Regardless of the industry you work in, chances are your workforce is changing right before your eyes. From a younger generation bringing new approaches, to the rise of automation and new technologies that enable a more mobile and autonomous team, the pace of change is unprecedented. And even while these transformations are making tangible impacts on how businesses acquire and retain talent, many managers and organizations are not responding quickly enough to maintain their position as a competitive or preferred employer.
As we look back on 2018, there are three key workforce trends in particular that will continue to impact how businesses reward and incentivize workers to compete for and retain talent. Read on to learn what you can do to get ahead of the curve in 2019.
Trend #1: Salaries have flat-lined; but incentives are growing
If your organization is any one of the 96 percent of private US companies (or 85 percent of all US employers) that offer some type of performance-based bonus or other vari¬able incentive pay, you might have noticed that even as the economy has improved, annual raises continue to hold steady around 3 percent, while more variable compensation is tied to performance than ever before.
And in most cases, companies are offering fewer group incentives, shifting their focus to individual performance, as the recent WorldatWork study shows. In fact, only 19 percent of private companies surveyed offer group or company-wide incentives (down 3 percent since 2015), replacing less motivating rewards with spot and discretionary individual rewards.
Tying incentives to individual performance tends to correlate to better motivation, but also has the potential to make rewards programs overly complicated and difficult to implement – a big concern for mid-size and smaller companies. A recent Willis Towers Watson report unveiled an increased focus on “reducing the complexity of short-term incentive design and establishing a more rigorous process for setting company and individual performance goals.” The need for simplicity is especially important at smaller organizations who may have less sophisticated systems or fewer staff responsible for implementing programs.
Take action to stay ahead of the game:
Individual spot rewards and incentive payments must be compelling, perceived as fair, and accessible for employees, but also scalable and practical for employers to manage. Streamline your incentive programs by avoiding physical spot rewards which are expensive to ship and store and time consuming to manage. Maintain cash incentive payments, but make sure they’re digital via direct deposit or reloadable payment cards that can be managed from anywhere. New to or overwhelmed by the whole incentive program concept? Stick to what you do best and outsource your program to an expert.
Trend #2: The Gig Is Big
By now, you’ve probably heard all about the gig economy, and maybe you think that it doesn’t apply to your business. But chances are good that if it hasn’t already impacted your business in some way, it will soon.
Fifty-eight percent of organizations surveyed in 2018 by Deloitte report that they’re now primarily made up of non-salaried employees like contract, freelance and gig workers – and respondents expect their numbers to increase dramatically over the next few years.
The report also remarks on the diverse “ecosystem” of personnel types replacing the traditional workforce as we know it. And with that change comes huge new opportunity to attract and retain top talent without many of the restrictions that have limited business leaders in the past.
Unfortunately, most businesses are still applying old payment and incentive processes and systems to these new realities. In fact, only 16 percent of the organizations surveyed have established policies and practices to manage this diverse workforce, “pointing to an enormous gap in capabilities.”
Take action to stay ahead of the game:
Gig work is here to stay, so it’s time to update your market approach. Organizations who want to stand out as progressive employers and hiring partners in 2019 should update their compensation and incentive programs to be more flexible, mobile and worker-friendly. For companies, showing a commitment to all employees, including salaried, hourly and gig can have strong lasting impacts on employee loyalty. Showcasing flexibility and innovation in employee compensation and incentives can strengthen an employee’s connection to the business, building stronger ambassadors for the brand and mission, during their tenure and long after they move on. This includes payment methods that are easy for employees and contractors to access from anywhere, and rewards that are immediate and universally valued. Learn how.
Trend #3: Workers want more feedback; employers should too
Traditional review cycles have companies and managers providing structured feedback only once a year at review time, often tied to an annual compensation plan. “That’s a mistake,” says Brian Thornsberry, Prepaid Technologies, senior vice president of sales and marketing. “Waiting 12 months to share feedback means the employee misses out on valuable opportunities to be energized and engaged, and the company misses timely opportunities to deliver a better customer experience and stronger results.”
Pair this with the fact that many workers – millennials and Gen Y in particular – want more feedback than ever before, and employers have a great opportunity to align feedback with incentive and reward programs.
Yet these annual exercises persist, often at the expense of more frequent feedback and impactful rewards. It’s no surprise then that only 8 percent of HR executives think that performance management made a significant contribution to performance in their organization.
Take action to stay ahead of the game:
Breaking incentive payments into shorter-term, more actionable chunks drives better performance. Giving workers clear direction and priorities is essential and should play out as timely work-product feedback, recognition and necessary adjustments.
Deloitte’s study found that allowing employees to provide input on what they would do, vs what they think about their past performance allows for better individual assessment. This dialogue can also help to ensure that reviews remain focused on a path forward, vs. dwelling on past gaps.
By demonstrating that you value people’s opinions, and directly linking what they are doing to tangible organizational goals, managers can drive long-term engagement. Incentives are a big part of this feedback cycle, but the processes for implementing are key as well. Managers need to be responsive to generational and individual preferences for verbal, face to face, and electronic feedback and ensure that communication is two-way. Timely, valuable rewards and incentives back this up, ensuring employers can put their money where their mouth is.
With workforce changes poised to accelerate in 2019, business leaders have a major opportunity to adapt and surpass the competition. Whether it’s more timely and relevant rewards and incentives, a shifting gig economy or more targeted feedback and management cycles, fostering a more engaged and loyal workforce will be the key to success. Employee engagement and workforce well-being will continue to foster stronger loyalty and give businesses the competitive edge in a tight recruiting landscape. Will your business be ready?
