According to a new study, the Reward Next Practices Survey conducted by Hay Group and WorldatWork, companies attempting to measure reward program success plan to increase their focus on employee engagement as a key metric.
From Hay's release on the study:
According to the study, current reward program performance metrics are more heavily weighted toward financial performance than employee engagement, with companies reporting a current focus of 71% on using financial performance measurements and 40% on employee engagement. Other performance standards, such as customer satisfaction, innovation, talent management and employee engagement are all at less than 40% of current focus by organizations. Of all of these metrics, organizations report a more intense future focus (57%) on employee engagement performance.
I haven't yet seen the full report of the research, but as a WorldatWork member I hope to. From the release it is a little difficult to ascertain whether we are talking about 1) the metrics used in reward plans or 2) the metrics used to assess the performance of reward plans. My read is that it's the latter. Either way, it is an interesting piece of news.
To some extent, I appreciate the need to mix it up and not have financial metrics exert too heavy an influence on the design of our reward programs. Financials are, after all, backward looking or "lag" metrics in that they measure success that has already taken place. (And, as someone once said, running an organization on financial metrics alone is like trying to steer a boat by watching its wake.) Employee engagement, on the other hand, could be considered a forward looking, or "lead", metric in that it intends to measure something that is predictive of success.
Some element of balance in our reward metrics - financial versus non-financial, lag versus lead - is a good thing. It is this realization, at least in part, that has driven the success of the Balanced Scorecard.
The question that nags at me, though, is whether we should be using employee engagement as the (or even a) primary measure of the success of our reward plans, at the expense of focusing on bottom line results. To me, it parallels the question of whether we should focus on being the best places or the best high performance places to work. Are we moving in the right direction here?
This is exactly the point of a lot of recent criticism of HR from our friends over in Finance. In a recent article at CFO.com, Memo to CFOs: Don't Trust HR!, Rutger University's Richard Beatty criticized HR as spending too much time and effort on satisfying the overall employee base and too little on attracting and retaining top talent.
Beatty based this conclusion on employee surveys done at IBM and other companies that found little relationship between job satisfaction and performance ratings. Not only is employee engagement very expensive, but "how do you know you're not satisfying a lot of people you really wish weren't there?"
While motivating people is certainly critical right now, it needs to be motivation directed toward accomplishing the things that will keep the employer profitably in business. If we weight our reward programs too heavily toward engagement and away from the bottom line, eventually the bottom line will go away. Where will we be then? Not very engaged or satisfied. Perhaps not even employed.
What's your take? Am I all wet here?