Employee Rewards – Engagement vs. Bottom Line?

WorldatWork is a leading human resources professional association with more than 30,000 members worldwide.  WaW sees itself as the “Total Rewards Association”, and draws the the premier companies and practitioners in this realm to its annual Total Rewards Conference, held recently in Seattle.
One of the really fascinating presentations in Seattle earlier this month in Seattle revealed the results of a new study on reward programs by Hay Group and WorldatWork.  The study: “Reward Next Practices: The future of reward programs” finds that in the next two to three years 57% of firms plan to increase focus on employee engagement in measuring reward programs. Also, 64 percent will increase focus on the “motivational value of reward programs” in the future.
Here’s what Tom McMullen, U.S. Reward Practice Leader for Hay Group says about these results: “The global downturn has prompted organizations worldwide to shift to an increased focus on how to engage and motivate employees. However, during times when budgets are tight, maintaining an engaged workforce is more difficult than ever. When times are tough, employers are looking for ways to improve engagement – and it’s essential they remember the motivational power of intangible rewards, the role of the line manager in establishing a great work climate and the importance of communicating effectively with employees.”
The study has stirred up commentary from HR bloggers, some of whom question how to go about measuring effective engagement and rewards. In Compensation Force, Ann Bares calls study findings “an interesting piece of news” calling for “some element of balance in our reward metrics – financial versus non-financial, lag versus lead.”
In his Strategic HCM Blog, John Ingham says it’s essential to be clear about intended outcomes first when measuring a reward program.
How are rewards currently measured? The study of 763 diverse companies in 66 countries found that reward program performance metrics weigh heavy on financial performance (71%) using employee engagement (40%) to a lesser extent. In the future, more companies report they plan to focus more on engagement.
Other key findings:

• Almost half, 44 percent, plan to increase their future focus on using reward to reinforce a culture of creativity and innovation.
• Two thirds, 67 percent, will focus more on improving the ability of line managers to effectively manage the overall pay-for-performance relationship with employees, and on the role of line managers in communicating total rewards to employees.
• Key components of the reward programs of the future will include leveraging important non-financial rewards including career and development opportunities, improving work climate and non-financial recognition.