Back in 2000, WorldatWork introduced a new way to consider compensation packages and dubbed the model “The Total Rewards Strategy.” The idea is brilliant—a comprehensive platform to help keep employees productive, inspired, and committed through five aligned practices:
The official definition of Total Rewards:
Total Rewards defines an organization’s strategy to attract, motivate, retain and engage employees. It’s the tool kit from which an organization chooses to offer and align a value proposition that results in satisfied, engaged and productive employees who, in turn, create desired business performance and results.
To be sure, this great concept has tremendous potential. It is also an abject failure.
Financial stress, burnout, mental health issues, health care costs, consumer debt, employee engagement—all of these problems are worsening and have had generally negative trends over the last two decades since Total Rewards was introduced and eventually codified in the Society of Human Resource Managers certifications.
The WorldatWork website offers clues as to why this concept has failed to deliver on its promise. Research and surveys cover salary budgets, compensation programs and practices, bonus programs and structures, promotional guidelines, employee recognition trends, job evaluation and market pricing, and more. The complexity of attempting to provide a comprehensive rewards platform has broken HR into a siloed approach and seemingly endless tech stacks that fail to integrate in a consumable way for both the administrators and users of the resources. Open enrollment has become an information blitz peddled by benefit providers and barely tolerated by participants trying comprehend the relevance and best use of each dizzying election.
This is not the fault of HR. Let’s consider just one issue to understand the complexity of this attempted solution—financial stress. We know, with great certainty, how financial stress impacts engagement and cost in:
- Productivity—An average loss of 13.6% of productivity for financially-stressed employees (54% of all workers) regardless of income level.
- Turnover—Employees with financial stress are twice as likely to be looking for a new job, with replacement costing 16% of salary for low-wage workers rising to 213% for executives.
- HR Administration—hours lost on benefit questions, payroll taxes (because of reduced usage of pre-tax benefits), 401(k) loans, wage garnishments, and delayed retirements.
But there are also documented, proven, but yet-to-be-quantified losses in:
- Mental Health—6-7 times as likely to experience depression and anxiety when dealing with financial stress.
- Physical Health—Insomnia, disease management, lack of exercise, avoiding check-ups and preventative care, increased incidence of ulcers, digestive issues, high-blood-pressure, heart attack, substance abuse, and obesity are related to financial stress.
- Culture & Safety—Financial stress causes increased risk of preventable accidents and strained work relationships.
So how can we expect HR to build a solution around six seemingly disparate issues without gumming up the existing solutions for each of those challenges? And how will that solution integrate with the balance of total rewards options? And how can we expect the end-users to understand which to choose and use or even understand what is relevant to them?
There is no easy answer. But what we know is that Total Rewards—indeed any successful compensation system—requires buy-in and understanding at the highest levels in order to be successful. The CEO, CFO, and managers must understand and be able to share the relevance, application, and integration of the program. Human connections and conversation must combine with the technology in order to drive usage and value for both employer and employee.
But most importantly, the system must deliver meaningful outcomes to the participants. While billions are spent every year in researching benefits and compensation structures, very few organizations are measuring the impact of their Total Rewards platform on the end users. There are engagement and satisfaction surveys, but there is very little measurement of meaningful outcomes. Do you know how your employees:
- See their work connecting to their core values and life mission?
- Relate their professional and personal development to their foundational relationships with family and friends?
- Come home from work feeling empowered or extracted?
- Are hitting personal goals in mental and physical wellness?
- Are converting their compensation package into meaningful financial progress and security covering savings, major purchases, essential protections, education planning, retirement preparation, and even gifting?
If you cannot answer these questions, you are not meeting the real and immediate needs of your people.
Total Rewards is a complex system that offers great promise—but only if we start with employee outcomes in mind and align those goals with executives and management, helping to create the daily, human connection and impact that employment should bring to everyone.