Top Three Reward Strategies for 2008

Every year I do a survey of compensation plans and practices in my market.  As I've posted before, one of my favorite questions on this survey is the one where we ask participants "What compensation strategies and tactics did your organization find most successful in attracting, retaining and motivating employees over the past year?"  The responses never fail to reveal interesting patterns, particularly in light of larger business and economic trends.

2008's winning reward strategy, as has been true now for the third year in a row, is variable pay - incentives, bonuses, etc.  No real surprise here; if there has been any megatrend playing out in the field of employee rewards, it is certainly the increasing prevalence of variable pay plans.  WorldatWork's 2008/09 Salary Budget Survey tells us that 81% of responding organizations now have variable pay in place (beyond just their sales force), a figure that has increased steadily from 66% in 2001.  There are few industries and professions - if any - that remain untouched by this trend.  Why, even university faculty are now eligible for performance-based bonuses.

More intriguing, though, are the second and third place responses.  In second place for winning reward strategies - as it was last year - is keeping pay competitive.  Despite economic woes and uncertainty, many responding HR professionals and leaders say that their smartest move - the one that paid off best for them in 2008 - has been taking the steps necessary to keep their compensation structures and programs market competitive.  A sizeable minority even indicate that 2008 was the year they decided - as an organization - to move to a more aggressive (e.g., 75th percentile) competitive stance.  Our conclusion can only be that the need to battle for good people, particularly in critical skill and experience areas, is still very much a reality for today's organizations.

In third place, seemingly from out of nowhere for this study (since they barely drew a mention last year), among 2008's most successful reward strategies are hiring bonuses (including sign-on bonuses as well as employee referral bonuses).  Many organizations re-instated this practice for 2008, and others put sign-on or referral bonuses in place for the very first time.  In some cases, these practices were limited to certain hard-to-hire jobs or job families; in others, they went across-the-board.  But for every organization who listed this practice, it was seen as the most important reward strategy in place for 2008.  More evidence, again, that the competition for talent rages on - and has been happening (at least for many of these organizations) through 2008.

Most of us realize that the labor market isn't equally strong across-the-board and in all industries, but it clearly has legs in the business sectors that these companies represent.   The days of the entire labor market moving in lock-step and in one direction would seem to be behind us, at least for now.  In their place we find today's market - one that is fluid, uneven and ever changing.

What was your organization's top reward strategy in 2008?

Comments

[Wally Bock]

Gosh I love the information I get here, Ann. Thanks. The "competitive pay" response doesn't surprise me, since my work leads me to believe that most people want to be paid fairly, not necessarily the highest possible.

But I have a question for you on the bonus issue. Is it possible that this tactic is getting the high ranking because it's new? It seems to me that if you put these programs in place within the last year or two it's a bit soon to accurately evaluate their success.

[Ann Bares]

Wally:

Thanks for the thanks - great to hear that you find the information helpful.

Re your question - assuming you are speaking of the hiring/sign-on bonus responses - I don't believe the tactic is new, although I have the impression that it has waxed and waned in response to labor market conditions. I was just surprised to see it being mentioned so prominently during what many believe to be a buyer's labor market. Just goes to show - I think - that the market is a tough thing to pin down.

Appreciate the comment!

[Chris Young]

Great post Ann! It's always nice to hear what's working and what isn't from real people and leaders, especially when it comes to compensation and reward.

I shared your post with my readers in my weekly Rainmaker 'Fab Five' blog recommendations as found here: http://www.maximizepossibility.com/employee_retention/2008/09/the-rainmaker-2.html

Be well!

[Ann Bares]

Chris:

Thanks for the comment, and for the recognition in your "Fab Five" - appreciate it!