total reward design for an intergenerational workforce - compensation strategies
DESCRIPTION
Total Reward Design for an Intergenerational Workforce: This presentation discusses: • An overview of generations • Compensation strategies for rewarding and motivating the inter-generational workforce including Base salary, Incentives, Benefits and Pay increases. Ed Rataj is a nationally recognized compensation expert, Certified Compensation Professional and Managing Director of Compensation Consulting with CBIZ Human Capital Services. For more information about CBIZ Human Capital Services, visit http://www.cbiz.com/page.asp?pid=6034.TRANSCRIPT
CBIZ Human Capital Services
Total Reward Design for an Intergenerational Workforce
Introduction
• Edward R. Rataj• Managing Director, Compensation Consulting• Certified Compensation Professional (CCP)• Frequently quoted in national news publications such as
the Wall Street Journal and Smartmoney.com
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Overview
• Overview of generations• Compensation strategies for rewarding and motivating the
inter-generational workforce:– Base salary– Incentives– Benefits– Pay increases
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Why Specifically Focus on Generations?
• The workforce continues to change demographically and globally
• For the first time, we have the largest number of generations (Traditionalists, Baby Boomers, Generation X, Generation Y and Millenials) in the workplace
• Generations have varying values, motivations and perceptions of reward strategies
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One Note About Generalizations…
Importa
nt!
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Generations Born Age
Traditionalists 1930-1945 66-81
Baby Boomers 1946-1964 47-66
Gen Xers 1965-1978 33-46
Gen Yers 1979-1990 21-32
Gen Z/Millenials* 1991 & Later 20 & Younger
* New to the workforce, characteristics still being defined
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The Emerging Workforce Has Different Values*
Traditional
(1930–1945)
Boomers
(1946–1964)
Gen X
(1965–1978)
Gen Y
(Born 1979–1990)
• Conformity
• Stability
• Upward mobility
• Security
• Economic success
• Personal and social expression
• Idealism
• Health/Wellness
• Youth
• Free agency and independence
• Street smarts
• Friendship
• Cynicism
• Hope about the future
• Collaboration
• Social Activism
• Tolerance for diversity
• Family centricity
*CEO Magazine 7
Traditionalists - Characteristics66-81 years old
• Appreciate tradition and conformity; patriotic• Stability and security “You get a job…you keep a job”• Make a lasting contribution• Value appreciation for input and experience• Value financial security; thrifty• Economic success
– $1.7 trillion in buying power– 50% of discretionary income -this is changing
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Traditionalists - Communication
Face to face
Telephone
Formal
Handwritten personal note
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Baby Boomers - Characteristics
• 77 million strong!• “Work hard, pay your dues”
– First generation of “workaholics”; focused on outstanding careers
• Idealism• Grew up during times of societal change• Value personal and social expression• A sense of community and belonging• Health/wellness/youth is critical
47-66 years old
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Baby Boomers - Communication
Phone
Personal interaction
Meetings
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Gen Xers - Characteristics
• More likely to be children of divorce and/or be children of working parents – Independent; “Latch-key kids”
• Watched as parents were right-sized or down-sized and may have jaded view of loyalty to one company. – First generation of “Job-hoppers”
• Training is security – If not learning then won’t be prepared for the future.
• Thrive on responsibility, honesty, creative input• Grew up with technology, savvy with media and
information
33-46 years old
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Gen Xers - Communication
Efficient technologies
Voice mail
Direct & Immediate
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Gen Y - Characteristics
• Respect accomplishments rather than authority• Goal oriented, problem solvers• Street smart and savvy• Born in the time of the “child” – praised constantly,
everyone is a winner• Great multi-taskers – been doing multiple activities their
whole life• Intent on making a difference in their communities
21-32 years old
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Gen Y - Communication
Email and voice mail
Instant messaging
Text messaging
Blogs
Tweets
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Millenials/Gen Z - Characteristics
• Just beginning to enter the workforce• Technology driven• Views communication as an instant – anytime, anywhere• Like Gen Y, are great multi-taskers – been doing multiple
activities their whole life• Exposed to classrooms and teams rich in cultural,
religious and ethnic diversity• Learned conflict-negotiation skills in school
20 and younger
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Millenials/Gen Z - Communication
Text messaging
Verbal and written communication skills may be lacking
Large social networks
No expectation of privacy
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What does this mean for total reward design?
• Base salary• Incentives• Benefits• Pay Increases
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Base Salary
• Regardless of generation, salary must be market competitive to recruit and retain talent.
Traditional
(1930–1945)
Boomers
(1946–1964)
Gen X
(1965–1978)
Gen Y
(Born 1979–1990)
• Loyalty to organization
• Internal competitiveness
• Hired guns/ mercenaries
• Accessing opportunity
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Designing a Market-Based Compensation System
• Plan and collect data• Ensure job documentation accuracy• Complete market analysis• Design pay structures• Model implementation costs• Assess internal equity• Create procedure manual• Report results
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Designing Salary Structures
Range SpreadMidpoint Differential
minim
um
midpo
int
maxim
um
Typical Structure
Designing Salary Structures
Range SpreadMidpoint Differential
minimum
midpo
int
maximum
22Midpoint Differential
minimum
midpo
int
maximum
Market Structure “Gen Y” Structure
Incentives
Traditional
(1930–1945)
Boomers
(1946–1964)
Gen X
(1965–1978)
Gen Y
(Born 1979–1990)
• Appreciation & recognition important
• Plaques, certificates, employee of the month
• Individual rewards
• Reward for results
• Team rewards
• Constant feedback
• Spot awards useful
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Incentives
• Ensure incentive programs are aligned with overall organizational objectives
• Develop line-of-site performance objectives• Consider mix of short-term and long-term awards along
with spot awards and non-monetary recognition programs
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Benefits
Traditional
(1930–1945)
Boomers
(1946–1964)
Gen X
(1965–1978)
Gen Y
(Born 1979–1990)
• Embrace defined benefit retirement programs, including social security
• Eligible for Medicare
• Make employment decisions based upon benefits offerings
• View social security as a “ponzi scheme”
• “Pay me now, I’ll take care of myself” mentality
• Prefer flexible benefit options
• Value creative and time off benefits
• More focused on salary than benefits
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Benefits
• Consider offering high-deductible plan option• Think about adding a unique benefits like veterinary care
insurance or sabbatical leave to attract and retain Gen Y• Work/life balance, flexible work environment and wellness
programs key• Consider benefits of Early Retirement Incentive Program
(ERIP) if organizational fit
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Pay Increases
Traditional
(1930–1945)
Boomers
(1946–1964)
Gen X
(1965–1978)
Gen Y
(Born 1979–1990)
• Cost of Living Adjustments (COLA) important
• Seniority and internal equity important
• Pay increases should be tied to performance
• In constant communication with friends, will share pay increase information
• Entire group may leave if perceived as unfair
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Pay Increases - Merit Matrix
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Boomer-Centric
Matrix
Performance 1 2 3 4Exceptional 3.5% 3.5% 3.0% 3.0%
Exceeds Expectation 3.0% 3.0% 3.0% 3.0%Effective 2.5% 2.5% 2.5% 2.0%
Development Needed 2.0% 2.0% 2.0% 2.0%Critical Need for Improvement 2.0% 2.0% 2.0% 2.0%
Quartile in Range
Pay Increases - Merit Matrix
Best Practice
Matrix
Performance 1 2 3 4Exceptional 6.5% 5.5% 5.0% 4.0%
Exceeds Expectation 6.0% 5.0% 4.0% 3.0%Effective 5.0% 4.0% 3.0% 2.0%
Development Needed 2.0% 1.0% 0.0% 0.0%Critical Need for Improvement 0.0% 0.0% 0.0% 0.0%
Quartile in Range
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Pay Increases - Merit Matrix
Ultra-Aggressive
Matrix
Performance 1 2 3 4Exceptional 13.0% 11.0% 5.0% 3.0%
Exceeds Expectation 11.0% 6.0% 3.0% 1.0%Effective 4.0% 0.0% 0.0% 0.0%
Development Needed 0.0% 0.0% 0.0% 0.0%Critical Need for Improvement 0.0% 0.0% 0.0% 0.0%
Quartile in Range
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Results
Model fits within budget
Typical
Matrix
Performance 1 2 3 4Exceptional 8.0% 7.0% 6.0% 5.0%
Exceeds Expectation 6.0% 5.0% 4.0% 2.5%Effective 4.5% 3.5% 3.0% 2.0%
Development Needed 2.0% 0.0% 0.0% 0.0%Critical Need for Improvement 0.0% 0.0% 0.0% 0.0%
Cost SummaryPayroll: $30,400,917 Budget $: $1,064,032
Merit Increases: $1,071,120.86 Budget as % of Payroll: 3.5%
Percent Increase: 3.5%
Cost Detail
Performance First Second Third FourthExceptional $83,979 $184,222 $88,669 $15,200
Exceeds Expectations $109,175 $158,310 $58,617 $0Meets Expectations $108,116 $191,830 $36,698 $3,650
Development Needed $32,654 $0 $0 $0Critical Need for Improvement $0 $0 $0 $0
Total Cost: $1,071,121
Employee Count Detail
Performance 1 2 3 4Exceptional 24 36 16 4
Exceeds Expectations 36 60 20 0Effective 52 96 16 4
Development Needed 36 40 20 4Critical Need for Improvement 24 32 12 4
Total Employees: 536
Quartile in Range
Quartile in Range
Quartile in Range
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Pay Increases - Merit Matrix
• Common Pitfalls– Structures out of alignment with market
• Garbage in, garbage out
• May improperly allocate limited salary increase dollars based upon the current competitiveness of pay
– Performance scores not calibrated• Supervisors can learn to game the system
• Cheating is rewarded
• Top performers may not be properly rewarded
– Matrix results outside of budget
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Summary
The intergenerational workforce brings different values, attitudes toward work, work styles, job satisfaction criteria, engagement beliefs, learning styles, expectations and levels of commitment to the workplace
Organizations that understand this and design rewards programs to meet generational needs will have the competitive edge
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Additional Considerations
• Nonprofit compensation• Executive compensation in closely held businesses• Fair pay based on race and gender• Online performance management• Sales compensation
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CBIZ CompCasts
CompCasts Nonprofit Quick Guide to Navigating Intermediate Sanctions
How to Set Pay Ranges that are Fair and Effective
Creating and Using a Salary Increase Matrix
Fair Pay: Maintaining Equality in Today’s Litigious Society
In development at: www.cbiz.com/hr/compcasts
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Questions?
Ed Rataj, CCP
Managing Director – Compensation Consulting
CBIZ Human Capital Services
(314) 692-5884
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