Employee Value Proposition and Total Rewards: Modernize or Risk Irrelevance
September 29, 2016
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Findings from the 2016 Global Talent Management & Rewards and Global Workforce Studies
About the 2016 studies
Fielded April – June, 2016§ 29 markets globally§ 2,004 employer
respondents representing >21 million employees
§ 21st annual survey
Key topics covered:§ Attraction and retention
drivers§ Talent mobility and challenges§ EVP and total rewards§ Leader and manager
effectiveness§ Career management§ Performance management § Pay for performance
35%
21%
18%
26%
2016 Global TM&R Study
Asia Pacific EMEALatin America North America
Key topics covered:§ Attraction and retention
drivers§ Drivers of sustainable
engagement§ Leader and manager
effectiveness§ Career management§ Performance management§ Health, stress, wellness§ Communication
Fielded April – May, 2016§ 29 markets globally§ >31,000 employee
respondents
Global Talent Management & Rewards Study (TM&R)
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Global Workforce Study (GWS)
Number of participants (Financial Services):GWS: 4,816TM&R: 350
Modernizing your Employee Value Proposition and Total RewardsDiscussion outline
Setting the Stage§ What’s driving a modernization agenda§ Talent market context§ What it all means§ The Modernization Agenda § The ROI on Getting it Right
Understanding the Drivers of Attraction, Retention and Sustainable Engagement Modernizing your EVP§ Effective Leaders § Work, Stress and Wellness § Performance Management§ Total Rewards
Anticipating the Future of Work
Conclusion
Additional Information
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Conclusion
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Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
Modernization, relevance and what’s at stakeCreates increased pressure and stress on the workforce and a whole new definition of what it means to be a leader
Market trend/reality
Expectations of transparency and individualization
Fast-changing technology
Demographic shift – It’s really happening
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Fast-changing market
Challenges attracting employees in key workforce segments remain high overallEven more so for organizations operating in emerging economies
Mature Markets Emerging Markets
6
28%
45%
55% 54% 56%
44%
57%
66%
77% 76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
Attraction Challenges
Nearly half (48%)of employers report
hiring activity increased
GLOBAL
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Retaining key employee groups remains difficult, especially in emerging markets
Mature Markets Emerging Markets
7
Close to three quarters of employers have trouble retaining high potentials
20%
28%
37%
47%44% 41%
47%
59%
70%65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
Retention Challenges
One-third (35%) of employers report
turnover activity increased
GLOBAL
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The cost of turnover puts significant value at risk
Job LevelFinancial cost of turnover
(% of annual compensation)*% of ee’s at highrisk of turnover**
Financial costat risk***
Senior Manager/Executive 74% 31% 23%
Professional 59% 25% 15%Sales & Customer/ClientManagement 59% 27% 16%
Business Support 48% 27% 13%
Lost productivity
Hiring
Training
Job vacancy
Probability of turnover
Financial cost at risk
Financial cost of
turnover
8
*FCOT measured in our proprietary benchmark database**% at risk of turnover from 2016 Global Workforce Study ***Financial cost at risk=FCOT*% at risk of turnover
GLOBAL
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Needed: A modernization agenda to address the challenges of today’s workplace and remain relevant
The Modernization Agenda – companies need to:
Be agile and nimbly respond to changes in business strategy and talent markets
Introduce flexibility into talent and reward plan design and delivery
Improve transparency in reward programs
Tailor programs to key segments of their workforce
Leverage technology to digitally engage employees
Transition from job security to relevance (career security)
Address work place stress
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Modernizing also means getting the EVP right
Have formally articulated their EVP that is clearly aligned with what they stand for in the marketplace, and differentiates them from other organizations with whom they compete for talent
Understand their employees and potential candidates the same way they would understand their external customers
Customize their EVP for employees with critical skills
Effectively communicate and deliver their EVP, leveraging technology to understand employees and communicate differentiated messages to them
Best practice EVP companies:
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Conclusion
11
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.
Modernizing your EVP should be accomplished in the context of an overarching human capital framework
Leadership
Measurement, Change Management, Communication and HR Technology
EVPEmployee Value
Proposition
Desired Culture
Human Capital
Strategy
almost 3x as likely to report theiremployees are highly engaged
93% more likely to report significantlyoutperforming their industry peersfinancially
27% fewer regrettable new hires in the first year
More than 10% less likely to reportdifficulty attracting and retaining keyemployees segments
OutcomesHuman capital dimensionsBusiness strategy
17% lower voluntary turnover
Best practice EVP companies achieve better outcomes
12
GLOBAL
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Getting it right starts with understanding the top drivers of attraction
RankFinancial Services Global
Employee view Employer view Employee view Employer view
1 Base pay/salary Career advancement opportunities Base pay/salary Career advancement
opportunities
2 Job security Base pay/salary Job security Base pay/salary
3 Career advancement opportunities
Reputation of organization as a great place to work
Career advancement opportunities
Reputation of organization as a great place to work
4 Challenging work Challenging work Challenging work Challenging work
5 Reputation of organization as a great place to work Job security Opportunities to learn new
skills Job security
6 Opportunities to learn new skills
Organization's mission, vision and values
Reputation of organization as a great place to work
Organization's mission, vision and values
7 Health care and wellness benefits
Opportunities to learn new skills
Health care and wellness benefits
Opportunities to learn new skills
13
Comparing top drivers of attraction
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You also need to understand why employees would choose to leave your organization
RankFinancial Services Global
Employee view Employer view Employee view Employer view
1 Base pay/salary Base pay/salary Base pay/salary Career advancement opportunities
2 Career advancement opportunities
Career advancement opportunities
Career advancement opportunities Base pay/salary
3 Job security Relationship with supervisor/manager Physical work environment Relationship with
supervisor/manager
4 Ability to manage work-related stress
Ability to manage work-related stress Job security Ability to manage work-
related stress
5 Length of commute Short-term incentives (e.g., annual bonus)
Ability to manage work-related stress
Opportunities to learn new skills
6Relationship with
supervisor/managerOpportunities to learn new
skillsRelationship with
supervisor/managerFlexible work arrangements
7 Flexible work arrangements Trust/Confidence in senior leadership
Trust/Confidence in senior leadership
Short-term incentives (e.g., annual bonus)
14
Comparing top drivers of retention
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GroupFearful
Stable and steady
Financially concerned
Making a career of it
In a good place
Key characteristic
Don’t want to lose my job
Don’t want my job to change
Don’t want to lose my paycheck
In it for the long haul
I’m happy, for now
Employerscan offer
Career Security through training to remain relevant in the new market
Integrated Performance Management to help employees to adapt to changing workplace needs
Alternative work arrangements to allow employees to do same tasks for more than one employer
Total Reward programs redesigned to help employees with concerns about budgeting and financial planning
Leadership and managers who support an innovative culture
Greater use of pay programs with emphasis on LT payoffs (Career Management, LTI, Pensions)
Pay for performance and skills
Training for high valued skills to remain relevant in marketplace
Job security and the modernization agenda are not irreconcilableJob security is a top driver of attraction and retention, but can mean different things to different people
*Percentages represent those who selected job security as a driver of retention and who fall into this group.
15
26% 24% 22% 10% 19%
GLOBAL
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To achieve desired outcomes, companies must address the drivers of sustainable engagement
Sustainable Engagement Drivers
Rank 2016 – Financial Services 2016 - Global 2014 - Global
1 Senior Leadership Senior Leadership Senior Leadership
2 Supervision Clear Goals & Objectives Clear Goals & Objectives
3 Clear Goals & Objectives Supervision Workload & Flexibility
4 Workload & Flexibility Image & Integrity Image & Integrity
5 Image & Integrity Workload & Flexibility Empowerment
16
What is Sustainable Engagement? § Engagement – Rational, emotional and behavioral attachment to the company§ Enablement - A local work environment that supports productivity and performance§ Energy - Individual physical, interpersonal and emotional well-being at work
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Sustainable engagement pays dividends...
17
but only one-third of employees are highly engaged
§ Research shows that companies with high levels of sustainable engagement outperform those lacking energy and enablement
37%
17%
21%
25%
Global
Highly Engaged: Those who score high on all three aspects of sustainable engagement
Unsupported: Those who are traditionallyengaged, but lack enablement and/or energy
Detached: Those who feel enabled and/or energized, but lack a sense of traditional engagement
Disengaged: Those who score low on all three aspects of sustainable engagement
-13.3%
1.9%5.2%
-20%
0%
20%
12-month change in gross profit margin vs. sector
Highly engagedDisengaged Unsupported
41%
17%
19%
23%
Financial Services
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Conclusion
18
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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In the modernization agenda, we (re)define the term “leader”
19
However, what the leader leads is dependent on the role within the organization
The executive-leader:§ Makes sure the right things are done§ Engages others in building and driving the business§ Leads others while managing outcomes/results§ Fosters a broad culture of success and fulfillment
The manager-leader:§ Makes sure things are done right§ Engages others in getting the work done every day§ Manages the work/outcomes while leading others§ Creates a local environment for success and
fulfillment
Manager Executive
In simplest terms, a leader is someone who leads –
not necessarily a specific role or title (e.g., a manager or executive)
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What makes a leader effective? There are key areas of leadership effectiveness that are “universal”
Professional People
Pioneering
Handling a wide range of people issues across teams and functions. Interacting assertively with people to achieve results. Understanding and adapting to the needs of others.
Impact created through:§ Engagement§ Successful Teams§ Communication
Impact created through:§ Managed Risk§ Service & Product Delivery§ Expert Reputation
Applies expertise and deep knowledge. Uses strong analytical and reasoning capability. Investigates and solves problems using specialist expertise.
Driving success, change and growth. Seizing commercial opportunities and outperforming competitors. Generating imaginative solutions and a long-term vision.
Impact created through:§ New Product/Markets§ Organizational Transformation§ Organizational Growth
Based on our research, the requirements of the leader are guided by three performance factors and the impacts needed from the leader
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Our research indicates that the emphasis on performance factors changes, depending on leadership level
The emphasis on certain
areas shifts depending
on scope of role in the
organization
Managers tend to focus more on the professional side than other levels of leadership. And the impacts they create are related more to operational activities.
Successful Executives focus more on the pioneering factor – but they don’t lose focus on professional or people; they are still bringing their domain expertise to bear, and industry leadership. Additionally, the people side of their role is still a key area of focus.
21
Manager Executive
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Our organization develops leaders who will be able to meetchanging business needs
Strongly Agree/Agree
64%
So what are companies doing around leadership development? Overall there is room for improvement
22
My organization makes effective use of a leadership competency model
Strongly Agree/Agree
61%
Currently have
46%
Which of the following HR technologies does your organization currently have or plan to add in the next year or two?
Leadership developmentPlan to add in next
year or two
35%No plans
20%
In Financial Services:§ 71% of organizations agree or strongly agree that they develop leaders who will be
able to meet changing business needs§ 60% report that they make effective use of a leadership competency model§ 49% currently have and 33% plan to add leadership development technology in the
next year or two, while 18% have no plans
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Employees give senior leadership low marks on key aspects of their role
Percent favorable
Item Financial Services Global
How would you rate the job that senior leadership is doing to:
Grow the Business 62% 52%Manage Costs 57% 47%Develop Future Leaders 44% 39%
Senior leadership behaves consistently with the organization's core values 59% 52%
I believe the information I receive from senior leadership 56% 50%
I have trust and confidence in the job being done by the senior leadership of my organization 55% 48%
Senior leadership at my organization has a sincere interest in employees' well-being 49% 44%
Fewer than half (46%) of the next generation of leaders globally thinktheir organization does a good job of developing future leaders
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Less than 20% of employers are removing or redeploying blockers, or using software for succession management
24
Employer view
Succession Management process : Financial Services Global
Uses work assignments and talent movement to develop leaders 78% 75%Uses actual succession plans to fill vacancies 62% 60%Links our succession management process with other talent and reward programs (e.g., performance management, compensation)
41% 38%
Uses psychometric tests to assess potential 29% 28%Uses software to enable succession management 20% 18%Removes/Redeploys "blockers" to provide development opportunities to top talent 13% 16%
Succession management is a key enabler of developing future leaders. There’s a significant opportunity for employers to do more.
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Employees give their immediate managers better marks than senior leaders
25
Given the importance of managers, there is still room for improvementEmployee view
My immediate supervisor/manager: Financial Services Global
Treats me with respect 76% 72%
Assigns tasks suited to my skills and abilities 70% 66%
Clearly communicates goals and assignments 56% 55%
Encourages new ideas and new ways of doing things 60% 54%
Listens carefully to different points of view before reaching conclusions 58% 54%
Helps remove obstacles to doing my job well 56% 52%
Is effective at differentiating performance between high and low performers 58% 52%
Makes fair decisions about how my performance links to pay decisions. 53% 48%
Has enough time to handle the people aspects of the job 48% 46%
Coaches me to improve my performance 47% 44%
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The responsibility-respect mismatch: Less than half of all employees think the role of the manager is respected
26
Yet so much is expected of them, and having the necessary skills is the number one facilitator of performance management
Which of the following are facilitators of your performance management experience at your organization?
The People manager role is highly respected in my organization
45%global
My line manager/supervisor has the necessary skills
42% global
Lack of effective feedback is the
#1 barrierto the performance management experience (#1 globally)
Managers are spending5.5 hours per employee/year on managingperformance (3 to 4 hours globally)
Inadequate time spent in their role as people manager
46%Financial Services
46%Financial Services
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9%11%
26%54%
Both ineffective
The bottom line: Employees with effective senior leaders and managers are much more likely to be highly engaged
Highly EngagedUnsupportedDetachedDisengaged
Source: Willis Towers Watson 2016 Global Workforce Study – Global. Note: Proportions may not sum up to 100% due to rounding.
33%
25%
24%
18%
Effective senior leaders & ineffective
manager
23%
20%32%
26%
Effective manager & ineffective senior
leaders
67%17%
11%5%
Both effective
27
GLOBAL
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So what does it take to be an effective leader?
Effective leaders demonstrate these key competencies
Source: Willis Towers Watson 2016 Global Workforce Study – Global.
Rank How effective is your manager at… Favorable Not Favorable
1 Developing Talent (creating developmental opportunities, coaching and mentoring, giving feedback)
56% 20%
2 Leading Change (identifying change needs, driving change, addressing concerns)
54% 20%
3 Engendering Confidence and Trust (demonstrating reliability, being open and honest, being consistent)
53% 20%
4 Building Effective Teams (forming teams, creating shared purpose, identifying talent needs)
54% 19%
5 Displaying Entrepreneurial Spirit (perceiving subtle changes, thinking boldly, pursuing opportunities)
54% 21%
6 Focusing on Customers (identifying needs, developing relationships, developing solutions)
52% 20%
7 Articulating the Vision (communicating the vision, translating the vision, showing commitment)
52% 21%
28
Engagement levels are significantly higher among employees who rate their managers favorably on these competencies
Engagement levels are significantly higher among employees who rate their managers favorably on these competencies
GLOBAL
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Conclusion
29
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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Two-thirds of employers globally identify stress as the top workforce health risk issue
30
Source: 2015/2016 Global Staying@Work Survey
Stress (64%)
Lack of physical
activity (53%)
Poor nutrition (31%)
Lack of sleep (30%)
Stress (85%)
Unplanned absences
(45%)
Stress (74%) Stress (72%)
Lack of physical
activity (58%)Stress (44%)Overweight/
Obesity (70%)
Lack of physical
activity (61%)Overweight/
Obesity (45%)
Lack of physical
activity (52%)
Lack of sleep (30%)
Stress (75%)
Poor nutrition (50%)
Lack of physical
activity (46%)
Lack of physical
activity (45%)
Poor nutrition (36%)
Lack of sleep (31%)
Overweight/ Obesity (43%)
Overweight/ Obesity (47%)
Poor nutrition (41%)
Overweight/ Obesity (31%)
Presenteeism (35%)
Poor nutrition (30%)
Overweight/ Obesity (32%)
Presenteeism (23%)
Presenteeism (40%)
Global US Canada EuropeLatin
America Asia PacificRank
1
2
3
4
5
GLOBAL
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Addressing workplace stress involves rethinking pay, addressing staffing issues, and changing an organization’s culture
31
Source: 2015/2016 Global Staying@Work Survey and 2015/2016 Global Benefits Attitudes SurveyGBAS sample: US and Canada full-time employees with an employer health plan. Rest all employees.
Lack of work/life balance #1 ≠ #5 #1 ≠ #6 #1 ≠ #8 #1 ≠ #6 #1 ≠ #5 #1 ≠ #4
Inadequate staffing #2 = #2 #2 ≠ #1 #3 ≠ #1 #2 ≠ #1 #2 ≠ #3 #2 = #2
Technologies that expand day #3 ≠ #13 #3 ≠ #12 #4 ≠ #12 #3 ≠ #14 #6 ≠ #11 #4 ≠ #11
#1Lack of work/life balance
#1Low pay
(Global, Lat. Am. & APAC)
Inadequate staffing(US, Canada & Europe)
Company culture #10 ≠ #3 #12 ≠ #3 #10 ≠ #3 #9 ≠ #4 #11 ≠ #9 #8 ≠ #3
Low pay #11 ≠ #1 #11 ≠ #2 #12 ≠ #2 #12 ≠ #2 #10 ≠ #1 #10 ≠ #1
Global US Canada Europe Latin America Asia Pacific
Employer view
Employee view
Note: Rankings based on options 3/4/5 on a 5-point Likert scale
Causes of stress: main disconnects between employer and employee views
GLOBAL
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The employer role: Move from ‘pull’ (encouragement) to ‘push’ (driving change) gradually – build employee permission.
Trust: There is a strong connection between health engagement and the broader employment deal. Address concerns on privacy of personal information.
Social connections: Leverage worksite and support interactions and competitions around health. Important for managers to be effective advocates of employer programs.
New technology: Use technology, peer groups and personal communication to motivate action.
So what does it take to build a culture of health and well-being?
1
2
3
4
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Conclusion
33
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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Performance management and “going ratingless” are in the spotlight What are companies actually doing?
Is your organization planning to make any of the following changes to your performance management process?
Already taken action
Planning to take action
Considering taking action
Neither planning nor considering
taking action
Financial Services Global Financial
Services Global Financial Services Global Financial
Services Global
Focus on increasing frequency and improving quality of performance conversations/dialogue between manager and employee
35% 33% 23% 23% 26% 24% 16% 19%
Using performance management to evaluate/measure future potential 32% 28% 22% 20% 24% 25% 22% 27%
Implementing new enabling technology (e.g., to support crowdsourcing or enable mobile platforms)
13% 15% 15% 16% 23% 21% 49% 48%
Eliminating performance ratings/scores entirely 4% 8% 4% 3% 14% 15% 77% 74%
Eliminating performance ratings/scores for performance management but keeping for compensation purposes
3% 5% 6% 4% 14% 14% 78% 77%
§ Very few employers have gone or are considering going ratingless§ Most are focusing on having more and better performance
management conversations
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Employees continue to say that performance management –as they experience it – is not very helpful
Employee View
The extent to which you agree with the following statement: Financial Services Global
People are held accountable for their performance at my organization 60% 56%
The people who evaluate me have clear visibility of my performance on the job 63% 56%
My performance was accurately evaluated in my most recent performance review 60% 52%
My organization does a good job explaining our performance management process 57% 50%
My performance reviews have helped me improve my performance 51% 48%
High-performing employees in my organization are rewarded for their performance 57% 46%
There is a clear link between my job performance and my pay 54% 45%
35
This represents a lost opportunity to address a top driver of sustainable engagement: clear goals and objectives
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While more favorable, employers are not enthusiastic about their performance management process
Employer View
The performance management process at your organization is effective at: Financial Services Global
Aligning individual performance objectives with strategic business priorities 82% 76%
Identifying high, average and low performers 82% 74%
Reinforcing key organization-wide values and desired behaviors 75% 73%
Providing a mechanism for differentiating rewards 79% 70%
Driving high performance across the workforce 70% 67%
Informing development needs and plans 69% 64%
Providing a mechanism for determining talent program eligibility 65% 60%
Encouraging employees to set stretch goals 61% 60%
Creating a positive employee experience 53% 51%
Clarifying accountability of specific roles 51% 47%
36
Just 51% of employers indicate that their performance management process is effective at clarifying accountability for specific roles
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Employers’ views on managers’ effectiveness at performance management are not very favorable
37
Managers are effective in the following aspects of performance management:
Financial Services Global
Differentiating performance between high and low performers 58% 53%
Fairly reflecting overall performance in the employee’s final performance rating 53% 50%
Working with employees to set appropriate performance goals for individual performance 47% 49%
Fairly reflecting performance in pay decisions 54% 49%
Identifying development opportunities 41% 39%
Giving employees regular coaching and feedback on their performance 40% 35%
Conducting career development discussion 33% 30%
Driving the right degree of risk taking to enable innovation 23% 22%
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Over 75% of managers spend less than six hours per employee per year on performance management
% of managers
Financial Services Global
2 hours or less per employee 21% 27%
3 or 4 hours per employee 27% 26%
5 or 6 hours per employee 23% 22%
7 or 8 hours per employee 7% 10%
9 or 10 hours per employee 4% 5%
More than 10 hours per employee 18% 10%
In the typical year, how much time per employee do you spend on performance management, including any time spent on the ratings calibrations process? The Math:
On this critical process, the typical manager globally devotes time to performance management equal to 0.2% of the hours a typical fulltime employee works in a year.
What falls through the cracks?
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Managers also say they spend too much time filling in forms…
The amount of time I spend on the performance management process:
Too little About right Too muchFinancial Services Global Financial
Services Global Financial Services Global
Collecting feedback from colleagues is... 22% 24% 68% 63% 10% 14%
Ongoing conversations with employees about their individual performance is... 22% 19% 64% 64% 13% 16%
Helping employees set performance goals or objectives is... 18% 19% 68% 66% 14% 14%
Understanding and using performance management technology is... 16% 18% 69% 67% 15% 15%
Year-end performance feedback sessions is... 12% 18% 74% 66% 15% 16%
Participating in calibration sessions is... 16% 16% 69% 64% 15% 21%
The process overall is... 12% 15% 72% 68% 15% 17%
Completing forms is... 6% 7% 68% 69% 26% 24%
39
And not enough time on setting goals, collecting feedback and discussing individual performance
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There appears to be a sweet spot in terms of time invested in performance management activities and desired outcomes
2 hours or less per
employee
3 or 4 hours per employee
5 or 6 hours per employee
7 or 8 hours per employee
9 or more hours per employee
It is easy to get the information I need to update my direct reports on key organizational changes 45% 60% 60% 67% 58%
Our annual base salary increases are effective at drivinghigher levels of performance among my direct reports 37% 52% 52% 53% 49%
Our annual base salary increases are effective at differentiating pay based on performance among my direct reports
36% 52% 54% 61% 49%
Our annual incentives or bonuses are effective at driving higher levels of performance among my direct reports 38% 57% 57% 61% 56%
Our annual incentives or bonuses are effective at differentiating pay based on performance among my direct reports
39% 55% 60% 59% 51%
Our formal performance ratings are effective at driving higher levels of performance among my direct reports 39% 52% 56% 57% 50%
Our performance management system is effective at differentiating performance among my direct reports 38% 58% 60% 66% 55%
40
Outcomes reported by managers vary based on how muchtime they spend per employee per year on performance management
GLOBAL
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Conclusion
41
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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Modernizing Total Rewards means challenging conventional thinking
Traditional approach New reality
42
Employees never discuss pay and benefit details with each other
“Living out loud” on Glass Door; emerging legislative agendas that prescribe pay transparency
Provide guaranteed jobs Enable career security through career development
Pay for performance = merit increase and incentive pay based on last year’scompany performance + individual “performance rating”
Changing business models and nature of work means challenging the individual performance definition and the role of base pay
“One size fits all” Segmentation and customization
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37%43%
48%
59%62%
37%44%
47%54%
62%
0%
10%
20%
30%
40%
50%
60%
70%
How my totalcompensation compares
to the CEO at myorganization
How my totalcompensation comparesto the typical employee atother organizations like
mine
How my totalcompensation comparesto the typical employee in
my organization
How my bonus isdetermined
How my base pay/salaryis determined
Percentage of employees who agree they understand…
Financial Services Global
Employees claim to understand how pay is determined, but not its value relative to other groups
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Employee perceptions of internal equity and market competitiveness are mixed
44
18%
33%
23%
16%
26%
17%
43%
36%
38%
42%
36%
37%
39%
31%
39%
42%
38%
46%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Base Pay
Bonus
Total Rewards
Base Pay
Bonus
Total Rewards
Below Average Average Above Average
Overall, how do you think the value of each of the following compares to that offered for similar positions in other organizations?
Pay fairness Globally, half think they are paid fairly, but 1 in 5 disagree Paid fairly compared to
others in other companiesPaid fairly compared to
others in my organization
Financial Services
Global
Global Financial Services Global Financial Services50% 54% 51% 55%
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Employers promise pay for performance differentiation, but fail to deliver
Employer view Manager view
Financial Services Global Financial
Services Global
Our base salary increases are effective at driving higher individual performance 47% 40% 45% 48%
Our base salary increases are effective at differentiating pay based on individual performance 58% 55% 49% 49%
Our short-term incentive programs are effective at driving higher individual performance 58% 50% 49% 52%
Our short-term incentive programs are effective at differentiating pay based on individual performance 66% 52% 49% 52%
Our formal performance ratings are effective at driving higher levels of performance among my direct reports n/a n/a 50% 50%
Our performance management system is effective at differentiating performance among my direct reports n/a n/a 53% 53%
45
40% globally
47% Financial ServicesOf employers think that base salaryincreases drive performance
Only
50% globally 58% think that short term incentives do
Perceptions of differentiation effectiveness are mixed
Financial Services
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The organization has defined job levels that reflect a common definition of internal job contribution across the organization
Our career planning and growth program includes emphasis on dual career paths for people managers and comparable-level individual contributors
My organization has a formal process to ensure there is no bias or inconsistency in performance reviews
No Yes No Yes
39% 59% 52% 62%
My organization has a formal process to ensure there is no bias or inconsistency in compensation distribution
39% 66% 57% 68%
The need for consistency in performance reviews and compensation decisions raises the importance of job leveling and career frameworks
46
The transparency agenda demands it
52% of organizations globally report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)52% of organizations globally report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)
GLOBAL
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Merit increase
Employees who did not meet expectations 0%
Employees who partially met expectations 1%
Employees who met expectations 3%
Employees who exceeded expectations 4%
Employees who far exceeded expectations (e.g., top 10%) 6%
Overall merit increase 3%
Incentive plan funding and differentiation resultsSuggest that “pay for performance” programs are not delivering the overall performance lift or the differentiation levels intended in design
Short-term incentive/bonus amounts Target differentiation*
Actual differentiation*
Employees who did not meet expectations 21% 18%
Employees who partially met expectations 52% 50%
Employees who met expectations 88% 86%
Employees who exceeded expectations 101% 99%
Employees who far exceeded expectations (e.g., top 10%) 118% 113%
47
At the same time 90 percent of organizations have, are planning, or considering changing some aspect of their performance management program
*Values represent averages
GLOBAL
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How do we put “pay for performance” back on track?Get crisp on what performance needs to be rewarded and adapt programs accordingly
Define performance Drive the right performance
Reward for performance
Cultivate a high performance culture
§ Define all key performance dimensions (e.g., results, potential, behaviors, culture, collective, individual) and how and where they may differ by employee segment
§ Ensure objectives (e.g., results-based, behavioral, cultural) are aligned to deliver on the defined performance dimensions
§ Improve the performance experience through efficiency and effectiveness
§ Determine the performance dimensions to be “rewarded” by talent segment and choose the “right” combination of reward vehicles
§ This may include broadening performance pay to include other rewards (e.g., PTO, career management)
§ Genuinely commit to a change strategy to build and embed the desired performance culture
§ Ensure all leaders and managers are communicating and engaging in an ongoing dialogue with employees on performance
Adopt Enabling HR Software
You may need to take a step backwards to move forward
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On merit increase decisions, HR puts most emphasis on final rating and achievement of goals; managers take a more holistic view
HR’s view Manager’s viewFactor should
effectManager gives more weight than intended
Factor does effect their decision
Financial Services Global Financial
Services Global Financial Services Global
Final rating in most current year-end performance review 78% 72% 55% 52% 66% 63%
Achievement of individual goals 61% 65% 45% 47% 66% 65%Demonstration of knowledge and skills required in current role 53% 55% 43% 41% 70% 68%
Penetration in pay range for current role 58% 54% 31% 30% 55% 57%
Achievement of team goals 51% 49% 38% 29% 68% 66%
Concerns over market competitiveness 52% 48% 42% 37% 50% 55%Possession of skills critical to the success of the future business model 51% 46% 43% 40% 61% 63%
Criticality of the role 57% 48% 60% 54% 58% 62%
Concerns over internal equity 44% 42% 47% 44% 50% 52%
Perceived potential 45% 41% 40% 41% 56% 59%
Demonstration of company values 33% 35% 20% 19% 52% 57%
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Performance Rating
Salary Range PositionBelow
MinimumLower Third
Middle Third
Upper Third
Unsatisfactory performance
0.0% – 2.0% 0.0% – 2.0% 0.0% 0.0%
Performance needs improvement
2.0% – 4.0% 1.0% – 3.0% 0.0% – 2.0% 0.0% – 1.5%
Good performance 4.0% – 7.0% 3.5% – 6.0% 2.5% – 4.5% 1.0% – 3.0%
Excellent performance
7.0% – 11.0% 5.0% – 8.0% 3.5% – 6.0% 2.5% – 4.5%
Base pay, the number 1 driver of attraction and retention globally, gets mixed reviews while the world will get more complicated
50
Suggesting that old tools and approach tothe annual merit cycle may needto change. As the number onedriver of attraction and engagement, weneed to get base pay right in themodern context
Half of employersglobally expect to pay more
for certain skill sets
in the next 3 years , in comparison
to an expected 46% of Financial
Services employers
Our managers execute our base pay program well
51% global
59% Financial Services
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After base pay, career management continues to be a top driver of attraction, retention and sustainable engagementBut effective career management remains elusive
Financial Services Global
All employees
All employees
Top performers
High potential
My company does a good job explaining how I can advance in my career 43% 42% 48% 59%
My immediate supervisor/manager helps me with career planning and decisions 37% 38% 47% 54%
My organization provides career planning tools and resources that are helpful to me (coaching, self-assessment, career paths, job rotation, competencies)
51% 44% 51% 60%
I have to leave my organization and join another organization in order to advance to a job at a higher level 43% 44% 42% 45%
51
Most employers provide traditional career paths, on-the-job training and internal job boards
Only a third of employersglobally provide lateral or dual career paths, beyond-the-job training, employee self-service tools and integration within technology (e.g. HRIS)
44% of employees globally feel they need to leave to advance their career.This doesn’t change for top performers (42%) or high potentials (45%)
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Employees with alternative and flexible work arrangements are more engaged and a lower retention risk
Flexible work schedule
Compressed work week
Work from home
Work from other remote
locationHot desking/
hotelingNone
of these
By Engagement Group
Highly engaged 48% 46% 43% 49% 49% 29%
Unsupported 15% 17% 19% 19% 17% 16%
Detached 19% 19% 19% 17% 19% 23%
Disengaged 18% 18% 19% 15% 16% 32%
By Retention Risk
Stayers 45% 38% 47% 47% 45% 39%
Soft Stays 29% 30% 27% 28% 29% 35%
At Risk 10% 17% 10% 10% 9% 5%
Leavers 15% 15% 16% 15% 17% 21%
52
GLOBAL
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3 Changing nature of work demands modern approach to pay for performance
In summary, the new Total Rewards reality suggests…
1 Transparency is a core principle
5 Recognize that the “total” in total rewards includes flexibility and a move away from “one size fits all”
2 Career security is the new job security
4 Base pay needs an identity check, it’s purpose may be lost
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Conclusion
54
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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The Reality: The employment relationship is changingThe plurality of work options is here…
55
Artificial IntelligenceRobotics
Talent platforms
AlliancesOther types of workers
OutsourcingTraditional employees
Volunteers
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Resulting in fundamental shifts in how work and organizations are organized
Our organization is a place containing employees doing work.
Our organization organizes work and talent.
Our organization is a fixed set of functions that work together to create value.
Supply chain ManufacturingRetail stores Marketing
IT R&D
Our organization is a malleable set of functions and deciding which ones get done inside the organization is a big part of strategy.
Supply chain Manufacturing
Retail stores MarketingIT R&D
R&DRetail stores
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The use of non-employee talent is increasing and having an impact on businesses
Growth in share of non-employee talent expected over next three years
25% globally
24%globally
46%globally
54%globally
Of all managers say they manage at least one contingent worker on their team
Of all managers say they manage at least one contractor
Of companies report changing their workforce activities enabling them to use more non-employee talent due to technology now or in in the next three years
57
28% Financial Services
19%Financial Services
43%Financial Services
58%Financial Services
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Considering the future, employers feel it’s more likely they will need to redesign jobs to be done by employees with lower or higher skills
Which of the following areas of your workforce and work activities are changing today or will change in the next three years due to technology?
Today but not
in 3 years
Today and in 3
years
In 3 years Neither
Paying more for employees with certain skill sets 29% 15% 35% 22%
Increasing work flexibility (e.g., scheduled hours to get work done) 30% 13% 31% 26%
Changing the way we design jobs so they can be done by employees with lower skills 14% 4% 29% 53%
Enabling work to be deployed to other locations 27% 11% 27% 36%
Changing the way we design jobs so they can only be done by employees with more skills 16% 4% 26% 54%
Requiring/Enabling us to use more nonemployee talent* 18% 6% 23% 52%
Improving collaboration and information sharing 45% 22% 18% 16%
58
GLOBAL
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Identify the tipping pointsWhile jobs filled by employees will continue to be the dominant means for getting work done, companies are experiencing challenges in two key areas
High Value/Limited Supply: “Premier”
§ Highly skilled work with challenges attracting & retaining and market supply (e.g., software development talent)
§ By deconstructing jobs companies can change the talent curve creating supply for select activities and tasks
High Supply/Eroded Value:“Democratized”
§ Technology is fragmenting traditional skilled work into tasks that can increasingly be performed by less skilled talent (e.g., accounting, manufacturing assembly)
§ There are significant cost opportunities to be realized by thinking beyond employment
59
Val
ue
Supply
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Conclusion
60
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
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Supervision – Make room for managers to have the time needed to provide effective people management
Transparency – Heighten transparency
Performance Management and Pay for Performance–Re-define performance management and differentiate
Flexibility – Create flexible career paths, embrace flexible work arrangements
Technology Enablement – Leverage digital media to drive engagement
Leadership – Instill trust and confidence/build trust-based relationships; role model the EVP, develop the next generation of leaders
Modernization will create a more equal value exchangeThe employee-employer relationship in the new world of work
61
Key Leverage Points for Employers to Improve
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Conclusion
62
Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
© 2017 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson cl ient use only.
63
Thank you
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