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REWARD
The Benefits of a Total Rewards Approach
A look at the WorldofWork's Total Rewards Model
by Peter Raj

Oct 2010 | Total rewards is recognition of the fact that pay in itself is not the sole motivator.

It acknowledges that it is both the tangible and intangible aspects of the work experience that contribute to the employees’ sense of engagement and choices in their careers.


HR Matters Magazine
Issue 12 | October 2010


Adam Sorensen, Global Remuneration Professional (GRP), leads the WorldatWork global rewards practice. Sorensen serves as staff liaison to the WorldatWork Global Advisory Board and also has responsibility for developing WorldatWork education for rewards professionals working in global organizations.

Sorensen has more than 15 years experience working in global human resources.

Prior to joining WorldatWork, he was Global Work-Life Manager at Intel Corporation, where he led the design and implementation of the company’s work-life programs worldwide. Under his leadership, Intel launched a worldwide work-life training initiative for managers and employees, expanded the range of flexible work options for all employees, and extended the company’s financial support for employees caring for dependents.

His contributions helped the company earn recognition as one of FORTUNE’s “100 Best Places to Work” and Working Mother Magazine’s “100 Best Companies.” Sorensen was recognized in 2006 as one of the “Top 10 Men in Work-Life” by Work/Life Matters Magazine.

 

 





The Chartered Institute of Personnel and Development (CIPD) which is Europe’s largest HR and development professional body defines the concept of total reward thus : Total reward is the term that has been adopted to describe a reward strategy that brings additional components such as learning and development, together with aspects of the working environment, into the benefits package. It goes beyond standard remuneration by embracing the company culture, and is aimed at giving all employees a voice in the operation, with the employer in return receiving an engaged employee performance (1).

WorldatWork, a not-for-profit organisation that provides education, conferences and research on global human resources issues defines total rewards as “all of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”

Total rewards has the potential to assist employers, in a very powerful way, and help them align both their HR and business strategies. If we consider all the tools available that we can use to attract and retain, certain considerations come to mind.

Firstly, no single element can be considered in isolation. Certain elements may rank higher in terms of priority, such as pay, of course. However, there are other elements, which contribute to a sense of fulfillment for an employee and make the difference between whether an employee stays or goes. In fact, how many of us have heard and read that oftentimes, people leave because of their manager? This goes to show how the entire employment experience needs to consider the critical nature of some of the non-financial elements.

Secondly, while there are many tools available and many options we can explore, the most important thing to consider is whether we truly understand our people. Our ability to understand what motivates them, what they are really thinking about key issues, how they feel about certain initiatives, how well they get along with peers, subordinates and leaders and your assessment of all of this have a far-reaching impact on how you approach total rewards.

Total rewards is, after all, an approach. It gives you a framework to manage your compensation and benefits issues but it is reliant on accurate assessment and analysis for it to work.

We recently spoke with Adam Sorensen, Global Remuneration Professional (GRP), who leads the WorldatWork global rewards practice. Sorenses serves as staff liaison to the WorldatWork Global Advisory Board, which advises the association on issues related to the design, implementation and management of total rewards programmes globally. The WorldatWork in 2000, introduced a total rewards framework which was intended to advance the concept and help practitioners approach rewards in new ways. You can see the Model below.


WORLDATWORK TOTAL REWARDS MODEL. COURTESY : WORLDAT WORK


Sorensen spent some time with us, to outline key aspects of this Model. Although it has been a decade since the Model was developed, Sorensen says that the concept of the Model has not changed very much. If anything, it was the application of the Model that tends to change in response to the environment.


ADAM SORENSEN
“If an organisation has adopted the Total Rewards Model, then what you will find is that different elements come into play and a number of things work together. To compare and contrast the US and emerging markets in Asia, for example, you would note that compensation in the US has been declining. You will see that compensation has been less important and therefore, organisations have been emphasising the other parts. However, in Asia, growth has slowed but not necessarily declined and therefore you see that compensation is really emphasised. In short, it really is driven by what is happening around us,” Sorensen explained.

The Model itself focuses on three elements, namely, compensation, benefits and the work experience. Sorensen explained at length that one of the most important things to recognise about the Model is the larger context.

“For a long time, people have talked about compensation and benefits. But the way in which we conceptualise the Total Rewards Model is to call out explicitly that it’s not a strategy in itself - it really needs to exist as part of a larger framework. You need to look at what the business is trying to achieve. You need to consider what the organisational culture is and what values it is trying to create. Thereafter, you need to look at what this represents in relation to the HR strategy. All of these come together to help an organisation to think of total rewards in a specific context. You step back and see what you are trying to achieve and look for the elements that will support your strategy and your HR plan,” he added.

The WorldatWork Model recognises that total rewards operate in the context of the business strategy, the organisational strategy and the HR strategy. How do these external influences impact on the Model as such? Sorensen highlighted the fact that there has been much recognition from HR practitioners that there is a lot of flexibility here.

“When taking a total rewards model approach, you can modify what you have. I worked with a high tech company some time back and they were having issues with retaining women in skilled technical positions. So, one of the things they concentrated on was increasing diversity. We developed a range of work-life strategies to attract these women. If you leverage one of those pieces, it can go a long way towards helping you,” Sorensen clarified.

The Total Rewards Strategy leverages five elements to attract, motivate and retain. These five elements are compensation, benefits, work-life, performance and recognition and lastly, development and career opportunities. WorldatWork regards these elements as the ‘toolkit’ from which an organisation chooses from.

However, are all five necessary? Could some of us say, choose to focus on compensation and work-life while disregarding development to a larger extent? We argued that some organisations do already implement rewards in this way and perhaps compensate in one area for the non-inclusion of another element. We asked Sorensen whether one element carries more weight than another.

Sorensen was candid. He pointed out that, while as an organisation they did advocate the Total Rewards Model, they did spend more time on compensation than on any other area. The reason he pointed out was that the majority of their members are Compensation and Benefits practitioners.

Does that make compensation and benefits more important? Not necessarily. The point Sorensen makes here is that organisations realise that, at a baseline, one needs to have competitive compensation programmes. The best work-life programme would not get you anywhere without the compensation element being prioritised. As he puts it, “People will stop working for you if you take away their pay.”

Our research into what practitioners were doing in the rewards sphere led us to the UK. This year marks the ninth year the annual survey of reward management was carried out in the UK. The survey was conducted between August and October 2009. Based on replies from 729 organisations, the survey found that just over a third of the respondents have a reward strategy with a further three in ten planning to create one this year. Interestingly, one in twelve respondents abandoned their reward strategy and one in twenty ditched their total reward approach.

They survey also found that key reward issues for this year were :-

  • ensuring alignment with the business strategy;
  • ensuring reward is market competitive;
  • cost minimisation; and
  • ensuring that reward is internally fair.

Clearly, Total Rewards encompasses a range of things within the employer-employee relationship. We know that a paycheck, while important, is not in itself the single most decisive factor. There are after all, many reasons for why we do what we do. As Sorensen explained perfectly, “In a sense then, total rewards is an attempt to recognise these other reasons for why people go to work and how organisations can leverage some of these other things to get people to perform at their best”.

 

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