In 2015, Deloitte released the results of a study that evidenced a significant shift in the employer-employee relationship—one that had serious implications for the kind of value proposition businesses would need to provide. What Deloitte revealed seven years ago proved to be prophetic. In fact, if businesses would have acted on Deloitte’s recommendations in 2015, they would not be having problems with the “Great Resignation” in 2022.
To make the point, here's an excerpt:
“…The employee-work contract has changed: People are operating more like free agents than in the past. In short, the balance of power has shifted from employer to employee, forcing business leaders to learn how to build an organization that engages employees as sensitive, passionate, creative contributors. We call this a shift from improving employee engagement to a focus on building an irresistible organization.” (Becoming irresistible: A new model for employee engagement Deloitte Review Issue 16, Deloitte Insights)
It’s uncanny, is it not? Deloitte could say the exact same thing about the state of things today. Their findings are as relevant now (perhaps more) as they were then.
The question is, how do companies make themselves “irresistible?”
Well, it starts with having the right culture…and a good culture is the product of a great employee experience…and a great employee experience is the natural extension of a complete and compelling value proposition. (Have you read, “If You Give a Mouse a Cookie? If not, never mind.)
Why it Matters
Too often, by the time business leaders discover their compensation offering is inadequate it’s too late. They lose a key player to another organization that has offered her a “better deal” or they fail to secure a top recruit because their value proposition just isn’t compelling. In short, a rewards offering cannot be an afterthought. It has to be approached strategically and comprehensively or it will fail in its ability to attract, develop and retain premier talent.
The word that could be used to describe the compensation approach of most companies VisionLink encounters is “incomplete.” If they are successful businesses, they have inevitably done some good things with their pay offering, but they just haven’t gone far enough. For example, they may have a well-thought-out salary structure, a robust benefits package, and a solid annual incentive plan, but they have no means of sharing long-term value with those who create it. And so on.
What it Means to Have a Complete & Compelling Pay Offering
One of the purposes a pay strategy should serve for a business is to reinforce the performance standards the company needs to maintain for its growth goals to be achieved. Business leaders have performance standards because they are trying to develop a performance culture. That environment exists when virtuous cycles of focus, execution and sustained success are reinforced and repeated. When they are, consistent wins are the result and a culture of confidence emerges; People know the company is going to succeed and they are invested in its victories. So the question an organization needs to answer is this: What approach to pay will reinforce and encourage a mindset of focus, stewardship, and execution and unleash employee commitment and engagement?
Unfortunately, there is not a magic plan or strategy that will ensure a performance culture takes hold in an organization. However, there is a secret to developing rewards strategies that unleash greater motivation on the part of a company's workforce. The secret lies in appealing to what might be referred to as the “financial hierarchy of needs” employees have with regard to how they are paid. Borrowing from Maslow’s theory, businesses should examine compensation through the eyes of their employees in evaluating whether or not their pay offering is compelling. They must determine whether employees feel their financial needs are being addressed fairly and that they are participating in a unified vision for business growth is being established.
The Financial Hierarchy of Needs
With that in mind, let’s highlight the five levels of the employee financial hierarchy of needs. This structure is the secret to building a pay strategy that your people will consider complete and compelling.
1. Cash Flow and Living Standard. Employees have an intuitive sense about what their skills and experience should merit them in the amount they are paid for their work. This is not simply a market data issue. Employees have a subjective view of this, especially in the current talent environment (i.e. the Great Resignation).
2. Risk Protection through High-Value Benefits. Highly compensated talent is typically interested in the types of security plans a company has to offer. These are plans that offer supplemental disability and life insurance coverages that help them adequately protect against loss should something happen to them. They also want a means of sheltering income from taxes through participation in benefits such as a non-qualified deferred compensation plan.
3. Retirement Planning. Most employees look to the company for whom they work as the channel through which they can accumulate funds for retirement. However, as with benefits, this area needs to reflect workers' distinct needs based on their career and life circumstances.
4. Long-Term Value-Sharing. Of paramount importance to key performers is the ability to participate in the value they help create. Those of superior talent relate to the concept of value-sharing because they want and expect to participate financially in the growth they help create.
5. Wealth Accumulation. In an employee’s mind, the four previous components just listed add up to the total wealth accumulation opportunity the employer's value offer represents to them. Every individual has a different contribution ambition in mind for their future which will require a certain wealth standard to achieve. As a result, your key performers in particular take a composite view of the pay programs you offer and evaluate whether they will provide them the accumulation opportunity they seek. If your company doesn't provide it, they will search for an organization that will.
Top talent finds companies that adopt this approach to be "irresistible." And when a complete and compelling employee value proposition is combined with a superior employee experience, you have the recipe for winning the recruiting and retention wars for years to come.
To take a deeper dive into what it takes to build an "irresistible" value offer, read our free report--The Ultimate Guide: How to Build a Complete and Compelling Employee Value Proposition.