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by Patricia K. Zingheim and Jay R. Schuster
Companies have announced a commitment to "growing
(not shrinking) to greatness." However, growth requires people,
and there doesn't seem to be enough good ones to go around. Most
executives would agree that pay and other rewards are part of the
answer. They will help get prospective employees' attention. Yet,
they are often omitted from many otherwise potentially powerful
change initiatives businesses need to thrive. And, there is concern
about the impact of the resulting "noise" on the existing
workforce.
The solution is to strategically deploy pay and
rewards so they support needed business growth. This single act
will provide a differential advantage over companies that don't
do this effectively. But people work for more than pay. This is
why wise businesses like IBM, General Mills and Honeywell are transitioning
to total rewards for their workforce.
What are total rewards? In our book, Pay People
Right! Breakthrough Reward Strategies to Create Great Companies,
we suggest the four components of total rewards are: (1) a compelling
future, (2) individual growth, (3) a positive workplace and (4)
total pay, of course.
The goal is a balance. Some companies may emphasize
a compelling future and others individual growth. But the best solution
is a combination of all four -- customization of total rewards to
match the company and workforce.
To understand "total rewards", you must
look briefly at the kinds of deals that have preceded the better
business deal we're proposing companies offer their employees:
The Old Deal. Entitlement -- rewarding
tenure rather than performance and skill growth --characterized
the 1960s through the 1980s. People expected, and were often given,
career employment with one company--that was "the way it was"
in the old deal. Workers owned their jobs. Companies commonly had
a paternalistic view toward their people. Annual pay and benefits
increases were expected and typically granted. Companies' roles
to fill matched the number of people seeking work. It was a time
of workforce stability.
The company absorbed pay and benefit cost increases
without regard for its own ability to pay. The balance was clearly
toward the side of the workforce. In the end, this was not a good
deal: the workforce got a message of "plenty" whether
this existed or not.
The New Deal. Downsizing, reengineering,
rightsizing and flattening took their toll on the old deal during
the late 1980s and much of the 1990s. The new deal was a "tough
love" perspective. Companies expected people to meet more than
halfway to acquire and apply the skills the company needed to succeed.
The emphasis was on "shrinking to greatness." Many proud
workforces were decimated, and extensive loss of trust was the result.
It represented a wrenching change in how work was done and who did
it. It made many people "virtual workers" whether they
were ready or not. Pay and benefit costs needed to be cut at the
expense of staffing levels, and major cost cutting often occurred.
The new deal was a dramatic change from the past,
and it came upon companies and workforces quickly and painfully.
The new deal thrived when more people were chasing fewer jobs. People
were asked to come much of the way to ensure their employability
by keeping their capabilities current and meeting company performance
standards.
This kind of deal has proven unsuccessful. To
get and keep scarce talent, companies will be required to change
their view of how people are rewarded. We're talking about a movement
toward total rewards, driven by a combination of unparalleled organizational
growth and a severe talent shortage.
The Better Workforce Deal. People
want a better deal; they don't want to be viewed as "commodities"
to be bought and sold like hogs and cattle. This better workforce
deal requires that companies invest in their workforce and form
a win-win partnership. Companies need to build trust through more
open communications, sharing information and results, and being
truthful about what people must do to grow and add value to the
business.
In the better workforce deal, the enterprise and
people each meet halfway. This deal supports mutual choice by companies
and workforces -- more coaching, developmental feedback, training,
and nurturing that result in better understanding, acceptance of
goals and improved business outcomes from the workforce. It signifies
a positive workplace with a compelling future that invests in people
and also provides attractive total rewards. This partnership is
important to making a company and workforce really begin to "tick."
What has this better deal meant to pay and rewards? What's the bottom
line for the future? It is an association between businesses and
people emphasizing shared destiny.
Patricia K. Zingheim and Jay R. Schuster
are partners in Schuster-Zingheim and Associates, Inc., a pay and
rewards consulting firm located in Los Angeles. This article is
based on their two books-a new book, Pay People Right! Breakthrough
Reward Strategies to Create Great Companies (Jossey-Bass Publishers,
2000), and their best-selling pay book, The New Pay: Linking Employee
and Organizational Performance (Jossey-Bass, 1996). They can be
reached at paypeopleright.com.
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