A Hay Group and WorldatWork study found that 57% of companies plan to increase their focus on employee engagement in measuring their reward programs during the next two to three years, while 64% will also increase their future focus on the motivational value of reward programs.
The "Reward Next Practices Survey" found that a majority of organizations plan to increase their focus on improving the pay for performance orientation of their reward programs.
"Tough times mean that companies are still maintaining a sharp focus on costs," said WorldatWork President Anne Ruddy. "We are seeing a strong future trend in achieving a better balance between the financial management and motivational aspects of reward."
According to the study, current reward program performance metrics are more heavily weighted toward financial performance than employee engagement, with companies reporting a current focus of 71% on using financial performance measurements and 40% on employee engagement. Other performance standards, such as customer satisfaction, innovation, talent management and employee engagement are all at less than 40% of current focus by organizations. Of all of these metrics, organizations reported a more intense future focus (57%) on employee engagement performance.
"The global downturn has prompted organizations worldwide to shift to an increased focus on how to engage and motivate employees," said Hay Group U.S. Reward Practice Leader Tom McMullen. "However, during times when budgets are tight, maintaining an engaged workforce is more difficult than ever. When times are tough, employers are looking for ways to improve engagement-and it's essential they remember the motivational power of intangible rewards, the role of the line manager in establishing a great work climate and the importance of communicating effectively with employees."
The study also found that 57% of companies plan to ramp up their future focus on regularly measuring the return on their total reward investment, while only 20% of respondents currently regularly measure the return on their reward investment.
"Noncash financial rewards such as benefits and pensions often represent a third or more of an organization's total remuneration costs, but few employers understand the total value of their packages. As organizations continue to tighten their belts, they're recognizing the importance of getting the most bang for their reward-program buck and putting their mouth where their money is in terms of effectively communicating the reward program's value," added McMullen.
In addition, leveraging important nonfinancial rewards, such as career and development opportunities (60% greater focus), improving work climate (53% greater focus) and nonfinancial recognition (52% greater focus) will be key components of the reward programs of the future.
"The erosion of financial capital has led to a renewed focus on the value of human capital," said Ruddy. "Organizations are learning to treat employees as assets, not costs-and to invest strategically in talent using a broad range of total rewards."