Maximize the Value of Total Rewards in Your Hiring Process
By Peter Saulnier and Vincent Chow
Alex, a recruiter in a mid-sized engineering firm, just got a phone call from Chris, a current candidate. Chris has been through three successful interviews for the role of Project Engineer and has received an offer from Alex for $60,000. Chris is now telling Alex that another firm has just offered him $75,000. Chris has decided to accept the higher offer and will pass on the one from Alex’s company.
Alex is thinking – is there anything else I can do or say to save this deal? Or just let it be – after all, this is the fourth candidate this month who didn’t accept their offer. “Are we that off?” she wonders, as she walks to tell the Compensation team that, thanks to their “competitive” ranges, they’ve just lost another candidate.
No Compensating for Poor Offers
One of the most challenging parts of the hiring process is the salary negotiation. Since most people don’t work for free, compensation is obviously a very important reason why people work. However, talented employees don’t just work for money. Today’s employment deals include many items, some of which can be easily quantified, and some which can’t.
In a hiring process, one thing is almost certain: candidates would like to maximize their deal and get the highest pay they can negotiate. Managers, on the other hand, may have a very different number in mind, whether due to limited budget, concerns about internal equity with existing employees, or simply because there is a clear pay range for the position.
What happens when you have done all your homework and you believe that what you’re offering is a fair and equitable salary – but it’s still not enough? Why do there always seem to be other organizations offering higher salaries than you?
As we live in a free market society, no matter how competitive your offer is, there is always a possibility that someone else will offer higher. In recent years it’s become obvious that organizations need to utilize the “total rewards” concept effectively – not only for their existing employees, but also for their potential employees.
By selling your total rewards package effectively, organizations are showing candidates the true employment deal – not just the number on their pay cheque. Candidates will have a much fuller understanding of what they will receive if they join your organization. It also takes away some pressure during the salary negotiation process as now the emphasis is on the overall value of the offer.
Here are 3 easy steps to ensure that you maximize your organization’s total rewards programs to attract, and secure, quality candidates:
1. Making a List – Build Up a Full Inventory
Many organizations have all the pieces of a comprehensive total rewards program, but haven’t spent time putting them together on one sheet. It is a rather easy thing to do: review your inventory of programs and summarize them together so it is easy for recruiters, hiring managers and candidates to understand the overall total rewards package.
There are 5 elements of total rewards:
- Performance and recognition
- Development and career opportunities
Salary is obviously a key element. However, many organizations also offer short term and/or long-term incentives. Sometimes it can be difficult to demonstrate the value of an incentive plan, especially when it’s an equity-based plan (stock options, for example). However, it can be advantageous to explain to candidates what the payout could be in different scenarios. Also, don’t forgot some of the extra incentives your organization may provide, such as a referral bonus, project completion bonus, or recognition awards.
The list of benefits can be long, and most organizations have them summarized already. For those organizations with a retirement benefit, the biggest opportunity is to make it easy for candidates to understand its value. Don’t just present the plan text, but also a few scenarios and real examples so new recruits can appreciate its significant potential value to them.
Work-life programs can range from flextime and telecommuting to health and wellness initiatives, to community involvement and volunteering programs. Today’s organizations have established many programs to enhance their employee experience. These programs usually reflect the organization’s culture and values – which for many candidates can be the real differentiator when they choose their next employer.
It may seem strange to include this as a reward, but in many organizations the focus of the performance process has switched from appraisal to development. And accountability for the process is shifting from manager-owned to employee-owned, or at least shared accountability. Hence, employees can really benefit from a well-designed and well executed performance process that includes, for example, goal setting which assists their career development, coaching meetings to help them perform well, etc.
Development and Career Opportunities
One of the common reasons that candidates consider joining a new organization, especially when they currently have a job, is that there may be better opportunities in a new organization. Some learning and development programs that organizations provide are easily translated to a dollar value to show to candidates. Others may be more difficult, such as a formal coaching program, a career development initiative, or a job rotation program. For the “right” employee, these programs and opportunities are invaluable.
2. Make the Data Come Alive
Once the list is done, focus on what you can do to make it easier for candidates to realize the value of all these items.
A great example are equity-based pay programs such as stock options or restricted stock. These can be a very effective way to create future wealth for employees, but it can be difficult for some candidates to visualize the actual potential. Companies should utilize scenarios and visual aids to illustrate the earning potential and provide candidates a positive (but realistic) view of the program.
Similarly, many organizations have a good retirement program but struggle to demonstrate its value. The same approach can be used to bring it alive for candidates. Even for a straightforward group RRSP, instead of simply indicating in your offer letters that your organization contributes 3 per cent, why not show it in real dollars based on earnings and help them understand the potential future value? Powerful stuff.
How about those total reward items that are harder to quantify? Be creative. For example, for courses that are offered or for career opportunities within the organization, how about showing candidates real employee testimonials, even video clips, about their experience working with your organization? Or even share your training calendar with your candidates so they truly appreciate your investments in employee development.
3. Customize: Own Your Rewards
Once you have the full inventory, create a few variations based on your frequent hires and/or targeted demographic groups. Figure out what would be the perceived strengths (and areas of improvement) for various groups, and then emphasize the most attractive items with each candidate group.
For example, for a retail company the majority of hires are front line sales employees. The rewards emphasized in the hiring process for this group might be your flexible hours, or learning opportunities, or very competitive branch bonus plan. Whatever they are, make sure that you present the most relevant rewards in a way that the candidate groups will best understand their value.
Follow these three steps and you’ll be well equipped to show candidates the true value of your offer. And that will give your hiring process the best chance to succeed.
Peter Saulnier, CHRP and Vincent Chow are partners with Logan HR Management Inc. (LoganHR.com), a consulting firm specializing in career transition, compensation and performance management.
(PeopleTalk: Winter 2012)