Increased Flexibility With the one-size-fits-all approach essentially gone, the twenty-first century may well become the “rewards your way” era. Just as companies create niche products and services to cater to small consumer segments (micromarketing), employers need to start creating different blends of rewards packages for different workforce segments.
This is particularly true in a global labour market where workforce diversity is the rule, not the exception, and when specific skills are in short supply.
A total rewards approach-which combines transactional and relational awards-offers tremendous flexibility because it allows awards to be mixed and remixed to meet the different emotional and motivational needs of employees. Indeed, flexibility is a two-way street. Both employers and employees want more of it.
As the importance of flexibility has become more understood, more companies are allowing employees to determine when they work, where they work, and how they work. Total rewards recognizes that employees want, and in many instances demand, the ability to integrate their lifestyle and their work.
Improved Recruitment and Retention Organizations are facing key shortages of best-in-class workers (top performers), Information Technology (IT) workers with hot skills, and workers for entry-level, unskilled jobs. The classic initial solution to a recruitment and retention dilemma is to throw money at the problem. But because this solution is so overused, it does not offer a competitive advantage. Furthermore, it immediately raises costs. A total rewards strategy is critical to addressing the issues created by recruitment and retention. It can help create a work experience that meets the needs of employees and encourages them to contribute extra effort-developing a deal that addresses a broad range of issues and spending rewards dollars where they will be most effective in addressing workers’ shifting values.
Indeed, today’s workers are looking beyond the “big picture” in deciding where they want to work. Work and personal life should be seen as complementary priorities, not competing ones. When a company helps its employees effectively run both their personal and work lives, the employees feel a stronger commitment to the organization. In addition, numerous studies show that employees look at the total rewards package when deciding whether to join or to stay with an organization.
An actual summary statement can be prepared for potential employees, enabling them to see the whole value of being employed by a company. As such, as highly desirable job candidates explore their options with various companies, companies with total rewards have a competitive advantage because they are able to show the “total value” of their employment packages.
Reduced Labour Costs/Cost of Turnover The cost of Turnover-often the driver of recruitment and retention-is sometimes invisible. In reality, it’s far from cheap. Estimates of the total cost of losing a single position to turnover range from 30 percent of the yearly salary of the position for hourly employees (Cornell University) to 150 percent, as estimated by the Saratoga Institute, and independently by Hewitt Associates (Lermusiaux 2003). In addition, the cost of turnover includes indirect costs such as losses from customers and sales, as well as decreased efficiencies as productive employees leave and the remaining workers are distracted.