Total Rewards is a signaling mechanism. It tells the individual that they are valued and announces that to the rest of the world
The differentiation lies in the user experience and for that, HR professionals have to think like designers and obsess about the employee experience
He lay in his bed and wondered if his employer would ever take him back. His father was a good worker and earned 75p a week. His mother used to be paid 35p for a week. They were poor but happy. After his parents had died, he had to move to an orphanage.
The employer had been kind enough to take orphans like him and made them apprentices who would learn the textile trade and paid him 15p per week. The 12-hour shifts were dangerous especially when children like him would be made to go inside machines to clean them while they were still moving and jump out in time before they were injured.
The children were scared of the supervisor. He carried a leather strap with which he would punish the children who were caught talking or whistling during the meals. The supervisor was mean. He routinely altered the time on the clocks and claimed that the children were late to work and imposed a fine.
But being in the hospital was much better than sleeping in the barracks attached to the factory. The hospital had given him a bed all to himself. He loved the feeling that the bed was his and he did not have to vacate it for another exhausted child returning from the previous shift. He had difficulty hearing the doctor when he told the nurse, “This wretch caught pneumonia when he went out into the cold night air led after being in the warm and damp factory for 14 hours at a stretch. His hearing has been damaged because of the noisy machines in the factory…” The medicine made him sleepy.
We have come a long way since the scene from 18th century England described above when factories and mine owners sought to control and discipline their workforce through a system of long working hours, fines and low wages. Today, the investors want to know how you treat your employees. The CHROs use analytics and other tools to explain to the Board and C-Suite how they intend to answer the questions about Total Rewards.
Total Rewards refers to six basic elements all employers use:
- Work-Life Integration
- Rewards and Recognition
- Performance Management
- Talent Development
The word compensation describes something, typically money, that is paid out in recognition of loss, suffering, or injury incurred – recompense. It is interesting that we use the word compensation and benefits to describe what we get in return for our participation in the talent market.
If you map the six elements to Maslow’s hierarchy, compensation and benefits would address physiological needs and safety needs. The rest are truly aimed at addressing the higher order needs of belonging, esteem and self-actualization. Looked at from that lens, Total Rewards is a signaling mechanism. It tells the individual that they are valued and announces that to the rest of the world.
Are signals effective
Netflix rehires its top talent every year during its performance reviews. That pegs the top employees’ pay to going labor market rates and addresses the gripe that laterals are always paid more than those who stay on in the organization. Companies in the Silicon Valley try to outdo each other (at least during boom times) to provide everything from concierge services to slides in the office to attract talent. But talent still seems to get wooed by competition any way.
Addressing the lower rungs of Maslow’s hierarchy seems passé. Are employees willing to work in a stressful workplace if their mission seems lofty enough? Evidently yes. Recently, Tesla and SpaceX – both run by Elon Musk were in the news for being stressful places to work. Elon Musk responded by saying, “SpaceX and Tesla rated most meaningful work in high tech. Also, most stressful, but that goes with the territory.” Musk has really made engineering and manufacturing interesting again.
Intangibles are the differentiators
The evolution of the digital economy is being driven by the customer and the employee in equal measure. Employees have evolved from being yet another factor of production to being viewed as talent where each individual’s contribution is unique and critical. The individual’s personal brand matters as much as the organization’s. The enterprise and talent have a symbiotic relationship which results in the evolution of the spectrum from compensation and benefits to total rewards.
The tangible elements of total rewards like compensation and benefits are easy to benchmark and copy. But that is like trying sell a smartphone based on its hardware and software. Every phone allows the user to do exactly the same thing. The differentiation really lies in the user experience. This can be done only when HR professionals think like designers and obsess about the employee experience. Designers address the unspoken needs of users. Total rewards is no longer about the articulated needs. It is on intangibles.