Disruption: trending near you.
If your organisation hasn’t been disrupted, be alert, soon it will be. That’s the reality of the digital economy. It requires businesses to continually respond to threats of new technologies and agile digital native companies. It means transforming how they work and how they reward people – and not just once. Organisations need to embed this ability to change into their DNA, so they can continually respond and become digitally sustainable. In this article, we explore what this means for remuneration and benefits.
It’s a truism that perception is reality. And there’s no better example of this in the workplace, than reward: how your employees perceive the fairness of their pay has huge implications for their workplace reality. This goes both ways – a well-attuned reward strategy that’s understood and seen as fair can be a key lever for lifting engagement. On the other hand, if pay is perceived to be in the proverbial black box, then it can quickly pull that lever in the opposite, more negative direction.
It’s never been easy getting this balance right. But the challenge is only heightened by the demands of the digital economy. To thrive in this new environment, traditional organisations are being forced to re-imagine how they do business and then to match this vision internally with a supportive culture and the processes and procedures that will engage and enable their workforce.
Reward is just one of the many challenges of this digital puzzle. As roles and accountabilities flex and change to meet market demand, new jobs emerge without pay precedent and tech skill-sets command a premium, there’s a temptation to simply plug the gaps in your existing reward framework.
The risk is, plug too many gaps and you quickly move towards the black box end of the reward spectrum. Creating a remuneration strategy for the digital economy requires a more fundamental rethink. It’s not about going through a new design process and then simply ticking that box, done. It’s about building a reward framework that’s as agile as your new business model, which can continue to adapt to changing conditions, harnessing the discretionary energy of your people to deliver high performance.The digital economy requires a reward framework that’s as agile as your new business model. Click To Tweet
Perceptions of fairness are challenged inside and out
We’ve already said that when it comes to pay, fairness – real and perceived – is paramount. This means clearly linking pay to performance and rewarding the behaviours that support new ways of working, like collaboration and innovation. In short, it means rewarding people for their real contribution to the business.Remuneration fairness means rewarding people for their real contribution to the business. Click To Tweet
The complication is that perceptions of fairness can easily vary, especially when there are gaps in understanding. Today’s workplace is filled with these gaps, leaving a lot of room for differing perceptions. Organisations are creating new jobs and bringing in new, technical skillsets that are foreign to the existing workforce. The gig economy is changing the shape of the workforce with more, often highly-paid contractors coming in, while generational shifts bring equivalent shifts in expectations. Looking outside the organisation, LinkedIn updates on available jobs (and their attendant pay packets) and Glassdoor salary searches make external comparisons easier than ever.
These features of the modern workplace can quickly lead existing employees to believe they’re being unfairly treated. And our responses can seem deeply irrational. Research has repeatedly shown that we would prefer to receive less ourselves, so long as it’s still more than others receive.
It starts with clarity
It may seem obvious, but when it comes to meeting these challenges, being clear around what’s expected from different roles at different levels in the organisation is incredibly important. This means each individual needs to understand what they’re expected to deliver, how they fit into the structure and how they’ll be measured.
Build in basic hygiene factors
There will be times when reward strategies need to flex for specific circumstances. The obvious example is recruiting new skills that are in high demand and are attracting a premium in the market. A sustainable reward framework deals with these situations by making sure that each decision is approached individually and basic hygiene principles are applied.
So yes, you can pay more for specific skills, but think about how the package is built – for example by specifying a premium, rather than rolling it into base salary – to both meet the expectations of the individual and market conditions, while retaining flexibility when things inevitably change again.
Introduce tailored options
With up to four different generations now in the workplace, your reward framework needs to be capable of catering to the different needs and expectations of these different life stages. What appeals to and motivates a senior employee nearing retirement, will be very different to someone starting out in their career.
To do this successfully, you need to understand what different segments of your workforce are looking for and build up a suite of offerings to meet differing needs. Giving employees input into designing their own remuneration package – whether that involves purchasing extra leave or choosing wellness benefits – helps to generate belief in the fairness of the process.
Tell people about it
Comparison is both the friend and enemy of perceived fairness. To make it your friend, all employees need to understand both the big picture reward strategy and how they individually fit within it. There are important decisions to be made here about how transparent your organisation is about salaries and role gradings, but as a baseline, it’s essential to explain your processes and empower managers to talk to their individual team members about what this means for them.
Through keeping fairness and clarity at the heart of your reward strategy it is possible to build a sustainable framework fit for today and for the future.
Download our latest report Rebuilt to last: The journey to digital sustainability to learn more about the role of fairness in activating your digital strategy.