When it comes to investing in employee total rewards programs, companies can learn a thing or two from how people make decisions about their personal budgets.
If you’re like me, your home budget needs to take care of mandatory items like a mortgage, groceries, utilities, taxes and hopefully some savings. What’s left is available to spend on other things that bring you enjoyment. The same $4,000 of discretionary income might get you a family trip to California, the latest home theatre equipment, or cover car payments on a German-made sports sedan. People are pretty good at optimizing the return from their discretionary income by spending it carefully on the things they value most.
But what if you didn’t have a choice? What if everyone had to use the $4,000 for the trip? Some people would be pleased while others, the non-travelers, would have been happier with a $1,000 big screen TV. For these people, a much less expensive item would have been more highly valued.
That’s what employers need to consider within their Total Rewards programs. These ‘people programs’ include salaries, benefits, stock grants, pensions, fitness centres, free coffee, employee training, holiday parties, etc. The items and the mix vary from company to company, but they all have to fit within a finite “people related” budget.
It’s a tricky balancing act to try to satisfy all members of your employee population within this budget. At home, when we plan our discretionary spending we have the advantage of knowing what we value most. We certainly wouldn’t spend $4,000 on a trip if we’d be happier with a $1,000 TV! Unfortunately, companies may not realize they are paying top dollar for employee rewards that simply aren’t hitting the mark.
By conducting a regular Total Rewards review a company can gain insights into the investment they are making in each program and how it is valued by employees. By understanding which programs your staff value the most you can fine tune your Total Rewards portfolio to optimize your spending while delivering a more effective employee value proposition that attracts and retains the talented people you need.
It’s more important than ever to optimize the investment made in Total Rewards programs. Why spend $4,000 on a stock option grant when your employees might prefer a $1,000 training program? Multiplied across your employee population the savings can be significant. Smart companies (and their CFOs) want to know if they are giving $4,000 trips to employees who would rather have $1,000 televisions! What about yours?
When you plan your employee-related programs for next year, take some time to review your Total Rewards portfolio. It could be a totally rewarding experience for both your employees and your budget!