The 2008 financial crisis revealed much about the culture of many organisations in the financial services sector, attracting widespread condemnation. The crisis paved the way for robust discussions about the link between remuneration and culture and the topic recently gained renewed energy with the Australian banking royal commission.
In contrast, there’s no shortage of studies, including ours, showing that salary and benefits are no longer the top reason a candidate chooses one company over another, nor are they the most effective way to motivate employees. Today, culture is the number one differentiator. However, it’s not as simple as saying culture trumps reward in attracting and motivating people. The truth is much more complicated: remuneration is at the heart of culture, it signals to employees what the organisation values. Remuneration strategies must consciously be designed to reinforce the culture companies want to create.
At the heart of the discussions around culture in the banking industry royal commission is the recognition that reward, whilst only one aspect, does have a role in influencing behavioural outcomes – and by extension in attracting and retaining the right people – but it doesn’t stand alone. Reward strategies must now evolve to embrace a true employer value proposition (EVP) approach that recognises the link between reward, culture and brand. Reward on its own does not create the EVP, but it can help tell the story. Take sustainable outdoor clothing company Patagonia as an example. Their innovative reward structure includes elements like 3-day weekend options and a surfing policy that allows employees to surf (or do other exercise) in work hours. They report that rewarding their people in this way has helped them attract people aligned to their values and has improved performance and productivity.
EVP is certainly not a new idea; in the 2001 book The War for Talent, the authors stated that an EVP “is about how well the company fulfills people’s needs, their expectations, and even their dreams.” People have dreams beyond only wealth – money doesn’t buy happiness. In 2018, in a workplace where millennials are now the most populous generation, the shape of those needs, expectations and dreams has changed dramatically. Now, they’re more likely to be driven by the individual’s values, rather than by pecuniary reward. So, while pay is still important, it’s only one factor. Indeed, pay is now well down the list of reasons why people leave or join an organisation behind factors like culture and leadership.
What’s more, an organisation’s EVP is now open to greater scrutiny than ever before. While the organisation can control how it talks about it’s EVP, the ubiquity of social media and increased transparency led by platforms like Glassdoor, mean that EVP perceptions can now be tested publicly. If the way the EVP is experienced by employees doesn’t stack up, then the employer’s external brand will suffer as a result.
The brand damage that’s followed the revelations in the banking industry has been extreme, with only 1 in 5 people now believing that banks consider the best interests of their customer according to a recent Deloitte study.
Of course, the reverse is also true. While a poor reward strategy will feed a negative culture, a well-designed reward strategy can reinforce a positive culture and demonstrate alignment between what the company promises its employees and what it delivers. Remuneration and benefits professionals have a key role in aligning the EVP with organisational strategy and making it operational. More than ever, this requires the HR community to work closely with business leaders to implement the approach in an integrated and coordinated manner.
While the starting point is a clear and cohesive EVP, reward strategy is essential in translating the EVP into an authentic employee experience. Taking a holistic view of what your reward structure says about the culture and values of your company sets you up to attract and retain the right people to deliver your organisation’s strategy and live your purpose.