Employee engagement on a budget

May 18 2009 by Nic Paton Print This Article

With employers no longer able to afford to throw money at their employees to keep them happy and engaged, managers are having to become more imaginative when it comes to rewards, including placing greater emphasis on talking up "invisible" benefits, such as pensions, healthcare and training, that may previously have been taken for granted.

The fact that budgets are under so much pressure has forced managers to look more closely at whether workers are recognising the value of all the intangible benefits they get from their work, new research has suggested.

Rather than just focusing on cash rewards for performance, organisations are looking afresh at how pay and reward programmes can be better used to promote employee engagement and motivation.

What this means is that there is now increased emphasis on the whole notion of "total reward" or communicating the wider array of benefits that you as an employer offer, the research by recruitment consultancy Hay and WorldatWork has suggested.

The poll of 763 organisations in 66 countries found nearly six out of 10 planned to increase their focus on employee engagement when it came to measuring their reward programmes during the next two to three years, while nearly two thirds said they intended to increase their future focus on the motivational value of such programmes.

"Tough times mean that companies are still maintaining a sharp focus on costs," said Anne Ruddy, president of WorldatWork.

"We are seeing a strong future trend in achieving a better balance between the financial management and motivational aspects of reward," she added.

What was also clear from the research was just how heavily reward programmes have been weighted towards financial rewards up to now.

Seven out of 10 firms reported focusing their programmes on financial performance measurements against just four out of 10 that focused on employee engagement.

Other performance standards, such as customer satisfaction, innovation, talent management and employee engagement were all at less than 40 per cent of current focus by organisation.

"The global downturn has prompted organisations worldwide to shift to an increased focus on how to engage and motivate employees," pointed out Tom McMullen, U.S reward practice leader for Hay.

"However, during times when budgets are tight, maintaining an engaged workforce is more difficult than ever.

"When times are tough, employers are looking for ways to improve engagement Ė and it's essential they remember the motivational power of intangible rewards, the role of the line manager in establishing a great work climate and the importance of communicating effectively with employees," he added.

Nearly six out of 10 of the firms polled also intended more regularly to measure the return on their total reward investment, against the fifth who currently did so.

"Non-cash financial rewards such as benefits and pensions often represent a third or more of an organisation's total remuneration costs, but few employers understand the total value of their packages," said McMullen.

"As organisations continue to tighten their belts, they're recognising the importance of getting the most bang for their reward-programme buck and putting their mouth where their money is in terms of effectively communicating the reward programme's value," added McMullen.

More than four out of 10 planned to use their reward programme to reinforce a culture of creativity and innovation within their organisation, something currently only done by a quarter of those polled.

Similarly, two thirds said they would focus more on improving the ability of their line managers effectively to manage how pay for performance was measured and communicated.

There was also going to be greater emphasis on "sweating" non-financial rewards, such as career and development opportunities and improving the work climate.

"The erosion of financial capital has led to a renewed focus on the value of human capital," pointed out WorldatWork's Ruddy.

Employee engagement and keeping employees happy needed to be about more than just money, she stressed. "Organisations are learning to treat employees as assets, not costs Ė and to invest strategically in talent using a broad range of total rewards."