Perspectives. Employee Value Proposition: Key to Getting and Keeping the Best

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1 Perspectives Employee Value Proposition: Key to Getting and Keeping the Best How can an employee value proposition (EVP) help you find and keep the best talent? What are the 10 critical practices to developing the right EVP for your organization? Why is it important to brand the EVP and how do you do it?

2 Companies that have adopted an integrated approach to reward strategy, design and execution in the context of an overarching EVP are realizing better outcomes. At a recent meeting, the head of human resources at a large, global consumer products company asked us a critical question: How can I make sure we re attracting, retaining and engaging top talent especially in fast-growing regions like China and Brazil? I see our current demographics; I see our growth plans, and I worry that we aren t doing enough to position ourselves against the competition. If your company has global operations, you ve probably confronted the same issue or you will soon. Findings from our Global Talent Management and Rewards Study, The Next High- Stakes Quest: Balancing Employer and Employee Priorities, confirm the issue: Almost three-quarters of employer respondents globally (72%) report problems attracting critical-skill employees, and over half (56%) report problems retaining them. The numbers are even higher among companies in fast-growing economies, with 82% and 71% reporting problems attracting and retaining critical-skill employees, respectively. That s the bad news. The good news is that our research and experience also reveal what it takes to get it right. Companies that have adopted an integrated approach to reward strategy, design and execution in the context of an overarching EVP are realizing better outcomes. These companies are: Less likely to report problems attracting and retaining critical-skill employees Five times more likely to report their employees as highly engaged More than twice as likely to report achieving financial performance significantly above their peers And the differences are more pronounced when these findings are examined in the context of the regional economic conditions in which the companies are operating. In fast-growing economies, where talent markets are tight and competition for the best talent is intense, the companies that get it right in terms of an effective EVP and total rewards strategy, design and execution are even less likely to report problems with attraction and retention, and 2.5 times more likely to report financial performance that is substantially above their peer group. Getting the EVP Right So how do you get the EVP right? At Towers Watson, we ve distilled the process into 10 key practices: Develop a formal EVP. Effectively communicate the EVP to employees. Align the EVP with what the organization stands for in the marketplace. Deliver on EVP promises. Differentiate the company from competitors in the labor market. Design customized EVPs for critical employee segments. Articulate a total rewards strategy aligned with the business and HR strategy. Use business strategy and objectives to inform talent management and reward programs. Create specific objectives for each talent management and reward program to align it with the EVP. Employ organizational analytics (i.e., business performance and analytics, workforce demographics, workforce performance data) to test the effectiveness of total rewards programs. What Is an EVP? The EVP refers to the collective array of programs that an organization offers in exchange for employment. It is also referred to as the employment deal. The EVP defines the give and the get between company and worker, encompassing every aspect of the employment experience from the organization s mission, purpose and values, to its jobs, culture and people, to the full portfolio of its total rewards programs. We know that employees respond favorably to having a formal EVP. Towers Watson s Global Workforce Study shows that when the EVP is clearly articulated and communicated, employees better understand this give and get of a career at their organization, along with the value both extrinsic and intrinsic of staying. 2 towerswatson.com

3 EVP Driving Engagement Purpose and Values es Employee Experience Business Strategy Organizational Context Human Capital Strategy Brand Promise Total Rewards ewards EVP Business Realities Jobs, Jobs, Culture and People Employee Performance Financial Performance Customer Engagement Business Results Managing Expectations Organizations can achieve a return on their investment in terms of improved HR and business outcomes by simply starting on the journey toward a fully evolved EVP and total rewards strategy. The starting place is thinking through and articulating your organization s EVP. We are often asked whether organizations should have one EVP that applies to all employees or many EVPs directed to specific employee groups. In general, an organization should have one overarching EVP that applies to all of its operations and employees globally. This companywide EVP can then be tailored to meet the needs and preferences of pivotal workforce segments such as critical-skill employees, high potentials and top performers. In a similar way, geographic or cultural differences can drive variations in the core EVP. An exception to the single-evp approach might be for a highly diversified holding company where the deal across its entities is simply too different to be captured under one umbrella. Defining and Communicating the EVP The right team is crucial to successful development of the EVP. In our experience, a cross-functional team designs the more successful outcome. While most of our clients have HR in a lead role, working groups that include marketing or corporate communication for alignment with the customer experience and external brand as well as line executives or managers representing key businesses and geographies, bring a broad spectrum of experience that enriches the process. It s also good to have a diversity of age and tenure on the team. For companies that feel a large team is necessary, we recommend two tiers a larger group as a steering committee to provide input, offer direction and support successful implementation, and a smaller core working group to direct or do the work, implement final recommendations, and keep the steering committee updated and present recommendations to leadership. With the project team organized, process takes center stage. EVP projects start with a broad set of questions: Who are we as an organization? What do we do? Why does it matter? What workforce will we need (and where) to succeed? Who are they and what matters to them? With whom do we compete for talent? In general, an organization should have one overarching EVP that applies to all of its operations and employees globally. Employee Value Proposition: Key to Getting and Keeping the Best 3

4 This is the essence of EVP: Your programs must match your intent. 4 towerswatson.com The answers help you firmly set your EVP in the context of your business strategy. They pull in the elements of your brand and purpose, your competitive environment, and ultimately, your human capital plan. With answers to these questions in hand, the team can define the organization s give and get in other words, what the organization offers and what it expects in turn from its employees. The get is especially critical. It s common for companies to have thought carefully about programs and policies but less common for them to think broadly about the return they expect. Moreover, while it s fine to be somewhat aspirational with answers to the EVP element questions, it s also important to acknowledge the current state. If, for example, a company wants to improve its innovation (and many do), then how will it close the gap between the present state and the vision for the future? What rewards will need to be changed? Which elements of performance management tweaked? What cultural changes needed? This is the essence of EVP: Your programs must match your intent. Some of the most interesting work we ve done comes in facilitating conversations to determine how companies describe their deal. In the area of purpose and values, how might your working group members succinctly describe the organization? Regarding jobs, culture and people, how do you articulate what s different about the people, what it s like to work at the company and what is attractive about the jobs there? For total rewards, what opportunities do employees enjoy, and what benefits are offered? Getting to the essence or the common view is hard work, and the discussions are usually lively. Then things tend to get quiet because we start to examine what the organization expects from its employees in the areas of measurable performance, discretionary effort, self-investment, and behaviors and values. To prepare for the discussion, we help companies look at existing data from engagement studies, from leadership interviews, and from employee focus groups, and we overlay our own research, benchmarking competitive sets and global norms. Communicating an EVP that is aspirational with no acknowledgement of the work needed to get there will cause frustration and cynicism in the ranks, and may, in fact, make it more difficult to attract and retain critical talent. Developing an outline of necessary program and policy changes is a key step in designing an EVP that will drive the performance your company needs to compete. EVP is about much more than communication. Too often, companies design a recruiting campaign that touts their differentiators (or aspirational differentiators) and call it a day. Then, after recruiting people to their innovative and collaborative environment, they wonder why engagement is down or attrition is up. Articulating the EVP is an important step, but it comes after determining the answers to the questions we ve asked here. From Programs to Branding Once the EVP elements are set, the employment brand work can start in earnest. Most companies use their external or customer brand promise as the basis of their EVP work because it is key to understanding who the company is. Next, a well-thought-through creative brief lays the foundation for the EVP story. Interestingly, it s here that companies can lose their courage. They tend to play it safe, first by assuming they know what s truly relevant to their employee groups and second by shying away from emotion. When companies dive deep into understanding employees preferences, they are often surprised by what employees deem important. Armed with this knowledge, they can both design relevant programs and better articulate a meaningful EVP. Testing creative concepts with key employees outside the working group is also a critical step. Employees often choose the edgier approach (and the one that appeals more directly to emotions), while EVP working groups tend toward the safer version. Employee opinions can give the working group the courage to be bolder in their EVP communication and can help sell edgier concepts to management. Once the EVP has been branded, launching a big campaign isn t always necessary. Many companies prefer to simply start using the language and design in communication materials for recruiting and for current employees. They also engage managers to help them understand the EVP and how to position it with their reports. Companies with a strongly articulated EVP can customize it for critical employee groups, emphasizing elements of the deal that are most meaningful to those groups. For example, one client s employee research showed that its pharmacists valued flexible time over other benefits, so in communicating to that group, that element of the deal was front and center.

5 Be Deliberate and Test for Success All companies have an EVP, even if it has not been formalized. The work we ve described is a way of moving from an informal, unmanaged EVP to one that is deliberate and aligns with what you stand for in the market and how you want to be known as an employer. Once the EVP is defined and communicated, and total rewards programs designed accordingly, checking with employee groups to make sure your organization is delivering on the promise is essential. Companies that adopt a holistic approach to reward strategy that includes a thoughtful and well-articulated EVP can realize significantly stronger results from their talent management and reward programs than those that do not. Perhaps even more important, our research shows that a well-articulated and managed EVP is directly linked to both better HR and financial outcomes. Developing an effective EVP is well within reach for any organization. Having a clear EVP is an increasingly critical tool in the war for talent, particularly as the market for that talent becomes more global. Refining your EVP and its elements based on ongoing employee research will bring you full circle in getting it right. The outline of policy and program changes developed during planning stages, coupled with some practical measurement mechanisms, can help you gauge progress against critical milestones. Some examples to monitor progress include regular engagement surveys, gathering feedback from recently recruited employees, and regular analysis of employee productivity and financial performance from the onset of implementing the newly crafted EVP. Active monitoring like these examples will help tell you whether employees believe the deal is real and if your company is delivering on the EVP promise. Critical Outcomes From an EVP Having a clear EVP is an increasingly critical tool in the war for talent, particularly as the market for that talent becomes more global. For employers, it helps attract, retain, motivate and engage employees to drive business success. For employees, it shapes the overall view, emotional connection and level of discretionary effort they bring to the company. For both, it s a critical element for a successful workplace and career experience. Get Started With Your EVP: Identify the right cross-functional team. Ask and answer the critical EVP questions. Explicitly define your organization s give and get. Take a deep dive into understanding employees preferences. Align where it matters with talent management and reward programs. Test for success and monitor progress along the way. Contact your Towers Watson consultant or visit towerswatson.com for more information. About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Copyright 2012 Towers Watson. All rights reserved. TW-NA towerswatson.com