Bosses must start tailoring rewards to needs
Most companies provide a framework for decisions about compensation, promotion and other entitlements by working with an in-house system of grades and seniority.
It shows employees where they are and what they can aim for in both career and financial terms. Reach grade five, for example, and you qualify for the profit-sharing scheme. Advance to the rank of general manager and you get a company car and an extra three days’ annual vacation.
The rules and rewards are generally clear enough and it is easy to assume they achieve the intended objectives of encouraging performance and ambition.
In practice, though, many schemes don’t quite hit the mark. The problem is that they tend to be fairly inflexible and take too little account of the different ways employees contribute, as well as what they actually want. At a time when the recruitment and retention of good staff is a constant challenge, this means employers are missing out.
“Companies should take a close look at their reward policy and provide more choice, because one size doesn’t fit all,” says Richard Payne, Asia-Pacific practice leader for consultancy firm Aon Hewitt. “They should identify mission-critical positions, differentiate pay based on roles, and allow for individual packages, so that people really appreciate the benefits.”
From an employer’s viewpoint, he adds, rewards are usually just “one number”. Organisations calculate costs and then reduce everything to basic financial terms. Schooled by convention, they also regard money in the bank, or equivalents such as stock options and allowances, as the obvious method to reward and incentivise staff.
By listening to and meeting a different set of expectations, however, employers have the chance to raise productivity, job satisfaction and staff loyalty at little or no extra expense.
“At the end of the day, money is money and you are limited in what you can do, especially if budgets are tight,” Payne says. “That is why we help to identify what else companies can offer and what individual employees will really value.”
An employee with children, for instance, may prefer the option of flexi-time instead of a promotion that, although bringing more money, also involves longer hours and more stress. The year’s top salesperson, meanwhile, might prefer comprehensive medical insurance for their family, rather than an all-expenses-paid trip to a luxury resort. For young career-minded graduates, something as simple as job rotations and proper mentoring can make all the difference in terms of attitude and enthusiasm.
No one will ever turn down a pay rise or bonus, but in Hong Kong, where basic needs are less of an issue, career opportunities or a better work-life balance often matter just as much.
“For HR departments, the important thing is a change of mindset,” Payne says. “They have to be far more proactive and see where they can get the biggest bang for their buck. In particular, there has to be a greater flexibility and targeting of rewards. This should ensure they are what people value, not what the company thinks they value.”
In doing this there is scope for innovation and, of course, to grant reasonable personal requests, which can otherwise develop into major gripes and cause good people to move on. In mainland cities, for example, an employer could sponsor school places for the children of transferred workers. Elsewhere, it might be a question of arranging overseas secondments or specific training courses.
“Companies should also emphasise communication so employees understand the value of experiential rewards, training and development, and tasks beyond the normal scope of their job,” Payne says. “In that way, people will more fully appreciate what they receive and, as a result, be more motivated and have more reasons to stay with the organisation.”
Jeffrey Tang, director of talent and rewards for Towers Watson Hong Kong, says that customised reward packages are catching on and make sense in a time when good staff know they have options. A tailor-made approach, with perks tied closely to individual performance, can mean that high-performing employees are properly rewarded, while low-performing ones miss out on a bonus.
“We are seeing the emergence of specific incentives to drive different behaviour,” Tang says. “Companies are adopting customised programmes and there is greater discussion at board level about tying incentives to the long-term strategic goals of an organisation.”
A notable trend among Hong Kong companies is the growing use of the employment value proposition (EVP). This encourages a more holistic approach to rewards and gives organisations flexible guidelines to structure their programmes.
“[The EVP] helps to instil a robust performance-management system incorporating financial and non-financial indicators,” Tang says. “Retention doesn’t merely depend on pay.”