Compensation Force

Agile Rewards & the End of the Corporate Couch Potato

Yesterday I posted on agile rewards and the need to use your reward program to create and maintain a workforce that is fleet of foot.  A flexible workforce is a critical part of establishing an organization that is able to respond quickly to the threats and opportunities that will drop unexpectedly in its path.

From ChangeThis comes a terrific manifesto "Calling All Corporate Couch Potatoes: Put Down the Doritos & Get Moving!"  which reinforces my point beautifully - that succeeding in the face of uncertainty will be a critical competency going forward.  Which is why I predict that agility will become an important new watchword for reward design. 

The authors spent three years studying a group of managers who successfully grew their business in the face of uncertainty and scarcity.  From that experience they draw a series of lessons, which they term "alternate realities."

Allow me to share an outtake from number 4, which speaks most directly to the importance of agility:

Alternative Reality Number FOUR:
What if you can’t hide from uncertainty, you can only out-run it?

Managers who are succeeding in spite of, or maybe because of, uncertainty accept it as a fact of life and recognize that they have to let go of stability. It’s that denial that slows you down, that produces the negative anxiety that creates blinders that block seeing new opportunities. Managers who succeed in today’s challenging environment will need to lean into the uncertainty and befriend it. They will need to carefully distinguish between what they can and cannot control. They will stop trying to predict the future based on the past and use healthy anxiety as a positive force for growth.

Your biggest challenge is not to find a way to trim another 10% off your work force. It is to make dealing with instability your sweet spot—to hone your ability to leverage surprise and uncertainty rather than just react. In doing so, you just might find a new set of possibilities that wouldn’t exist in a stable, predictable world.

Exciting, yes?  And so I repeat ... got agility?

Image: Creative Commons Photo "Potato Head - Couch Potato" by oddsock

The 401(k) as Cost Reduction Target

I've been asked by several clients recently for data about the reduction or elimination of 401(k) employer matches as a cost-savings tactic.  Thanks to the recent release of a few studies, we have some up-to-the-minute information available that sheds some light not only on how prevalent this tactic is, but also a little on the outcomes driving these initiatives and some alternatives to consider first.

Recent research released by Hewitt Associates and Watson Wyatt (note that these links go to the releases themselves) provides data on the extent to which organizations are taking this particular cost reduction step:

  

While only a minority of organizations appear to have already taken the step, when you add in those that are contemplating such a move, the numbers get more significant.  A separate study by Hewitt Associates tells more about what kinds of cost savings are driving this interest.  According to Hewitt's analysis in this second study, companies can save, on average, more than $1,500 per year by suspending their 401(k) employer match (assuming an average employer match of 50 cents to the dollar for up to 6% of pay).  For the average large (U.S.) company this could be savings of $25 million a year.   For the average mid-sized business it could add up to $10 million annually, and to nearly $2 million for the average smaller company.  It's no wonder employers are tempted.

But, as the Hewitt study details, these decisions come at a high cost to employee plan participation and contribution rates and - ultimately - can significantly impact employee savings for retirement.  With this in mind, Hewitt proposes some alternative approaches that can help employers mitigate short-term cost pressures while still encouraging workers to invest wisely for retirement:

Decrease the match: The average large employer can save nearly $13 million each year by decreasing their match by half instead of suspending it entirely. This still motivates employees to continue contributing to their 401(k), even if at a lower rate.

Communicate to employees only through online means:Hewitt research shows that employers believe communication is a critical tool in helping their employees save properly for retirement, particularly during these troubled economic times. Three-quarters (75 percent) of companies are using their intranet site, 60 percent are making use of e-mail blasts, and 49 percent are using Webinars. Still, many employers use printed materials in addition to online tools to communicate with employees. By moving to online-only communication, employers can effectively reach their employees while saving money on paper costs.

Make fees transparent: Employers should take a closer look at the funds they offer in their 401(k) to ensure they do not carry high expense ratios. Hewitt research shows that additional annual expenses of 0.25 percent — the difference between the typical institutional fund and retail mutual fund portfolio — can reduce projected retirement income substantially over time. For younger employees, these higher costs can erode 401(k)-related retirement income levels by nearly 6 percent by the time these employees reach retirement age.

Comparable Worth Bill Reintroduced to House & Senate?

It appears that comparable worth may be back on the table.

From an article on the Washington D.C. Employment Law Update site:

To commemorate Equal Pay Day, Sen. Tom Harkin (D-Iowa) and Rep. Eleanor Holmes Norton (D-DC) reintroduced the Fair Pay Act (S. 904, H.R. 2151).  While full text versions of these bills are not yet available, they are believed to be substantially similar if not identical to the bills Harkin and Holmes Norton introduced during the last congressional session. Notably, this bill would amend the Fair Labor Standards Act (FLSA) by introducing the concept of equal pay for comparable – not equal – work.

According to this source, the House version of the Fair Pay Act has been referred to the House Committee on Education and Labor.  The Senate companion bill has been referred to the Senate Committe on Health, Education, Labor and Pensions.

This will bear watching.  (Hat tip and thanks to reader Paul for the alert.)

Agility. The New Reward Watchword

There's a lot we don't know about what life will be like as we continue through the recession, or when we eventually arrive on its other side.  There's one thing we do know, though: that the business landscape will be different.  Maybe profoundly so.

Assuming this to be true, we can also conclude that success in the future (near term as well as over the longer haul) will require organizations to be quick to respond to the threats and opportunities that show up, unanticipated, in their path.  This, in turn, will demand a workforce with the flexibility to adapt to environmental demands.

Reward programs have a very important role to play in maintaining a workforce that is sufficiently fleet of foot.  This is why I believe that agility should be the new watchword for reward design.

Agile rewards are those which carefully balance fixed reward elements with their more nimble variable counterparts.  The agile reward package recognizes the importance of providing competitive base pay in exchange for a particular set of skills and qualifications (and a competent or better level of performance), but seeks to use non-fixed rewards (cash and non-cash) to accomplish most other objectives.  These other objectives might include everything from recognizing temporary project-based outcomes to addressing the increasingly frequent need for people to step out of or up above their "normal" roles in response to changing circumstances.

A picture being worth many words, I use my reward portfolio diagram to illustrate this challenge:

In the past (and still today in some sectors), it was common and acceptable to reward many, if not all, of the performance elements listed on the left side via base salary.  Agility demands that we provide a competitive base, but then - as much as possible - use other right side components to drive and recognize the results demanded of our workforce.

So .... got agility?

Image: Creative Commons Photo "Rainbow!" by Evoo73

WorldatWork Launches Borderless Online Community

WorldatWork, the association for reward professionals, has just launched a new online community designed to give professionals in the areas of compensation, benefits, work-life and total rewards a forum for interaction, knowledge sharing and  problem solving as well as easy access to extensive topical resources.

If you're a WorldatWork member, you've already received an announcement and invitation to join the community.  I think you'll be impressed with its design, capabilities and offerings.

If you are not a WorldatWork member, this is an incredible gift from WorldatWork to you (and you should feel free to say "thank you"!).  While some resources are limited to members only, the non-member public can join for free, invite others, access a host of features and join in discussion with compensation, benefits and work-life professionals.

Join now!