With companies now having increasingly diverse workforces, a critical question that many face is how to most effectively reward their diverse workforce in order attract, motivate, and retain top talent. A South African study examined the reward preferences of various demographic groups based on characteristics such race, gender, and age. The study results indicated that a ‘one size fits all’ approach to reward management is not effective as employee reward preferences were found to differ across demographic groups.
Key Topics: Total rewards; Demographics; Reward preferences
Title of Reviewed Article: Total rewards that retain: A study of demographic preferences
Researchers: Monica Pregnolato (University of Cape Town), Mark H.R. Bussin (University of Johannesburg), and Anton F. Schlechter (University of Cape Town).
Publication: SA Journal of Human Resource Management, 2017, Vol. 15 No. 1, pp. 1-10.
Setting the Scene
How to optimally reward employees is a question many companies face, given the importance of an efficient and effective workforce to company success (Jensen, McMullen & Stark, 2007). As such, it is critical for companies to understand what attracts, motivates and retains talented employees (Kotze & Roodt, 2005). The growing diversity of company workforces, with increasingly wide ranging demographic profiles, adds more challenges to employers in determining an effective reward strategy, as these different groups may have differing reward preferences and expectations (Bussin, 2012).
WorldatWork’s (2007) total rewards model espouses five primary elements of total reward, namely: Remuneration (e.g. salary and bonus); Benefits (e.g. retirement and medical benefits); Work-life balance (e.g. practices and policies supporting work-life balance); Performance and recognition (e.g. performance assessments); Development and career opportunities (e.g. job related training; promotion opportunities).
Research suggests that different demographic groups may value these reward elements differently (Bussin, 2012; Snelgar et al., 2013), and increasingly, academics and practitioners are examining the merits of tailoring reward strategies to the needs of different demographic groups, with recent findings suggesting that such tailoring can improve companies’ ability to attract, motivate, and retain employees (Schlechter et al., 2014; Snelgar et al., 2013).
Against this backdrop, the researchers of the present study seek to examine one primary research question, namely “What is the ideal total reward mix of reward elements that will retain skilled employees from specific demographic groups?”
How the research was conducted
Participants in this study were sourced from companies that were corporate members of the South African Reward Association (SARA), and other selected companies. 376 employees participated, from multiple companies.
In order to examine individual reward preferences and optimal reward mix, the researchers distributed 3 questionnaires. The first questionnaire (Remuneration Managers Questionnaire) was circulated to reward managers and requested information regarding how reward managers would reward different types of employees in order to retain them.
The second (Remuneration Preference Questionnaire) and third (Choice-based Conjoint Task Questionnaire) questionnaires were circulated to employees at the participating companies.
The second questionnaire requested information on participants preferred reward types, and was broadly based on the WorldatWork Total Rewards model (2007), which comprised of 6 types of total rewards: (1) Performance and recognition, (2) Work-life balance, (3) Learning, (4) Career advancement, (5) Remuneration and (6) Benefits.
Questionnaire 3 asked participants to provide information on their total reward mix preferences. The questionnaire was designed to replicate real life decision making where the individual could not have all available rewards and therefore had to make a trade-off between different combinations.
Key Research Findings
The results from the first questionnaire were primarily used in the design of questionnaire 3.
The results of questionnaire 2 indicated that remuneration and benefits were the most preferred reward types, followed by performance and recognition. Next learning, career advancement, and work–life balance practices were all similarly rated by respondents.
A number of demographic differences are noteworthy. Women were found to place a higher value on learning and career advancement than men. While older employees placed less value on performance and recognition.
For questionnaire 3, broadly consistent total reward mix preferences were found across demographic groups, with some variation.
Overall, financial rewards, in the following order, were found to be the most important components of a total reward package: benefits, performance and recognition, remuneration, career. These were then followed, in order of importance, by career advancement, learning and work–life balance.
Benefits were found to be significantly more important to employees than remuneration, with pension and medical benefits seen as most important benefits.
Differences in reward mix preferences across gender and race were limited. Work–life balance was more important to Generation Y (those born between 1981 and 2000) than career advancement, and they placed slightly less importance on remuneration than other groups.
For those with less education, they placed least importance on access to learning opportunities.
The results indicate that across all groups, financial rewards were most important to employees, which will be refreshing to hear for many companies, given that these reward components typically incur the greatest financial costs for companies. These results are also consistent with the findings of prior studies which found that employees place high value on financial rewards (Sicherman, 1996; Kotze & Roodt, 2005).
The finding that benefits were most important to employees is consistent with prior research (Kochanski & Ledford, 2001). This finding is particularly unsurprising in a South African context, where social benefits may be inadequate. It is likely that the importance employees place on benefits will have a direct correlation with the standard of social benefits offered in that country.
The differences in reward preferences were found to be primarily between generations and educational achievements, rather than gender or race. Generation Y’er placed least value on career advancement, which is interesting, given that this generation would be in a life stage where promotions would typically be most frequent and the results may reflect a shifting from a focus on advancement to one which calls for a balanced and fulfilled life inside and outside of the workplace. Less surprising is the finding that senior employees placed a higher value on learning than those in more junior jobs, which may reflect an openness to learning that allowed them to progress to their current level.
Organizational and Reward Implications
The results of this study support prior research in the assertion that different employee groups have differing reward preferences, and that offering diverse reward packages can help in attracting and retaining top talent.
The optimal reward mix for all groups assessed was one which mixed both financial and non-financial reward components, indicating that reward for most employees is not just about financial gain, and companies viewing it in such a way are likely to fail in attracting, motivating, and retaining employees. In developing their reward strategy, companies should take a broad view on reward in order for it to be most efficient and effective in meeting the needs of a diverse workforce. Companies should weigh up the benefits of a more individualized approach against the likely additional administration needed to manage such a strategy.
This study provides strong support for the effectiveness of a reward strategy that is tailored to the needs of a diverse workforce, and suggests that such a reward management approach is critical in attracting and retaining employees. While this study provides comprehensive information on employees’ reward preferences at a high level, future research conducting a deeper examination of preferences for different reward plans would be helpful in broadening our understanding of reward preferences across different groups.
Source Article: Pregnolato, M., Bussin, M., & Schlechter, A. F. (2017). Total rewards that retain: A study of demographic preferences. SA Journal of Human Resource Management, 15(1), 1-10.
Published by: AOSIS Publishing
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