Turn Your Millennial Pay Plan into a Marketing Strategy

I recently participated in a roundtable with other business leaders to discuss issues facing our organizations and get feedback from the group.  One company president expressed this frustration: "We installed a profit sharing bonus plan for our employees and it absolutely bombed." Another in the group immediately asked, "What's the age range of the employees in your business?" "Most are between 23 and 35," was the response. "There's your problem," the questionner asserted. "Millennials just don't care about money. That's the reason it failed."

Millennials don't care about money. Really?  It's that simple?

Think about approaching your millennial pay plan as a marketing strategy instead of a rewards program.

With all due respect to the good intentions of the business owner who made that comment, it's a lazy response. To suggest that millennials don't care about money is to excuse an organization from the hard work of figuring out how to appeal to a critical employee constituency; one that is rapidly growing in numbers and has become the largest generation within the global workforce. It's a group whose influence is expanding, not shrinking, and dismissing them as simply not interested in money won't help anyone.

In my view, the failed profit pool was due to something bigger than poor plan design or employees just "not getting it." It was a marketing flaw. Here's what I mean.

Suppose that company thought of millennial pay as a marketing strategy instead of a compensation strategy. If that was its orientation, what framework would have guided its approach? If the context was marketing and not just rewards, here is the sequence its leadership probably would have followed (and you might also consider adopting) in constructing a pay strategy for millennials...or any other part of its workforce:

  • Identify the Audience
This isn't a matter of simply putting a broad label on the group such as "millennials."  If you were creating a marketing strategy, and this was a key customer category, you would spend time identifying the "persona" of the people you're trying to reach. What is their age? At what point are they in their career? What is their family situation?  What are their career goals? Where does your organization fit in that trajectory? Where do they live?  What do they read? Is there more than one kind of millennial employee in your business (people just looking to gain some early career experience vs. those looking for an entreprenuerial opportunity, for example)? How do they spend their free time?  You get the picture. Before being able to design an effective marketing strategy, you would have to first clearly define your audience.
 
  • Identify What you Want Them to Do
This relates to the role you want them to perform. What are the outcomes for which they're responsible? What is impacted if they achieve those outcomes? What is the course they will need to follow if those outcomes are to realized? What unique abilities do they have that will allow them to succeed in that role? And so on.  All great employees--including those of the millennial generation--want to know where they fit and why it matters. They need context--both micro and macro. They want to know what role they're fulfilling, not just what position they're occupying. (A profit sharing bonus plan provides a "macro" view of the business. Without further role context--and micro outcome definition--it will remain a well-intentioned plan in search of an audience who can relate to it.)
 
  • Identify What your Employees Need to Believe in order To Do
People are moved to action by compelling beliefs. So, what would your employees have to believe to produce the outcomes for which they have stewardship?  Who will benefit from those outcomes?  Why does that matter?  What positive impact will role fulfillment have on the employee? On his career? On his co-workers or team? On the company? On the customer or client? Simon Sinek refers to this as "Start with Why." Millennials believe their work should have meaning. Their motivation to produce results will come when they understand why it matters. The financial component is part of this--but its only one piece of a Total Rewards picture they need to form for their belief to congeal. And millennials will identify their own heirarchy of needs when it comes to the financial element.  That ranking is largely rooted in the kind of lifestyle issues described in the "Identify the Audience" step--which is why that exercise is so critical. 
 
  • Identify What Your Employees Need to Know in Order to Believe
Once you're clear on what is meaningful to millennials based on their beliefs, a critical next step is to determine what they will need to know for that sense of meaning to take root.  This is primarily a line of sight issue. What do employees understand about the vision of the company?  Do they "see themselves" in the future business; has that picture been painted for them? Do they understand what the business model and strategy is and how they relate to fulfilling the organization's vision? Do they know what the revenue drivers of the business are and how the company competes in the marketplace? Do they understand their role in the business model and what's expected of them in that role? Do they know what the leverage points are in the business model and how their role impacts them? Do they understand how they will be rewarded If they fulfill those expectations? Are they clear about how those rewards relate to their own financial priorities? All of these things have to be connected in the minds of millennials if they are going to believe that what you want them to do should matter to them.
 
That process puts you in a better position to construct a millennial pay plan that fits the audience. With the results of that exercise as a foundation, you can weigh various components of pay and come to a conclusion about what your philosophy should be in constructing compensation for millennials. Where should you be relative to market pay for salary? What is the right balance between guaranteed and variable pay?  How much of variable pay should be short-term and how much should be long-term?  How long-term should the latter be (3, 5 8, 10 years?)  and what form should it take (equity, phantom equity, performance units, profit pool, deferred compensation, other?)  What about benefits such as group health and retirement?  Should they have more or less emphasis based on what you know about your group of millennials?
 
In the end, compensation is a strategic tool to market a future to your employees and define the financial partnership you want to have with them. But make no mistake, this is more a marketing than a financial exercise. What makes that reality all the more ironic is that the company with the failed profit sharing plan is a marketing firm.
 
To learn more about how performance principles should inform your compensation approach for millennials and others, tune into our upcoming webinar broadcast: "Performance-Based Pay that Actually Performs."


Register Now!

 

Ready To Get Started?

If you would like to speak with one of VisionLink’s pay strategy experts, click on the “Request a Consultation” button below, or call us at (888) 703 0080.

Request a Consultation