Company reward schemes yield dividends
Companies that reward their top performers more than other staff produce significantly higher returns to shareholders than those that don't customise benefits, according to research from Watson Wyatt.
The Watson Wyatt Strategic Reward Survey found that those organisations that customise reward schemes to motivate high achievers produced average five-year shareholder returns of 74%. This compares with an average return of 57% for companies with reward programmes that don’t differentiate.
Tony Gilbert, a partner at Watson Wyatt, said the findings supported the argument that a well structured reward programme was a source of competitive advantage.
‘Motivating your best performers with better rewards really does work. Many employers instinctively know this, but what our research shows is just how large the affect may be,’ Gilbert said.
But more than just financial incentives, the survey found that some of the most successful rewards for motivating top performing employees were non-pay related, such as tailored jobs, providing the opportunity for promotion and the acquisition of new skills.
The survey of over 170 European companies found that higher performing companies were the most likely to consider employee rewards as a means to improve performance.
Over three quarters of high performing companies – those in the top third for total shareholder return performance over five years – reported that they view rewards as a way to engage people in improving performance. This compared with 44% of low performing companies.
Motivating those employees most able to make a significant contribution to a company’s success would also increased company performance and control costs by reducing turnover of key staff, Gilbert said.
Although employers are generally finding it easier to retain employees in the current economic climate, 70% of employers admit they still experience some difficulty in either attracting or retain top performing employees.
The survey asked 2000 top performing employees how likely they were to leave their current employer within the next year.
In companies with reward programmes structured to differentiate between top and average performers, 24% said they were moderately likely to leave. This increased to 35% for firms that did not differentiate.