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Findings from the 2016 Global Talent Management & Rewards and Global Workforce Studies
New Jersey Compensation AssociationMarch 7, 2017
Brian Bechan, Willis Towers WatsonDarren Tse, Willis Towers Watson
About the 2016 studies
Fielded April – June, 2016§ 29 markets globally§ 2,004 employer
respondents representing >21 million employees
§ 21st annual survey
Key topics covered:§ Attraction and retention
drivers§ Talent mobility and challenges§ EVP and total rewards§ Leader and manager
effectiveness§ Career management§ Performance management § Pay for performance
35%
21%
18%
26%
2016 Global TM&R Study
Asia Pacific EMEALatin America North America
Key topics covered:§ Attraction and retention
drivers§ Drivers of sustainable
engagement§ Leader and manager
effectiveness§ Career management§ Performance management§ Health, stress, wellness§ Communication
Fielded April – May, 2016§ 29 markets globally§ >31,000 employee
respondents
Global Talent Management & Rewards Study (TM&R)
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Global Workforce Study (GWS)
Number of participants in the US:GWS: 3,105TM&R: 441
Challenges attracting employees in key workforce segments remain high overallEven more so for organizations operating in emerging economies
Mature Markets Emerging Markets
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28%
45%
55% 54% 56%
44%
57%
66%
77% 76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
Attraction Challenges
Nearly half (48%)of employers report
hiring activity increased
Retaining key employee groups remains difficult, especially in emerging markets
Mature Markets Emerging Markets
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Close to three quarters of employers have trouble retaining high potentials
20%
28%
37%
47% 44% 41%47%
59%
70%65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
All employees Diverseemployee
populations
Critical-skillemployees
High-potentialemployees
Top-performingemployees
Retention Challenges
One-third (35%) of employers report
turnover activity increased
The cost of turnover puts significant value at risk
Job LevelFinancial cost of turnover
(% of annual compensation)*% of ee’s at highrisk of turnover**
Financial costat risk***
Senior Manager/Executive 74% 31% 23%
Professional 59% 25% 15%Sales & Customer/ClientManagement 59% 27% 16%
Business Support 48% 27% 13%
Lost productivity
Hiring
Training
Job vacancy
Probability of turnover
Financial cost at risk
Financial cost of
turnover
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*FCOT measured in our proprietary benchmark database**% at risk of turnover from 2016 Global Workforce Study ***Financial cost at risk=FCOT*% at risk of turnover
Getting it right starts with understanding the top drivers of attraction
Rank Employee view - USA Employer view - USA Employee view - Global Employer view - Global
1 Base pay/salary Organization's mission, vision and values Base pay/salary Career advancement
opportunities
2 Job security Challenging work Job security Base pay/salary
3 Career advancement opportunities
Career advancement opportunities
Career advancement opportunities
Reputation of organization as a great place to work
4 Vacation/Paid time offReputation of the
organization as a great place to work
Challenging work Challenging work
5 Opportunities to learn new skills
Ability to have a real impact on the organization's
performanceOpportunities to learn new
skills Job security
6 Health care and wellness benefits Base pay/salary Reputation of organization
as a great place to workOrganization's mission,
vision and values
7Reputation of the
organization as a great place to work
Health care and wellness benefits
Health care and wellness benefits
Opportunities to learn new skills
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Comparing top drivers of attraction
You also need to understand why employees would choose to leave your organization
Rank Employee view - USA Employer view - USA Employee view - Global Employer view - Global
1 Base pay/salaryCareer advancement
opportunities Base pay/salary Career advancement opportunities
2 Career advancement opportunities
Relationship with supervisor/manager
Career advancement opportunities Base pay/salary
3 Job security Base pay/salary Physical work environment Relationship with supervisor/manager
4 Trust/Confidence in senior leadership
Ability to manage work-related stress
Job security Ability to manage work-related stress
5 Opportunities to learn new skills Flexible work arrangements
Ability to manage work-related stress
Opportunities to learn new skills
6 Length of commute Trust/Confidence in senior leadership
Relationship with supervisor/manager
Flexible work arrangements
7 Ability to manage work-related stress
Opportunities to learn new skills
Trust/Confidence in senior leadership
Short-term incentives (e.g., annual bonus)
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Comparing top drivers of retention
Conclusion
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Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
37%44% 47%
54%
62%
0%
10%
20%
30%
40%
50%
60%
70%
How my totalcompensation compares
to the CEO at myorganization
How my totalcompensation comparesto the typical employee atother organizations like
mine
How my totalcompensation comparesto the typical employee in
my organization
How my bonus isdetermined
How my base pay/salaryis determined
Percentage of employees who agree they understand…
Employees claim to understand how pay is determined, but not its value relative to other groups
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Employee perceptions of internal equity and market competitiveness are mixed
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18%
33%
23%
19%
34%
20%
43%
36%
38%
42%
34%
38%
39%
31%
39%
39%
32%
42%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Base Pay
Bonus
Total Rewards
Base Pay
Bonus
Total Rewards
Below Average Average Above Average
Overall, how do you think the value of each of the following compares to that offered for similar positions in other organizations?
Pay fairness Globally, half think they are paid fairly, but 1 in 5 disagree Paid fairly compared to
others in other companiesPaid fairly compared to
others in my organization
USA
Global
global USA global USA50% 53% 51% 55%
The organization has defined job levels that reflect a common definition of internal job contribution across the organization
Our career planning and growth program includes emphasis on dual career paths for people managers and comparable-level individual contributors
My organization has a formal process to ensure there is no bias or inconsistency in performance reviews
No Yes No Yes
39% 59% 52% 62%
My organization has a formal process to ensure there is no bias or inconsistency in compensation distribution
39% 66% 57% 68%
The need for consistency in performance reviews and compensation decisions raises the importance of job leveling and career frameworks
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The transparency agenda demands it
52% of organizations report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)52% of organizations report that they have formally defined and communicated career paths/tracks (e.g., support/professional/management)
Employers promise pay for performance differentiation, but fail to deliver
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Employer view Manager view
USA Global USA GlobalOur base salary increases are effective at driving higher individual performance 24% 40% 27% 48%
Our base salary increases are effective at differentiating pay based on individual performance 42% 55% 28% 49%
Our short-term incentive programs are effective at driving higher individual performance 40% 50% 30% 52%
Our short-term incentive programs are effective at differentiating pay based on individual performance 41% 52% 48% 52%
Our formal performance ratings are effective at driving higher levels of performance among my direct reports n/a n/a 31% 50%
Our performance management system is effective at differentiating performance among my direct reports n/a n/a 48% 53%
40% globally 24% USA
Of employers think that base salaryincreases drive performance
Only
50% globally 40% USAthink that short term incentives do
Perceptions of differentiation effectiveness are mixed
Merit increase
Employees who did not meet expectations 0%
Employees who partially met expectations 1%
Employees who met expectations 3%
Employees who exceeded expectations 4%
Employees who far exceeded expectations (e.g., top 10%) 6%
Overall merit increase 3%
Incentive plan funding and differentiation resultsSuggest that “pay for performance” programs are not delivering the differentiation levels intended in design
Short-term incentive/bonus amounts Target differentiation*
Actual differentiation*
Employees who did not meet expectations 21% 18%
Employees who partially met expectations 52% 50%
Employees who met expectations 88% 86%
Employees who exceeded expectations 101% 99%
Employees who far exceeded expectations (e.g., top 10%) 118% 113%
And 90 percent of organizations have, are planning, or areconsidering changing some aspect of their performance management program
*Values represent averages
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On merit increase decisions, HR emphasizes the final rating and achievement of goals while managers take a more holistic view
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HR’s view Manager’s view
Factor should effect
Manager gives more weight than intended
Factor does effect their decision
USA Global USA Global USA Global
Final rating in most current year-end performance review 71% 72% 41% 52% 68% 63%
Achievement of individual goals 63% 65% 40% 47% 68% 65%Demonstration of knowledge and skills required in current role 55% 55% 34% 41% 73% 68%
Penetration in pay range for current role 51% 54% 28% 30% 39% 57%Achievement of team goals 46% 49% 21% 29% 71% 66%Concerns over market competitiveness 45% 48% 39% 37% 54% 55%Possession of skills critical to the success of the future business model 33% 46% 28% 40% 48% 63%
Criticality of the role 30% 48% 42% 54% 56% 62%Concerns over internal equity 36% 42% 47% 44% 30% 52%Perceived potential 32% 41% 40% 41% 40% 59%Demonstration of company values 36% 35% 20% 19% 60% 57%
Base pay, the number 1 driver of attraction and retention, gets mixed reviews while the world will get more complicated
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Performance Rating
Salary Range PositionBelow
MinimumLower Third
Middle Third
Upper Third
Unsatisfactory performance
0.0% – 2.0% 0.0% – 2.0% 0.0% 0.0%
Performance needs improvement
2.0% – 4.0% 1.0% – 3.0% 0.0% – 2.0% 0.0% – 1.5%
Good performance 4.0% – 7.0% 3.5% – 6.0% 2.5% – 4.5% 1.0% – 3.0%
Excellent performance
7.0% – 11.0% 5.0% – 8.0% 3.5% – 6.0% 2.5% – 4.5%
Suggesting that old tools and approach tothe annual merit cycle may needto change. As the number onedriver of attraction and engagement, weneed to get base pay right in themodern context
Half of employersglobally expect to pay more for certain skill sets in the next 3 years
Our managers execute our base pay program well
51% global
39% USA
After base pay, career management continues to be a top driver of attraction, retention and sustainable engagementBut effective career management remains elusive
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USA GlobalAll
employeesAll
employeesTop
performersHigh
potential
My company does a good job explaining how I can advance in my career 41% 42% 48% 59%
My immediate supervisor/manager helps me with career planning and decisions 32% 38% 47% 54%
My organization provides career planning tools and resources that are helpful to me (coaching, self-assessment, career paths, job rotation, competencies)
41% 44% 51% 60%
I have to leave my organization and join another organization in order to advance to a job at a higher level 47% 44% 42% 45%
Most employers provide traditional career paths, on-the-job training and internal job boards
Only a third of employersglobally provide lateral or dual career paths, beyond-the-job training, employee self-service tools and integration within technology (e.g. HRIS)
44% of employees globally feel they need to leave to advance their career.This doesn’t change for top performers (42%) or high potentials (45%)
Employees with alternative and flexible work arrangements are more engaged and less likely to be retention risks
Flexible work schedule
Compressed work week
Work from home
Work from other remote
location
Hot desking/ hoteling
None of these
By Engagement Group
Highly engaged 48% 46% 43% 49% 49% 29%
Unsupported 15% 17% 19% 19% 17% 16%
Detached 19% 19% 19% 17% 19% 23%
Disengaged 18% 18% 19% 15% 16% 32%
By Retention Risk
Stayers 45% 38% 47% 47% 45% 39%
Soft Stays 29% 30% 27% 28% 29% 35%
At Risk 10% 17% 10% 10% 9% 5%
Leavers 15% 15% 16% 15% 17% 21%
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For each work arrangement, distribution of employees across the engagement or retention risk groups
Conclusion
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Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
Percent of children entering school today who will end up in jobs that do not exist yet
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Source: Scott McLeod and Carl Fisch, quoted by World Economic Forum Future of Jobs Report, Davos, 2016
?
The Reality: The employment relationship is changingThe plurality of work options is here…
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Artificial IntelligenceRobotics
Talent platforms
AlliancesOther types of workers
OutsourcingTraditional employees
Volunteers
Resulting in fundamental shifts in how work and organizations are organized
Our organization is a place containing employees doing work.
Our organization organizes work and talent.
Our organization is a fixed set of functions that work together to create value.
Supply chain ManufacturingRetail stores Marketing
IT R&D
Our organization is a malleable set of functions and deciding which ones get done inside the organization is a big part of strategy.
Supply chain Manufacturing
Retail stores MarketingIT R&D
R&DRetail stores
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The use of non-employee talent is increasing and having an impact on businesses
Growth in share of non-employee talent expected over next three years
25% 24% 46% 54%Of all managers say they manage at least one contingent worker on their team
Of all managers say they manage at least one contractor
Of companies report changing their workforce activities enabling them to use more non-employee talent due to technology now or in in the next three years
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Talent Platforms: Freelancers & the redefined “job”
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Hiring for work, not jobs
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Identify the tipping pointsWhile jobs filled by employees will continue to be the dominant means for getting work done, companies are experiencing challenges in two key areas
High Value/Limited Supply: “Premier”
§ Highly skilled work with challenges attracting & retaining and market supply (e.g., software development talent)
§ By deconstructing jobs companies can change the talent curve creating supply for select activities and tasks
High Supply/Eroded Value:“Democratized”
§ Technology is fragmenting traditional skilled work into tasks that can increasingly be performed by less skilled talent (e.g., accounting, manufacturing assembly)
§ There are significant cost opportunities to be realized by thinking beyond employment
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Valu
e
Supply
Conclusion
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Setting the Stage
The Modernization AgendaGetting it right
Effective Leaders are Critical to a Compelling EVP
Addressing the Work Component of the EVPEmployers need to focus on workplace stress and wellness
Achieving Effective Performance Management
Implications for Total Rewards
Future of WorkEffective management of work types, channels and options is part of the modernization agenda
Additional Information
3 Modernizing pay for performance starts with re(defining) performance
The new Total Rewards reality suggests…
1 Transparency is a core principle
5 Recognize that the “total” in total rewards includes flexibility and a move away from “one size fits all”
2 Career security is the new job security
4 Base pay needs an identity check; it’s purpose may be lost
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Modernizing Total Rewards means challenging conventional thinking
Traditional approach New reality
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Employeesnever discuss pay and benefit details with each other
“Living out loud” on Glass Door; emerging legislative agendas that prescribe pay transparency
Provide guaranteed jobs Enable career security through career development
Pay for performance = merit increase and incentive pay based on last year’scompany performance + individual “performance rating”
Changing business models and nature of work means challenging the individual performance definition and the role of base pay
“One size fits all” Segmentation and customization
What HR Leaders should be doing now to address these issues…
29
Leaders within every organization have a call to action!
§ Are new or different skills needed to guide the future?
§ Do you understand the workforce of your future? § What is the new desired organization culture?
Understand how technology is impacting your business
§ How can work be deconstructed?§ Can you accommodate a range of work options
(from AI and Robotics to contingent labor?)§ How will you align the right rewards to the
workers?
Take advantage of digitalization for how work
gets done at your company
§ Build out your learning and development programs to ensure you upskill the workforce to meet your future needs
Provide opportunities for Learning and Development
§ Build out a Worker Value Proposition that takes advantage of technology touchpoints inside and outside of your organization
§ Leverage technology and data insights to shape a value proposition for all of the workers
Consider using new technology to shape your employment and worker
value proposition
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