Rewarding the performers

Human Resource Executive Online

December 1, 2008
by Paul Gallagher (an excerpt)

Reward programs are powerful tools in creating and keeping talent, but an exclusive recalibration of Fortune magazine's "Most Admired Companies" list shows total rewards isn't all about money.

Most companies know that an engaged employee means money in the bank for the employer. But after an employment deal is clinched, after an employee's pay is bumped and after "atta boys" are doled out to the high-performers, not every company succeeds in attracting, retaining or developing its greatest asset — its talent. What differentiates the admirable employer from the merely adequate?

New research from Philadelphia-based Hay Group, the global management consulting firm, and interviews with top HR executives at some of America's most successful multinational companies indicate that alignment, communication — and a dash of cachet — may separate the most respected companies in HR from the also-rans. For the fourth year, Hay Group has recalibrated its "Most Admired" companies list for Fortune magazine to create the exclusive "Most Admired for HR" list for Human Resource Executive® magazine. The latter HR-focused list is derived from key data within the "Most Admired" list, recompiled with a focus on what Hay Group terms "attributes of reputation." To create the "Most Admired Companies" rankings for Fortune, Hay Group surveyed more than 3,700 executives, directors and analysts to rate companies in their own industry on eight criteria. Half of those criteria which could serve to describe essential HR functions — Management Quality, Product/Service Quality, Innovation and People Management — were then pulled and recompiled to create this magazine's "Most Admired for HR" list.

Among the findings: Companies that rank among the "Most Admired for HR" tend to concentrate on developing talent from within and provide a clear line of sight for promising talent in the organization. They also offer clear communication on total rewards thoughout the organization, from senior-level management to the rank-and-file employee. By and large, "Most Admired for HR" companies also lean toward paying lower base salaries for management and professional employees — about 5 percent lower than average, according to Mark Royal, a senior consultant in Hay Group's Chicago office. "It's a striking finding," says Royal. It would be easy to conclude that successful companies owe some of their admiration and employee loyalty to the almighty dollar, but Royal says the research points elsewhere. By emphasizing talent development from within, through mentoring, coaching and "actively managing the careers of employees and leaders at all levels," he says, companies are able to avoid paying salary premiums to import talent.

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