Fixing Your Total Rewards Mix: Tom McMullen Q+A (Part 2)

October 6, 2016 Sarah Payne

Mixture of ingredientsGet insights from Tom McMullen on finding the right mix of rewards for employees.

Which reward programs provide the greatest impacts and ROI for employees? What role does peer recognition play in driving engagement?

For the first part of our Q&A with Tom McMullen, senior client partner and North America rewards expertise leader at Korn Ferry Hay Group, we asked about the latest trends in pay practices and why salary increases have remained stagnant.

In part two below, we take a deep dive into rewards that are both cost effective and drive performance. We also take a peek at the future, exploring new research on what pay practices might look like 10 to 12 years from now.

Read more below.


Can you share an example of a company that’s found a mix of reward strategies that’s both cost effective and drives performance?

There are a number of them. A good place to look is at the Fortune Most Admired Company list. Each year, Korn Ferry Hay Group runs this analysis for Fortune and has developed some great insights into what makes these organizations admired, including what differentiates their reward systems.

Most Admired Companies generally strike the right balance in terms of cost effectiveness, organizational performance, a strong culture, and reward programs that are aligned with their business and talent management strategies.


What results have you seen from companies that use peer recognition? How do they budget for this kind of reward?

We did a joint study with Globoforce a couple of years ago on this topic. Peer recognition programs, especially when tied to key business priorities (e.g., collaboration, operational excellence, innovation) can really engage the workforce. Organizations need to be serious about the commitment though.

“Peer recognition programs…can really engage the workforce.” @tommcmullen_hg #workhuman
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In terms of budgeting for these programs, we saw a tipping point of between 0.5% to 1.0%+ of payroll, where respondents felt the program had real impact. Of course, an adequate program budget is necessary, but not sufficient. Senior leadership support and supporting technology are also key enablers.


Which reward programs provide the greatest impacts and ROI for employees?

It’s the classic answer “it depends.” It is difficult to generalize here. For example, employees in lower wage earning jobs typically focus on (and get better personal ROI) on base salaries and benefits. Individuals in higher level roles often prefer career development opportunities, recognition, and exciting work environments.

In past Korn Ferry Hay Group research on management and professional roles, we asked this question and found that senior reward professionals believe that:

  • Non-financial rewards have more impact on engagement (and ROI) than base pay, benefits, and incentives
  • Short term incentives are the financial rewards that have the most impact on engagement (and ROI)
  • Quality of work, work environment, career development, and senior leadership are the non-financial rewards that have the most impact on employee engagement (and ROI)


What will pay practices will look like 20 years from now?

I’d be fabulously wealthy if I could predict the future, but Korn Ferry Hay Group recently did a study where we looked at the future of work and the impact on reward programs. The forecasting timeframe on this study was 10-12 years into the future and we found from senior reward leaders a general consensus on the following:

  • Reward systems will be much more diverse and complex given different demands by different employee segments. There will be a need for meaningful and segmented rewards that provide distinction from other organizations.
  • At the same time, appropriately differentiated employee reward programs within the organization will need to be balanced with less resourcing from HR and more consistent/centralized program management by corporate centers of excellence. Relying on technology and increasingly mobile technology will rapidly increase.
  • There will be continued emphasis on non-financial rewards for retention and engagement such as meaningful role design, career development frameworks, energizing work climates, interesting project opportunities. This implies that organizations will need to build out their employment value propositions, related reward communications, and supporting management tools.
  • There will be more emphasis on clear and transparent reward strategies, processes, and communications for the reasons mentioned earlier.



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Are Rewards Demotivating? Myth and Reality

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