address a top driver of

sustainable engagement: clear goals and objectives

While more favorable, employers are not enthusiastic about their

performance management process

The performance management process at your organization is effective at: Employer View

Aligning individual performance objectives with strategic business priorities 76%

Identifying high, average and low performers 74%

Reinforcing key organization-wide values and desired behaviors 73%

Providing a mechanism for differentiating rewards 70%

Driving high performance across the workforce 67%

Informing development needs and plans 64%

Providing a mechanism for determining talent program eligibility 60%

Encouraging employees to set stretch goals 60%

Creating a positive employee experience 51%

Clarifying accountability of specific roles 47%

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 34

Just 47% of employers indicate that their performance management process is

effective at clarifying accountability for specific roles

Employers do not rate managers favorably in terms of their

effectiveness at performance management

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 35

Managers are effective in the following aspects of performance management:

Differentiating performance between high and low performers 53%

Fairly reflecting overall performance in the employee’s final performance rating 50%

Working with employees to set appropriate performance goals for individual

performance49%

Fairly reflecting performance in pay decisions 49%

Identifying development opportunities 39%

Giving employees regular coaching and feedback on their performance 35%

Conducting career development discussion 30%

Driving the right degree of risk taking to enable innovation 22%

Over 75% of managers spend less than six hours per employee per

year on performance management

% of managers

2 hours or less per employee 27%

3 or 4 hours per employee 26%

5 or 6 hours per employee 22%

7 or 8 hours per employee 10%

9 or 10 hours per employee 5%

More than 10 hours per employee 10%

In the typical year, how much time per employee do

you spend on performance management, including any

time spent on the ratings calibrations process? The Math:On this critical process,

the typical manager devotes

time to performance

management equal to

0.2% of the hours a

typical fulltime employee

works in a year.

What falls through the cracks?

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 36

Managers also say they spend too much time filling in forms…

The amount of time I spend on the performance

management process: Too little About right Too much

Collecting feedback from colleagues is... 24% 63% 14%

Ongoing conversations with employees about their individual

performance is... 19% 64% 16%

Helping employees set performance goals or objectives is... 19% 66% 14%

Understanding and using performance management

technology is... 18% 67% 15%

Year-end performance feedback sessions is... 18% 66% 16%

Participating in calibration sessions is... 16% 64% 21%

The process overall is... 15% 68% 17%

Completing forms is... 7% 69% 24%

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 37

And not enough time on setting goals, collecting feedback and discussing

individual performance

There appears to be a sweet spot in terms of time invested in

performance management activities and desired outcomes

2 hours or

less per employee

3 or 4

hours per employee

5 or 6

hours per employee

7 or 8

hours per employee

9 or more

hours per employee

It is easy to get the information I need to update my direct

reports on key organizational changes 45% 60% 60% 67% 58%

Our annual base salary increases are effective at driving

higher levels of performance among my direct reports 37% 52% 52% 53% 49%

Our annual base salary increases are effective at

differentiating pay based on performance among my direct

reports 36% 52% 54% 61% 49%

Our annual incentives or bonuses are effective at driving

higher levels of performance among my direct reports 38% 57% 57% 61% 56%

Our annual incentives or bonuses are effective at

differentiating pay based on performance among my direct

reports 39% 55% 60% 59% 51%

Our formal performance ratings are effective at driving

higher levels of performance among my direct reports 39% 52% 56% 57% 50%

Our performance management system is effective at

differentiating performance among my direct reports 38% 58% 60% 66% 55%

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 38

Outcomes reported by managers vary based on how much

time they spend per employee per year on performance management

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 39

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Modernizing Total Rewards means challenging conventional thinking

Traditional approach New reality

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Employees never discuss pay and

benefit details with each other

“Living out loud” on Glass Door;

emerging legislative agendas that

prescribe pay transparency

Provide guaranteed jobsEnable career security through

career development

Pay for performance = merit increase

and incentive pay based on last year’s

company performance + individual

“performance rating”

Changing business models and

nature of work means challenging

the individual performance definition

and the role of base pay

“One size fits all” Segmentation and customization

37%

44%47%

54%

62%

0%

10%

20%

30%

40%

50%

60%

70%

How my totalcompensation compares

to the CEO at myorganization

How my totalcompensation comparesto the typical employee atother organizations like

mine

How my totalcompensation comparesto the typical employee in

my organization

How my bonus isdetermined

How my base pay/salaryis determined

Percentage of employees who agree they understand…

Employees claim to understand how pay is determined, but not

its value relative to other groups

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Employee perceptions of internal equity and market

competitiveness are mixed

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18%

33%

23%

43%

36%

38%

39%

31%

39%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Base Pay

Bonus

Total Rewards

Below Average Average Above Average

Market competitiveness: Most think they are paid at or above market

Overall, how do you think the value of each of the following compares to that offered for similar positions in other organizations?

Pay fairness

Half think they are paid

fairly, but 1 in 5 disagree

Paid fairly compared to

others in other companies

50% 51%Paid fairly compared to

others in my organization

Employers promise pay for performance differentiation,

but fail to deliver

Employer view Manager view

Our base salary increases are effective at driving higher

individual performance40% 48%

Our base salary increases are effective at differentiating pay

based on individual performance55% 49%

Our short-term incentive programs are effective at driving

higher individual performance50% 52%

Our short-term incentive programs are effective at

differentiating pay based on individual performance52% 52%

Our formal performance ratings are effective at driving higher

levels of performance among my direct reports n/a 50%

Our performance management system is effective at

differentiating performance among my direct reports n/a 53%

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40%Of employers think that base salary

increases drive performance

Only 50%think that short term incentives do

Perceptions of differentiation

effectiveness are mixed

Employees with alternative and flexible work arrangements are

more engaged and less likely to be retention risks

Flexible work schedule

Compressed work week

Work from home

Work from other remote

location

Hot desking/ hoteling

None of these

By Engagement Group

Highly

engaged48% 46% 43% 49% 49% 29%

Unsupported 15% 17% 19% 19% 17% 16%

Detached 19% 19% 19% 17% 19% 23%

Disengaged 18% 18% 19% 15% 16% 32%

By Retention Risk

Stayers 45% 38% 47% 47% 45% 39%

Soft Stays 29% 30% 27% 28% 29% 35%

At Risk 10% 17% 10% 10% 9% 5%

Leavers 15% 15% 16% 15% 17% 21%

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For each work arrangement, distribution of employees across the engagement or retention risk groups

3 Modernizing pay for performance starts with re(defining)

performance

In summary, the new Total Rewards reality suggests…

1 Transparency is a core principle

5 Recognize that the “total” in total rewards includes flexibility

and a move away from “one size fits all”

2 Career security is the new job security

4 Base pay needs an identity check; it’s purpose may be lost

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Conclusion

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Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

The Reality: The employment relationship is changing

The plurality of work options is here…

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Artificial IntelligenceRobotics

Talent platforms

AlliancesOther types of

workers

OutsourcingTraditional

employees

Volunteers

Resulting in fundamental shifts in how work and organizations

are organized

Our organization is a place containing

employees doing work.

Our organization organizes work and

talent.

Our organization is a fixed set of functions

that work together to create value.

Supply chain Manufacturing

Retail stores Marketing

IT R&D

Our organization is a malleable set of

functions and deciding which ones get

done inside the organization is a big part

of strategy.

Supply chain Manufacturing

Retail stores Marketing

IT R&D

R&DRetail stores

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The use of non-employee talent is increasing and having an impact

on businesses

Growth in share

of non-employee

talent expected

over next three

years

25% 24% 46% 54%

Of all managers

say they manage

at least one

contingent worker on their team

Of all managers

say they manage

at least one

contractor

Of companies

report changing

their workforce

activities enabling

them to use more

non-employee

talent due to

technology now

or in in the next

three years

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Looking ahead, employers think they will redesign jobs that require

either lower or higher skills

Which of the following areas of your workforce

and work activities are changing today or will change in the next three years due to technology?

Today

but not

in 3 years

Today

and in 3 years

In 3 years

Neither

Paying more for employees with certain skill sets 29% 15% 35% 22%

Increasing work flexibility (e.g., scheduled hours to get

work done)30% 13% 31% 26%

Changing the way we design jobs so they can be done

by employees with lower skills14% 4% 29% 53%

Enabling work to be deployed to other locations 27% 11% 27% 36%

Changing the way we design jobs so they can only be

done by employees with more skills16% 4% 26% 54%

Requiring/Enabling us to use more nonemployee talent 18% 6% 23% 52%

Improving collaboration and information sharing 45% 22% 18% 16%

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Conclusion

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Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

Supervision – Make room for managers to have the time needed

to provide effective people management

Transparency – Heighten transparency

Performance Management and Pay for Performance–

Re-define performance management and differentiate

Flexibility – Create flexible career paths, embrace flexible

work arrangements

Technology Enablement – Leverage digital media

to drive engagement

Leadership – Instill trust and confidence/build trust-based relationships;

role model the EVP, develop the next generation of leaders

Modernization will create a more equal value exchange

The employee-employer relationship in the new world of work

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Key Leverage Points for Employers to Improve

Conclusion

© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 53

Setting the Stage

The Modernization AgendaGetting it right

Effective Leaders are Critical to a Compelling EVP

Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness

Achieving Effective Performance Management

Implications for Total Rewards

Future of WorkEffective management of work types, channels and options is part of the modernization agenda

Additional Information

CRAFT YOUR EMPLOYEE VALUE PROPOSITION

Exercise

1 What is the employee experience?

2 What are the expectations of the employer?

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EVP Statements

© 2016 Willis Towers Watson. All rights reserved. 55

The Employee Experience: Give.

Purpose and ValuesOpportunities and

Total RewardsPeople and Culture

What does ABC Company expect of an associate?

Summary Statements (“Headlines”)

EVP Statements

© 2016 Willis Towers Watson. All rights reserved. 56

The Employee Experience: Get.

Purpose and ValuesOpportunities and

Total RewardsPeople and Culture

Summary Statements (“Headlines”)

CRAFT YOUR BENEFIT PHILOSOPHY

Exercise

What does the employer think is fair and

equitable?

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ABC Company’s Benefit Philosophy

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▪ Providing “compelling competitive value” that aligns with our philosophies of being at

the 50% percentile which helps attract, develop, grow and engage a highly talented

workforce

▪ “Inspiring people” to be their best by encouraging active and healthy lifestyles and

choices including alignment to Well-Being strategies and initiatives

▪ “Promoting shared responsibility” that encourages employees to select the right

consumer driven benefits and to use benefit programs wisely

▪ “Keeping things simple” by designing one benefits platform for the movement of talent

across legal entities, provide meaningful choice for all generations and family needs and

provide education materials that are understood

▪ Provide flexible programs that meet government regulations that keep us in

“compliance”

▪ Creating short and long term programs aligned to our strategies to position us well given

future “excise tax” implications

Kate Hubben, CSFS

Client Advocate

[email protected]

216.937.4203

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Thank you


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