A comprehensive meeting summary, along with all slides and presentations is available to EN Global Total Rewards members only. Don’t forget to fill out the form at the end to learn more.
Looking Ahead and Building for Long Term Value in Total Rewards
Our 2020 Spring GTRN virtual network meeting brought together 23 global total rewards leaders to discuss various topics relating to incentive and recognition plans and TR strategy. Companies included Anglo American, BAT, BP, BNY Mellon, Cargill, Cofra Holding, Colfax, Danaher, Danfoss, Dow, Fortive, Hitachi Data Systems, JT International, Mastercard, MetLife, Novartis International, RELX Group, Shell, Sun Life Financial, Tapestry, Unilever, and Xerox.
Stretch Thinking Session: Motivating Long Term Behavior Greg Milano, Founder and CEO, Fortuna Advisors
Rewards programs have become increasingly complex in attempts to differentiate and recognize employees for their hard work while satisfying the needs of shareholders. As a result, the job of Total Rewards leaders is very challenging, often pulling them in many directions at once. Greg Milano encourages leaders to simplify incentive programs to reflect the core idea that “when good things happen people make more money, and when bad things happen people make less money.”
In an ownership culture, strong opportunity and accountability exist. By looking at the attributes of owners, Greg shared how both public and private companies can create and benefit from an ownership culture:
- Spending like it’s Your Money: Public companies tend to overspend on things they would never spend on themselves and underspend on long term investments.
- Extreme prioritization: Focus on core initiatives that directly impact the business’ success.
- Willingness to Fail: Owners are more willing to experiment and try new things, but they also know when to stop a project that is not working.
- More Doing and Less Talking: Fewer meetings and faster decision making can help prevent companies from spending more money on making decisions than the actual decision is worth.
- Short Term and Long Term: 80% of public companies say they are willing to sacrifice shareholder value to meet short term earnings targets. Owners, on the other hand, drive results but would never sacrifice the future by cutting investments for short term gain.
Variances to plan are the biggest cause of short-termism. But when measuring performance, the amount of improvement is more important than the variance to plan. Greg recommends leaders stop negotiating targets. Instead, look at one measure that balances the key drivers of revenue growth, margin, and asset utilization. Residual Cash Earnings (RCE), the difference between gross cash earnings and capital change, allows the planning process to be more about planning and less about coming up with benchmarks, resulting in more entrepreneurial thinking. Measuring the change in RCE can provide real pay for performance.
Member-Led Discussion Takeaways
Much of the two days was dedicated to member-led conversations, questions, and best practices. A few takeaways are:
- For many companies, wellbeing started as an initiative focused on employees’ physical health. But the concept of wellbeing has since expanded to include mental, social, and financial health. COVID-19 is an opportunity to accelerate wellbeing programs, especially those focused on mental health.
- ESG has recently become central in conversations with board members and leaders. For many, COVID-19 has not heavily impacted ESG plans, but it has enhanced those already in place.
- Global recognition programs can lead to a positive cultural shift as employees feel empowered to recognize their peers without having to go through management.
- A successful implementation of a global recognition program requires cross functional expertise, early buy in from stakeholders, global consistency, regular communications, and engagement from senior leaders.
- Leaders often spend too much time planning and designing and not enough time communicating the value behind the rewards programs.
- It is important to keep the TR strategy connected to the business strategy. Looking at total rewards holistically and aligning it with your EVP can serve as a strong differentiator.
- Crowdsourcing can be used to gain insights about what employees really want from rewards.
- Members asked for peer input on the following Total Rewards Strategy questions: Is it documented? How often do you review it? Is it linked to your business strategy? What metrics do you use to measure the effectiveness of your TR strategy?
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