Recipe for success

A reward strategy must keep up with the workforce's preferences

Different generations may value and perceive employee rewards differently. This impacts on reward strategies in the workplace which have been specifically developed to attract, retain and motivate staff. A one-size-fits-all approach to reward strategy may not achieve the objectives intended, leading to direct and indirect financial implications for businesses.

Considering future demographic trends, employees from Generation X and Generation Y will start to dominate the composition of the workforce. Employers need to consider the preferences and motivations of these generations in order to attract and retain talent, as well as to increase productivity. 
 

Reward strategy plays a key role in defining the employee value proposition and, as such, demands the continued attention of employers. One-size-fits-all reward strategies do not take individual preferences into account, but it can be argued that large employers do not have the capacity to customise reward packages at an individual level.

The complexity of this type of customisation would lead to significant expenses in terms of time and coordination. It is thus beneficial for organisations to find a way to segment the workforce according to reward preference, in a way that provides a balance between individual customisation and organisational efficiency.

To develop an effective pay plan that can meet the needs of each generation, an organisation needs to:

Identify and quantify which generations are prominent in your workforce: Think about how that may change in the future and try to anticipate the generational makeup of your workforce five years from now. Some predictions show nearly half of the workforce will comprise millennials in five years. By understanding what your workforce looks like today and is likely to look like in five years, employers can establish a forward-thinking, strategic head start on defining a compensation strategy that will carry their business into the future.

Assess your current compensation mix and how well it aligns (or doesn’t) with your workforce: Remember that it may not necessarily be tied just to generational differences; the mix of pay that works best for the various segments of your population may have just as much to do with function than strictly generations. What types of compensation does your organisation currently use to pay employees? Perhaps more importantly, how competent are you in putting together the right compensation mix for your workforce? 

Begin a conversation with your executives about the appropriate level of transparency relative to your pay plan in the organisation: After taking an inventory of the workforce, employers should think about the organisation’s culture and industry. Some more traditional industries avoid full transparency while other value-driven organisations lean towards higher levels of transparency. 

These insights help us understand the need to design tailored compensation programmes for a workforce belonging to different age groups.