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Compensation & Benefits

Published September 2007

Aligning Rewards with Business Strategy

  Dick Kleinert, Tim Phoenix and Joseph Rosalie

Given increased globalization, stiffer competition and the shrinking labor pool, companies no longer can afford to view traditional rewards programs as a cost to manage. HR departments need to research what their employees truly want and develop total rewards systems that match the value they bring to the organization and align to corporate ROI.

We're living in an era marked by tipping points on many fronts, from dealing with global climate change to feeding the world's hungry. The business world also has had its moments of delicate balance and shifting paradigms in recent years, surviving executive scandals, corporate failures and increased regulatory scrutiny.

We seem to be in a cycle. When it comes to the need for significant change in important matters, tweaking simply is not good enough, and substantive progress is most effectively achieved through real transformation.

This also holds true for addressing many workforce and people challenges. In a recent survey conducted by Deloitte Consulting LLP in collaboration with the Economist Intelligence Unit, 85 percent of more than 500 senior business and HR executives from 468 companies said the people they employ are vital to all aspects of their company's performance, especially their top strategic challenges.

This shouldn't come as a surprise — increased globalization, innovation-driven competitiveness and the continuing push for both greater efficiency and productivity are all issues that come back to people at the core.

Yet, on the HR front, we do not see a great deal of transformative activity in regard to establishing the type of feedback mechanisms and rewards systems that would support improved efforts to attract, motivate and retain the best people. And although this might be true of the general employee population, it is a particularly troubling observation to make with respect to the critical workforce segments.

Failures of Conventional Wisdom

The war for talent has been waged somewhat officially for nearly 10 years, but most companies still have not achieved the balance they seek between meeting recruitment and retention needs and offering the programs that keep employees engaged, productive and aligned with business objectives.

To some extent, current practices have failed to recognize that people are in a near-constant state of flux in regard to many key business-related concerns, including specifics about what inspires, motivates and rewards them. In the absence of identifying a better way, most companies fall back on benchmarking surveys, which long have been among the primary tools used for setting both the level and content of employee rewards packages.

If you think your organization has distinction and a unique character and culture, using peer benchmarks and other external reference data will tell you nothing about how to effectively align your own rewards programs with your particular business strategy and employee population.

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