total rewards: smart, strategic & sustainable ......q:\2014\gbs\17\nichename\20\dcn#.pptx 7 key...

$: TOTAL REWARDS: SMART, STRATEGIC & SUSTAINABLE ......Q:\2014\GBS\17\NicheName\20\DCN#.pptx 7 Key Strategic Considerations 1. Who are you trying to recruit, retain and reward? 2. Where$
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Q:\2014\GBS\17\NicheName\20\DCN#.pptx



TOTAL REWARDS: SMART, STRATEGIC & SUSTAINABLE

STRATEGIES TO ACCELERATE YOUR BUSINESS

Andrew Klein, Ph.D. Principal

HR and Compensation Consulting Practice

© 2015 GALLAGHER BENEFIT SERVICES, INC. s 1



Agenda

• Importance of A HR Strategy

• Shaping a Total Rewards Strategy to Fit

• Current Trends in Total Rewards

• Understanding Costs and Context

• Where do you stand? Benchmarking

• Case Studies

• Questions and Answers

2© 2015 GALLAGHER BENEFIT SERVICES, INC.



A strategic approach to human resources and compensation can help you recruit, retain, deploy, develop and reward talent to fuel your organization’s growth and success.

© 2016 GALLAGHER BENEFIT SERVICES, INC. 3

HR &

Compensation

Consulting

Staff and

Executive

Compensation

Executive

Search &

Interim

Placement

Custom

Compensation

& Benefit

Surveys

HR &

Organizational

Development

Consulting

Employee

Engagement





HR Strategy

© 2015 GALLAGHER BENEFIT SERVICES, INC.



Total Rewards Model


What Is Total Rewards?

The World@Work Total

Rewards Model demonstrates

the dynamic relationship

between employers and

employees. This graphic

depicts the strategic elements

of the employer-employee

exchange as well as reflecting

how external influences and an

increasingly global business

environment affect attraction,

motivation, retention and

engagement



Total Rewards


External Influences

Successful organizations

understand that total rewards

must be designed and

administered in the context of

not only an organization's

internal environment (for

which organizations have

direct control), but also

influences external to the

organization (for which there

is little or no control).



Total Rewards




The six elements of total

rewardsThese collectively define an organization's strategy to attract, motivate, retain and engage employees are:

• Compensation: Pay provided by an employer to its employees for services rendered (i.e., time, effort, skill). This includes both fixed and variable pay tied to performance levels.

• Benefits: Programs an employer uses to supplement the cash compensation employees receive. These health, income protection, savings and retirement programs provide security for employees and their families.

• Work-Life Effectiveness: A specific set of organizational practices, policies and programs, plus a philosophy that actively supports efforts to help employees achieve success at both work and home.




The six elements of total

rewards• Recognition: Either formal or informal programs that

acknowledge or give special attention to employee actions, efforts, behavior or performance and support business strategy by reinforcing behaviors (e.g., extraordinary accomplishments) that contribute to organizational success.

• Performance Management: The alignment of organizational, team and individual efforts toward the achievement of business goals and organizational success. Performance management includes establishing expectations, skill demonstration, assessment, feedback and continuous improvement.

• Talent Development: Provides the opportunity and tools for employees to advance their skills and competencies in both their short- and long-term careers




Total Rewards Refresher


The Result

The desired outcome of an

organization's total rewards

strategy is business

performance and results

through the work of engaged

employees who contribute

their time, talent and efforts.

An effective total rewards

strategy produces a workforce

that has the right people in the

right jobs who are motivated

and engaged to do the right

things – and feel loyal to the

organization and its success



“If you fail to plan, you are planning

to fail!” (Benjamin Franklin)

From the 2015 Gallagher Survey

“Do you have a written total rewards or strategic benefits plan with measurable objectives?”

• 91.7% of the participants said you have a written total rewards or strategic benefits “No”.

• But….Only 9% of participants said they have a total rewards strategy!

• Nearly three quarters of the participants do not have a defined compensation philosophy covering pay and benefits (and/or other reward elements).




Total Rewards Context


An employee value proposition is the experience offered by an employer in exchange for the productivity and performance of an employee… And it may need to be different for different elements of your workforce.

(Source: SHRM)

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjmmee4-47OAhXIGh4KHRXsD5QQjRwIBw&url=http://www.titanhr.com/total-rewards/&bvm=bv.127984354,d.dmo&psig=AFQjCNFUr9z7D6MId-r5XwBsGarKvfMp0g&ust=1469548103054726

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjmmee4-47OAhXIGh4KHRXsD5QQjRwIBw&url=http://www.titanhr.com/total-rewards/&bvm=bv.127984354,d.dmo&psig=AFQjCNFUr9z7D6MId-r5XwBsGarKvfMp0g&ust=1469548103054726



Does it Matter?

Research has found that companies

with an integrated total human capital

and total rewards strategy were:

• 18 percent less likely to experience problems

retaining top-performing employees

• 33 percent less likely to experience problems

retaining critical employees

• 18 percent more likely to be a high-performing

organization


Taking a Measure of Talent, A Report by Harvard Business Review Analytical Services, HBR.org

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjwsvCh-47OAhXQPB4KHZ_pDKgQjRwIBw&url=http://hrpost.hellowallet.com/strategy/5-factors-impacting-hr-planning-in-2015/&bvm=bv.127984354,d.dmo&psig=AFQjCNEtaaw-c9ZYqWqlMrap8h2sS9m_ew&ust=1469548052954453

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjwsvCh-47OAhXQPB4KHZ_pDKgQjRwIBw&url=http://hrpost.hellowallet.com/strategy/5-factors-impacting-hr-planning-in-2015/&bvm=bv.127984354,d.dmo&psig=AFQjCNEtaaw-c9ZYqWqlMrap8h2sS9m_ew&ust=1469548052954453



HR Strategy and Business Impact

There are clear associations between a company’s financial performance and strong talent management practices:

• McKinsey & Company found that companies that scored highest in global talent management practices earned significantly higher profit per employee — almost 30 percent — than those companies that scored lowest on the human capital measures.

Source: Taking a Measure of Talent, A Report by Harvard Business Review Analytical Services, HBR.org




Total Rewards Context


• What makes us unique?

• What gets employees in the door, what keeps them there?

• Purpose, mission, culture

• Once in the door, what engages them to provide full value?



7 Key Strategic Considerations

1. Who are you trying to recruit, retain and

reward?

2. Where are they coming from? Where are they going? Why are they staying?

3. How do you align your benefit plans? Your Wellness programs?

4. What process do you utilize to understand your workforce’s composition, needs and preferences?




7 Key Strategic Considerations

5. What percentage of your workforce is on

track to retire “on time”?

6. How does plan utilization in your

organization relate to plan design? Is the

plan design effective and efficient?

7. How are you communicating and educating

your workforce?


https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi8sICy947OAhXGXR4KHTwIA-YQjRwIBw&url=https://douglasjacksonrecruitment.wordpress.com/2012/07/24/employee-engagement-are-your-employees-engaged/&bvm=bv.127984354,d.dmo&psig=AFQjCNFxLaGL8P6WImX7ToE2XSD-j4PBRQ&ust=1469546551428862

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi8sICy947OAhXGXR4KHTwIA-YQjRwIBw&url=https://douglasjacksonrecruitment.wordpress.com/2012/07/24/employee-engagement-are-your-employees-engaged/&bvm=bv.127984354,d.dmo&psig=AFQjCNFxLaGL8P6WImX7ToE2XSD-j4PBRQ&ust=1469546551428862



Pittsburg Statistics• December 2016 unemployment 5.2%

• Pay growth through 2016 averages 3%




Pittsburg Statistics - Location




Pittsburgh Statistics- Industry





• Plan the Project and Discuss Strategy

• Assess the Organization and Current Reward Programs

• Benchmark the Reward Programs

• Design Plans/Recommendations to Close Gaps/Reallocate

• Present to Leadership

• Implement… and then Review Annually

Sample Process



Different Strokes


Two very different organizations

• Scenario 1 – Higher Education

– Average age of employees in 50’s

– 80% retirement eligible by 2020

– Comp and benefits are “average”

• Scenario 2 - Technology

– New company (4 years old – valued at $1.2B)

– Growth critical for survival

– Low tenure, high turnover – average age low 30’s

– Labor competition is very high



Gallagher 2016 HR and Benchmarking Survey



Key Statistics from the Survey

• 2,900+ participants across the U.S.

• Number of FTEs

– 42% Under 100 FTES

– 44% 100-1,000 FTES

• Ownership

– 60% Private or Publicly Traded

– 40% Nonprofit




Top 3 Organizational Challenges

Faced By Employers

62%

55%

48%

Controlling employee benefit costs

Attracting & retaininga competitive workforce

Revenue/Sales Growth

Arthur J. Gallagher & Co., 2016 Benefits Strategy & Benchmarking Survey, U.S. National Report, July 2016.





Current Benefit Trends




2016 Gallagher Survey

HR-Specific Challenges


Controlling Benefit Expenses (53%)

Retaining Talent (47%)

Recruiting Talent (42%)

Training and Developing Talent (40%)



Survey Findings - Benefits

Total Benefit Cost Increases


36% have seen an increase of in past 2 years

24% have seen a 10% or more increase in health

premium

53% have an effective strategy

to manage healthcare costs

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjPgfLb9o7OAhUBkx4KHT_lCSQQjRwIBw&url=http://blog.conqueryourdebt.org/2013/04/17/5-expenses-that-are-worth-the-money/health-insurance-2/&bvm=bv.127984354,d.dmo&psig=AFQjCNHBAfRPZtDFv5oly5fDn0wL3ftnng&ust=1469546817734059

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjPgfLb9o7OAhUBkx4KHT_lCSQQjRwIBw&url=http://blog.conqueryourdebt.org/2013/04/17/5-expenses-that-are-worth-the-money/health-insurance-2/&bvm=bv.127984354,d.dmo&psig=AFQjCNHBAfRPZtDFv5oly5fDn0wL3ftnng&ust=1469546817734059




Health Insurance


67% agree that Medical and Pharmacy

Benefits is the key benefit in attracting and

retaining talent

Median employee only contribution is 20%

Median employee family contribution is 30%

Varies by industry sector and co size




Deductibles


Median employee only deductible is

$1,500

Median family deductible is $3,000

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiBxrPr9o7OAhVBrB4KHcunCJAQjRwIBw&url=https://forcechange.com/61800/encourage-walmart-to-offer-low-cost-health-insurance-for-small-businesses/&bvm=bv.127984354,d.dmo&psig=AFQjCNHNhu5Wj8q8Kj6k5t4r-AYIhLw0sQ&ust=1469546862049824

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiBxrPr9o7OAhVBrB4KHcunCJAQjRwIBw&url=https://forcechange.com/61800/encourage-walmart-to-offer-low-cost-health-insurance-for-small-businesses/&bvm=bv.127984354,d.dmo&psig=AFQjCNHNhu5Wj8q8Kj6k5t4r-AYIhLw0sQ&ust=1469546862049824





Current Pay Trends




Pay


• Median pay has actually decreased

the past 8 years

• Job growth for 68 consecutive months

• Disappointing wage growth. Why?

– Employers offering more benefits—or non-wage

compensation.

– Doubling of variable pay opportunities

– Scars from the recession – workers are not yet

“restless” enough to drive change (e.g. unions)



2017 Salary Increase Forecasts


• Wages rising, but not dramatically for most, but

• Bonus budgets almost double

• Top performers 2x the average increase.

• Promotional increases 8% (budgeted separately)

Survey Source

Actual

2016

Projected 2017

The Conference Board 3.0% 3.0%

Economic Research Institute 3.0% 3.0%

Mercer 2.8% 2.9%

SHRM 3.0% 3.0%

Towers Watson 3.0% 3.0%

World at Work 3.0% 3.0%

Korn-Ferry/Hay Group 2.8% 3.0%



Deceptive Statistics

• An example: STEM pay up, on average, 12%

– Engineering >15%

– Computer Science 10.6%-14.6% for specialties,

7% overall

– Math and science 7%

– Business - economics 11.8%, marketing 10.6%

others, like finance, supply chain, and sales are

down




2017 MAY be a Breakout

Year for Pay Increases• Unemployment low (watch out for aggregate statistics)

• Job openings high – especially for skilled labor

• Growth continues (slow rate, but consistent over time)

• Hiring is solid (227,000 in January and 235,000 in February)

• Reduction an availability of foreign labor

BUT…

• Proposed healthcare law could impact costs for all

• Lack of skilled and low skilled workers could slow growth

• Uncertainty fuels reluctance




Keep a Keen Eye






Benchmarking Pay and

Benefits




Benchmarking Pay

Four Key Steps

1. Define your market for talent

2. Find sources of data that match

3. Determine benchmark jobs

4. Compare pay and salary ranges




What is your market for

talent?

Key factors to consider :

Industry

Location

Size




Location Drives Talent

For entry level and clerical jobs

typically

Managers and specialty jobs may be

local but can be regional or even

national

Executive search is usually the

broadest




Sample Pay Strategy Grid


Job Group Industry

Sector(s)

Geographi

c

Size and

Scope

Market

Positioning

ExecutivesCommercial

BankingNational

$700 mm

Assets;

50-100 FTE’s

Salary and

Total Cash:

50th%ile

(Median)

Lending and Retail

Managers and

Exempts

Commercial

Banking Local

$700 mm

Assets;

50-100 FTE’s

Salary and

Total Cash:

50th%ile

(Median)

Non-banking Staff;

Clerical and Hourly

Banking and

All IndustriesLocal All Sizes

Salary and

Total Cash:

50th%ile

(Median)



Selecting Your Benchmark

Jobs

• Represent large incumbent populations

• Represent all levels in the organization

• Represent all departments

• Represent all job families




Selecting Your Benchmark

Jobs

• Jobs critical to the organization

• Jobs that are “hot” in the marketplace

• Jobs where market pay fluctuates often

• Usually 35%-50% of jobs are benchmarks




Using a Survey Market

Composite

• Using multiple survey sources

• Averages the sources to form a “composite” of the market

• Can be weighted by number of organizations or employees matched

• Reduces survey bias and variance

• Beware of “free data from the web”





$100,250

$67,000

$37,500

$25,000

$97,500

$69,000

$34,200

$26,300

$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000

SR. LENDER

BRANCH MGR.

PERSONAL BANKER

TELLER

XYZ Bank Salary vs. Market Median Salary

XYZ Bank Salary Market Salary



Five Key Points to Remember

1. Job Matching is critical in making comparisons

2. Beware of internet data

3. Use multiple survey sources

4. Use relevant and specific market data

5. Age all data to a “common” date




Benchmarking Benefits

Focus on the “big three” costs

• Health Insurance

• Retirement

• Paid time off


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiu18jw947OAhXRMx4KHYzKDHAQjRwIBw&url=http://www.tutorialspoint.com/human_resource_management/human_resource_management_compensation.htm&bvm=bv.127984354,d.dmo&psig=AFQjCNHCPLw0qZ3xhEW4MBg_ycL5r73ggA&ust=1469547080802981

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiu18jw947OAhXRMx4KHYzKDHAQjRwIBw&url=http://www.tutorialspoint.com/human_resource_management/human_resource_management_compensation.htm&bvm=bv.127984354,d.dmo&psig=AFQjCNHCPLw0qZ3xhEW4MBg_ycL5r73ggA&ust=1469547080802981



Benchmarking Benefits-Internal

Demographics and Employee Opinion

• Inspect your employee demographics

• Conduct anonymous employee surveys or focus groups

• Do current benefit plans match?




Benchmarking Benefits


Overall Benefits Costs –As a Percent of Payroll





Generations




Recruit and Retain – Defining the

Value Proposition•: Generational differences

– Is this real or media myth?....yes!

• Millennials

– What benefits are most valued?• Training and development

• Flexible work hours

• Cash bonuses

• Free or low cost healthcare

• Pension/retirement funds

• Gen-z is next……According to Forbes (2015), generation is

25% of the U.S. population, making them a

larger cohort than the Baby Boomers or Millennials




One Size Does not Fit All

• Not everyone is a millennial

• Life stages matter more

• Culture differences are real and powerful

– Employer

– Employee

• Recruiting is different that retention

• Not all retention is good

• Who provides (owns) skill transitions and upgrades?






Engagement




Not Engagement




Engagement –




Does Engagement Have Impact?• Gallup calculated relationship between employee engagement

and performance outcomes. Confirmed the connection between employee engagement and nine performance outcomes:

1. customer ratings

2. profitability

3. productivity

4. turnover (for high-turnover and low-turnover organizations)

5. safety incidents

6. shrinkage (theft)

7. absenteeism

8. patient safety incidents

9. quality (defects)




Strategic Findings

Our workforce is highly engaged


(58%) Agree/Strongly agree

(30%) Neutral

(12%) Disagree/Strongly disagree

62% have an engagement strategy

Only 51% have conducted an engagement

survey in past 2 years

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj09YGf947OAhVIlx4KHdHCDNkQjRwIBw&url=http://www.barrettrose.com/keeping-employees-motivated-engaged/&bvm=bv.127984354,d.dmo&psig=AFQjCNFxLaGL8P6WImX7ToE2XSD-j4PBRQ&ust=1469546551428862

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj09YGf947OAhVIlx4KHdHCDNkQjRwIBw&url=http://www.barrettrose.com/keeping-employees-motivated-engaged/&bvm=bv.127984354,d.dmo&psig=AFQjCNFxLaGL8P6WImX7ToE2XSD-j4PBRQ&ust=1469546551428862



Measurement is not Enough!


Make a plan of actionable

responses to what is learned.




Questions & Discussion


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc., a non-investment firm and subsidiary of Arthur J. Gallagher & Co., is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Securities and Investment Advisory Services may be offered through NFP Advisor Services, LLC, Member FINRA/SIPC. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, a Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Not all individuals of Gallagher and none of Gallagher Fiduciary Advisors, LLC individuals are registered to offer securities or investment advisory services through NFP Advisor Services, LLC. NFP Advisor Services, LLC. is not affiliated with Arthur J. Gallagher & Co., Gallagher Benefit Services, Inc. or Gallagher Fiduciary Advisors, LLC. Neither Arthur J. Gallagher & Co., NFP Advisor Services, LLC, nor their affiliates provide accounting, legal, or tax advice.

.

total rewards: smart, strategic & sustainable ......q:\2014\gbs\17\nichename\20\dcn#.pptx 7 key...

Documents