Few total rewards and business strategies fully align

Few total rewards and business strategies fully align

Few organizations’ total rewards and business strategies fully align, according to Mercer survey

  • May 19, 2014
  • United States, New York City

Mercer’s Total Rewards Survey examines the practices organizations are using to align compensation, benefits, training and career development with today’s business priorities. This survey found that while more than half (56%) of organizations made a significant change to their total rewards strategy in the past three years, less than one-third (32%) said their total rewards and business strategies fully align.

“It is critical that companies’ rewards strategy aligns with its business strategy to achieve overall success,” said Steve Gross, Senior Partner in the Rewards segment of Mercer’s Talent practice. “A balanced approach to total rewards – one that acknowledges the needs of the business, the changing environment, the aspirations and demographics of employees, the local culture, and the current and future cost constraints – is both essential and challenging.”

According to Mercer’s survey findings, the majority (89%) of organizations rank attracting and retaining the “right” talent as the most significant challenge of their overall total rewards strategy. Other challenges noted as very important include: gathering relevant market compensation data (reported by 74% of organizations), keeping rewards affordable (66%), communicating the value of rewards to employees (61%), and ensuring pay for performance and performance differentiation (62%). 

Based upon experience with a number of clients who want to address the gap between total rewards strategies and their business strategies, Mercer has identified a number of action steps employers can take.

“As companies focus on the cost of their talent, attracting and retaining the ‘right’ employees and differentiating rewards for top performers are challenges that can be made easier by incorporating the use of workforce analytics,” said Mary Ann Sardone, Partner in Mercer’s Talent practice and Regional Leader of the firm’s Rewards segment. “Additionally, incorporating offerings such as career development and work/life balance initiatives into total rewards strategies caters to the needs of Millennials in the workplace.”

According to Mercer’s Critical Talent Practices Survey, the ability to make a difference in the job function leads the list as to ways to enrich the employee experience beyond pay, reported by 59% of organizations. Other non-cash rewards to attract and retain the “right” employees include career progression (53%), healthy living/wellness (49%) and recognition (45%). 

Sourcing talent and “hot jobs”

According to Mercer’s survey, organizations that have operations in emerging markets tend to use a “buy” approach to talent more frequently than they do for their operations in mature markets. Likewise, organizations use a “build” approach to talent more often for their operations in mature markets than they do in emerging markets. This practice is most evident for sourcing positions in top management, human resources and operations with at least twice as many organizations indicating they use a “buy” approach for filling these jobs in emerging markets compared to mature markets.

Regardless of the market, “hot jobs” – those jobs difficult to fill due to skill shortages and higher pay rates to attract and retain – include two within the STEM fields. Nearly two-thirds (65%) of organizations in the US reported information technology as the leading function for hot jobs in mature markets, and almost half (44%) indicated both engineering and information technology jobs in emerging markets.

“Recognizing critical workforce segments is a core component of a successful total rewards strategy, and focusing on specific job functions can mean the difference between attracting critical employees and watching them go to your competitors,” said Mr. Gross. “Companies that emphasize factors beyond pay that help retain critical employees, like career opportunities, work/life balance and effective communication will have a competitive advantage.”

Going forward, most organizations intend to maintain their investments across all offerings of their total rewards strategy. Mercer’s survey shows that approximately one-fourth of organizations plan to invest more in base salary increases, career development/management programs and training opportunities in emerging markets. Moreover, those organizations with operations in mature markets plan to invest slightly more in these offerings.

“In today’s increasingly global and competitive business environment, companies recognize that investing in their total rewards programs is essential to support business goals, deliver on greater pay for performance, and promote employee engagement,” said Ms. Sardone.

Mercer’s Total Rewards Survey, which includes responses from more than 350 employers across all industries throughout the US and Canada, assesses how organizations address total rewards strategies in their mature and emerging markets. To download the survey results, visit http://www.imercer.com. For more information about Mercer’s Talent business, which helps organizations address rewards; leadership and organization performance; communication; diversity and inclusion; mobility; and workforce analytics and planning needs through information and technology, visit http://www.mercer.com.

About Mercer
Mercer is a global leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 42 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With over 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.