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May 21, 2008
Improve Engagement and Company Performance through 'Generational' Total Rewards
By Chris Ceplenski, Senior Editor

Want better retention, lower absenteeism, improved recruitment, and higher productivity at your company? This is the potential ROI you can achieve if you take a generational approach towards total rewards.

This was a message delivered at a breakout session Wednesday at the 2008 WorldatWork Total Rewards Conference & Exhibition in Philadelphia. Roger W. Smith, VP Human Resources Continental Division at HCA/HealthONE, and HealthONE's Director of Total Rewards, Courtney Sherwin, made the case for taking a total rewards perspective when thinking about the generations in the current workforce--Traditionalists, Baby Boomers, Generation X, and Generation Y--in order to create satisfaction and engagement among workers, which will in turn improve performance and results for businesses.

As explained by Smith and Sherwin, the total rewards perspective organizes the employee population into groups consistent with their experiences, history and generational association to determine what components of their compensation, benefits, work-life performance, and development and career opportunities are perceived to be most valuable to them.

Smith and Sherwin placed special emphasis on Generation Y (those defined as born in 1982 or later) in their presentation. Among the reasons why are two that are significant and related: 1) There will be a shortage of workers to fill tomorrow's jobs: the U.S. Department of Labor estimates that there will be 165 million jobs in 2012, but only 162 million available in the workforce. By that time, 76 million Baby Boomers will retire and only 46 million younger workers will take their place. 2) Gen Y is the fastest-growing segment in the workforce. Therefore, it follows that if your company wants to attract and retain members of this generation, now accounting for over 20% of the population, it should strive to understand them, their traits, and their values in order to offer total rewards that best meet their needs.

Regardless of what generation you're dealing with, Smith and Sherwin stressed that when you're aligning your total rewards with employee needs, it is paramount that your managers get to know your people/employees on an individual level. Members of all four generations want to be appreciated and have their efforts rewarded in some way, and rewards that reflect a company's understanding of what individual employees value most will go a long way towards creating employee engagement and satisfaction.

For examples of this concept in practice, here's a quick look at Traditionalists (those born before 1946) and recommendations Smith and Sherwin made for approaching them from a total rewards perspective: About 75% of Traditionalists are grandparents and 95% of them are retired. Many who are still working are doing so because they've either come out of retirement, or simply can't afford to retire.

Smith suggests that for these workers, recognition doesn't have to come in the form of a big bonus, but could be as simple as purchasing a gift for the employee's grandchild. He gave the example of a manager getting to know about the employee and his family and catering the gift to his grandchild's interests (a signed baseball bat for a big baseball fan), a good example of taking an individual approach towards rewards and one that's likely to have a lasting impact on the employee.

Other ideas Smith gave to reward Traditionalists involve flexible scheduling--allowing early risers to start their workdays early and leave early; allowing extended time off in colder/warmer months so they can their time in a second home, and allowing them a paid day off for their grandchild's birthday. In terms of career and development, employers could offer these workers basic courses for using PCs, e-mail, instant messaging, etc. Another idea Smith posed would be to invite Traditionalists to speak at new employee orientations and create opportunities for them to mentor Gen Y workers.

Again, the needs and life circumstances of members of each generation play a large role in the types of rewards you should offer, Smith and Sherwin explain. Take Generation X, for example: Nearly 1 out of 2 members of this group (born between 1964-1982) is a working parent. It is an "incredibly family-centric" group, Sherwin notes. Therefore, in order to provide work-life balance for these employees, employers could encourage them to take time off to attend kids' field trips or sporting events. Or they could arrange schedules so that employees can take a block of time off to spend with their kids. Another suggestion Smith and Sherwin offered would be to create incentives to rehire corporate alumni, by allowing those that leave the company to return within a specified period of time (for example within 5 years) and still be allowed to retain their accrued paid time off balance.

Also, Gen X is a group that is squeezed between caring for both their aging parents and their children. Therefore, any benefits such as on site daycare or back up care arrangements, an offering of long term care insurance, and other services of that nature could be extremely beneficial to Gen Xers.

Generation Y Brings New Challenges, Opportunities

There was a large amount of voluntary audience participation when the speakers aimed to identify the values and traits of Gen Y. Some universal themes that emerged between the speakers' presentation and the audience's input is that Gen Y is a group that is incredibly technologically savvy, accustomed to getting instant information/answers (via internet primarily), mobile, and good at multitasking. (Only one member of the audience self-identified as a member of Gen Y and Smith teased her in jest for text messaging during the presentation.) Another notable trait among this group is that they often take collective action (stand together for a cause, such as the environment).

Members of this generation are not likely to stick with the same employer for very long and are less enamored with authority figures within the company (a marked contrast with many Traditionalists or Baby Boomers who would place a high value on being recognized by a company CEO). Sherwin explained that if your company has a multi-year vesting schedule for some type of benefit such as a 401(k), it's going to fall on the deaf ears of a potential Gen Y hire.

Sherwin asserted that the concept of "work/life" has undergone a "paradigm shift" with Gen Y and has now become a "life/work" balance. That is, members of this generation say "I want a life first, and then I'll work." To that end, companies seeking to attract them should focus on this life/work balance, and let employees choose their work location and hours, if the job allows.

Because they value immediate results, provide immediate performance feedback to Gen Y, say Smith and Sherwin. This translates to rewards in the form of spot bonuses: Members of Generation Y don't want to hear about the promise of a large reward "down the road" for their efforts. In fact, they would rather receive a reward that has less value now versus waiting for a more valuable reward later, Sherwin explains.

To address their desire to get behind a cause, you could offer a week of paid time off to volunteer support hurricane relief (i.e., Hurricane Katrina) or other similar types of efforts. Development and career opportunities for Gen Y might include providing opportunities for leaderless groups or those that have the authority to make decisions outside the formal lines of authority. Another idea is to create stimulating jobs and opportunities for job variation, mobility, and personal growth (Sabbaticals, key assignments, frequent changes in job, location and/or departments).

A few of these ideas related to Gen X and Gen Y may sound somewhat extreme or exceedingly generous on their face, particularly when it comes to granting time off and presenting incentives for returning workers, but keep in mind that it's estimated that members of Gen Y will hold 25 (yes, that's twenty-five) jobs on average in their lifetime. (Even if members of Gen Y leave your company, it's possible that they could come back to work for you once or twice more during the scope of their career, Smith noted.) The speakers stressed that a key component to the retention of members of younger generations (particularly Gen Y) will be for employers to design work schedules that fit employees' needs.

The Payoff

Smith and Sherwin provided examples of companies that have implemented ideas such as the ones they presented in order to leverage talent in a multigenerational workforce, and shared the results:

  • UPS implemented flexible schedules and realized a reduction in turnover from 50% to 6%
  • Children's Health System saved 4,020 work days after it began providing its employees with back up child care
  • Hewlett Packard experienced a 200% increase in daily transactions, a 50% reduction in overtime, and 100% higher productivity after implementing a compressed workweek

Finally, the speakers cited a Cone Corporate Citizenship Study that found that 77% of adults indicated a company's commitment to social issues influenced their decision about where to work. Certainly food for thought in the wake of DOL's forecast regarding a worker shortage.

The speakers also showed that Fortune 100 "Best Companies to Work for" have experienced bottom line results in terms of their stocks, which have performed better overall than the S&P 500 (a 10-year return of 35.5% vs. 17.6%).

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