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June 2010 World at Work Study of the Impact of Rewards Programs on Engagement

June 2010 World at Work Study of the Impact of Rewards Programs on Engagement

Motivation Minute Blog


In response to the economic crisis, employers are concerned about keeping employees engaged after they have suffered through wage freezes, lost bonuses, increased work demands and downsizing. Motivating employees under these circumstances while recognizing that once the economy improves top talent may leave for other opportunities has created a new corporate battle cry: employee engagement.

Employee engagement is typically described as a high level of employee involvement, commitment to the organization and job satisfaction.  Engaged employees value, enjoy and have pride in their work. They are more willing to help each other and the organization succeed; take additional responsibility; invest more effort in their jobs; share information with other employees; and remain with the organization than employees who are less engaged. 

Although the primary focus of engagement efforts has mostly been on team-building programs, employee opinion surveys and nonfinancial rewards, egalitarian pay structures have been found to be related to employee cooperation, involvement, satisfaction and commitment (Bloom and Michael 2002; Levine1991; and Pfeffer and Langton 1999), all of which have been used as proxies for employee engagement. However, these studies do not examine specific pay practices used by compensation professionals or attempt to relate pay programs specifically to employee engagement.  The authors’ survey explores this gap and determines how total rewards programs and employee engagement are related. It also helps determine whether total rewards programs are associated with organization performance by focusing on the following:

  • Which reward policies and practices are associated with employee engagement?
  • Does involvement in the development of pay programs enhance employee engagement?
  • Is employee engagement associated with organization performance?

Dow Scott, Ph.D., Loyola University, Tom McMullen with the Hay Group, and WorldatWork invited 6,300 WorldatWork members, primarily total rewards professionals, to participate in The Impact of Rewards Programs on Employee Engagement study. The survey was open from Dec. 15, 2009 through Jan. 12, 2010. A reminder to complete the survey was emailed half way through the survey period and again just before the survey closed. The survey required approximately 15 minutes to complete. There were 736 WorldatWork member
respondents.

Here are some of the interesting findings:

  • 44% of the organizations indicated that they explicitly included employee engagement in their organization strategy, whereas 31% said they did not. (it is surprising how few organizations have taken even basic steps to encourage employee engagement)
  • 37% of respondents said engagement levels fostered by line managers are an important factor in evaluating their performance (the line manager relationshih is the key driver in employee engagement, yet in the survey only 37% agree? )
  • Only 39% agreed Total Rewards Programs reduced turnover
  • The survey shows that employees have limited involvement in design, implementation or evaluation of pay programs. (Yet organizations that involve employees in the design, implementation and assessment of total rewards programs are associated with rewards strategies that effectively engage employees the best)

Study Conclusions:

  1. Organizations that make employee engagement a performance criteria for evaluating managers, and reward engagement through incentives, outperform those that don't
  2. Base pay and benefits have the weakest link to employee engagement compared to rewards, intangible rewards, and manager relationship.  (Note: manager relationship was the strongest.)
  3. 80% of companies utilize employee surveys (the effectiveness was much stronger for organizations where employee opinion survey results generate action and change.)
  4. Involvement by low level managers and employees in design, implementation and assessment of total rewards programs increases the likeliness of program effectiveness

Here is a link to the full study

     World at Work