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Mar 27, 2012

Rethinking the total rewards strategy

Complacency not an option in the face of talent shortages, rising costs

By Claudine Kapel

There’s no shortage of news and surveys covering the myriad human resource challenges facing organizations today.

And they all share a common theme: complacency is not an option. Now, more than ever, organizations need a viable and sustainable total rewards strategy if they are to remain successful.

The latest volley comes from Deloitte Consulting and the International Society of Certified Employee Benefit Specialists (ISCEBS), whose new survey identifies talent as the most significant challenge for organizations over the next three years.

The survey of human resources professionals explores the total rewards priorities of U.S. organizations. But their areas of concern will no doubt resonate in Canada as well.

For example, 25 per cent of survey respondents identified talent shortages and the motivation and retention of qualified talent as the most significant challenge facing their organization. This was up from 16 per cent in 2011.

The survey report observes this upward swing in concerns about talent shortages comes at a time when U.S. unemployment remains near historical highs. So the surplus of jobseekers has not translated into a talent surplus, but instead “employers are facing heightened competition for highly skilled talent that is not necessarily present in the large pool of unemployed.”

Other areas identified as the most significant challenge include:

  • Rising total rewards costs (21 per cent).
  • Health care reform complexity (18 per cent).
  • Uncertain economic conditions (10 per cent).
  • Total rewards administration that meets or exceeds expectations (seven per cent).

In response to the challenges they face, 71 per cent of the survey respondents said they either revisited their total rewards strategies or programs in the last 12 months or plan such a review in the coming 12 months.

From a compensation perspective some of the action items identified by the survey participants include:

  • Reviewing the compensation philosophy/strategy (60 per cent).
  • Redesigning variable pay plans (38 per cent).
  • Redesigning base pay programs (33 per cent).

Those engaged in revamping compensation programs also identified some of the design changes they were considering, including:

  • Increasing the emphasis on performance-based pay.
  • Shifting the compensation mix toward more incentive pay.
  • Modifying merit distribution guidelines to drive more pay to higher performers.
  • Revising base pay structures.
  • Changing the target competitive position versus market.
  • Changing incentive plan targets.
  • Improving performance management tracking and administration.

A total rewards offering has numerous moving parts including pay and benefit programs, training and career development, and the attributes of the work environment itself.

In many companies, the focus on total rewards waned during the recent recession. But there is growing recognition that more attention to the employment proposition is essential if organizations are to successfully compete for – and retain – top talent.

When was the last time your organization took a hard look at its total rewards offering? Have you defined a clear and multi-faceted total rewards strategy? Does it still make sense given your organization’s business strategy and talent requirements?

Given the challenges many feel lie ahead, there may be no time like the present to ensure your organization’s total rewards and compensation strategies align with current and emerging business realities.

Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit

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