Over the past decade, there has been a growing trend among global organizations to treat their employees as internal consumers. The most innovative of these companies have gone a step further by embracing the concept of “consumer-driven human resources (HR)” -- that is, a mind-set and an operating philosophy that acknowledge and respond to the increasing variety of work-related choices available to employees.
This approach has significant potential for impact on the design and administration of total rewards programs, thus influencing the work and careers of total rewards professionals around the world.
Companies adopting the characteristics of consumer-driven HR recognize that employees today have a broader level of information and choice in many areas, including a greater range of career options, a wider array of employers from which to choose, and more flexible programs offered by specific employers (with more features selectable by employees).
These expanded choices have in turn made corporate life a more efficient marketplace for its increasingly savvy employee-consumers. The roots of this shift in program design actually go back to the 1980s, when companies introduced choice-based programs, such as flexible benefits and cafeteria-style plans.
Today’s employees are more mobile, educated, technologically enabled and short-term-focused than ever. They also have become informed consumers of their organizations’ brands, culture, and compensation, benefits, and career development programs. And with the first Generation Z employees entering the workforce, companies can expect that the preferences and expectations of their employee populations will continue to change, becoming more personalized and more sophisticated along the way.
In response to this emerging consumer-employee, leading companies have turned to consumer marketing theory to gain insights about -- and connect with -- their current and potential talent. Just as companies are using technology and Big Data to direct products and services to ever more carefully targeted segments of customers, organizations are starting to understand the different segments of their varied workforces, including what motivates them and what elements of the employee value proposition they value most.
The 2014 Global Workforce Study conducted by Towers Watson reports that 70% of employees believe their organization should understand them to the same degree that they are expected to understand external customers. Yet only 43% of employees report having an employer that understands them in this way.
A central tenet of marketing theory suggests that not all customers want the same things. The corollary is that not all customers are equally important to the company. Both concepts also apply to the market for employees. Companies that take a “consumer-driven HR” approach use consumer marketing principles to define and understand employee groups by what they need and by their contributions to the success of the business.
For example, the most innovative companies: (1) segment the employee market. Innovative organizations begin by defining employee segments in ways that extend beyond classic demographic groupings.
Effective segmentation criteria leave generous room for creativity in exploring the values, attitudes, preferences and relative contributions of the employee population. Most organizations begin by collecting information from standard demographic and generational categories, but more relevant segmentation variables emerge, including strategically critical roles or locations, actual and potential performance levels, engagement levels, life stage segments, and attitudinal categories.
These data provide organizations with additional information and insight beyond what can be derived from conventional segmentation approaches.
(2) Measure how employees value rewards elements. After segmenting the employee population, companies can test rewards elements to determine which have the highest perceived value to particular employee groups.
The objective is to understand and define the value proposition with the greatest appeal to each group.
Consumer-products companies do the same thing when they conduct sophisticated market research to understand how their target segments will respond to the features and price of a proposed offering. This research can take a number of forms, including focus groups, data mining, employee surveys, and trade-off analysis (which presents employees with scenarios to determine what they view are the most and least valuable components of their rewards package).
(3)Analyze the financial and behavioral implications of rewards. Once companies understand what employees value (market researchers call these utility preferences), the information can be translated into guidance for determining rewards that the organization can deliver. Program design hinges on the relationship between what employees value (and the resulting behaviors, like commitment and engagement, that these programs encourage) and the cost to provide a specific array of rewards.
The ultimate goal is for the company to identify ways to fund more desirable rewards, by shifting investment away from less desirable rewards areas (those with lower perceived value relative to cost).
Organizations that embrace consumer-driven HR have learned that by understanding and acting on employee needs and preferences, they are more likely to have motivated and committed work forces, even with total rewards budgets that are no greater in aggregate than the investments of their peers. Their employees will be more engaged, serve customers better, innovate more frequently and consistently, and protect company assets more conscientiously.
Experience with organizations that have performed the return on investment analysis demonstrates that superior financial results become part of the equation as well.
Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, financial and risk management. For more information, please write to Leah Denoga at leah.denoga@towerswatson.com, call 902-0731 or visit www.towerswatson.com/philippines.
source: Businessworld
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