November 2006

What do employees value? Survey reveals answer

Many companies have an incomplete understanding of what employees value and, as a result, have less committed employees according to the 2006/2007 Strategic Rewards study.

To attract and retain top talent in a cost-effective way, employers must focus on what motivates employees and act accordingly, according to the survey. In addition to driving commitment, employers should also communicate company goals and link them to individual goals — or create line of sight — to better engage employees and, ultimately, drive company success.

Key findings of this study include:

• Companies report increased difficulty in attracting and retaining employees — particularly critical-skill and top-performing employees — for the third year in a row. Most notable is the growing gap between high and low-performing companies in their ability to draw and keep the talent they need.

• Employers underestimate the role that benefits such as healthcare coverage and retirement plans play in retaining top employees. For example, none of the companies surveyed think healthcare coverage is a key reason that top-performing employees leave; however, 22 percent of top employees cite it as an important reason.

• Employees say that it would take a median pay increase of 20 percent for them to leave their organization, but employers think it takes less than that to attract talent from other organizations.

• Employers are putting more money into performance-based rewards. Twenty-five percent of the participants increased cash incentive targets in 2006, and more than one-third increased cash incentive payouts.

• While the overwhelming majority of companies (86 percent) think they do a good job of treating employees well, only 55 percent of employees agree.

• With merit increases averaging 3.6 percent, increases for some employees may not keep up with current inflation rates. However, as employers differentiate merit increases based on performance, top-performing employees can achieve real wage increases. Employers are also budgeting 1.4 percent of payroll for market adjustments and promotions, which can support retention goals if used to reward top performers.

Source: Watson Wyatt Worldwide, www.watsonwyatt.com

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