Organisations neglecting their employee value propositions

2013

Every employment relationship is built on a psychological contract between employer and employee that defines what the employer expects from its employees and what it provides in return. Yet this contract – also known as the employee value proposition (EVP) – is often far from explicit, consisting of unstated assumptions and perceptions that are rarely formally recorded or measured, despite the critical impact they can have on employee motivation, engagement and performance.

According to new research by global professional services company Towers Watson, the widespread ambiguity and lack of clarity around the EVP represents a missed opportunity for organisations to boost employee engagement, attract and retain top talent and improve their financial performance, largely because fewer than half of companies have a long-term plan for getting the most from their EVP.

A survey of 207 large and midsize organisations from across North America, Europe and Asia foun d that the organisations that use their EVP most effectively are five times more likely to report their employees are highly engaged and twice as likely to report achieving financial performance significantly above their peers when compared to companies that use their EVP less effectively.

But most fail to realise these benefits, with fewer than half (43 per cent) of HR and communication teams having a long-term plan in place to support the use and development of their EVP. "The employee value proposition is one of the best tools available for companies to engage employees, as well as attract and retain top talent," said Richard Veal, head of Towers Watson's Reward, Talent and Communication consulting practice.

"Unfortunately, too many organisations, the EVP remains a hidden gem that is unshaped, overlooked or not utilised to its fullest extent. Our latest research provides important insight into what makes the best companies — those with highly effective EVPs — different."

But what is an effective EVP? According to the results of the survey, one key factor is that it is comprehensive and balanced. Half the companies surveyed with highly effective EVPs combine extrinsic factors such as pay, bonuses and benefits with intrinsic factors including work environment and teamwork, compared to just a quarter of companies with low-effectiveness EVPs.

Differentiation is important. Almost half (47 per cent) of the highly-effective EVP companies have EVPs that are significantly different, stand out from their competitors and are appealing to talent, compared with fewer than one in five (18 per cent) of low-effectiveness companies.

An effective EVP is also business-oriented. Six out of the highly-effective companies are using their EVP to both drive the employee behaviour they need to deliver on their strategy and to be financially successful, the research found.

Finally, the EVP needs to be employee-focused. While almost six out of 10 (57 per cent) low-effectiveness companies focus on communicating the features and financial value of the deal, nearly half (44 per cent) of highly-effective companies help employees understand how their individual needs will be met. In other words, an effective EVP aligns the whole work experience, from culture, mission and values, to total rewards, through jobs and people, and backs this up with a strong employer brand strategy and communication plan. "The EVP defines the employment deal. It's a promise to help employees meet their needs in exchange for their daily efforts to help the business succeed," said Veal.

"What we found, though, is that low EVP effectiveness companies discuss the deal in terms of the programs they provide and how valuable they are. But the best companies go much further. They discuss how they meet their employees' expectations and, in return, what behaviours they expect employees to exhibit to help them succeed."

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